Selling to the Capitalists

Recently the cavernous halls of the Washington, D.C. Convention Center witnessed an event that would have been considered extraordinary only several years ago. There, in the center of the capitalist world, sat dozens of exhibits featuring the very latest in high technology and other products and services from Russia.This major exhibition, called Technology from Russia '94, brought together under one roof representatives of industries and companies from all over Russia ranging from St. Petersburg to Siberia. The three-day exhibition was well-attended, by members of the U.S. military among others, and can be considered a success.On the positive side, this major effort demonstrated a seriousness of purpose on the part of many Russian companies, as it clearly took much time, effort and expense to develop and bring the displays and information to the United States.The project was also a welcome effort to balance the scales and bring more attention to what Russia can offer to the United States, as opposed to what the United States can offer Russia.However, the exhibition also illustrates the relatively undeveloped state of the commercial relationship between Russia and the United States. Displays of this type are a useful way of bringing attention to a relatively broad audience about the nature and quality of potential products and services. But much more will be required on the Russian side to make significant commercial transactions a reality.Targeting markets. While the difficulties of targeting specific markets are undoubtedly significant, it makes sense for Russian companies to obtain information on the most likely potential markets for their products. We are not by and large talking about massive market research surveys or even classic MBA-style efforts. Given the limited resources on the Russian side, this is not realistic. Rather, companies should at least seek to develop answers to a few basic questions: Are there serious potential markets for the product? Where are U.S. markets currently buying those products? If the product is not currently being used, why might it be of interest? Can a Russian product be competitive in terms of price and quality?Creative Targeting. Developing markets is not just a matter of identifying companies which are already using the company's type of product. It also means finding companies which might use the product if they knew it existed.Entrepreneurship. A key facet of entrepreneurship is persuading companies who are not currently using a product that they really have a need for it, even though they have not previously been aware of it. Russian companies therefore need to view their products in imaginative ways.Visibility. It will do little good for a Russian company to possess a competitive product if that fact is not known by potential customers. While the kind of exhibition which took place in Washington is necessary and useful, it is inherently somewhat of a scattershot approach. Russian companies, after identifying realistic markets, need to focus directly on these potential commercial relationships and convey to them the kinds of information that such U.S. entities will find relevant to their decision-making. In other words, general information about what a product will do, such as the Washington exhibit presented, is useful, but it is not enough.Awareness of the political environment. For better or worse, the political and governmental environment is an important factor in international business interaction. For Russian companies, several considerations are relevant. First, the U.S. government (and state and local governments) are potential customers for Russian products. Secondly, governmental policies, such as statutes, regulations and court decisions on matters such as taxes and tariffs, can directly affect the prospects for commercial transactions, and can also cause problems even after such transactions are agreed upon.Finally, the overall political and economic environment will affect the prospects for Russian companies. Any non-U.S. product that is in competition with an American product will be subject to concerns about the impact on jobs in the United States. When the U.S. government is making purchases, for example, there are both laws and political pressures that encourage the purchase of products made by U.S.-owned companies.In this regard, Russian companies will have to consider whether it might make sense to develop a cooperative business relationship with a U.S. company (via purchase, creation of a joint ownership or other arrangement). Such companies might have a competitive advantage in the U.S. market. Further, truly privatized companies will in general be more attractive to U.S. businesses than state-run companies.Of course, even doing all of the above will not be enough. Russian companies must also offer quality products and be willing to understand U.S. business customs and practices.While the competition will be fierce, and the effort at times bewildering or frustrating, it is clear that Russian companies do have products marketable in the United States. With persistence and awareness of the above guidelines, there is every reason to believe that Russian companies can compete in the U.S. market.Robert G. Allen is a partner in Allen & Harold and also publishes The Commercial Code of Russia. W. Bruce Weinrod is Counsel to Allen & Harold and was U.S. deputy assistant secretary of defense for European and NATO policy from 1989 to 1993. They contributed this comment to The Moscow Times.