Difficulties Of Entering A Foreign Market

Leon Prikhodovskiy
INBA 3810: TASK#1

For my report I decided to interview a close family member of mine, Michael Kotoyan. For the last 6 years, my uncle was a partner/co-owner in a software company in Ukraine. He has traveled there multiple times in order to set up offshore software engineering and quality assurance teams. The team he was in charge of in Eastern Ukraine consisted of 30 people. Along with working in eastern Ukraine, he also spent a month in India running a small software engineering team.
Michael said there were lots of major challenges that he had encountered in both Ukraine and India. Some of these problems were: cultural work ethic differences, corruption, government instability, communication/language challenges, and time zone differences. Of these obstacles’ he mentioned that corruption and government instability were the toughest to get around. Corruption in a way that government officials both, local and federal, ask for bribes to accomplish anything. For example, let’s say you need rent an office; the office rental has to be approved by the local city council. They won’t approve it unless you provide them with a bribe, they will just give you the run-around. Also extortion for example, a tax auditor or a fire department inspector will come and shut down operations until given a bribe to go away.
Another question I asked Michael was, “What were some key things you learned from doing business into a different country? What may you have done differently if you did it again? One of the keys things he learned was respecting the cultural work difference but without imposing US work attitudes. However, at the same time be very strict about deadlines. He mentioned that deadlines are dealt with differently overseas. In a lot of countries deadlines are not treated as seriously. Enforcing deadlines works well with offering premium bonuses for completing projects on time. Also some things he would’ve done differently would be to hire local leaders and directors instead of sending an expatriate from the USA. Local directors or team leads are trusted more than foreigners. Also, if you are doing business in a non-western country then make sure to have a ‘bribe budget’. It is impossible to get anything officially done when doing business in a development country. Simple tasks like Internet and utility installation require a bribe. Also different local agencies ranging from tax authorities and fire departments will constantly ‘audit’ your office and demand a bribe to basically stop the audit.
Lastly when asked about hiring consultants, Michael said that would be a great idea. He said he would hire local recruiters and give them the project of hiring the best talent possible. Also, Michael would hire a law firm that has a branch office in the foreign country as well as a branch office in the USA. It will definitely pay off to have legal representation in the foreign country. He would assign them the project of setting up and/or legally maintaining a subsidiary organization. To go along with everything else it would be a good idea to hire a consultant that has had experience of implementing and setting up an offshore office from start to finish. This would then give the consultant a project where he can find room for improvement. I think I would like to further explore the difficulties of entering a foreign market, and the hardships that companies may face in the near feature.