Custom «Doing Business with Russia» Essay Paper Sample
Booster Juice businessis the largest fresh juice bar chain. This business specializes in the development of health-conscious pure, fresh juices, ice, fresh and frozen yoghurt, and fruit sorbet. This company aims in supplying individuals with health dietaries that enhance active lifestyles. The smoothies made are suitable for all purposes ranging from power breakfasts, energy enhancers, meals on the run, to work out snacks. The concept of booster juice is a unique food service concept that combines the taste of meals with the concept of promoting health and wellness to the consumers of the product. The business has been influenced by the following Russian’s variables; political and legal environment, cultural environment, economy environment, ethical environment and finally trade, investment, and foreign policy profile (Booster Juice, 2011).
Political and legal environment
Currently, Russia’s political system has globalized itself up to the worldwide market environment, and there has been a conscious effort to foster trade, universal security, and the general image of Russia. This has been a boost factor for the booster juice business. However, there are still numerous political leaders, especially the older generation, whose philosophy is typified by the centrally governed system of engaging business. The Prime Minister Vladimir Putin was the preceding president and still has a considerable degree of power over the nation. His pressure coupled with protectionist principles, has formed some indecision among foreign businesses; thus, lowers competition level for this business. There are still numerous political obstacles for engaging in business in Russia including bribery, civil instability, bureaucracy, corruption, and conflicting regulations. However, the demands of globalization have compelled Russia to become less bureaucratic, less state controlled and more transparent. The prediction for Russia’s political environment remains optimistic. This is an encouraging variable for any business and more so for Booster Juice Business that has globalized. The political system of Russia has opened up to the global market, facilitating the presence of improved trade patterns, global security, and has improved the general image of the country.
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The stabilization of the financial system and government is just one of numerous indicators gearing to a constructive franchising environment for a Western industry wishing to invest in Russia. The rising demand for recognized and Western products, a boost in consumer consumption and earnings, high confidence in foreign product worth, and a strong drive for franchising by the Russian commerce community offer a great chance for a business such as Booster Juice. Franchising is fetching an increasingly well-liked form of business in Russia. A lot of Russian entrepreneurs support established brands as they are perceived as keys to adopting up to date technology and efficiency merits over their competitors. Therefore, there has been prosperity of Western franchising industries, especially in the fast food businesses like Booster Juice that have established in the Russian market.
Franchising in Russia does have risks because of Russia’s legal environment, though positive procedures are being taken to remedy these problems. The Civil Code’s management of competition regulation, intellectual possessions law and common agreement law contains requirements that allow franchising practices and normal contractual preparations. The law regarding franchising is known as “Law on Contract of Commercial Concession”, which is integrated in the Russian Civil policy. However, it can be hard to comprehend because at the moment, it was created; the idea of franchising was mainly unknown in Russia. There are a number of very important limitations the law imposes on franchisors. The code that permits the franchisee to renovate the franchise accord under the same conditions is very prohibiting and unjustified from a franchisor’s perceptions. Furthermore, under the set of laws, the franchisor can be accountable for claims filed against the enterprises. However, some sections of the law commonly considered as obstacles for franchising in the country can be shunned by a full explanation of the matters in the franchise accord. Competent legal committee will need to be employed to make sure the drafting of franchise conformity accounts for the shortcomings of the regulation code. These regulation challenges have helped to streamline business activities in Russia; thus, assisting Booster Juice business to flourish and face risks adequately. The Russian court structure remains one of the feeble parts of the Russian lawful system though it has enhanced over the years. Arbitration Procedure Codes and new civil enacted under previous President Putin have simplified and rationalized jurisdictional and procedural policies, making the system less corruption oriented. Court decisions are disadvantaged by arbitrary enforcement and corruption that remains a considerable problem in Russia nowadays. Favorably for Booster Juice business, the Russian confederation ranks 19th out of 183 nations for the simplicity of enforcing business contracts; in regard to the World Bank’s Doing commerce in Russia 2010 statement. The legal environment of Russia is a risk to franchising in Russia. However, there are efforts made to cub the problem, this serves as a threat to investors. Laying down of the laws on franchising occurred when franchising had not penetrated into Russia (Windemuth, 2009).
Along with money matters, culture is another so known environmental unmanageable, which marketers and businesses must reflect on. In fact, a very vital variable as it is so simple to misread a circumstance and take assessments which consequently can prove catastrophic. Product packaging, physical characteristics, labeling, and promotion have to acclimatize to the cultural requirements when needed. Religion, aesthetics, values, language and substance culture all affect manufacture decisions. These cultural variables have influences the flourish of Booster Juice business in Russia. Russian consumers are altering their habits and adopting new trends that mirror the attitude and lifestyle of Russia as an entrepreneurial nation. Consumer expenditure has gone up, fueled by a revenue growth tempo of approximately ten percent annually for the last few years. The tendencies of strong economic development, declining joblessness, and rising disposable earnings have redominantly changed the expenditure habits of Russia's newly buoyant youth whose actual annual disposable earnings have grown steadily. The improvements of the Russian trade market and arising disposable incomes have rooted a major revolutionize in the way Russians acquire and consume foodstuff. Chain operating fast food businesses like Booster Juice are facing a rapidly growing market. As central class clients begin to characterize greater worth to comfort, value, and safety when purchasing relevant food staff. Russians are accepting the simplicity of accessibility and reliable, quality obtainable in more modern businesses. Russia does have a strong domestic fruit marketplace, and there are no signs of excessive obstacles to importing fruit from neighboring areas this is a boost to the Booster business since they have wider suppliers scope (Voldnes, Pirjo and Goril, 2010). Although in the early on stages, the business ships all the required key ingredients such as Booster Juice’s proprietary sorbets to franchisee from neighboring Canadian headquarters. This has been applied for Booster Juice’s supplementary international franchisees as to preserve a level of worth and consistency athwart markets.
Due to the growing costs, Booster Juice will vigorously find confined suppliers for dairy. In order to ascertain Booster Juice’s position as a superior and healthy option to other food options, the storage outline and design must equal the high standards of the target market. Values comprise of a religious foundation and attitudes refer to economic actions. It is necessary to establish attitudes towards marketing behavior, which lead to prosperity or material gain. For example, Booster juice business is high influenced by these variables. Aesthetics is a major cultural element which refers to the ideas in a culture regarding beauty and good taste as articulated in the arts, music, and businesses and dancing and approval of color and form. Aesthetic differences influence design, packaging, colors, brand names and media messages. In accordance to the Booster Juice business packaging and choices of colors; the aesthetic value implemented have attracted many consumers and boosted the business growth. Another strategy is to have some prior knowledge on the tastes and preference of the people of Russia. It is also essential to maintain the Booster Juice logo and colours used globally to maintain a global market. Material culture that involve artifacts; technology and tools applicable, also involve transportation consideration when a business involve in a foreign country business has been implemented adequate at Booster Juice business. Since this is an international business, cultural aspect has played a major role in the realization of the business success. The success factor of the business lies on employee training. This training ensures that employees use the best juice preparation techniques. Marketing strategies used aim in building a solid base for loyal customers.
While all Booster Juice localities are expected to have a general look and feel reliable with the franchisor, each setting can incorporate diverse store design distinctiveness to fit into the target demands. The additional venture in the store plan will be off-set by the finest prices Booster Juice employ to charge in Moscow and other cultural values. Another feature of Booster Juice’s core assessment that needs to be transformed into the Russian setting is fun and energetic. Stocks up an environment that promotes healthy livelihood and attracts reiterate customers. The added assessment of service factor has become increasingly essential; as the competition in Russian’s healthy fast food manufacturing increases, and customers become more challenging. Cultural challenges have made the business seeks better approaches for marketing strategies, and this has worked successfully for the business. The business product is widely acceptable by all cultural environmental perspectives. Fruit juices are recommended for all age groups, values, religion beliefs and health requirement. The unifying factor is that Russian is the widely spoken language in Russia thus making promotion and selling Booster Juice products much easier (Andreassen, 2007)..
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Russia has a strong market favourable for booster juice business. For the past years, Russia has been experiencing a consistent GDP growth rate. The population of Russia is approximately one hundred and forty million people. Good economic management in areas such as regulations, taxation, and commerce licensing is a basic pillar for the formation of a constructive business environment. Since Russia have put considerable policies in place, Booster Juice business have flourished and expanded. The economic environment of Russia is favourable for the development of booster juice business. Despite the fall in the economy in early 1990, and disruptions due to the financial crisis of the 1998, the Russian economy has improved extremely. The privatization and liberalization of business has provided guidelines and opportunities for development. The privatization of small and medium-sized business is currently in the process.
Russian effective set of laws addresses market failures that slow down productive investment and merge public and private interests. Consumer expenditure has gone up, fueled by a revenue growth tempo of approximately ten percent annually for the last few years. The tendencies of strong economic development, declining joblessness, and rising disposable earnings have predominantly changed the expenditure habits of Russia's newly buoyant youth whose actual annual disposable earnings have grown steadily. The improvements of the Russian trade market and arising disposable incomes have rooted a major revolutionize in the way Russians acquire and consume foodstuff. This tendency has boosted the business and made the manager target the right customer and effectively apply selling strategies (Ramanjit, 2010).
Russian’s developed financial economy provides payment services; organize deposits, and affordable investment financing. Well-organized financial markets decrease the reliance on interior funds and cash from informal foundations. The economic growth of Russia has been a pillar for many businesses such as Booster Juice. It has allowed unlimited expansion and growth of business due to availability of a ready market and favorable environment.
After the destruction brought by the harsh wildfires and drought experienced last year, economic developmeent has stabilized although remained below fellow the market expansion profiles. Poor demographics combined with efficiency constraints provide little advantage in potential development for Russia over the medium term, and what expansion is predictable mainly reflects the catch up from the losses got in the crisis. The economic set backs are challenges the Booster had to face to forge the better ways of succeeding. This is one of the reasons the globalization of the business becomes more fruitful and appropriate.
The business management has been internationally recognized thus proving ethical standard. Ethical conduct flourishes in an environment of candidness and management-by-example. Unethical behavior flourishes in an environment of secrecy and propaganda. For this obvious cause, the goals off Booster business have always been accountable in decision-making. This pertain first to individuals at the top and then throughout the business organization of Booster juice business (Laura, 2008). When decision making is carried out in the context of undoubtedly communicated and established values and code of behavior, it is much difficult for employees to become prey to dreadful behavior and to blame one another when something goes a miss. Each individual ought to be held accountable for their actions, in spite of of rank or seniority. In an ethical environment, Booster business partners and employees understand that ethical conduct is the means by which the business success has been achieved. The employees of the Booster business have been exemplary as evident in the expansion and growth of the business. They see through model after model that ethical conduct is rewarded, and disreputable behavior is not accepted. They appreciate that leadership holds itself to the uppermost standards and that entirely everyone, no matter how essential to the business, is responsible for the security of the ethics of the industry. All good things will follow in the business (Terterov, 2005). There are for all time going to be ethical issues that occur but having a good ethics code in the organization there is an elevated chance that disputes can be resolved. Booster business has always experienced challenges, which threatened to crumble it; however, the good, ethical decision has always resolved the situations. It is necessary that the morals codes are enforced, and if anyone is acting unethically or not adhering to the code that they employee should face severe consequences. Ethics offer the foundation for which a cultured society can subsist; therefore, they are key constituents in the success of all professions and business. It is arguable the ethical environment deter business growth since the business is a competitive and risk taking activities that involve optimizing opportunities. The businesses that have always ignored the ethical aspect have always short lived their life span. This is a clear evident that Booster business has always embraced the ethical environment concerns.
Trade, investment, and foreign policy
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Investment Environment:Russian’strade and investment issues are strategic regions of both domestic and foreign policy. There have been situations in which the administration or government have intervened in sectors perceived to be strategic to Russia’s foreign and safety or commercial policies. While fighting corruption has become a chief policy focus of the Medvedev administration with notable attempt on tackling low-level bribery, the government has recognized that more progress is wanted. On the heels of the financial crisis, President Medvedev encouraged the notion of transformation as a means to invigorate the Russian economy and accept foreign capital in order to stop the budget shortfall. These policies elevated the economy of the Russian and therefore, potential earnings for the Booster business. As part of this endeavor, Russia is undertaking a significant privatization programme from 2011to 2013 which will give stakes in key businesses also open up important opportunities for foreign investors. That so, high dishonesty levels remain a continuing concern and a key obstacle for the state in heartening new foreign investment (Zubytska, 2011).
The trade patterns of Russia have also changed considerably. Trade with the west has gone up while trade with the old trade partners has gone down. A factor that will affect business in Russia is the slow process of reform. Russia is still carrying out substantial reform processes indifferent sectors of society. The surplus in Russia’s trade is because of oil export. However, there has been shrinking in the imports. Reforms have also had negative ramifications, the social catastrophe among the Russians. There has been a decline in the productivity levels and a rising black economy and currency flight. The rise in crime rates in some parts of the country have also slowed down the reform process.
Foreign policy: Traditionally, in order to meet the criteria to buy a Booster Juice franchise, the aspirant must have a least amount net worth of $0.35m and $0.1m in liquid assets. In a developing country like Russia, with the reservations involved, this hampered investment initially; however the policy changed and become more accommodative thus encouraging booster business in Russia. A lack of transparencies in trade dealings in Russia, made Booster Juice undertakes careful, due diligence when choosing a partner. Thus, Booster first goal was to attract Russian leaders who has readily available finances and who comprehends the Moscow market target and is able to incur losses for the initial three years of business. As the wealthy part of Russia’s population continues to enlarge with the fresh market economy, a pool of prospective franchisee owners presents to Booster Juice (Delaney, 2004).). The loss of Russia’s national identity is a blow to the business sector as the leaders fail to recognize the country. These difficulties have led to the use of the terms russkie, which refers to the ethnic Russians, who are descendants of eastern Slavs, and rossiyane, which refers to the Russian citizens, regardless of ethnicity. Russians in the ultranationalist movement focus on the first identity, while most of Russia's ethnic minorities identify themselves with the second definition. The Russian -speaking persons outside the Russian borders are russkies and get protection within the Russian ethnics. This makes the development of a multiethnic society or multi faith impossible. With these differences, there is a hindrance in developing booster business.
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