Pest Analysis: Business Environment in Russia
Russia, with a wide base of natural resources and one of the BRIC countries is seen as an attractive market to gain a toehold in by global investors including the United Kingdom’s retail industry. This report aims to analyze the business environment in Russia for British retailers using the PEST analysis. The PEST analysis will focus on four different aspects of the business environment which are the political, economic, sociocultural and technological factors.
The political factor will consider the level of corruption in Russia and how it affects the retail industry seeking expansion. According to the corruption perception index 2010, Russia ranks at the 154th spot out of 178 countries and is tied with 9 other countries such as Cambodia and Kenya (Transparency International, 2010). Moreover, the Interior Ministry in Russia also reported that the average bribe paid in 2010 was $1450 and approximately $300 billion of bribes is received every year (Havocscope, 2010). This widespread corruption is starting to repel many foreign investors despite its lucrative market. Retailers have to face endless bureaucratic procedures as these are just a pretext for officials to get bribed (Saltmarsh and Kramer, 2009). For example, the Swedish company, IKEA is facing problems with its stores permits as the company refuses to bribe the safety inspectors (Meyer, 2011). This case is further enforced by the research of EPFR Global of Cambridge, Massachusetts, which discovered that the reason Russia had less investment fund inflows compared to the other BRIC countries was largely due to their corrupted legal system. The political risk and government issues in Russia are discouraging foreign companies to expand there as the Russian market is deemed unstable and insecure (ibid.).
Next is the economic factor which includes...