Magazine article Business Credit

Doing Business in the Former Soviet Republics: Six Steps toward Success

Magazine article Business Credit

Doing Business in the Former Soviet Republics: Six Steps toward Success

Article excerpt

In the West, capitalism is an idea you grow up with. As American children mature from their first allowance to their first credit card, capitalism slowly weaves its way into their daily lives. However, in the former Soviet Republics, nearly four generations have grown up in a world where supply and demand have no necessary relationship, where the "plan" meant everything and innovation was a scary word.

In spite of this, businesses flock to the former Soviet Union with the expectation that their counterparts will understand intricate concepts such as depreciation, gross profit, and subordinated debentures. Once they arrive, however, these expectations are quickly shattered.

Take the case of the vice president of marketing who blithely presented his business card at a preliminary meeting.

"Marketing?" he was promptly asked. "What is marketing?"

Get To Know the Communist Mindset

To begin communicating with businesspeople in the former Soviet Republics, you must understand where they came from and what they grew up believing. Only in this way can you develop a strategy to help them understand what you have to say.

Anyone who has worked within a state-run institution understands something about what life was like in the Soviet Union. Every facet of Soviet life, from art to advertising, was highly bureaucratized. And, as happens with bureaucracies, the paperwork took on a life of its own. For example, by the time you received your medicine at a Soviet pharmacy, seven or eight little pieces of paper, covered with stamps and signatures and authorizations, were affixed to your original prescription.

If you imagine constant shortages in a land of rampant bureaucracy, you begin to get a picture of what citizens in the former Soviet Union experienced. People reacted to conditions in a very natural way: They found their own power wherever they could.

Blat is the Russian word for "influence" or "pull." As the saying goes, "Everyone has a little blat." The secretary with access to a photocopier has some, likewise, the professor who can help you pass your entrance exams. Perhaps nobody has more blat than the grocery store worker with first pick of fruits and greens, which can be traded for medicine or car parts--or even better grades for the children.

As a result, the people in Russia and the other republics will probably feel they have a great deal at stake when they bargain with you. You will represent an important potential source of power and connections at a time when their own economic lives have become incredibly insecure. They'll be sizing you up, of course, trying to determine the source of your blat and the extent of your connections.

The frustrating part is once a deal gets rolling, and you are to some extent dependent upon your partners, all enthusiasm may seem to suddenly vanish. In part, this may mean your partners are experiencing resistance from bureaucratic channels, intentionally overestimating their ability to do business in order to gain your backing, or are beginning to wield the only word that helps a bureaucrat feel powerful--"no."

Seek Creative Ways To Get a "Yes"

In the Soviet Union, they used to say, "Whatever is not prohibited is not permitted." Unfortunately, the demise of the Soviet Union has not meant the demise of this attitude. Although business law is rapidly being liberalized, this legal flux can create more confusion than opportunity; and bureaucrats, ironically, may seem more unyielding than ever. One sound piece of advice (particularly when dealing with government people) is not to waste too much time arguing points of law. This will probably just make the nay-sayer entrench even further (especially if you begin to wave your hands and shout about the "absurdity of Soviet law").

Some of the most adept legal eagles in the former Soviet Union are getting around troubling laws by means of something called the "variant" or exception. …

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