The Russian economy grew at 6% and 8.1% in 2008 and 2007 respectively, and witnessed an average GDP growth rate of 7% over the last decade. By 2008, the country had a forex reserve of $600 billion. The country is also looking at entering the WTO or the World trade organisation. GDP stood at $1.757 trillion in the year 2008. (Russia, April 2009) Goldman Sachs has predicted that Russia along with Brazil, India and China would become larger in terms of size than the present US and European economic powers over the next forty years. According to the report the Russian economy would surpass the economies of Italy, France, UK and Germany by the years 2018, 2024, 2027 and 2028 respectively. It is also being claimed that by 2050 Russia will be the only country amongst the BRIC nations which would have per capita income equivalent or to big European economies. By 2050 Russia would also have the highest per capita income among the BRIC countries. (Dreaming With BRICs: The Path to 2050, 2003) (Hult T., 2009). The country has also got a growing middle class which constituted 45% of the total population in 2003 (Senaeur B., and Goetz L., March 2003). Recent reports have also pointed out the positives and strengths of the retail sector in Russia. In a recent report Russia has been ranked 3rd in terms of the attractiveness of retail market and retail development opportunities within a group of 30 countries (A.T. Kearney Global Retail Development Index, 2008). Moreover about 39% of the population in the country is between the 15 to 39 age group. Carrefour and IKEA are just some of the global marquee name operating in Russia. Growing middle class with increasing disposable income and high rate of economic growth makes Russia an attractive retail destination for global majors and local companies as well. (A.T. Kearney Global Retail Development Index, 2008).
Factors Affecting Entry Mode Decisions
UK based Wedgwood is famous for its high end china tableware and other home d'cor stuff. It is looking at expanding into markets like Russia.
Characteristics of desired mode:
Low need of financial expenditure at the initial stage then increased chances of higher ROI at a later stage.
Specific factors in context of Transaction:
Russia is socio economically quite different from Western economies, owing to its communist past. So it won't be easy for Wedgwood to select the Licensee partner.
FDI policy in Russia has improved as the leaders across political dispensations have started welcoming FDI into the country (Minniti M. et. al, ). This is evident from the fact that total FDI over the period 2002 to 2006 increased 20 times over. It stood at $52 billion in the year 2007 (Souza L.V.D., April 2008).
Academic literature provides various theories in context of choosing the mode of entry into a foreign market. Sequential iterative model of Young et al. (1989) the four factors which affect the entry mode by Hollensen (2007: 298) when