BISNIS Interview: Basics of Business Development in Eurasia

BISNIS Bulletin, September/October 2004

BISNIS trade specialist Marianne Drain spoke to Tim McQuillin and Lyudmyla Zabroda of ROMDEL CIS, a Berkeley, California-based company that helps small and medium-sized U.S. manufacturers capitalize on business opportunities in Eurasia, about current opportunities and advice for U.S. companies interested in the CIS markets.

What opportunities do you see for U.S. products in the Eurasian market?

The region has roughly the same population as the United States, so it presents a large potential consumer market for U.S. goods. The Russian and Ukrainian economies are by far the most developed in the CIS, and have shown steady and impressive growth over the past several years. This growth has led to annual double-digit increases in disposable incomes, forming a small yet growing middle class whose standard of living and purchase priorities can be compared to that of the American middle class of the early 1960s. They are increasingly looking for high quality, affordable goods that reflect their growing, albeit modest, prosperity. Popular items include home furnishings, home renovation supplies, clothing, health and healthcare-related products, and entertainment. Competition from Europe is tough, but only a handful of major brands are present, leaving opportunities for new players. Additionally, in some categories, such as furniture, American brands are practically nonexistent, leaving this niche wide open.

What are the key components for small and medium-sized companies to capitalize on these opportunities?

First, some prior international experience would help a company avoid the most basic mistakes and also decrease time to market entry. Second, internal support of senior management is critical because they can ensure the necessary time and financial resources are made available to pursue this new market. Third, take a win-win attitude toward potential customers and business partners, just as one would with any business relationship. Fourth, have a business or marketing plan with realistic payback periods and sales goals. Finally, demonstrate to potential local partners that your company has a long-term interest in their market. Credible local partners will distrust and avoid doing business with companies they feel are only looking for a quick buck. Tangible signs of a long-term interest include flexible terms of sale, a co-op advertising program, a local presence, and the ability to operate within the local culture, customs, and language.

Can you give an example of how you’ve helped bring a company successfully into the this market?

A good example is a client of ours, a leading U.S. furniture producer, which was already an experienced exporter. We created a turnkey sales representative relationship with them in order to establish a diversified and sustainable distribution network in Russia and Ukraine. We conducted market research, screened potential dealers through phone conversations and in-country meetings, developed a strategic marketing plan, negotiated terms of sale, and managed fulfillment. We are also currently planning their participation in a trade show next year.

Any final words on doing business in Eurasia?

When thinking about doing business in the region, I am often reminded of some lessons I learned as a volunteer business consultant in Ukraine with MBA Enterprise Corps. First, a good local management team is worth its weight in gold. By good I mean skilled, motivated, trustworthy, and having a good rapport with their American partner. Second, U.S. companies have to be adaptable and flexible. Any company looking to do business in a foreign market must adapt itself and its product to the local market if it wants to succeed. Circumstances can change quickly and unexpectedly in developing countries, so U.S. businesses must keep long-term goals in mind in order to remain flexible in the short-term. It sounds textbook and easy, but you’d be surprised at how many American managers have a lot of trouble in these areas.

ROMDEL CIS can be reached at info@romdel.net or (510) 549-2414.