Magazine article Management Review

An American Trade Show in Moscow

Magazine article Management Review

An American Trade Show in Moscow

Article excerpt

An American Trade Show in Moscow

More than a hundred people shuffled patiently in line to receive a sample tube of Colgate toothpaste or a cup of Pepsi-Cola.

Dozens craned their necks for a glimpse at a Cadillac Fleetwood, an IBM computer or a color television set broadcasting NBC's Today show.

And when RJR Nabisco started giving away plastic bags full of crackers, cereal and cigarettes, the sales reps were nearly overrun by eager consumers and decided to stick to handling out brochures.

It all could have been a dream come true for an American manager looking to introduce products into a new international market. But this new market is the Soviet Union, a place where dreams have remained unrealized for decades, and the occasion was USA '89, the largest American trade show ever held in the USSR and the first such exhibition in 30 years.

For most of the 144 U.S. companies represented at the Moscow show last October, doing any significant amount of business in the Soviet Union remains an elusive dream. But the incredible pace of change in the Soviet Union and the Eastern bloc has made the possibility of conducting business in the communist world more desirable than at any time since the Russian revolution of 1917.

U.S. corporate giants attending the trade show included Philip Morris, General Electric, American Express, Johnson & Johnson, Proctor & Gamble, Estee Lauder, Eastman Kodak, Federal Express, E.I. Du Pont, Caterpillar, Ralston Purina, among others. The reason they came is simple.

"The Soviet Union is an extremely large untapped market with enormous potential," says William D. Forrester, president of the U.S.-USSR Trade and Economic Council in New York, which organized USA '89. The Soviet Union has 280 million consumers largely unfamiliar with sophisticated Western products. And because there are so few products available for them to buy on the domestic market, these consumers often have been able to save large sums of rubles, which they are eager to spend on high-quality goods. The same is true for buyers of industrial products, who face the tremendous need to modernize the Soviet Union's lumbering infrastructure.

The wide variety of opportunities that exist for U.S. companies looking at the Soviet market must also be tempered by the difficulties, including restrictive currency regulations and the infamous slowness of Soviet bureaucracy. Even a trade booster like Forrester is compelled to note, "Everyone must be realistic about this market. It's not suddenly going to burst open."

Soviet leader Mikhail Gorbachev, speaking with Americans during a lengthy visit to USA '89, tried to assuage some Western fears about his moribund economy: "Now, of course, we are rethinking everything and rearranging everything," he told one U.S. clothing manufacturer. "For us, today, the market is our number one problem. We are trying to reorient our whole economy to the customer. . . . Please don't be too concerned about our current economic situation because we are going through a period of transition. Things will get straightened out eventually." He may be right, but for now the economy is far from straightened out, despite the dramatic economic reforms Gorbachev has initiated under his policies of perestroika.

The challenges for U.S. companies doing business in the USSR begin with the way they get paid for their products or services. Soviet citizens and enterprises do have plenty of money - in rubles. Despite urgings from the West for reform, rubles remain strictly controlled and cannot be converted into other hard currencies. The ruble is basically worthless to a U.S. company.

Ed A. Hewett, a senior fellow with The Brookings Institution, says that the Soviets "need to understand [the ruble] is not real money, it's wallpaper. . . . They need a price system with a real exchange rate."

While the Soviets have made some moves toward ruble reform - last fall they devalued the ruble by 10 times, thus making it more expensive for Soviet citizens to travel abroad and less expensive for Western tourists to visit the USSR - no one expects real convertibility soon. …

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