How to do business with Eurasian markets

Lecturer: Prof. Fred Ludolph

Date: 18th & 19th Feb 2020

First Subject: How to do business with Eurasian markets

The seminar began at 09:00 a.m. with the welcome of Ms. Mina Alavash – the education delegate of DMAN Academy management school in Iran and with the cooperation of I.E.CC. Ms. Alavash introduced Prof. Fred Ludolph as a professional lecturer with a good face of teaching background as well as consulting in every field of business in Germany, CIS, and especially in Russia.

Prof. Ludolph started the first day seminar with the topic of how to do business in Eurasia Region, with the content as below:

The Member states of the Eurasian Customs Union (EACU)

  • Armenia
  • Belarus
  • Kazakhstan
  • Kyrgyzstan
  • Russia

The treaty establishing the Eurasian Economic Union was formally signed by three states which were part of the former Soviet Union: Belarus, Kazakhstan and Russia.   Agreements to enlarge the EAEU to the other post-Soviet states of Armenia  and Kyrgyzstan  were signed on 9 October and 23 December 2014, respectively 

Trade agreement Iran – Eurasia: In May 2018, Iran signed an agreement with the Eurasian Economic Union members -Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia- in Kazakhstan.

Once the free trade zone comes into force, the EAEU will grant Iran tariff concessions on hundreds of items (862 products, with 360 related to the EAEU and 502 to Iran).

Russia’s State Duma and the Federation Council ratified the agreement to establish Iran-EAEU free trade zone in November 2018.

How to do Business with Russian Market

Russia Fact and Figures: Russia is a country in Eastern Europe and North Asia. The
capital of Russia is Moscow. There are direct national borders with 14 neighbor countries:
Azerbaijan, Belarus, China, Estonia, Finland, Georgia, Kazakhstan, North Korea, Latvia, Lithuania, Mongolia, Norway,Poland and Ukraine.

IRAN Im-/ Export with Russia

Russia exported 148,386 tons of commodities worth $62.12 million to Iran, up by 86.15% in tonnage and down 62.44% in value YOY respectively. Iran mainly imported field corn, sunflower oil, barley and radio navigation devices from Russia. (07.07.2019)

Irans commercial exchanges with Russia amounted to $1.33 billion in the first seven months of 2019, indicating a 24.6% rise compared with the corresponding period of 2018, according to the Federal Customs Service of Russia. Iran exported $333.7 million worth of commodities to Russia from January to July, down 6.2% year-on-year, Russian news agency Sputnik reported. Russia’s exports to Iran totaled $999.3 million, up by 39.9% YOY. Iran’s share in Russia’s foreign trade during the period rose to 0.4% from 0.3% in the corresponding period of last year.

Kazakhstan Import Export with Iran

The volume of mutual trade between Kazakhstan and Iran reached $ 516.3 million in 2018, adding that it includes $426.7 million (82.6 percent) of Kazakhstan’s exports to Iran, and $89.5 million of imports from Iran. Kazakhstan is ready to increase supplies of wheat to Iran from 500,000tons in 2019 to a million tons in 2020. Kazakhstan imported pistachios, dates, apples, plastics, tableware and meat processing equipment from Iran.

Belarus and Iran:

Belarus’s most valuable products, imported by Iran:

  • Synthetic staple fibres and synthetic filament tows;
  • Fibreboards of wood;
  • Trucks and parts thereof;
  • Cosmetics;
  • Tyres;
  • Optical apparatus;
  • Bearings;
  • Medical equipment.

Armenia

Armenia – Iran trade

According to Armenia’s National Statistical Service, Armenia exported $94.2 million worth of goods to Iran, a 12% increase over 2017. Armenian imports from Iran in 2018 totaled $269.4 million, up 54.2% from 2017. In 2018, Iranian-Armenian trade totaled $363.6 million, up 40.5% from 2017.

Cement was the next largest import – $25.7 million, followed by coke, bitumen and petroleum products ($14.5 million).

These imports were followed by fruits, walnuts, fertilizer, construction materials, glass, tiles, metal bars and wire, and pipes.

Kyrgyzstan

The two countries trade in agriculture and capital goods. … According to Azer News, the ambassador of Iran to Kyrgyzstan Republic, Ali Mojitaba in 2019, disclosed that the trade volume between Iran and Kyrgyzstan has totaled to over $44 million.

Iran mainly exports clothing, nuts, paints and flooring to Kyrgyzstan and imports meat, grain and steel scraps.

Key factor to success

  • Market-/Marketing Study before market entry
  • Due Diligence of potential parters
  • Relationship Management (relationship network)
  • Key-Account Management is a matter for top management
  • Time is money! Speed = competitive advantage
  • Develop a first-class team of motivated employees on site
  • Quickly build up references and use them as advertising
  • Develop operational excellence
  • Long term orientation with business in Eurasia
  • Global sourcing – use Eurasia potencies

Legal structures for starting a business in EURASIA

  1. Direct sales
  2. Distributor contract businesses (agencies)
  3. Representative office or branch
  4. Russian subsidiary company
  5. Joint Venture

Second subject : Change Management for the stability of economy Business Plan and Strategic Management

Vuca( Volatility, Uncetainty, Complexity, Ambiguity)

Which are about : Dealing with unexpected, unstable events/Dealing with lack of other information even though the basic cause and effect /Dealing with situations flooded with interconnected variables and parts even though some information is available/ Dealing with vague issues with unclear relationships and unknowns.

Main characteristics àManager(Visionary thinking, To possess a high degree of emotional intelligence, Goal-oriented, endurance and perseverance, Creativity, flexibility, lateral,strategic, scenario thinking , Enthusiasm, obsession (fighting for success), Power of judgement, decision-making ability, Willingness to take risks, Communicative competence, Willingness for life-long learning, To aspire for independency

Emotional Intelligence – 5 domains:

Knowing your emotions/ Managing your own emotions/ Motivating yourself/ Empathy à Recognising and understanding other people´s emotions/ Managing relationships, managing the emotions
of others

Business Model Canvas that pay an impotamt roles in Change Management :

Partner,Activites, Resourses, Value proposition,Channels, Customer Segments, Costs, Revenue strems

Most important reasons for a business plan:

Foundation of an enterprise (Start up)/ Search for investors or venture capital/Merger/Aquisition/Restructuring and rationalisation/Restructuring and rationalisation/ Financing/  To attract a potential client (key account)/Recruitment of top executives/Information for the share holders/ Guideline for the management

Strategic Management

The two approaches of strategic management

  • the prescriptive approach and the
  • emergent approach

can be used to develop models for the corporate strategy process!!!

Environmental Analysis – PESTEL(Political –Economical- Social- Technological- Environmental-Legal)

Bargaining power of suppliers:

  • If there are only a few suppliers.
  • If there are no substitutes for the supplies they offer.
  • If suppliers’ prices form a large part of the total costs of the organisation.
  • If a supplier can potentially undertake the value-added process of the organisation.

 

Bargaining power of buyers

  • If buyers are concentrated and there are few of them.
  • If the product from the organisation is undifferentiated, the buyer can easily switch from one to another without problems.
  • If backward integration is possible.
  • If the selling price from the organisation is unimportant to the total costs of the buyer.

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