This research project identifies the issues and underlying problems that may arise when investors and entrepreneurs seeks to start new enterprises in an emerging economy. There are so many aspects that come into play, government policies, cross cultural communication and managing etc and it is imperative that the necessary preparation and research is conducted prior to the business entering the new market. Due to the large aspects of information gained from this research we are narrowing our topics down to those which we believe are essential and directly related to our subject which is, "Entrepreneurs in Emerging Economies". Our case study involves an emerging economy; India who is rich is resources and labour. The Indian entrepreneurs are interested in taking their clothing business suits attire into another emerging economy which is Russia. They see that Russia holds great potential and that there is a demand for the resources which India has so much to provide. The report further will discuss the difficulties that will arise as they discover many differences between the two countries.
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Entrepreneurial skills required for business success.
As we studied in our lectures, entrepreneurs must possess a range of skills that could are believed to be both posses by the individual from their personality and learned through life experiences. The key skills of entrepreneurs required as being risk takers, visionary, innovative, positive and persuasive. Entrepreneurs are widely known for seeking opportunities, however many Indian entrepreneurs have a different story. As we have discussed earlier in the trimester many entrepreneur on the other side of the world start business in order to survive. According to the research done by Lal and Clement (2005), India's entrepreneurs that thrived to feed their families and survival are the root for building the massive economic growth in India for the past decade. It seems as though now history is repeating itself again. The Indian economy has grown so much, however according to Lal and Clement (2005) income made in India by itself is not enough to sustain families, and the globalization lifestyle. Entrepreneurs in India are now seeking to do business across borders with their goods in order to provide for themselves and families. Entrepreneurs may possess the necessary skills mentioned earlier within their culture to be successful, however when it comes into play in a different environment it can be a totally different story. This research discusses a few main things that Indian entrepreneurs will encounter while starting their business, a clothing company, in an emerging economy of Russia.
A website called "Entrepreneurship in India" describes Indians as "adverse to risk" and also that the majority of the innovation and successful businesses in India are from inventions that are theÂ pureÂ andÂ concentratedÂ essenceÂ ofÂ the Indian culture. However on the contrary research is showing that Russian consumers are one of the world's top leading consumers who are leading the role for fashion, a dynamic luxury market, and electronics and now are overtaking Europe, according to www.Euromonitor.com. From this information it is significant that if Indian entrepreneurs are willing to seek business in Russia one of the main aspects they need to face is being creative following the fashion trends of the West which is contrary to what many Indian entrepreneurs are exposed and used to.
Following demonstrating creativity in product and promotion another significant aspect between the two countries is one of the cultural dimensions from Greet Hofstede's research called uncertainty avoidance. According to a research done by Naumov and Puffer in 2000, Russia scored as being one of the countries with the highest uncertainty avoidance, more than Japan and China. This means that Russian don't like taking risk, especially things they are not familiar with and would less likely to step into the unknown. What this means for the Indian entrepreneur is the product and reputation they establish needed to be perceived as safe, worthy of taking a high risk in paying for. On the other hand India according to the same research ranked low on uncertainty avoidance. Therefore many Indians are used to being flexible and are less tolerance of ambiguity. This can be an obstacle, if indeed the entrepreneurs want to win the Russian consumers they must put themselves in the shoes of a culture that does not tolerate new products well and plan their marketing schemes thoroughly with clarity and carefully. To be perceived in the Russian economy as to be bought with little risk as possible.
Always on Time
Marked to Standard
Lastly an important aspect that could potential discourages the Indian entrepreneur in establishing a business in Russia is the relationships factor. According to kwinessential.com.au Russians are comfortable doing business with anyone and relationships are not necessary for business. However on the contrary the Indian entrepreneur is high accustomed to doing business with something they feel confident with. We already know that the Indian entrepreneur is risk adverse; this relationship factor will force the Indian entrepreneur to take even higher risks in doing business with Russians who are less willing to establish a relationship. This can cause the Indian entrepreneur to feel uncomfortable and eventually lead to uncertainty in decision making. Unless both sides are willing to adapt to the culture of one another the business can be difficult for both parties.
Emerging economies market assessment and competitive environment
Although we are aware that Russia is growing in retail and buying power, for clothing a major problem that can occur between the two countries, mainly being, the material for producing the clothing. According the Indian trade statistics 2009 cotton was the major export globally following with silk. Many of the Indian entrepreneurs like mentioned before are accustomed to creating products and business that are solely directed to the Indian people, therefore there is a different market for Russia. Russia being one of the coldest countries in the world usually wears materials consists of heavy wool, leather and body sizes ranging from small to extra large according to Buzzle.com. The skills and experience that the Indian entrepreneur has picked up in India might not actually fit the market assessment for consumers of Russia. Although the India being one of the leading exports of clothing material many are made to suit warm to hot weather. This is a major problem for the business which is ready to produce however doesn't necessarily know that the product they need to create will be something completely differently from what they are used to. Moreover because this might be the first time the entrepreneur is launching a new product into the Russian market, the business is at a very high risk. The government also in Russia at this moment is encouraging many entrepreneurial activities within the country therefore the Indian entrepreneur not only must come up with a product that suits the Russian people but also is unique to be able to maintain its position in this dynamic fashionable culture.
The opportunity and expected demand. What is the need filled by the business?
According to the information mentioned above the Indian entrepreneur will need to invest time into understanding the Russian fashion trends along with understanding how to make clothing for a particularly cold climate. Furthermore we have found out from Buzzle.com that Russians prefer to wear dark down to earth colours yet elegant, in contrast to the Indian culture which is rich in colour. There is much more to establishing a business overseas than many imagine it to be. The detail and depth of culture needs to be understood and grasped before launching a product. Although there is potential in the market research needs to be done to really understand your consumers as well as for you to adapt yourself to the foreign culture.
Business _X______________ is a Delhi based Indian clothing company that manufactures Business suits and sherwanis - the Indian traditional Men's attire. It is eyeing at an opportunity to collaborate and merge with a Moscow based company called _Y________________. The various challenges in the merger is being analysed in the report and the viability of merger is discussed.
This is the era of globalization and no country, economy or culture is untouched from what is happening in other parts of the world. Doing business in a foreign land and encountering an unfamiliar business culture can be a strenuous and complex activity. This is a case of a dealing of two economies with different mentalities and business cultures.
The contemporary Russian Business culture is influenced by the diversified culture and the desire to study (Graudt S. , 2001). The Indian business environment is more conservative and adjusting.
Business and Market Descriptions
About Business X______________________
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It is a $ 500 million company with head office in New Delhi and manufacturing plant in Faridabad (near Delhi). The company manufactures Business suits and Traditional Sherwanis for Indian men. It has been in business since 1990 and has seen tremendous strides in growth in domestic market. It has market presence all over northern India. ___________ heads the giant company as its Chief Executive Officer and Managing Director. Now to make a global footprint, it is eyeing to merge with a Russia based major suits and shirts company.
About Y_______________________ Company
Tailor _____________, a great entrepreneur in name heads _Y________________ in Moscow. The company is one of the leading companies in manufacturing make-to-order business suits. It has clients in the ranks of Prime Ministers and giant-likes in Russia. The unique selling point of _Y___________ lies in its expertise to design business suits individually as per client (Graudt S. , 2004).
The merger of two companies will have both pros and cons. It makes sense to analyse both and then decide if the merger will be fruitful or not (Cooper, 2006).
Business Cultures - India vs. Russia
Russian Business dressing is formal and conservative. Men are required to wear business suits and women should wear subdued coloured business suits with skirts that cover the knees. Complete dressing sense is always exhibited by Russians (REFERENCE NEEDED). Since the temperature is cool in Russia for most part of the year, the business suit is always chosen over any other alternative.
Indian Business attire is more of conservative. Men are required to wear dark colored conservative business suits and women should dress conservatively in suits or dresses. In India, the weather often determines the clothing dressed. In the hotter parts of the country, the dress is less formal i.e. plain or lining shirts with trousers. But dressing as suggested above for the first time meeting indicates respect and high business discipline.
Business Language - A Barrier or A strength in disguise
While in Russia, the main Business language is Russian, Indians have the capability to leverage with the international language English. English is the most widely used language for business purposes (REFERENCE NEEDED), thus either parties can use it during merge negotiations. All the more, it will be beneficial from _____Y_____ point of view as it will help them in going global. The management of Indian company will assist in taking the new entity at a global platform.
Management and Personnel - Differences vs. Similarities
The hierarchical structure in Russian business practice refers that the decision makers higher ups have the authority over their subordinates. However, the collective good nature encourages a democratic and flexible work ethos. In Russian Culture, showing respect for seniority and giving consideration to the hierarchical structure is important for establishing and maintaining strong business relationships. In situations of conflict, Russians avoid taking official stance as they are more people oriented and thus respond to more personal approach.
Similarly, in India system as well, seniority is given prime consideration. They are referred with 'Sir', instead of their first names as is common in western countries.
Russian organizations run by technocrats are notorious for having many rules and regulations. This stems from the centrally-planned communist system. Usually, the company structures are vertical, with a top-down decision-making style. There is not much communication and information sharing between the different organizational levels. Trust that is based on good interpersonal relations is a crucial element in business in Russia. It is also observed that Russians show a traditional lack of trust towards foreigners (REFERENCE NEEDED).
Indians are more of a givers by nature. Respect for others, friendly behaviour is all ingrained in Indian people and so with the business culture (Kwintessential).
Friendliness, patience and open communication with respect for other country will help build strong relation between the two companies. There are more common things in the two country's business management practices than differences.
The innovative idea behind the business
Systems and procedures in the business and implementation strategies
The present day business environment in Russia is complex and not quite easy to understand and manage (Groznaya, 2009). Three partly different and partly similar generations co-exist in one business arena. In spite of all these differences, India and Russia share a lot of common things like Russians believe that in Russia virtually any problem can be solved. So is the Indian mentality that they never give up, until the problem is solved.
The modern Russia is more pro-western and is adapting to the western style of managing business. Thus, strategically, it would be a good prospect looking forward for the Indian Business X_______ to get merged with Y_____________. The synergies of both will help them reach broader markets and expand successfully.
Community participation and social entrepreneurship: -
Community means society or groups of people in local community or organisations. Participation means getting involved or contribution. When these two words are brought together, it means getting involved with groups of people in local community. Community participation and involvement in a project is one of the key elements of action research. To increase the sustainability of a project, it is quite important to be practical and analytical, when working towards improving the levels of commitment and getting everyone involved in the various stages of a project. The outcomes from these projects are more probable to suit local situations. It is often a challenge to develop and maintain participation of stakeholders (Entrepreneurs) for various strategies and consideration. Entrepreneurs can participate in many activities like initial planning activities, the development of action plans and many more.
Community participation is really important for Indian entrepreneurs because, they are planning to do business in Russia which involves lots of barriers such as different languages, having completely diverse culture, different climatic condition and more importantly different fashion styles of clothing compared to India.
This figure shows the involvement of all the group of people in a community project. As a rule, in the centre of the figure is the project team and those 'who it is for' (Wadsworth 1997). The next stage is to find with whom and how Indian entrepreneurs can collaborate with the project partners. This can include government agencies, funding bodies and support agencies. After this stage, network service providers are significant to find the association outside the organisation. For Indian entrepreneur, it will be quite valuable information, because those associates will contribute in some form and they will also help to create a link with the community. Last stage of this figure is the community or neighbourhood. This stage will give deeper understanding and feedback on the ways to connect the community.
By indulging in these stages, it will bring benefits to Indian entrepreneurs in a way that, they can bring together collective ideas, perceptions of different people and resources. It can also help to create an environment of collective responsibility which will generate a commitment among everyone to work together in a productive way. Community participation can develop shared vision between every person involved with these project, that will in turn, increase the sustainability of the project. Community involvement ensures an approach that suits local circumstances. With all this said, it is certain after following all these stages that, Indian business can reduce the risk of failing and will deliver as per the needs of the local community.
According to the ashoka.org, Social entrepreneurs often seem to be possessed by their ideas, committing their lives to changing the direction of their field. They are both visionaries and ultimate realists, concerned with the practical implementation of their vision above all else. Social entrepreneurship is "innovative activity with a social purpose in either the private or non-profit sector, or across both." (Bornstein 2004; Nicholls 2006; Martin and Osberg Spring 2007; Light 2007; Elkington and Hartigan 2008; Ashoka 2009). It will be supportive for Indian entrepreneurs to indulge with social entrepreneurs because the ideas given by them are user-friendly, understandable, ethical, and engage widespread support in order to maximize the number of local people that will stand up, seize their idea, and implement with it. By getting involved with Russian social entrepreneurs, it will assist the Indian entrepreneurs to tackle with the social issues and will make it easy for Indian entrepreneurs to adapt to the social change. It will create a better image within the community of the business by connecting with the community through social entrepreneurs. It will be sensible decision to involve local social entrepreneur because they are the one's who can give the better insights of the society than some entrepreneur from overseas.
Methods of expansion and growing the business in the future:-
Community participation: -