Doing Business in Russia: Motorola's Experience
Mr. John Doughty
Vice President and General Manager, Motorola,
Commercial, Government, and Industrial Solutions Sector for Europe, the Middle East and Africa
Many know Motorola as a cell phone company. It is our largest business, but we do many other things. We create cell phone infrastructures, make broadband communication set-top boxes, build semiconductor components for cell phones, and are involved in telematics, which is the electronic system in most of today's cars. Since I am particularly involved with the professional communication system business, I will talk about it because it has become very relevant in homeland security.
INTER-AGENCY COMMUNICATION
During the September 11 disaster, many agencies-the fire brigades, the police departments, the ambulance departments-were not able to communicate with each other, because each of the agencies made its own purchasing decisions and own technology decisions. However, Motorola was actually able to provide the technology to enable interoperable communications. But while we have seen SGI's demonstration, the truth is that information needs to be dispatched to people in the field, and that is done through wireless devices. Whenever I get the opportunity, I ask governments everywhere to think of homeland security and get their agencies to work together. If another major disaster occurs-and we know it is going to happen-there is not one Western country whose critical emergency agencies are currently able to communicate with each other.
DOING BUSINESS IN RUSSIA
Regarding Motorola's presence in Russia, we are very successful here and feel that it is a great and exciting business for us. Right now, Russia is growing at 7.5% annually and has overtaken China for first place. It is a big market with lots of opportunities. We sold more cell phones in Russia in June 2003 than we did in all of 2002. So, there is massive growth, with high cell phone penetration, and it is still on the rise. We are also the major supplier of communications equipment for the Ministry of the Interior, the police forces in Russia, a large market as well.
How did we achieve this? First, we got into business in Russia before the market opened up. We supplied the communications system for the Moscow Olympics. When the market did open, the police were already impressed with our technology and wanted it as soon as they could.
We also invested in people. Currently we have 600 employees in Russia, half of whom are software engineers based in St. Petersburg . All are Russian employees-there are no expatriates. Investing in local people was a good initiative because people's skill level in Russia is outstanding. Many of our early employees are now in key positions in Motorola in other countries.
We also have a very impressive distribution network of 150 distributors. These distributors are local companies. Some of them existed previously but most are startups. Again, the ability of younger-generation entrepreneurs in Russia is incredibly impressive. In fact, I think they rank with the best that we have in Europe, the Middle East, and Africa. We also have two very crucial joint ventures with state-run companies that provide us with political help.
This may sound great but it was not easy. You may remember the currency crisis of the mid-1990s, when many Western companies exited Russia. We chose to stay and maintain our investment. Patience is also a necessity in Russia. For example, until 2001, you had to have a license to have a cell phone. So technically you could have been arrested in Moscow before then for having a cell phone. Getting the regulations to keep up with business was definitely a challenge, and you only achieve it by having local contacts.
CONCLUDING REMARKS
Although I have spent a good deal of time in Moscow, I do not claim to know the culture intensely. You can come here many times and think that you understand it, but you do not. Therefore, to do business here, you must delegate your operations to local people and let them be your spokespeople and deal with the government. If you do that, however, the market is great and I defy anyone to look at the map and say that this area is not worth considering. I hope I have encouraged people to join us in this great market.
Many know Motorola as a cell phone company. It is our largest business, but we do many other things. We create cell phone infrastructures, make broadband communication set-top boxes, build semiconductor components for cell phones, and are involved in telematics, which is the electronic system in most of today's cars. Since I am particularly involved with the professional communication system business, I will talk about it because it has become very relevant in homeland security.
INTER-AGENCY COMMUNICATION
During the September 11 disaster, many agencies-the fire brigades, the police departments, the ambulance departments-were not able to communicate with each other, because each of the agencies made its own purchasing decisions and own technology decisions. However, Motorola was actually able to provide the technology to enable interoperable communications. But while we have seen SGI's demonstration, the truth is that information needs to be dispatched to people in the field, and that is done through wireless devices. Whenever I get the opportunity, I ask governments everywhere to think of homeland security and get their agencies to work together. If another major disaster occurs-and we know it is going to happen-there is not one Western country whose critical emergency agencies are currently able to communicate with each other.
DOING BUSINESS IN RUSSIA
Regarding Motorola's presence in Russia, we are very successful here and feel that it is a great and exciting business for us. Right now, Russia is growing at 7.5% annually and has overtaken China for first place. It is a big market with lots of opportunities. We sold more cell phones in Russia in June 2003 than we did in all of 2002. So, there is massive growth, with high cell phone penetration, and it is still on the rise. We are also the major supplier of communications equipment for the Ministry of the Interior, the police forces in Russia, a large market as well.
How did we achieve this? First, we got into business in Russia before the market opened up. We supplied the communications system for the Moscow Olympics. When the market did open, the police were already impressed with our technology and wanted it as soon as they could.
We also invested in people. Currently we have 600 employees in Russia, half of whom are software engineers based in St. Petersburg . All are Russian employees-there are no expatriates. Investing in local people was a good initiative because people's skill level in Russia is outstanding. Many of our early employees are now in key positions in Motorola in other countries.
We also have a very impressive distribution network of 150 distributors. These distributors are local companies. Some of them existed previously but most are startups. Again, the ability of younger-generation entrepreneurs in Russia is incredibly impressive. In fact, I think they rank with the best that we have in Europe, the Middle East, and Africa. We also have two very crucial joint ventures with state-run companies that provide us with political help.
This may sound great but it was not easy. You may remember the currency crisis of the mid-1990s, when many Western companies exited Russia. We chose to stay and maintain our investment. Patience is also a necessity in Russia. For example, until 2001, you had to have a license to have a cell phone. So technically you could have been arrested in Moscow before then for having a cell phone. Getting the regulations to keep up with business was definitely a challenge, and you only achieve it by having local contacts.
CONCLUDING REMARKS
Although I have spent a good deal of time in Moscow, I do not claim to know the culture intensely. You can come here many times and think that you understand it, but you do not. Therefore, to do business here, you must delegate your operations to local people and let them be your spokespeople and deal with the government. If you do that, however, the market is great and I defy anyone to look at the map and say that this area is not worth considering. I hope I have encouraged people to join us in this great market.