RUSSIA IS NOT ONLY MOSCOW
When the majority of companies think to expand their business to Russia, they think about Moscow. With a population over 12,5 million of people, the market of goods and services is very established. You can find almost any brand and any kind of service. Of course, there is still potential within Moscow’s market but, considering other regions can bring additional benefit to your business.
There are concrete regions where you can have multiple benefits for your business such as; 5-10 years tax free, reduced bureaucratic procedures and even subsidies on your energy bill, this can be up to 30% cost reduction for your business (russez).
These regions are called SEZ (special economic zones). Before entering in the Russian market you should study in detail the benefits in which these zones can present for your business. Companies such as, Honeywell, Ford, Novartis, Isuzu and many others already allocated their factories within these zones.
Another important issue to take in to consideration is the demographic change, the emerging middle class, it is not only emerging in Moscow or St. Petersburg. Cities such as Kazan, Nizhniy Novgorod, Sochi, Lipetsk, Perm and many other regions are experiencing important growth. Mostly the existing commercial infrastructures of these cities is not sufficient to satisfy the increasing demand for their customers.
With vast Russian territories (17.100.000 km²) logistics become an important issue but people have no choice than to travel to Moscow or St. Petersburg or to acquire a service or product. The biggest city after Moscow (12,5 million) and St. Petersburg (over 5.35 million) is Novosibirsk, with a population of 1.6 million. In total (in Russia) there are 15 cities which have over 1 million in population and there are 4 more cities that will reach approx 1 million population in the following 5-7 years (statdata). This presents important potential for certain businesses.
Many international companies have already focused their resources in developing their presence out of the capital, Decathlon reached an agreement with a Russian partner to assembly Bicycles in Perm. This will permit the French company to save up to 30% on customs duty (RDIF). Another good example is the American multinational, Honeywell which, not so long ago started the production of electrical goods within the special economic zone, Lipetsk.
Performing an allocation strategy requires an extended analysis of the business and its strategic objective but, it’s completely indispensable in order to provide our client guaranties for a long term business within the country.