Russian Business
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Since the Soviet Unions collapse in 1991, Russia has striven to implement a market economy and achieve consistent economic growth. Russia has a lot to offer foreign investors. The worlds largest country has a fast rate of growth in its gross domestic product, a large population of over 150 million people, and a substantial expansion purchasing power. High oil prices, foreign investment, and political stability have helped Russia attain economic growth. Since 1998, Russia has sustained an average annual growth of 6.7%. The majority of Russias exports include oil, natural gas, metals, and timber. “Russia has the worlds largest natural gas reserves, the second largest coal reserves and the eighth largest oil reserves. It is the worlds leading natural gas exporter and the second leading oil exporter (Bush, Jason).” A large growth in productivity, real wages, and consumption has played a large role in its growth. Russia contains a skilled work force consisting of women and minorities. Although Russia has been steadily on the rise, its dynamic, unique, challenging, and sometimes uncertain business environment has caused problems for many foreign companies. These factors have made many associate risk, rather than opportunity, with Russia. Based on interviews with executives from 36 foreign companies operating in Russia, eight commandments have been formed to help Western companies prosper. These commandments were formed to help entrepreneurs avoid mistakes that many foreign companies have previously experienced while trying to expand to Russia.
The first commandment states that companies should practice an authoritative, but not authoritarian leadership style. “This authoritative leadership occurs when a strong and highly-involved executive leads from authority gained from the followers by virtue of competence possessed rather than just through the power of the position (Fey and Shekshnia).”Choosing a leader with an appropriate leadership style is critical for a firms success. It is very important to understand which leadership styles are most effective. Leaders are important in any society. Effective leaders are able to drive economic and social progress at macro and micro levels. Past research suggests that different leadership styles are effective in different national contexts (Fey, Adaeva, and Vitkovskaia). “Russians value strong, highly involved leaders who gain authority and trust through competence. Effective leaders in Russia are able to communicate a compelling vision, deliver superior results and share responsibility and success with followers. A hands-off management style, on the other hand, is often mistaken for weakness (Fey and Shekshnia 2007).” The rise of capitalism in Russia has allowed entrepreneurs to gain a large amount of power within an organization. Followers look to a firms leader as a superior being with unique rights. Russians have a need for powerful charismatic leaders to guide them. In order to gain this respect and conformity, the leader must demonstrate competence and deliver tangible results. Russian workers expect these leaders to address their problems and improve their working lives and the companys performance. Foreign executives are expected to live up to a higher ideal than Russian managers. “In Russia the general belief is that foreigners are more progressive and can do more for their staff than Russian bosses(Fey and Shekshnia