country notebook - russia · great restraint and seriousness. practicality and efforts in modern...

Bates, Ewert, Fairbrother, Osen, Ziems 1

University of Portland

Country Notebook

Russia

Mackenzie Bates, Noah Ewert, Logan Fairbrother, Riley Osen, Remington Ziems

BUS 443 A – International Marketing Management

Tyler Laird-Magee

19 November 2019

Country Notebook


Executive Summary

There are a number of important differences for marketers based in the United States to consider

when attempting to do business in Russia. Russian history begins in the 9th century. The country

is much older than the United States and has a long-storied past of which most Russians have a

proud knowledge. While the history is very different than that of the history of the United States,

there is a similar cultural pride associated with a strong knowledge of that history. Having a

grasp on the events of the past and the cultural implications that those events have had on the

modern age is imperative to doing business successfully in Russia. Because Russia has been

around for such a long time and its people have had to persevere through great adversity in the

harsh climate of both political overthrow and the cold landscape, it should come as little surprise

that Russia has a very high long-term orientation score of 81. In a similar vein, Russia’s low

indulgence score of 20 indicates that the Russian people are those characterized by an ability for

great restraint and seriousness. Practicality and efforts in modern education are greatly stressed

in Russia; this can be observed by the fact that Russia is one of the most educated countries in

the world with a literacy rate of 99.68% and greater than 50% of the Russian population ages

between 25-64 holding at least one tertiary degree. Unfortunately, there is a large amount of

corruption in both education and the government. Russia’s high power-distance score of 93

indicates the acceptance of a major discrepancy between those with high amounts of power and

low amounts of power. Those with power in Russia are able to take advantage of that power to

great lengths. The importance of status upheld in Russian culture can be further observed in

family structures. Extended families can often be found living together, and there is a great

amount of deference paid towards elders in the family. This deference towards individuals with

more experience is mirrored in business interactions, as rank plays an important role in who is


able to influence decisions. High-ranking businesspeople are unlikely to communicate with

people further down in the chain of command.

In order to successfully enter the Russian market, it is important that an international

marketer is not only aware of the cultural differences that permeate throughout Russian culture,

but also sensitive to those differences and the ways that they influence business interactions and

decisions. Without proper understanding of the history that has shaped the way that Russians

interact, it is unlikely that a foreign businessperson will be able to gain or maintain respect in the

country. Furthermore, without careful consideration of the slow-paced business practices of a

very patient culture, an American businessperson runs the risk of offending the Russians with

whom they are attempting to do business. Rather than rushing through meetings to reach an end

goal that benefits the individual’s company, there is an expectation that business interactions will

function to create meaningful relationships through which all parties aim to benefit together.

Respect for rank and status and a willingness to behave within the respective boundaries of a

culture that operates within these parameters is absolutely necessary for the success of Russian-

American relations. American marketers must put their cultural biases aside and appreciate the

differences in thinking of their potential Russian business partners. Solid relationships built on

trust and transparency, rather than flashy attempts at achieving instant gratification will result in

considerable benefits in the long-term.

Cultural Analysis

Introduction


This group has chosen to investigate the viability of introducing solar power in Russia

introduced through SunRun. Solar power is one of the most sustainable sources of renewable

power and is produced via energy from the sun, which is then converted into thermal or electric

energy (“SEIA | Solar Energy Industries Association”). SunRun, founded in 2007 and

headquartered in San Francisco, is the largest player in the Solar Panel Installation industry –

holding 9.6% of solar market share. The next largest competitor, SolarCity, holds 5.8% of

market share. SunRun has two main market segments: customer agreements and incentives as

well as solar energy systems and product sales (Roth). The company provides customers with

residential solar panels and electricity through a variety of different plans and services,

including: solar batteries, which allows the customer to keep the energy produced by the solar

panels they install; solar lease, which allows the customer to lease the solar panels they install

and keeps the cost of installation lower than purchasing costs while providing lower energy rates;

and solar purchase, which allows the customer to own their own solar system (provided by

SunRun) as well keep all of the energy savings associated with switching to solar power. At this

time, SunRun has provided solar energy to 175 cities in 22 states in the United States and Puerto

Rico (SunRun). SunRun also has 53 official locations in 17 states. In 2018, the company saw

$760.0 million in total revenue, provided solar panel installation services to 233,000 customers,

and deployed 1.6 gigawatts of solar energy (Roth).

Solar Panel Installation industry background will also be important to understand in the

process of analyzing the feasibility of introducing solar renewables to Russia. Solar Panel

companies are contracted by a homeowner, solar panel manufacturer, or solar marketing firms,

who then contract an operator to carry out the installation. Key economic drivers in the solar

industry include electric power consumption, corporate profit, per capita disposable income, and


tax credits for energy efficiency. A major influence on the success of the solar industry is

government incentives in the form of tax credits, because a majority of the savings available in

the solar industry are long-term, while the initial expense of installing necessary infrastructure

for solar power is high. Another consequence of high initial expenses with long-term savings is

that those looking to install solar infrastructure (commercially and individually) usually require

high disposable income (Roth).

Country History

Founded in the 9thcentury, Kievan Rus was established as the first major East Slavic state

by the Viking leader Oleg, previously the ruler of Novgorod. In the 10thcentury, the Rurik

dynasty was established and the rule of Prince Vladimir the Great initiated the Golden Age. In

988, Vladimir accepted Orthodox Christianity and began the conversion of Kievan Rus to the

Byzantine rite, thus setting the course for Christianity in the East.

The Russian principalities were invaded by the Mongols during 1237-1240, which ended

Kiev rule. The Tatars (as Mongol invaders came to be known) established the empire of the

Golden Horde in southern Russia, and the Khan of the Golden Horde became the overlord of all

Russian princes. To this day, there are still about 3.7% of Russian citizens who identify as Tatar

(“The World Factbook: Russia”). From 1547-1584, the first Tsar, Grand Prince Ivan IV

(infamously known as Ivan the Terrible), sought to impose military discipline and a centralized

administration under which he instituted a reign of terror against the hereditary nobility.

In 1613, Romanov rule began, ending a long period of instability and foreign intervention.

Between the years 1798-1815, Russia took part in European coalitions against Revolutionary and

Napoleonic France and defeated Napoleon’s invasion in 1812 which ultimately contributed to his

overthrow. In 1897, the Marxist Socialist Democratic Party was founded.


The 1917 Bolshevik revolution established a ruthless “Dictatorship of the Proletariat”

under Communist Party rule and brought on the rise of the Soviet Union, which crushed all

religious and political assent. In 1922, the Bolsheviks reorganized the remnants of the Russian

empire to become the Union of Soviet Socialist Republics. Nine years later under the USSR,

Joseph Stalin became virtually unchallenged as a dictator. Towards the end of Stalin’s life, the

Soviets used their first nuclear bomb and initiated the Cold War.

The Cold War was a very costly endeavor for Russia and has substantially shaped

Russia’s relationship with foreign entities in recent history, most particularly Russia’s

relationship with the United States, and many of the economic and social tensions brought on by

the Cold War remain. Additionally, there has been an increase in nuclear weapon development in

a number of countries. More positively, this development has resulted in a rise in nuclear energy

use. There are still substantial consequences to nuclear development throughout the world

(particularly in Russia), however, and the lasting damage of radiation exposure cannot be

ignored.

1991 marked the official collapse of the Soviet Union, and together with Ukraine and

Belarus, Russia formed the Commonwealth of Independent States. The following year, Russia

took its seat in place of the former Soviet Union on the United Nations Security Council. In

1994, Russia joined NATO’s Partnership for Peace Program. In 2012, Russia finally joined the

World Trade Organization after 18 years of negotiating (“Russia Profile - Timeline”).

Geographical Setting

The Central Federal District is the largest of the eight federal districts, based on its

number of federal subjects and population. Located on the East European Plain, the CFD borders

Belarus in the west and Ukraine in the southwest. The CFD has the highest density of population


throughout Russia, with about 60.3 people per square mile. Russia’s capital, Moscow, is located

in the federal district and is the most populated urban area of the country even though the CFD is

one of the physically smaller districts. Within the region, there are several natural zones: mixed

forest, broad-leaved forest, forest-steppe, and steppe. The range of natural zones present in the

area could potentially produce a challenge for the implementation of a new product into the

district, especially if the natural zones lack the necessary infrastructure for navigation. In

January, the average temperature ranges from minus 7-14 degrees Celsius (19.4-57.2

Fahrenheit), and in July temperatures range from 16-22 degrees Celsius (60.8-71.6 Fahrenheit)

(“Central Federal District, Russia”).

Social Institutions

Family:

Structures in families, while often overlooked when considering culture, play an

important role in how people function. The involvement of ‘distant’ family, rituals and routines,

and household dynamics are all some of the key factors to consider. In Russian families, the

extended family plays a key role in the household and remains involved. Grandparents often

spend much time raising their grandchildren, living with the family more often than average,

with a strong respect for elders throughout (Evason). This often leads to crowded living

conditions which have caused a push for young couples trying to move out after marriage.

Within the nuclear family, it is common for both parents to work, however, women are still

somewhat more likely to care for the children and maintain the home. On the topic of children,

they are often a focus of parents, who aim to raise their children to be more successful in each

generation (Evason). This is consistent with Russia’s high score of 81 in long-term orientation

(“Country Comparison - Hofstede Insights”). Gender equality is a global issue to consider and in


Russia, this is no different. While women have equal rights to both work and study, much of the

progress that the communist regime provided in gender equality has been interrupted (Evason).

On the other hand, marriage does remain a key focus for Russians. Due to this, dating is less

casual than places such as America and has peculiar standards comparatively. Men are expected

to be gentlemen who must charm women via romantic gesturing. This then commonly leads to

marriage in the early 20s, with a high divorce rate of 51% in 2011 (Evason).

Education:

The system of general education in Russia is comprised of three separate parts, however many

Russian children will go to preschool before they officially enter the school system. While

schools are taught in Russian, citizens have the right to be taught in their native language. A

typical school week for Russian children involves 27-36 hours in schoolwork, with school

sessions lasting around 8-9 months. The first stage of education in Russia is primary education

which is comparable to elementary school in the United States. Children usually begin primary

school during the ages of 4-5 and it lasts for four years. The second stage of Russian education is

called basic general education and normally lasts five years between the ages of nine and

fourteen. In order to graduate from basic general education, students must pass a final exam,

after which they receive a Certificate of Basic Education called “Attestat ob Osnovam Obshchem

Obrazovani”. The last stage of general education in Russia usually lasts 2-3 years and is called

secondary education which is similar to high school in the United States. Like with basic general

education, students must pass a state test to finish this schooling to receive a Certificate of

Secondary (Complete) General Education called “Attestat o Srednem (Polnom) Obshchem

Obrazovanii” (“Education in Russia for the Foreign Citizens: Russian Educational System

Today”).


The average price for higher education ranges from 2,500 Euros to 5,000 Euros per year ($5,500)

and full-time students get benefits for studying in Russia such as shopping discounts, cheap

public transport, and entry into museums with their student ID. Currently, there are over 950

higher education institutions throughout Russia. Of these institutions, Lomonosov Moscow State

University is considered one of the best universities in the country and is ranked 92nd in the best

Universities in Europe. LMSU has been around since the 1700s and has a very rich history with

many awards and lots of credible alumni, including former Soviet leader Mikhail Gorbachev.

Education in Russia is taken very seriously, and higher education is highly sought out

among Russian citizens. Russia is one of the most educated countries in the world with a literacy

rate of 99.68% with over 50% of the Russian population ages 25-64 holding at least one tertiary

degree. A current issue facing the Russian education system in Russia involves the government

cutting a lot of the former education budget. At this time, the budget has decreased by over 10

billion USD and has caused many problems for the schools and universities in Russia. Not only

has the number of total college-aged students been declining in Russia, but professors are

continually being paid less money. Despite efforts to decrease corruption in Russia, the

significant budget cuts in the education system have added to a long history of systematic

corruption in Russian schools that began under communist rule. (“The Education System in

Russia - Expat Guide to Russia”).

Political System:

The structure and stability of the Russian political system is significantly different from that of

the United States. The history of Russian politics has shaped significant cultural elements within

the country as it has emerged from communism under the former Soviet Union. Until as recent

as the 1980s, Russia was a sovereign socialist state, however, in the 1980s the Communist Party


of the Soviet Union captured political power in Russia. Under the Communist party, a de facto

leader was appointed to be the figurehead of all decision making. In 1988, Mikhail Gorbachev

created the Soviet Congress of People’s Deputies, which began a slow shift in leadership by

allowing non-communists to run for office; however, members of the Communist Party still

dominated government at this time. In 1990, Boris Yeltsin became the first Russian president to

be democratically elected to office. Later in that same year, the Soviet Union was dissolved, and

Yeltsin secured even greater political power. In 1993, Yeltsin used military power to dissolve the

Russian parliament and made a new constitution that established much more power for the

president. This set the tone for the government in the last three decades. One major change that

has occurred is that in 2000 Putin created seven federal districts and established more power for

the central government than is allotted local and regional governments. Another major change is

that presidential terms now last for six years instead of the four (“Central Asia :: Russia”).

The Russian Government has a similar structure to that of the United States. Their legislature is

called the Federal Assembly and is made up of the Federation Council and the State Duma. The

Federation Council consists of appointed representatives from each of Russia’s administrative

divisions. The State Duma is an elected house of 450 members and has a unique relationship

with the President. The President nominates a chairman of the government which is then voted

on by the State Duma. If the State Duma does not agree with the nominee and passes a vote of no

confidence three times, however, the President can dissolve the State Duma to reelect the

members (“Central Asia :: Russia”).

There are several political parties worth noting in Russia. The most popular political party is the

Communist Party of the Russian Federation. The CPRF is a left-wing group with a demographic

of middle-aged and older working-class people. The Liberal Democratic Party of Russia is


mostly comprised of lower-income men from rural areas is the third-largest party in the duma at

this time. The party “A Just Russia” makes up the smallest parliamentary group in the State

Duma and is moderately left-wing. The Yabloko party is a pro-democracy party and is not

currently represented in parliament. The newest registered party in Russia is the Right Cause

party and their manifesto includes a plan to launch a bid for EU membership. The Right Cause

party is very westernized. Finally, there is the Patriots of Russia party, who have never had

representation in parliament and are not very popular in Russia (“Central Asia :: Russia”).

There are a few special taxes in Russia, beyond those within normal Russian tax law, some of

which could be particularly beneficial to an international marketer attempting to enter Russia.

There are no tariffs on customs under the Russian tax code, which relies heavily on profits from

natural gas and oil organizations (RTC). There is also VAT (value-added tax) of 20% on all

Russian goods which is usually charged solely on imports. There is a 20% corporate tax in

Russia 20%, 18% of which goes towards regional authorities with the rest distributed towards the

federal government. International companies in Russia are taxed at 20% on all royalties and

interests under Russia’s “no tax treaty” (“Central Asia :: Russia”).

Social Organizations:

Russia is the largest country on Earth and encompasses around one-eighth of the planet’s

landmass. Their population is just under 150 million, they border 15 countries, and have over

100 different languages and dialects spoken inside the borders. Russia’s main population is

“Russians”. Russians make up 81% of the country and are native to eastern Europe, originating

from East Slavic ethnicity. At 3.9% of the population, the next most populous group in Russia is

Tatars, who speak Turkic and live in central Asia and Eastern Europe. Ukrainians make up 1.4%

of Russia’s population, and they are of East Slavic ethnic group and of Ukrainian origin. Lastly,


Bashkirs, who are mainly comprised of Sunni Muslims make up 1.2% of the Russian population

(“Central Asia :: Russia”).

Business customs in Russia are unique to the culture. Most Russians are knowledgeable about

their own culture and history and it is important that foreign marketers intending to do business

in Russia have a good understanding of culture and history. Within the realm of business, older

Russians tend to be more conservative than younger Russians in all aspects, from negotiations to

business relationships. Russia has a monochronic culture and expects timeliness in addition to

meetings scheduled in advance, sometimes up to six weeks prior to the meeting. Formal dress is

expected for all business meetings in Russia, and negotiations tend to move slowly. Russians

tend to be very personal when making business deals and will want to know their potential

business partners on both a business and a personal level (“A Guide to Russia”). It is also

important to keep in mind that Russia is a high power-distance culture. This means that Russians

generally respect authority and status in a company and will not negotiate with individuals of

lower status (“Country Comparison - Hofstede Insights”). Because Russia is a high-context

culture, it is important to keep in mind the effect of body language in an interaction and the

different cultural physical cues that could be misinterpreted (“A Guide to Russia”).

Religion & Aesthetics

Religion/Belief Systems:

Religious beliefs, or lack thereof, play a significant role in the behavior of citizens

worldwide. For Russia’s religious makeup, data isn’t precise as their official census does not

record information on religion. Despite this, estimates are still made fairly often to better

understand the belief systems of Russians. In 2012, it was estimated that 41% of Russians follow

the Russian Orthodox Church, 25% claim to be spiritual without religion, 13% self-identify as


atheists, and smaller segments of religious beliefs and undecidedness exist as well (Evason).

Often times language and religion are compared in Russia as there exist many different

subcultures within the giant landscape of the country. However, these comparisons do not

entirely correspond. Slavic people are often found to be Orthodox Christian whereas Turkic

speakers are predominantly Muslim. Buddhism is also common among the Mongolian-speaking

Buryat and Kalmyk (Keenan, Edward Louis, et al). Interestingly enough, it has been discovered

that there’s a trend in Russian culture to become more religious as they age, often considering

family tradition. Historically speaking, religion was suppressed by the Communist Party as it

was thought to be incompatible with loyalty. This led to Russians renouncing their faith or

concealing their beliefs. Upon the collapse of the Soviet Union, it became apparent that Russians

had continued practicing faith privately (Evason). Data from the Pew Research Centre noted an

incredible drop in those not identifying with any religion from 61% to 18% from 1991 to 2008

(Evason). Tradition remains a key belief system for Russians which is reflected in some unusual

behavior such as the concept that “complimenting children can cause discomfort as it is thought

to potentially summon the evil eye,” (Evason).

Aesthetics:

Artistic engagement in Russia has run into several issues throughout the history of the

country, as various movements have restricted the growth and celebration of art. Despite these

setbacks, Russia still operates as the headquarters for many artistic movements. In literature,

much of the prominent works were in poetry, focusing on conceptualists such as Dmitry Prigov

and meta-metaphoric poetry of Ilya Kutik (Keenan, Edward Louis, et al). The ‘90s served as a

time of trouble for most Russian writers as the publishing industry was negatively impacted by

the economic downturn of the time. Music told another story, as a shift from ‘70s rockers


copying western styles to ‘80s rock led by Akvarium took on a uniquely Russian style. As an

operating underground, the band was constantly avoiding the police and had to circulate its

music on bootleg cassettes, which inspired future aesthetics that continue to flourish today in

both pop and rock (Keenan, Edward Louis, et al).

An important aspect of Russian culture to consider is architecture. Transitioning from the 19th-

century focus on medieval art and heritage, newer approaches with a focus on railway stations

arose. Unfortunately, this progress was disrupted by the postwar period during which housing

projects became the focus and are still considered bland and eyesores by some in the present-day

(Keenan, Edward Louis, et al). Nowadays, the architectural focus is on traditional but super-

sized structures that take on the shape of skyscrapers and are less distinctively Russian. This

choice partially resembles the global presence of Russia and showcases the power of

international business (Salmanova).

Theatre is another industry that went through an interesting development post-Soviet Union as it

was liberated from state censorship. Despite the new freedom of that time, a shift away from

politics and towards psychological themes took place. Unfortunately, this shift was met with

reduced state subsidies and a partial collapse of the industry in the ‘80s and ‘90s. However,

Russian cinema would still receive international recognition and awards, leading to an

established presence in current day theatre (Keenan, Edward Louis, et al).

Living Conditions

Diet and Nutrition:

According to Master Russian, most Russian people eat three times a day. The first meal

of the day is called Zavtrak, also known as breakfast (MasterRussian.com). It is eaten early in the

morning before people go to work, generally around 7 am - 8 am. Like many other cultures,


Russians have a wide array of foods that are usually eaten this early. Some common breakfast

meals more specific to Russia include kasha, a porridge that includes many different grains, and

butterbots, which is a piece of bread that has a single slice of butter or ham on top. Some non-

cultural exclusive meals include eating scrambled or fried eggs, cereal, and drinking coffee and

tea (MasterRussian.com).

Lunch, also known as obed, is generally eaten anywhere from 1 pm - 3 pm. Many cafes

and restaurants have lunch specials during this time range. Lunch generally comes in courses,

with the first of which is usually soup such as mushroom soup, chicken soup, noodle soup and

more (Mushtrieva). The second course usually consists of meat and potatoes, porridge, pasta, or

some mixture of them all. The last course consists of tea, coffee, or juice that is generally

accompanied by optional chocolates or cake. Dinner, also known as uzhin, follows lunch and is

served anywhere from 7 pm - 8 pm, a time most Americans would consider to be ‘too late.’ Most

Russian families eat dinner near the TV in order to keep up with the latest news. Dinner

generally consists of two appetizers and a main course which is usually fish, vegetables, meat,

and potatoes (MasterRussian.com).

According to the latest WHO data posted in 2017, malnutrition deaths are at a rate of 0.01

per 100,000 deaths. Thus it can be concluded that malnutrition isn’t a big issue in Russia

(“Russian Federation”). Rather, obesity is becoming a major issue in Russia. ‘“In Russia over the

past 30 years, according to the WHO (the latest statistics covering 190 countries for 2016), the

proportion of the population over 18 years old with indicators of ‘obesity’ increased in women

by 18%, while it more than doubled for men”’ (Polygraph.info). The foods available and

incorporated in cultural meals (potatoes, pasta, porridge, bread etc.) are heavy in carbohydrates,

which will turn into fat without exercise.


Housing:

Before the dissolution of the Soviet Union, private property was highly limited in rural

areas and was absolutely prohibited in urban areas. The majority of families lived in state-owned

apartment complexes that were run by local authorities who mandated living arrangements. This

was poorly run, as rent payments were so low that authorities could not cover maintenance and

repair costs for buildings. As a result, the public housing sector deteriorated. The end of the

Soviet Union marked a time when the private housing sector underwent mass change. Square

footage per household resident started to increase with privatization. Today, 87% of Russian

families own their own residence thanks to privatization (Riasanovsky et al.). However, much of

Russia’s housing was constructed before 1970. This means that most Russian families still live in

apartments. It is not uncommon for a family of three to four to live in a two-bedroom apartment

(Riasanovsky et al.).

Clothing:

Traditional Russian clothing consists of a wide array of colors and textiles. A woman’s

headdress is called a kokoshnik, which looks like a tiara. Men traditionally wear a top called a

rubashka, which is typically a long sleeve white shirt with a subtle floral design. However,

modern Moscow fashion is reminiscent of New York, where trendier styles are more likely to be

seen than in other parts of Russia. If there is a dress code at work, Russian men tend to wear a

suit and tie, while women wear nice dresses or blouses. If there is no dress code, many prefer to

wear jeans to work (Riasanovsky et al.).

Recreation:

Because Russia has many types of terrain and seasons, there are many ways to fill

recreational time. Hiking, skiing, ice skating, football, basketball, hockey, running, fishing and


kayaking are only the tip of the iceberg. Racquet sports, such as table tennis, tennis and

badminton are very popular. Additionally, mixed martial arts are very popular and saw a big rise

in the ’90s; it only makes sense why Vladimir Putin is a black belt in jiu jitsu (Riasanovsky et

al.). According to Russian Business Today, Russians spend almost a third of their income on

food (“Russians Spend a Third of their Income”). Additionally, with an indulgence score of 20,

Russia is a restrained country. “Restrained societies do not put much emphasis on leisure time

and control the gratification of their desires” (“Country Comparison - Hofstede Insights”). Thus,

it is safe to say that Russians do not spend much disposable income on fun activities.

Health:

Even though it is by no means perfect, healthcare in Moscow is far better than in many

other parts of Russia, where about 17,500 towns and villages across the country have no medical

infrastructure. Only 5% of Russian citizens in 2015 had health insurance and most of those who

did lived in major cities. Compared to the United States where the average life expectancy is

about 78, the average life expectancy for Russians is about 71.

Every Russian citizen and resident is entitled to free public healthcare under the Russian

healthcare system, but as previously stated, that goal is not perfectly upheld, and many Russian

citizens either pay for healthcare or have no access whatsoever. There are three types of hospitals

in Moscow alone: state facilities, private facilities, and western-oriented private facilities.

Generally, private hospitals provide a higher level of customer services, with shorter wait times

and English-speaking staff (“Healthcare in Russia”).

Unlike in the United States, employees in Russia are not obliged to pay social security

contributions; the burden instead rests on the employers. Since 2017, the Russian tax authorities

are responsible for administering most social security payments. Within these payments, there


are two major funds that finance the social security system: the social insurance fund, and the

pension fund of the Russian Federation. These funds are deducted from an individual’s gross

salary, with some expenses and bonuses that are eligible for an exemption, and citizens can make

voluntary contributions if they intend to save for a pension or plan for a better retirement

(“Healthcare in Russia”).

Language

The official language in the Russian Federation is Russian, with over 100 minority

languages and dialects spoken within the borders of the country’s territory. Russian makes up

85.7% of language spoke in Russia, Tatar makes up 3.2%, Chechen 1%, and others make up

10.1% (“Central Asia::Russia”). Additionally, many Russians in more populated areas of the

country speak English (“A Guide to Russia”). There are three primary dialects of Russian –

Northern, Central, and Southern – with Moscow and the Central Federal District fitting into the

Central dialect region. Differences between these dialects can be found in “phonetics

(pronunciation of sounds), morphology (changes to word endings based on case and number),

and vocabulary” (Guzeva). There are a number of components of the Russian language which

differentiate it significantly from English, including grammar and sentence structure, spoken and

written language, and contextual/cultural meanings of certain words.

Russian is based on a Cyrillic alphabet with 33 letters, unlike the Latin-based European

languages (English included). Spelling is highly phonetic, and most words are able to be sounded

out once a person has a command of the alphabet. As a result, sounds in Russian are very

different than those in English. The language has five vowels sounds, which are written with

different letters depending on the point of contact of the tongue in the mouth in the preceding

consonant. By comparison, English has 12 vowel sounds made up of five long and seven short


sounds, in addition to eight diphthongs. Similar to English, however, Russian has changing stress

patterns in pronunciation, which means that vowel sounds change whether a letter is stressed or

unstressed, while consonants change when a letter is either hard or soft. Consistent with the

importance of pronunciation’s importance in the meaning of a sentence, in Russian words always

accentuate one syllable, as opposed to everything being pronounced with the same strength

(Abbe). Another interesting linguistic insight that can be gleaned from Russian is an indication

of a higher amount of patience in Russian speakers compared to English speakers. Russian

syllables and words are much longer (most often around 30-50%), and sentences are usually very

long. English is comparatively made up of short sentences with brief structures (Bonvillain).

Both the grammar and sentence structure in Russia are significantly different than those in

English. A noteworthy characteristic of the Russian language is that Russian nouns have genders

and relies on male, female, or neutral nouns. Additionally, Russian does not rely on the use of

articles, such as “the” or “it” to precede or replace nouns (Abbe). This is culturally relevant

because linguistic studies investigating the role of gendered, natural gender, and genderless

language systems have shown that there is evidence for less gender equality within countries

where gendered languages are spoken (Prewitt-Freilino et al.) This theory is supported in

Russian by another study, which found that “Analysis of the meanings of male-female kinship

terms in Russian…shows a restricted representation of females… Derivations from female bases

generally refer to domesticity and/or sexuality, whereas those derived from male bases have

wider “semantic space” referring to activities or qualities of a more social character. And female

words tend to acquire negative connotations, most strongly so when applied to men, whereas

male terms are positive even when applies to women” (Bonvillain).


Another characteristic of the Russian language is that verbs are based on the concept of

aspect: an action is either completed or not completed, as opposed to whether an action has been

completed in the past, is currently being completed in the present, or will be completed in the

future. Aspect is indicated within a sentence by appending affixes to a root verb (Abbe). Modern

Russian in particular has a developed system of word endings in which each word in a sentence

has a function that can describe what the speaker would like. English, by comparison places

more attention on verbs for the purpose of describing situations. As a result, Russian speakers

tend to have a different mindset than speakers of Romantic or Germanic language. Russian is a

higher context language wherein significant meaning is attributed to both the way a word is said

and where a word is located in a sentence, rather than meaning that stems from the words

themselves. In fact, sentences are structured by importance, with the most significant words

appearing at the beginning of sentences. Another interesting grammatical feature of Russian is

that the language tends to rely on a lot of negative words in which the structure of a sentence

uses negation and double negation. As a result, expressing a thought “from the reverse” is

frequent (Bonvillain). The use of negative-focused sentence structures is consistent with insights

from Hofstede’s culture index. Particularly, Russia’s low indulgence score of 20 means that the

country has a “tendency to cynicism and pessimism”, and it’s noteworthy that this is present on a

linguistic level when understanding is based on the negation of an idea (“Country Comparison –

Hofstede Insights”). The consistencies between linguistic studies of Russian and Hofstede

insights don’t stop there. In particular, the difference in Russian understanding of the words

“challenge” and “problem” points to Russia’s low individualism score. According to a language

review by Alexandra A. Rivlina, “the Anglophone (especially, American) linguaculture, whose

dominant values are individual success and activity, competitiveness, positive thinking, sense of


adventure, etc., perceives difficulties as ‘stimuli’ and conceptualizes them in terms of

challenges”. In Russian linguaculture, however, difficulties are seen as problems (Rivlina). This

is consistent with Hofstede’s insights which indicate that Russians are more likely to be

relationship-oriented, passive, and pessimistic (“Country Comparison – Hofstede Insights”).

Economic Analysis

Population

From the most recent 2018 estimate, Russia’s population is about 142,122,776. The

overall population seems to be majority female, with a ratio of .86 males to females. The only

age group that is predominantly male is those that have just been born up to the age of 24. Even

though Russia is an incredibly expansive country, there are only a few areas to which a majority

of citizens gravitate. The six major urban include the following: Moscow, the country’s capital,

is the most densely populated of the urban areas throughout Russia with 12.476 million people;

Saint Petersburg with 5.427 million people; Novosibirsk with 1.65 million people; Yekaterinburg

with 1.493 million people; Nizhniy Novgorod with 1.261 million people; and Samara with 1.167

million people. These cities are mainly located along the outer boundaries of the country, and

there are not many densely populated areas in the middle of the country or the far north.

The population is heavily concentrated in the westernmost fifth of the country, south to the

Caspian Sea, and eastward parallel to the Kazakh border. There are also sizeable pockets that are

isolated and generally found in the southern parts of the country. The net migration rate is 1.7

migrant(s) for every 1000, which indicates that Russians do not tend to move from one city to

another, rather they find their choice of place and stay.

The predominant ethnic group is Russian - about 77.7% of citizens identify as this

ethnicity. The second-largest ethnic group, with the word “largest” being used very loosely, is


Tatar which makes up about 3.7% of citizens. On Russia’s 2010 census, there were over 200

national and/or ethnic groups represented, while in the US there generally only tends to be two

options; Hispanic or Latino, and Not Hispanic or Latino.

Russia’s age structure is heavily populated in the 25-54-year demographic, with 44.21%

of the population falling within this group. Those 24 and younger only make up 26.62% of the

population, which indicates that Russians are not having as many children at a frequent rate,

which is further reflected in their negative growth rate of -0.11%. (CIA)

Economic Statistics and Activity

Gross National Product

Russia has started to re-emerge as a competitive market since the end of its recession in

2017. Russia now has the 6thhighest GDP out of 229 countries, coming in at $4.016 trillion. Per

capita GDP, however, is ranked at #74 at $27,900.

Even though Russia has a high GDP and has a significant ranking, its rate of growth is

only 1.5%, placing them at #173 in a country comparison (“The World Factbook: Russia”). Over

half (52.4%) of Russia’s GDP comes from household consumption, and 62.3% is contributed

from the service sector, with agriculture and industry making up the remaining 37.7%.

Distribution of wealth

Russia’s wealth has an extreme inequality of distribution, with the top 3% owning about 89% of

all financial assets in 2018. Of this, they owned 92% of all fixed-term deposits, and 89% of all

cash reserves. This then relates to the poorest 20% of Russian citizens owning only 6% of all

financial assets (The Moscow Times). About 13% live in extreme poverty, with the average

household income per capita in 2018 only equating to $6,620.90 USD, the low income could be


which could be a contributor to why Russia’s indulgence score to be so low, putting them at a 20

(“Russia Household Income per Capita [1992 - 2019] [Data & Charts].”).

Since the country’s indulgence score is so low, it shows that Russia is a pretty reserved country,

and “people with this orientation have the perception that their actions are Restrained by social

norms and feel that indulging themselves is somewhat wrong” (Hofstede Insights). This makes it

interesting to see that 52.4% of total GDP is contributed from household consumption, which

indicates that citizens are spending on something household-related and in substantial amounts.

Russia’s middle class is shrinking, with only 14% of citizens being considered middle class. The

remaining majority are part of the lower class, with the very few being members of the upper

class (The Moscow Times).

Transportation

Russia is about twice the size of the United States but has only 1/6 the number of

roadways as the US, with 1,283,387km as of 2012; 927,222km of these roadways are paved,

while 355,666km are unpaved. Railways stretch about 87,157km, placing Russia as the third-

ranked country in number of railways. This could create potential problems when trying to

introduce a new product into the country because the infrastructure seems to be relatively sparse

for the sheer size of the landmass. The major seaports in Russia are located in Kaliningrad,

Nakhodka, Novorossiysk, Primorsk, and Vostochnyy, with the bulk of the major ports on the

western side of the country (“The World Factbook: Russia”).

Communication systems

Russia is one of Europe’s fastest-growing telephone markets for fiber-based broadband

and 5G trials, however the telecom sector was recently impacted by penalizations related to the

annexations in Ukraine. Telephone usage in Russia is broken up into two main sections: fixed


landlines and mobile cellular. Telephone communications function via cross-country trunk lines

which run from Saint Petersburg to Khabarovsk, and from Moscow to Novorossiyk. With about

31,190,855 total fixed landline subscriptions (22 per 100 inhabitants as of 2017), Russia ranks 8th

in worldwide subscription numbers. China is at the top with around 193,762,000 subscriptions,

the United States is at #2 with around 119,902,000 subscriptions (37 subscriptions per 100

inhabitants as of 2017), and Japan is at #3 with around 63,941,094 subscriptions. In the past few

years, fixed landline services have improved, but a large demand still remains. In rural areas in

particular, telephone services are still low-density, inadequate, and overall outdated. Mobile

cellular lines have a much broader dispersal and usage rate than landlines, with 227,341,873 total

subscriptions (160 per 100 inhabitants as of 2017). Russia ranks 6th in worldwide mobile cellular

subscriptions, while China is again #1 with about 1,474,097,000 subscriptions, India is #2 about

with 1,168,902,277 subscriptions, Indonesia is #3 with about 458,923,20, and the United States

is #4 with about 395,881,000 subscriptions (121 subscriptions per 100 inhabitants as of 2017).

Based on this information, it is important for a United States marketer in Russia to understand

that access to spreading information via cellphones (a major method for dispersing marketing

material in the United States) is not as widespread as it would be in the US. Considerations about

other methods of spreading marketing information would be important to consider based on the

audience the US marketer intends to target (“Central Asia :: Rusia”).

Broadcast media in Russia is incredibly limited compared to what is available in the

United States. There are not only fewer stations in Russia, but most of those stations are also

controlled by some form of government. There are 13 national TV stations in Russia which are

largely controlled by some form of government: the federal government owns one station and

holds a large control over a second; state-owned Gazprom has control of two national channels;


government-affiliated Bank Rossiya has control over two national channel; the Moscow city

administration owns one national channel; the Russian Orthodox Church and the Russian

military, respectively, own two additional national channels. Additionally, of the nearly 3,300

national, regional, and local TV stations in Russia, over two-thirds are completely or partially

controlled by federal or local governments. Radio is also largely controlled by government

interests; one of the three national radio networks is majority-owned by Gazprom. By

comparison, the United States has four major terrestrial TV networks with affiliate stations

throughout the country with additional cable and satellite networks, independent stations, and a

limited public broadcasting sector that is primarily supported by private grants. There are

thousands of TV stations broadcasting in the United States and multiple national radio networks

with many affiliate stations. Most stations in the United States are commercial, and as of 2018

there were over 15,000 radio stations in operation. An international marketer intending to enter

the Russian market must take into account the level of control that government holds over media,

especially when compared to the almost absolute freedom present in the United States.

Marketing any product without government support would be incredibly difficult if not

impossible, and as a Western foreign interest intending to market in Russia, companies from the

United States would have to be very intentional and careful about the methods used in regard to

broadcast media (“Central Asia :: Rusia”).

Finally, there are about 108,772,470 internet users in Russia, making up about 76.4% of

the population as of July 2016. Russia’s internet usage compared to the rest of the world places

them in sixth. China is ranked #1 with about 730,723,960 internet users, India is ranked #2 with

about 374,328,160 internet users, and the United States is ranked #3 with about 246,809,221

internet users (76.2% of the population). While the percent of Russia’s population with access to


internet is just barely above that in the United States, the United States still ranks higher in the

number of internet users. International marketers should keep in mind the type of people who

have access to internet in Russia when deciding whether to market their products through online

promotion methods (“Central Asia :: Rusia”).

Working Conditions:

High power distance in Russian culture has a substantial impact on the working

conditions in Russia, particularly within regards to employer/employee relations. Because of the

high power distance, there are relatively low participation rates of Russian employees in decision

making (Efendiev A.G et al). The right to strike, however, is constitutional within the Russian

Federation. According to the Labor Code of the Russian Federation, “A worker’s temporary and

voluntary refusal of a worker to fulfill their work duties, (entirely or in part) with the intention

being the settlement of a collective labor dispute”. There are very specific parameters and steps

to be undertaken at any time workers intend to strike. The decision must be made at a general

meeting, and at least half of the participating members at the meeting must vote to approve the

decision to strike. A written decision must then be submitted to the employer at least 10 calendar

days prior to the strike, and minimal essential services must be maintained, or the strike can be

recognized as illegal (“National Labour Law Profile: Russian Federation”). Due to cultural

convergence, foreign-owned companies with lower power distance cultures have been

documented with higher employee participation (Efendiev A.G et al). Employee participation

within Russian owned companies primarily occurs when employers decide that employee

participation would be relevant. These events might include a discussion with workers’

representatives regarding the implementation of enterprise-level regulations, as well as


discussions with employers on issues that concern the business (“National Labour Law Profile:

Russian Federation”).

Salaries and benefits in Russia are also specific and regulated by the Labor Code of the

Russian Federation. Normal working hours must not exceed 40 hours per week, with additional

specifications based on the age of the employee. Overtime is allowed under most normal

circumstances only with a worker’s written consent; however, overtime can be mandated if work

is considered necessary or essential for the public good. Overtime cannot exceed four hours

during two consecutive workdays and 120 hours per year. Wages cannot be lower than the

minimum wage, which is 9,489 rubles/month ($166/month), and wages must be paid at least

once every two weeks. In the event that wages are not paid for more than fifteen days, employees

are allowed to stop working until they are paid, as long as the employer is given written

notification. Additional compensation for hard labor and work with harmful and/or dangerous

working conditions includes 28 days annual paid leave in accordance with existing laws

(“National Labour Law Profile: Russian Federation”).

Principal industries:

GNI (gross national income, formerly GNP) is calculated as the “sum of value added by

all resident producers plus any product taxes (less subsidies) not included in the valuation of

output plus net receipts of primary income (compensation of employees and property income)

from abroad” (“Emerging Markets: The Parts of Russia’s GDP”). The GNI in Russia is

$1,501,66B as of 2018, with $10,230 GNI per capita. While there was no available breakdown of

the proportions of GNI in each industry, GDP per industry is included in the following details

regarding the principle industries in Russia.


Russia’s GDP is made up of three sectors: agricultural, industrial, and service industry.

The agricultural sector makes up about 5% of GDP and employs about 6% of the population.

While the agricultural sector includes forestry, hunting, fishing, farming, cultivation of crops,

and livestock production, Russia is a net importer in agriculture and food. This high import rate

occurs for two major reasons: foreign imports are more price-competitive than options available

naturally in the Russian market, and as economic progress in Russia has grown so too has the

demand for food, which is met by food imports. The industrial sector represents about 35% of

GDP and employs around 27% of the population (“Emerging Markets: The Parts of Russia’s

GDP”). The industrial sector is primarily made up of construction, manufacturing, electricity,

and mining. Mining, in particular, is one of the largest and highest contributing sources of the

industry in Russia, with petroleum extraction and production maintaining one of the most

profitable economic activities in the country. As a result, Russia is one of the largest oil and

natural gas producers in the world and contributes than any other country in natural gas exports.

This incredible reliance on natural gas and the corresponding lack of industry diversification has

been dangerous for Russia, however, because it puts the Russian economy at more risk in regard

to fluctuating prices of the global petroleum supply (WorldAtlas). Russia’s service sector makes

up almost 62% of GDP and is the largest in the Russian economy – employing more than 67% of

the population. The service sector includes real estate, tourism, healthcare services, marketing,

financial service, wholesale, retail trade, and personal and household goods. Of these groups,

retail is one of the biggest sectors, and made up 60% of household income before taxes in the

year 2011 (WorldAtlas).

Russia’s economic freedom is ranked 41st among 44 countries in the European region

with an overall score below both the regional and world averages. As government encroachment


continues to proliferate in the marketplace, the private sector has been continually demoted by

structural and institutional constraints. Rather than a strong private sector, large state-owned

institutions and an inefficient public sector control most of Russia’s economy (“Russia

Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption”). The high

involvement of the government in the private sector is consistent with Russia’s high power

distance. According to Hofstede insights, “2/3 of all foreign investments go into Moscow where

also 80% of all financial potential is concentrated”. As a result, foreign marketers intending to

enter the Russian market must be aware of the level of control that government has over

industry, and should consider trying to work with the government, rather than against it. The

approach to entry should correspond with this high power distance and should be top-down

(“Country Comparison - Hofstede Insights”).

Foreign Investment:

In the last few years, foreign direct investment has dropped considerably low. According

to The Moscow Times, FDI only accounted for 0.2% of the nation’s GDP, which is below

Nigeria, Venezuela and Ukraine (See Figure 1.0). Currently, Russia’s main investors are the

Bahamas, Bermuda, the Netherlands, Luxembourg, Cyprus, Ireland and the UK (Export

Entreprises SA). The industries that are backed by these foreign interests are mining,

manufacturing, trade and repair of motor vehicles, financial and insurance activities, public

admin, defense and social security, and real estate (Export Entreprises SA). However, the future

of flourishing foreign investment is at risk. Administrative problems, corruption, investor

perception, and the investment climate are all problems leading to low growth (Export

Entreprises SA). Additionally, Russia passed a law that allows the country to seize assets of

foreign states on its own territory in response to the Yukos affair of 2003 (Export Entreprises


SA). This law scares away foreign investors because their assets could potentially be seized at

any given time, which is reminiscent of the old Soviet Union.

International Trade Statistics, Balance-of-payments Situation, and Exchange Rates

Russia currently has a positive balance of trade, at over $14 billion USD. This trade

surplus shrank from $18.84 billion USD in the previous year. Russia is very heavily dependent

on natural gas and fossil fuels to support their economy and as trade restrictions on Russian fossil

fuels have been recently put in place by many countries, exports have fallen and caused trade

surplus to decrease. Russia has also witnessed an external debt increase to $471 billion USD

within the past year, which is a greater amount of debt than the country has seen historically. As

a result, the Russian exchange rate has recently fallen. In 2016, the Ruble rose to 67.056 per

USD, but fell again to 58.39 per USD in 2017.

In 2017 Russia’s exports totaled 353 billion USD. Most of these exports are going to

countries like China and the Netherlands, both importing 10% of this total each. Some

commodities that Russia exports include petroleum, natural gas, metals and woods, and civilian

and military equipment. The imports to Russia are quite different and total $283 billion USD.

Most of the imports come from China, at 21% and Germany, at 10%. Commodities that are

imported to Russia most frequently include, machinery, vehicles, pharmaceuticals, plastic, meat,

fruit and nuts, and metal and steel. Russia has increased its stock in indirect domestic foreign

investment to $535 USD billion in 2017 as well as increasing their stock in direct foreign

investment to $470 billion USD in 2017.

Trade restrictions:

Since the invasion of Ukraine, Russia has had many trade restrictions imposed against

them by many European countries and the United States. In response, Russia has quite a few


trade restrictions of their own. After invading Ukraine in 2014, Russia imposed an embargo on

agricultural and food products that originate from the EU, Norway, Canada, Australia and the

United States. These food products include meat, fish, milk, dairy products, fruits and

vegetables. This embargo will continue through 2020, as it was reinstated by President Putin

(“Russia - Prohibited & Restricted Imports”). Russian Customs Value Added Tax is 20% for

many goods and services. However, medical and pharmaceutical products, books and periodicals

and pedigree livestock have a 10% rate. In late 2018, Russia imposed tariffs ranging from 25-

40% on natural gas, oil and steel from the United States in response to US tariffs on Russian

natural gas, oil, and steel (“Russia - Prohibited & Restricted Imports”).

Labor Force:

The total workforce of Russia tends to fluctuate. As of September 2019, there were

approximately 72.2 million people employed, down 300,000 from the month prior. From 1991 to

2019, Russia averaged 69 million people in the workforce total. Their most recent

unemployment rate was very similar to the US at 4.5% (Macrotrends). In the late ’90s, Russia

had the highest unemployment rate its nation had ever seen at over 14%. Since then, there has

been a downward trend to some of the lowest unemployment rates in 2019, helping boost their

economy (See Figure 2.0).

According to Statista, less and less of Russia’s workforce share is in the agricultural

industry, as they slowly shift to a greater amount of the population in services and industry.

Interestingly enough given Russia’s trend away from agriculture, the country is a lead exporter

of meat, seafood and fish, natural gas and oil.

Developments in science and technology

Current Technology Available:


Technological capabilities and availability play an important role in determining the

opportunities in various international markets. Russia remains up to date with the latest

technologies on the market, locked in an interesting competition between themselves and the

U.S. competing for market share. Foreign corporations operate with much higher quality than

domestic ones, however, they cannot compete with the lower prices that products made in Russia

can set. Barriers from further growth in Russia include difficulties politically, sanctioned

industry sectors, specifically in energy and finance, underdeveloped solutions for new

technologies, and a labor market that has much room to grow (Kolesnikova). Considering future

developments, there are several interesting trends worth noting. Virtual assistants are under

continuous focus as strong demand for efficient services will forever exist. Cities are developing

interconnected services such as utilities and energy usage. User technologies such as virtual

reality, cloud platforms, drone management, all stand out as areas of emphasis as well while

corporations also seek domestic software development for streamlined production (Kolesnikova).

Technological Skills of the Labor Force and General Population:

The previously mentioned lack of skilled labor force in IT is a concern for the future of

innovation in science and technology. It has been noted that to remedy this issue, “educational

institutions and employers will have to significantly revise training and motivation programmes,

aimed at the development of skilled professionals,” (Shteingardt). Fortunately, these skilled

workers are able to swiftly find work, incentivizing involvement in the industry. However,

international competition does exist and is a concern for the future population of Russia. Skills

that are noted to be in demand include data scientists, community managers, and digital

transformation managers (Shteingardt). Fortunately, Russia’s IT market is larger than most

others in the world. There’s expected to be 124 million internet users in Russia by 2025, with the


IT market valued already at over $22 billion in 2018 (Kolesnikova). The fastest-growing

segments noted are “hosting, software maintenance and administration, consulting, software

customization, and information security services,” with market leaders expecting this continuous

digitalization to push the IT services industry further (Kolesnikova).

Initial Product Assessment

Product’s Innovation Assessment

Relative advantage:

Solar has a few key relative advantages in the context of the Russian market. The primary

advantage is a lack of precedence at this time for renewables (specifically solar). Because there is

little to no preexisting solar power sources in Russia, SunRun would not face a lot of competition

in attempting to enter the Russian market. Because of the potential volatility of future oil and

natural gas markets due to rising climate pressures, Russia could serve to benefit from

decentralizing its economy away from oil and natural gas. Russia’s economy is highly dependent

on oil and natural gas and the country already faces economic difficulty when prices fluctuate in

these industries. Shifting from one “energy” industry to another could be a key in stabilizing

Russia’s economy towards the future. Given that Russia is a long-term oriented culture, stressing

the benefit for future generations (environmentally and economically) from this switch could be

seen as a relative advantage.

Compatibility:

While solar power has the potential to do well in the cultural context of a long-term

orientated country like Russia, as well as the context of the eventual need for all parts of the

world to move away from reliance on fossil fuels, there are many reasons that solar energy is not

compatible with Russian culture, economic structure, and available infrastructure as they exist


now. Given that solar installation relies heavily on the presence of high amounts of disposable

income, it would be very difficult to introduce to Russia because a majority of the population

does not have access to the necessary funding. Solar is still a very new and very expensive

technology, so it is difficult at this stage in development to lower the cost of installation, even

with leasing options. Furthermore, because Russia’s economy is so dependent on fossil fuels, it

seems unlikely that the government would support the transition to solar energy. Without

government support and tax-cut incentives, it would be very difficult to introduce solar.

Additionally, trade restrictions on foreign products would likely create additional barriers to the

possibility of tax-cut incentives. Furthermore, while it might be possible to get solar installed on

higher-funded government buildings, introducing solar power to the average customer would

likely be difficult given the housing structures most common in Russia. Because many Russians

are not homeowners, the product would have to be marketed to owners of apartment buildings,

who often lack the resources to support the high cost of solar installation to support an entire

building. There are already specific barriers to growth in the technological side of energy

developments in Russia. Particularly relevant to a United States based company is sense of

competition and wariness towards technological advancements in United States.

Complexity

Depending on the methods of installation, solar panels and solar power could be highly

complex or moderately complex. SunRun’s current business model relies on third-party

contractors to install solar panels. Depending on their preexisting level of expertise on the

subject, explaining the actual installation process of solar panels to hired professionals could

create a significant barrier. Additionally, explaining why solar power is worthwhile to Russian

residents could prove difficult given the aforementioned reliance on the petroleum industry,


which is one of the most profitable economic activities in the country. The importance of

switching to solar power is difficult to market in countries that already have a precedent of solar

installation and could therefore prove even more difficult in Russia where there is no such

precedent. Furthermore, given that solar panels would most likely have to be installed very

minimally on residential homes owned by those who can afford home ownership, or more

broadly on apartment complexes, getting such a large collection of residents to switch their

power source following the installation could prove highly complex.

Trialability

The trialability of solar power is very low because solar panels have to be installed in

order to be tried. While small-scale attempts could be made at showing how solar power works

on an item-by-item level, it is highly unlikely that people would be able to use something of that

scale to understand the availability of the technology to power their homes.

Observability

The observability of solar power is low, because solar power has not yet made it into

Russia and as a result, all comparisons would have to be drawn from solar power used in other

countries. There is likely to be major problems and resistance to adoption because of the reliance

on fossil fuels as a major industry. Renewables in Russia have been very low because of a lack

of government support which stands in the way of that technology being used. Finally, there is a

high uncertainty avoidance in Russia. This means that Russians feel very threatened by

ambiguous situations. given the low trialability and low relative advantages, it is much less likely

that Russians are going to be willing to engage in a product that is so difficult to prove will be

successful. The low opportunities for context and background make it very unlikely for solar

power to be successful at this time.


Recommendations

While there is certainly a possibility for solar power to be highly useful and successful in

the Russian marketplace someday, it is unlikely that solar will be entering as a successful

innovation any time soon. While reliance upon fossil fuels will be forced to change in conformity

with climate consequences, that moment has not yet happened and is not likely to happen for

some time in Russia. Russia would have to be slowly prepared through steady dispersal of

information designed to show the usefulness of solar power, and this effort could take a

considerable amount of time. Entering the Russian market with solar panel installation would

require a lot of dedication and patience, as the population would have to be convinced that

moving away from petroleum is indeed necessary and useful. While certain aspects of Russian

culture, such as high long-term orientation and low individuality might make convincing the

population of the long-term broad social benefits easier than in it has been the United States, this

effort would still take a considerable amount of time. Government support would be especially

important for the purpose of ensuring tax-cut options, as well as for more general marketing

attempts. Available communication options in Russia are highly controlled by the government,

so dispersing information would be nearly impossible without government support. With the

current culture of competition in technological advances between Russia and the United States,

special attention would have to be paid to convincing the government that working with a

foreign company is worthwhile. For these reasons, (as well the additional reasons listed above

that give the solar panel installation low relative advantage, compatibility, trialability,

observability, and high complexity) this group would recommend that SunRun does not attempt

to introduce solar to Russia at this time. Instead, we would suggest that if SunRun intends to

expand into the Russian market, that they put a considerable amount of effort towards preparing


the government and the population with considerable amounts of information on the benefits of

solar power before making any attempt.

Appendix

Figure 1.0

Figure 2.0

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