Establishment &
Outsourcing in Russia
Danny Rames - Linon
Per Strandqvist - Advakom
Danny Rames, Linon & Per Strandqvist,
Advakom
1
Agenda
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Danny Rames (Linon)
15 min
Per Strandqvist (Advakom)
20 min
• Establishment
• Business culture
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• What is Advakom?
• What to do in Russia
• Management experiences
During the presentations – Prepare your questions!
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Questions & discussion
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Establishment
Business culture
Industrial start-up
...
Danny Rames, Linon & Per Strandqvist,
Advakom
25 min
2
Presentation
of LINON AB and its managing director
Danny Rames
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LINON´s core activity is to support industrial
corporations, investment banks and funds to
implement projects and investments in Russia.
Danny Rames, who has been working in Russia
last 16 years, has a successful and proven record
of competence, coupled with specific knowledge
of rules and regulations, among others managing
a spearhead investment of Volvo Trucks for an
assembly of trucks outside Moscow
Danny Rames, Linon & Per Strandqvist,
Advakom
3
 Establishment
1.
2.
3.
4.
5.
General conditions
Legal issues
Financing
Authorities & bureaucracy
Personnel
 Business Culture
1.
2.
3.
4.
5.
6.
Socializing
Question of time
Language
Management style
Networking
Corruption
Danny Rames, Linon & Per Strandqvist,
Advakom
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General conditions
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Establishment process takes time, resources and should be
carefully prepared.
It takes time to find suitable & trustworthy partners.
It takes time & resources to obtain correct information
about other companies.
Criminality is not a big issue.
Visa procedure is time consuming and trouble-some.
It is important to take advantage of a trustworthy person,
as a match-maker during an initial stage, who has a deep
knowledge and a successful record of doing business in
Russia. Preferably with a good knowledge of the Russian
language.
Danny Rames, Linon & Per Strandqvist,
Advakom
5
Legal issues
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Verbal agreements have no legal value.
Written & very detailed contractual documents are
considered norm.
All agreements may be renegotiated at any time.
Theoretical legislation is one thing, applicability is
a different issue.
Generally, Russian legislation is logical.
The legislation is dynamic, changes all the time.
Legislation is often contradictory.
”High street firm” is not always the best. A smaller
local firm may know local conditions better.
Danny Rames, Linon & Per Strandqvist,
Advakom
6
Finance & Administration
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Russian banking system does not yet provide all
services you are used to.
Russian Accounting System (RAS) is slightly
different from IAS, but the gap is closing.
All transactions must follow contractual
agreements (banks have a control function).
Local transactions between Russian banks work
well.
Rouble inflation is not considered as a problem
Danny Rames, Linon & Per Strandqvist,
Advakom
7
Authorities & Bureaucracy
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Russia is the ”Mecca” of formalism
and documents are almost
considered holy.
Bureaucracy is complex and rigid
with long proceeding times.
There is no coordination between
different authorities.
Customs and tax are the worst.
Danny Rames, Linon & Per Strandqvist,
Advakom
8
Personnel
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In Russia the boss is a Czar.
It is absolutely necessary to have a
Swedish person in the management.
Young managers (<35) may be shaped.
Managers and engineers are used to study
and like education.
Follow the laws of employment.
Use your own head when recruiting.
Danny Rames, Linon & Per Strandqvist,
Advakom
9
Socializing
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To do business in Russia, you have to be
physically present and take time to build
personal relationships
There are several unwritten business rules
(dress code, shaking hands, drinking,
remembering birthdays etc.)
Nowadays the vodka drinking is not that
necessary, but do not say no to a toast
Danny Rames, Linon & Per Strandqvist,
Advakom
10
Question of time
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“Time is a movable feast”
Be on time
Danny Rames, Linon & Per Strandqvist,
Advakom
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Language
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Russian language is a mentality.
In a long term, knowledge of the
Russian language is necessary.
A trustworthy interpreter is a key
factor.
Danny Rames, Linon & Per Strandqvist,
Advakom
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Management style
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(Once again) The boss is a Czar.
Information is power.
Consensus is an unknown
conception.
Danny Rames, Linon & Per Strandqvist,
Advakom
13
Networking
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In order to receive as much correct
information as possible, Russian
managers socialize frequently across
professional and social boundaries.
To meet and shake hands with
somebody at an informal occasion
might have an important impact later
on.
Danny Rames, Linon & Per Strandqvist,
Advakom
14
Corruption
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It is everywhere
Do not cut corners by bribing your
way through. Instead, push
authorities by constantly being in
their face, using trustworthy people.
Danny Rames, Linon & Per Strandqvist,
Advakom
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Some Good Advice
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There is nothing mystic about the
Russian market, so do not treat it
that way
Enter Russia wholeheartedly, or do
not enter
Trust is good, control is better
Use a good lawyer
Prepare for irritation and frustration
Be distinct and pedagogical
Danny Rames, Linon & Per Strandqvist,
Advakom
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Danny Rames, Linon & Per Strandqvist,
Advakom
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Location
Danny Rames, Linon & Per Strandqvist,
Advakom
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Business Idea & Market
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Business Idea
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Production of passive data- & telecom
components in Russia
Subcontractor to current market players
Contract manufacturing
Market
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Russian system integrators & distributors
International market leaders (subcontracting for
the ex-USSR markets)
Danny Rames, Linon & Per Strandqvist,
Advakom
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Products & Application
Danny Rames, Linon & Per Strandqvist,
Advakom
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Foundation Structure
European Bank
For
Reconstruction & Development
Swedish
Management
Private
Swedish Investors
Holding
Advakom
Danny Rames, Linon & Per Strandqvist,
Advakom
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Human Resources
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Swedish top management
More than 15 university engineers in
technical departments
More than 15 employees speaking English
More than 30 with university education
Russian ISO 9001 & QS 9000 specialists
Totally ≈125 employees
Danny Rames, Linon & Per Strandqvist,
Advakom
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Current projects
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Local production of data enclosures for
German market leader
Local production of electric enclosure
components for French corporation
Tailor made safety enclosure for large
broadband provider in Europe
Metal components for a European bus
manufacturer’s production in Russia
Metal products for large furniture supplier
Cable assemblies for a major telecom
equipment manufacturer
Danny Rames, Linon & Per Strandqvist,
Advakom
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Sample products
Danny Rames, Linon & Per Strandqvist,
Advakom
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Safecase
Danny Rames, Linon & Per Strandqvist,
Advakom
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Why to Russia?
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Reach a new market – increase sales?
Reduce manufacturing costs?
Reduce design costs?
Manufacture for Russia?
Manufacture for Russia & Europe?
Exploit Russia’s raw material resources?
...
=> Analyse your business & define your objectives
Danny Rames, Linon & Per Strandqvist,
Advakom
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What to do in Russia?
Market
requirements
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Specification
Design
Production
Sales
What part of your business to be done in Russia?
Interface to customer (sales & logistics)?
Production (local needs and/or multinational needs)?
Design work (for local production, for localisation of
products, for general needs, ...)?
Specification (to meet local specifics)?
Requirements (local requirements as base for total
process)?
Danny Rames, Linon & Per Strandqvist,
Advakom
27
Well Done in Russia
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Medium to large series
Few different components or raw
materials
Stable & repeating business
Engineering intensive
Labour intensive
Software
Danny Rames, Linon & Per Strandqvist,
Advakom
28
Less Good in Russia
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Prototypes & specials
Short series
One-off business
Scattered component & material
supply chain
“Sweat-shop” production only aiming
low labour cost
Danny Rames, Linon & Per Strandqvist,
Advakom
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Management Experiences (I)
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Compartmentalisation (everyone has his box)
Group working is an unknown method
Strong hierarchy
To do nothing is OK (or sometimes even good!)
Weak internal & external communication
Time is considered “free of charge” and a “nondefinite resource”
It is normal to argue and demand
Do not expect “common sense” to guide the
organisation
Danny Rames, Linon & Per Strandqvist,
Advakom
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Management Experiences (II)
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Russian managers are hard working
Deadlines work
Bonuses & performance/task oriented rewarding
work
Friendship & social relations are a part of the
business
Russian language is a must
Think for yourself and learn the details, do not
take “facts” for facts
Danny Rames, Linon & Per Strandqvist,
Advakom
31
One Advice
HANDS-ON!
Danny Rames, Linon & Per Strandqvist,
Advakom
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