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What to consider BEFORE starting business in the new regions?

What to consider BEFORE starting business in the new regions?

Let’s consider typical mistakes, risks and reasons of budget «holes» when starting business in a new region.

1. Argumentation for expanding abroad. Important questions before starting the project.

Very typical postulate for expansion is: “We produce the best products in our segment!” And it would be so great, unless this is the one and only argument of the decision to go abroad. Читать далее

Ruble exchange rates fluctuations bad or not?

Russian economy suffers or not? Ruble exchange rates fluctuations bad or not?

Russian Ruble exchange rates fluctuations remain in the local top news since the last two years. How does it affects foreign suppliers and companies who was only considering entering the Russian market. After several very hard ruble falls and obvious period of «frozen decisions», now ruble remains stable. At the level almost 2 times higher then 2 years ago, but stable… What does it means for vendors from abroad? Can importers win from the situation and use cheaper salaries and marketing costs which happens to be set up now in Russia?

What is the typical ROI period when you start doing business in the new country? 6 month, 1 year, sometimes 3-5 years, depending on the product type and business approach. During this period the regular investments are required for regional representatives, salaries, marketing, may be also for stock and logistics. Most of these costs are in local currencies. Now imagine that you do have a chance to spend 2 times less, just because Russian rubles suffered. Would it be a good option to invest at these times?

Now let’s try to analyze the situation in figures. Imagine 1 sample scenario.

Scenario 1. You consider to open a subsidiary in Russia

Fixed initial expenses, RUB Fixed initial expenses, EUR in 2014 (1 eur=49rub) Fixed initial expenses, EUR in 2016 (1 eur=79rub)
Russian company registration (incl. all fees and docs preparations) 30000 612 380
Marketing documentation localization (50 pages) 75000 1531 949
Printing brochures & marketing materials 100000 2041 1266
Total initial costs 4184 2595
Regular expenses
Monthly expenses, RUB/Month Investment period, months Cost per investment period, RUB Expenses per investment period, EUR in 2014 (1 EUR=49RUB) Expenses per investment period, EUR in 2016 (1 EUR=79RUB)
Office rent (50sqm) + internet + phone 70000 12 840000 17143 10633
Net salaries of 3x employees 240000 12 2880000 58776 36454
Taxes and payments for 3x employees 80000 12 960000 19592 12152
Accounting at outsourcing 40000 12 480000 9796 6076
Exhibiting at local fair (15sqm stand + other expenses) 800000 1 800000 16327 10127
Total per year 121633 75443

 

YOUR SAVINGS = 47 779 euro!!! Approximately 40% SAVINGS per YEAR just for a very small local office. Attractive? Yes, if RETURN sales will be achieved. Please, read our previous blog article to analyze IF YOUR PRODUCT WILL BE PURCHASED BY RUSSIAN CUSTOMERS in “crisis times”.

Share your concerns, ideas and questions below in the comments.

Changing business conditions for international players in Russia

Russia continue to lobby and to support local production

January 13th, 2016 – Many discussion and fears has arised due to the laws 1236 from 16 November 2015 and 1224 from 24 December 2015, accepted by Russian government. These acts facilitate state owned enterprises to purchase goods produced in Russia. Читать далее

Interview from Irina Voronkina on Radio Echo of Moscow

Glad to share with the the recorded interview of Irina Voronkina on Radion Echo of Moscow. Mrs. Voronkina tells about the influence of political situation on international business, about China and Russia relations with Europe and USA, about mentality differences and business approaches.

List at http://www.youtube.com/watch?v=LtI_Qq0UR6o (in Russian language only)

Key criteria for choosing an international consultant

What are the key criteria for choosing an international consultant?
Recently I’ve initiated a brief research among my network of contacts in LinkeIN – what are the key criteria for businessmen when choosing a business consultant? Here are some answers I’ve got… Читать далее

Direct vs channel sales. Alternative or combination?

Direct vs Channel Sales. Is is real alternative or one can combine the scheme successfully. We discuss today about choosing optimal sales approach in the new regions.
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