Vox Pop: Finns in Russia
- By Finn Cohen
- Mar. 17 2010 00:00
Pirjo Karhu, CEO of Konsu Oy Accountor Group, 1st Scandinavian accounting company to start a business in Russia and now the largest.
I established this business in 1982 and ran it for about 10 years in Finland. When the 'New Russia' started in 1992, I started to find business possibilities in St. Petersburg first. My home is a three-hour drive from St. Petersburg, so it was interesting to start there … there was no foreign business there at all in 1993. Then it was horrible, horrible, no laws. For example, the tax authorities didn't know anything about activities of international companies and they didn't know how to treat them. At that time there were more than 800 laws and acts and decrees concerning taxation, and you never knew which ones the authorities would apply in different cases. In 2002 came new tax laws, and they are quite similar to ones you have in Western companies. Now it's much easier, we have federal law for taxation. At that time there was no federal law.
We have tried to market the idea that now is a good time to start a business in Russia, but actually, it hasn't been so easy to get new companies. If there is some kind of negative news, companies are thinking over their decisions longer. But that is our message now.
It's very important to have good tax advisors in Russia. We've been in Russia for 17 years already, we started in St. Petersburg, and next year will be 15 years for us in Moscow. What our message is, is that we want to be the solution for our customers, that they can concentrate on their own work and we will take care of the paperwork, the bureaucracy, consultation … advising them how they can succeed better. I think Konsu is a good example of a success story in Russia, but it's been very hard work to do this, to keep people trained and keep their motivation level up. We have the slogan, 'In Russia With Love,' to let people know that OK, we love each other in the company, we love our customers, we want to make our clients happy and serve them better and better.
I think Finnish companies who are operating in Russia are looking for growth, because the market in Finland is very small, and if you want to grow by 20 to 50 percent, you have to find new markets. Russia is very close to Finland, and we Finns … we understand the Russian mentality. One of our strong points is that we don't want to change the Russian people…we just want to make things happen, and we do it as a team.
Sami Koivikko, electronic musician from Helsinki; who has performed all over Russia.
I have had good opportunities to travel, play and see so many cities around Russia. Since my music can be considered as marginal, not all the people in the crowd have heard my music before, but the feedback has been great. Traveling can be quite exhausting sometimes, but in the end, it's always rewarding to see people enjoy my music.
I have traveled in Russia by plane, train, car and bus. Once I had to keep company with a Russian man who was sitting next to me on a long flight. He didn't speak any English, nor did I know any Russian. Still, he wanted to talk to me all the time and know about my profession as a techno musician. He kept buying me whisky and cheerfully tried to understand my story. I think everybody else in the plane was trying to get some sleep since it was already past midnight, but I didn't have a chance.
When we got to our destination, he thanked me for keeping him company, wished me good luck and gave me a strong hug. My promoter met me at the airport and was a bit amazed to see me hugging a big Russian man who called me a friend.
Andrei Pantioukhov, general manager of Nokian Tires in Russia:
Nokian Tires' history in Russia dates back all the way to the company's establishment in 1898, when it started exporting rubber boots and technical rubber to Russia. The sale of tires started in 1964, and Nokian is in fact the first Western tire brand known to Russian consumer. Since then we have had a representative office in Moscow. We also had a joint venture with Amtel in early 2000's. In 2004, the decision was made to simultaneously develop sales and distribution system in Russia and invest more than 350 million euros ($515 million) in a state-of-the-art factory in Vsevolozhsk near St. Petersburg. As part of the distribution system we have developed the Vianor tire chain, which is now the biggest in Russia with more than 200 outlets. Since 2004, our sales in Russia grew very rapidly and exceeded 300 million euros in 2008. This year, sales have been hit by the economic crisis and weak car sales, but we see it as a temporary fallback.
Nokian is a market leader in Russia's market of premium tires with a market share of 30% in 2008. We are convinced that, with a very strong brand, comprehensive distribution and modern local production, we are well-positioned to further strengthen our market standing. Russia is and will be Nokian Tires' strategically most important market area.
Conditions are the same for all companies, but the approaches differ. We have certainly encountered difficulties with bureaucracy in Russia, but we have managed to work effectively here thanks to our localized professional expertise. Just one example. We built and launched a large-scale greenfield factory in less than one year. This became possible due to close cooperation with and continuous support from regional and local authorities. Our example shows to potential investors that you can be a fully transparent public company, operating only in a 100 percent legal way, and still be successful in Russia.
Kari Kauniskangas, deputy to the group's president and CEO, head of international construction services at YIT Corporation:
YIT has operated in Russia since 1961. Russia is a neighboring country of Finland, and it is a natural direction for expansion of operations.
In Russia there are over 140 million inhabitants and a big amount of 1950s- and 1970s-era s constructed buildings for residential use that do not fulfill that demand of the 21st century. YIT has knowledge from Finland to be used together with local competences to create living environments and apartments that attract a certain amount of potential consumers as home buyers. Russia is an emerging market where the purchasing power of consumers has increased favorably.
YIT operates in St. Petersburg, Moscow, and Moscow region, Kazan, Rostov-on-Don and Yekaterinburg. In Russia, as in many other countries of the world, there is one capital — Moscow and its suburbs and also the northern capital [St. Petersburg], which is competing in terms of investments and status. We believe that these two cities' potential will stay on a high level also in the future, regardless of short term fluctuations.
Then there is a second group of potential cities. In Russia, all big cities with more than 1 million inhabitants have a lot of potential both for residential and commercial development. After market research and detailed analysis, we have established our companies in Kazan, Yekaterinburg and Rostov-on-Don. We believe that continuous development of existing businesses and processes there give us a strong position in our customers' minds. To open a new business, even with local partners, in a new city requires not only financial but, very importantly, human resources.
With commercial development (mainly trade centers, logistics, in some cases offices) we concentrate on Moscow and St. Petersburg, where we have well-established infrastructure and a professional team. We believe that there's a higher demand for residential real estate in Russia rather than commercial.
Elena Eybshits, Fintra:
When a Finnish company buys a Russian company, they face the challenge of different national and corporate cultures, different business processes, quality standards, and so on. If Finnish management is successful in building a common culture and providing a common way of doing business, it brings results. Again, it's not easy to achieve this. One may think that company management may simply issue policies, values and codes of conduct, and order Russian personnel to follow it. But such an approach doesn't work in Russia!
In some cases, Finnish companies are too slow. Many decisions require approval from the head office. Management of the Russian subsidiary has to wait too long for that approval, facing the risk of losing growth opportunities. In other cases, Finnish companies try to move too fast without careful evaluation. It sounds a little bit strange, since Finns are well-known for their ability to plan and evaluate carefully. But they sometimes underestimate the complexity of the Russian market. Finns often assume that having international experience is sufficient for operating in Russia without special adaptation. But Russia is a very special case. Our experts have stated very clearly: International experience alone doesn't guarantee success in Russia.
Finland and Russia are neighbors, but we are very different. Employees and managers should be specially trained to learn how to work effectively together. Without such training, most probably significant contradictions will appear, which will influence the performance of the whole business.
Arto Halonen, documentary filmaker, director of "Pavlov's Dogs," a film about a Russian entrepeneur who organizes games for rich people.
The fact that I had experiences working in many dynamic and difficult places before "Pavlov's Dogs" helped me prepare for the shooting. I made my first documentary in Russia in 1993, called "Something in the Blood" and before "Pavlov's Dogs" I also worked in Kyrgystan, Malaysia, China, Tibet, India, Nepal and Cuba, which are also slightly complicated places to work. Also I tried to get very flexible group to work with me in Russia. I did not want any Finnish people (who thinks he or she is an expert of Russia) to guide me or for anyone to try to control me.
Good people helped me better to step inside Russian culture and reality.
Russia itself as a place to shoot is very dynamic, interesting, hectic and sometimes chaotic.
I wanted to make "Pavlov's dogs" in Russia because I loved the story how rich people were dressing up as poor people in games in Moscow and what this tells us about our current time and about the future and how we manipulate people through games. So I was excited about a story and how it's reflects our world. It is not only a story about Russia.
Erkki Leppanen, the managing director of Consortium Sofi Oy
Consortium Sofi is a joint venture established last May by some 30 Finnish companies for promoting their business in Russia. Many of our companies have long experience on the Russian market. However, we have noticed that the projects in the big country are so large that it is easier to get in negotiations when you are able to offer a package of services or deliveries on a turn key -basis. We believe that the model we offer is advantageous for Russian customers as all deliveries are available in one "supply center." This brings also considerable savings.
As regards to disadvantages, Finnish companies often say that it is difficult to be well informed about legislations and norms, especially in the changes of legislation. The way to do business in Russia is quite bureaucratic as you need lots of documents and certificates for several phases of a project.
The crisis, of course, has effected business, and many of our member companies say that they have lost deals because of the crisis. Still, we see that the model we offer has potential during the crisis, for instance in Sochi, the Russian customer can gain significant savings by working together with one supplier. We also understand that the crisis will not last forever. It is good to keep in contact with Russian customers in difficult times too.