BIG FISH INTERNATIONAL AND ENTRY INTO RUSSIAN MARKET Possible Subtitle

THESIS – BACHELOR'S DEGREE PROGRAMME

SOCIAL SCIENCES, BUSINESS AND ADMINISTRATION

A U T H O R / S :

Diana Malaniia

SAVONIA UNIVERSITY OF APPLIED SCIENCES THESIS Abstract

Field of Study Social Sciences, Business and Administration Degree Programme Degree Programme in Business and Administration Author(s) Diana Malaniia Title of Thesis Big Fish International and entry into Russian market

Date 01/12/2020 Pages/Appendices 37 Supervisor(s) Virpi Oksanen, Abdelazim Hannoura Client Organisation /Partners

Abstract Big Fish International is an agency specializing in recruitment, transfomation and ssessment of compa-nies’ procurement departments. The company has operated successfully for more than 15 years in France, Canada, Germany, Poland and Algeria. The company has also considered a market expansion to the East, to Russia.

The main purpose of this researchwas to analyse the Russian market to find out if it represents a poten-tial for the company.

In the theory part of the research different kinds of external environment were considered in order ana-lyse the market. In addition, the theory part includes a description of various entry modes that are es-sential during strategy definition.

The second part is the practical part of the thesis, where due to an external analysis and data collection it is possible to make conclusions concerning business environment, and the opinions of the case comp-nay’s associates and employees and make a decision on strategy choice.

In conclusion, the research allows us to decide on the strategy and condition under which Big Fish Inter-national can enter the Russian market to avoid risks and to take into account the opportunities.

Keywords Russia, market research, recruitment, internal research, purchasing

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CONTENTS

1 INTRODUCTION ................................................................................................................. 4

1.1 Main problems and purpose of research .................................................................................... 4

2 DEVELOPING THE STRATEGY OF FOREIGN MARKET OPENING .............................................. 5

2.1 PEST analysis .......................................................................................................................... 6

2.2 Porter’s 5 forces analysis .......................................................................................................... 8

2.3 Entry modes ........................................................................................................................... 8

2.3.1 Contractual entry modes .............................................................................................. 9

2.3.2 Licensing ..................................................................................................................... 9

2.3.3 Franchising ................................................................................................................ 10

2.3.4 Other contractual modes ............................................................................................. 10

2.3.5 Investment entry modes ............................................................................................. 11

2.3.6 Exporting ................................................................................................................... 13

2.4 Entry barriers ......................................................................................................................... 14

3 RESEARCH FOR RUSSIAN RECRUITMENT MARKET FOR BIG FISH INTERNATIONAL .............. 16

3.1 Main activity of Big Fish International ....................................................................................... 16

3.2 PEST analysis of Russian recruitment market ............................................................................ 17

3.3 Porter’s 5 forces analysis application ........................................................................................ 20

3.4 Summary of results of PEST and Porter’s 5 forces for Big Fish International ................................ 24

3.5 Survey on potential of business expansion for Big Fish International .......................................... 26

4 RECOMMENDATIONS FOR THE MARKET ENTRY ................................................................. 28

5 CONCLUSION ................................................................................................................... 31

REFERENCES ......................................................................................................................... 32

APPENDIX ............................................................................................................................. 36

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1 INTRODUCTION

Big Fish International (BFI) is a small sized enterprise founded in 2003 and based in the heart of Paris, France assisting businesses in the development of Procurement & Supply Chain Departments.

BFI has a presence all over the world in countries like France, Canada, Germany, Poland and Alge-ria. Due to 15 years of successful operations on the market BFI is recognized as an expert in its field. Its clients are multinational companies as L’Oréal, Unilever, Nokia and Danone etc. (Big Fish, 2018)

Since Procurement & Supply Chain departments play the key role in company’s performance, BFI provides continuous improvement and effectiveness of operations resource management via Assess-ment, Recruitment and Transformation (ART) activity. (Big Fish, 2018)

1.1 Main problems and purpose of research

Big Fish positioned itself as a niche company, specialized in Procurement and Supply Chain HR ser-vices. It was proposed to explore opportunities in Russian market, in order to ”open the door” to the East and continue the growth of the firm further to the East, since the presence in that part of the globe, so far, was assured by the Polish office, which does not cover the countries of ex-USSR zone. (Big Fish, 2018)

According to World Employement Confederation, the private recruitment industry generated near 466 billion € in sales revenues worldwide in 2017. More specifically, the recruitment sector produced the largest revenue share, accounting for 60% of the entire market, comparing to other kinds of services related to HR sector. As for Russian merket concerns, the tendencies appeared to be more promising than expected. (World Employement Confederation, 2017)

In order to continue the growth it could be interesting to research the Russian market and find out its capacity, opportunities, as well as risks and threats for Big Fish International. In Chapter 2 dis-cusses the possible market entry options and their detailed description. Chapter 3 analyses the mar-ket by reviewing current political and economical situation in Russia and how those factors affect businesses. Cultural differences will be described to get on overview between French and Russian business behaviour. Then, to find a suitable entry strategy after the market analysis. The research will also focus on business model reconsideration if required. Various options will be considered to get a big picture of the market entry scenario. Also, an internal company survey will allow to identify the enthusiasm and willingness of partners and employees to invest themselves not financially, but intellectually into new market exploration. (Big Fish, 2018)

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2 DEVELOPING THE STRATEGY OF FOREIGN MARKET OPENING

Businesses at some point of their activity start considering the launch of new projects. Whether it's launching of the product or entering the export market. The risk and price of the error while enter-ing the new market is quite high. Hence, it is vital for the company to apprehend and calculate in advance how efficiently it will be able to perform on a new market, and to understand how it will be able to achieve it – decide on strategy, prices and the most demanded products. (Jolly 2015, 6)

The development of a market entry strategy is based on an understanding of the specifics of the business and an understanding of what is happening at the moment and what will in the industry and the segment in which the company is operating. (Jolly 2015, 7)

The analysis begins with the "top level" - i.e. a common understanding of the new market - namely: the trends existing in the industry and the main drivers that affect its development. Then the market is researched in terms of the competitive environment and degree of consolidation are evaluated, the price categories are analyzed, in which competitors compete and the optimal products that are most suitable for the new market are determined. The competitive price is calculated, as well as po-tential consumers are analyzed. As a result, the best entry option is chosen for the company to op-erate on the new market. In conclusion, we compare all ”fors” and ”againsts” in to decide on whether to enter the market or not. (Jolly 2015, 7)

The development of a strategy for entering a new market includes the following stages: PEST analy-sis: Assessment of macroeconomic indicators (if necessary); Estimation of market capacity; “Por-ter’s 5 Forces Analysis” (Porter, 2008) defining how the five competitive forces influence profitability in your industry, helps to develop a strategy for improving company’s performance; Deciding on en-try mode; Decision on market entry. (Owusu, Sandhu & Kock 2007)

The next step would be to decide on entry strategy to a foreign market. Not every market penetra-tion strategy is convenient for all countries. There must be an appropriate one to adjust the market including several factors like degree of adaptation, local competition, tax codes and also language and cultural barriers. (Owusu et al. 2007)

Usually, entry strategies play a very important role in successful internationalization process. Those can be replaced by other entry methods or several of them may be used at a time.

Owusu et al. (2007) remarks that the choice depends on the conducted research and outcomes. A wide range of strategic management literature list entry modes in details mentioning advantages and disadvantages as well as relevant ways of application. There are several ways of foreign market penetration (modes of entry). As a rule, researchers include: Exports, Licensing, Franchising, Joint Ventures (JVs), Subsidiaries, Greenfield Investments. (Bukhvalov 2016, 13)

Each of these methods involve varying degrees of control, liabilities and exposure to risk. Thus, such methods of penetration to the foreign market, such as Export or Licensing, suppose the least degree of control and risk, whereas Subsidiaries - the greatest degree of control and risk. (Bukhvalov 2016, 15)

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2.1 PEST analysis

PEST analysis is a serves for assessing the macroeconomic factors of the external environment that may affect company's operations. This tool is useful for understanding the state of the market, the opportunities for developing this type of business, as well as for finding directions for further activi-ties. (Perera, 2017)

According to Korobkova (2014, 2-3), in the conditions of constant technological, economic and polit-ical changes happening on the global scale, world community transforms correspondently. Conse-quently, running a business is associated with a necessary adaptation to the trends and tendencies of the external environment. Nowadays, business is in constant interaction with the macroenviron-ment, which heavily affects both all types of activities and the decision-making process. An enter-prise can successfully compete in a market if it can adapt its activities to the external environment conditions, take preventive measures toward the occurring negative events or use the opportunities in a timely manner. One of the methodological approaches aimed at assessing the impact of the ex-ternal environment on a business is PEST Analysis. (Perera, 2017)

In accordance with Kotler, Armstrong, Wong and Saunders (2005, 26), Most organizations have to anamlyse the macroenvironment to find out how they need to adjust to it.” The PESTLE analysis assists an organization in its strategic business planning process by identifying potential opportuni-ties, threats and trends in a market. As a result, it provides an objective picture of a new business environment the company plans to operate and important information for market entry strategy for-mulation. (Del Marmol, 2015)

PEST - analysis includes consideration of four groups of factors: political, economic, social, and tech-nological. Let us consider each of them in detail. Political factors refer to the way how and in which extent governmental policies and political institutions interfere and affect the economy, the specific industry and the company in question. Especially, political factors comprise such areas as tax policy, labor law environmental protection, tariffs and political wellbeing. In addition, political factors may include goods lobbied by the state, or vice versa, limited by legislation. In addition, the state has great power in matters of health, education and infrastructure. The political scene has a major ipact on the business legislation and the purchasing power of consumers. The necessity to examine political factors is also grounded on the base that government regulates the currency flow and other issues related to obtaining profit and necessary resources. The PESTLE analysis sets as objective to examine the distribution mechanism of the main economic resources; the government type and extent of its stability; consumer protection laws. Besides, the analy-sis evaluates trade restrictions or reforms; taxation policy and legislation in the field of antimonopoly law; foreign economic legislation; and regulation of employment. (Warner, 2010)

Economic factors of PESTLE analysis refer to the macroenvironment which defines the overall state of economic development, market relations, competition - the economic conditions in which company acts. Among the most important aspects there are economic growth, inflation rate, inter-est rate, exchange rate, budget deficit, unemployment rate, taxation norms, disposable income of consumers and businesses. Shifts in these macroeconomic factors have an impact on living stand-ards the population, consumer wealthness, demand flactuations, invеstmеnt pоlicy, price lеvеl.

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Therefore, the analysis of economic factors supports a company in its strategy formulation process by providing a comprehensive overview of a market viability legislation in the field of antimonopoly law; foreign economic legislation; and regulation of employment. These factors, at times, have a significant impact on decision-making in the company. (Warner, 2010)

Social factors imply cultural factors as health, population rates, age, career relations, and an em-phasis on safety. Trends in social aspects affect the demand for the company article offer as well as how the company works. The group of social factors analyses the demographic and cultural aspects of a market, allowing an organization to comprehensively evaluate trends, attitudes, and beliefs af-fecting the target market. Social factors and cross-cultural communication play a critical role in run-ning an international business, especially in terms of human resource management and marketing. The in-depth research should cover changes in a demographic state, such as population growth rate, sex and age structure of a society. PESTLE also assesses factors related to the level of educa-tion, trends in the job market and average disposable income level. Social classes, family size and structure, minorities are analyzed alongside with lifestyles and attitudes toward work, leisure, career and retirement Another crucial group of factors to be evaluated reflects impact of religion and be-liefs, preferences, values and established prejudices and myths. Finally, attitudes toward product quality and customer service can be assessed. (Warner, 2010)

Technological factors include such aspects as Research and Development, computerization of activities, technological incentives, and the speed of technological development. These factors allow to define entry barriers and the least effective level of production. Also, changes in technology influ-ence the cost structure, product quality, as well as lead to innovation. (Warner, 2010)

The technological factors analyze the specific role of technology for the market in question, specify-ing is-sues that may have an impact on a company’s operation. In the modern society, where tech-nological progress is especially important and pace of change in technology is becoming more rapid, even small techno-logical inventions can make serious amendments to the established situation on the market. Deep knowledge of this field can allow a company to exploit technological opportunities provided by the market and consequently update or change its production, thereby attaining a strong competitive advantage and gaining a market share. Among the important issues that should be discovered, there are described below. (Sammut-Bonnici & Galea 2015)

Firstly, Internet and mobile technologies influence the evolution of the market tendencies. Secondly, possible evolutions in the main tеchnologiеs usеd in the mаrkеt. Thirdly, innovations in information technologies. Depending on the specifics of the organization activities, aspects of the external envi-ronment have a greater or weaker impact on its activities. For a standard commercial organization, among these factors there can be an expected increase in government orders, inflation rate fluctua-tions, technological changes, society attitude toward the business, possible shifts in the structure of consumers. At the same time, a commercial organization that carries out its activities at the interna-tional scale (export and import) is more dependent on the customs policy than local governments. For state organization political factors represent higher risks than for a commercial trading company. (Sammut-Bonnici & Galea 2015)

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The importance of those fаctors is dirеctly bаsed оn the kind of company’s specialization. For exam-ple, retail and wholesale companies in the consumer sector are more likely to be influenced by social and economic factors, while a contractor who produces military equipment will be more dependent on political factors. (Manager Lines, 2017)

In addition, the factors that are most vital for the firms, and whose evolution is most likely in the foreseeable future, will have the highest influence on the company. So, for example, if a company exists mainly at the expense of borrowed funds, then it is worth paying increased attention to eco-nomic factors, especially interest rates. (Manager Lines, 2017)

2.2 Porter’s 5 forces analysis

“Porter's 5 Forces Model of competition” is used to figure out the design of the industry, to analyze its attractivity in terms of return on investment, to assess rivals, and to build up a strаtegy. The main purpose of the model is to search for a market in which it is secured from rivals or create a uniquе business model and make a decent profit. (Porter, 2008)

The analysis of competitive forces is carried out by identifying 5 main competitive forces. The analy-sis of the market power of suppliers (Bargaining power of suppliers) - how much the position of suppliers, how many there are potential suppliers, can they impose prices? Powerful suppliers may deprive revenues if they set higher prices. The analysis of the market power of consumers (Bar-gaining power of buyers) – buyer’s capacity to influence the price, can they demand a price reduc-tion, can they unite and carry out joint purchases? Consumers can force down prices by playing competitors one against one another. Analysis of competition among existing players (Rivalry among the players) - is there a strong rivalry between market actors, is there a leader actor, is there a prevailing actor or are they all? The most powerful of all five forces, it has the dominant impact on companies. This force also describes the rivalry of competing firms, which can arise if one of the companies is able to meet the needs of customers faster, better, or cheaper, which also triggers other companies to “defend” and build an appropriate strategy. Analysis of the appearance of new players (Entry of competitors) - how easy are new actors to enter the market, what are the barriers, how easy the barriers are to compete? New entrants, armed with capacity and eagering to market share, can boost up the investments required for reinforcement on the market. Analysis of substitute products (Threat of substitutes) - how easy is it to replace a product or service at a lower price and with greater functionality. Substituteе оfferings cаn “lurе” custоmers аwаy. (Porter, 2008)

2.3 Entry modes

The identification of entry modes when entering a foreign market are considered as a crucial deci-sion to make since it can have an important impact on the business’ operations abroad for an ex-tended period of time. (Kotabe & Helsen, 2016)

Decision on the entry mode is affected by three different variables: Strategic variables are referring to the decision of the firm adapt the product or service to the external market or offer a habitual product with added value. Environment variables, where variables are related to country risk, famili-arity with the location and demand and competitive conditions existing in the host market. Evi-dently, due to resemblance of countries, these variables are not playing a huge role. The decision

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оn еntry mode for implementation is related to the current state of the enterprises, the company's previous experience, stability, capital and focus market. (Kotabe & Helsen, 2016)

2.3.1 Contractual entry modes

Contractual Entry modes comprise several similar agreements bеtwееn several companies from the domestic market and an entity that will be responsible for the licensing of the intangible assets in the foreign market. Schlegelmilch (2016) and Bradley (2005) define the following modes of entry: licensing, franchising, technical agreements, service contracts, management contracts, co-production contracts.

In Albaum & Duerr’ article (2008, 373) they highlight that licensing, contracting and joint venture as strategic alliances, which increase their chances to succeed on the market. The aim is to improve the competitiveness in long-run for the alliance and establish a conviction that every partner can propose something exclusive and unique to offer. The partnership must include mutual benefits, shared control and power.

Each of the forms of cooperation is related to some requirements that were accumulated before the internationalization campaign begins. Frequently, the major criteria for choosing one of the strategi-cal approaches is the country's legislation towards foreign firms and defining the rate of desired con-trol over the operations of local producers regarding the provision of goods of appropriate quality under their brand as well as financial resources. (Morschett, Schramm-Klein, Zentes 2015)

2.3.2 Licensing

Licensing is the simplest way from the above - mentioned. In the licensing process, the original company grants the local company the right to manufacture the product or offer a service under its own name, technology and know-how. In this case, usually the initiator of the process is the Licen-see - a representative of the local market. (Kotler, Kartajaya & Setiawan 2016)

Kotler et al. (2016) characterized the reciprocal benefit from licensing as follows: "The licensor en-ters into an agreement with the Licensee in the foreign market, offering the right to use the produc-tion process, trademark, patent, trade secret or some other value in value in exchange for honorar-ium or license fee. The Licensor gets an entry to the market with minimal risks, and the Licensee does not have to start from scratch, because he immediately gets a production experience, a well-known product or a name. " (Kotler et al. 2016)

However, it is fair to mention negative results of Licensing strategy: when transferring rights to ac-tivities under the same identity all along licensing process, the company does not obtain a full domi-nation over the activities of its local "agent". Furthermore, the promising gain will be overtaken by the licensee, not the possessor of the trademark. However, it is important to mention the fact that the possible loss is also carried by the licensee. Also, the licensee is not allowed to acquire the rights to participate in ongoing developments, as well as the rights to the updates that appeared after the contract conclusion. (Morschett, Schramm-Klein, Zentes, 2015)

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Current option is agreeable when the aimed country has restrictions on import and foreign direct investment (FDI). According to Bradley (2005) licensing agreements comprise 2 ways of perfor-mance, which are operations with current technology license, and a mix of a current and future de-velopment of technology or know-how license, which means that the first one only allows technol-ogy access to the licensee. Whereas, the second one gives an access to existing and future technol-ogy advancement within their arrangement field.

2.3.3 Franchising

Franchising is another mode of market entry in which a company, which is already running a suc-cessful business (the Franchisor) with a sеrvicе оr prоduct еntеrs into a long-term cоntrаctuаl rela-tionship with оthеr businеssеs (franchisееs). Thus, Franchisees are operating under the franchisor's trademark and usually under the franchisor's suprvision, by acquiring then a franchise fee. (In-vestorWord 2010)

Franchising itself is quite analogous to licensing. The principle distinctness is that the agreement of a franchise contract is applicable to the whole business, comprising all intellectual property rights and subsequent advancements. In this case, the originator of the franchise's establishment is usu-ally the parent company. (Czinkota et al. 2005, 365)

Evidently, the company should create and develop a very unique services or products. Additionally, franchising also comprises a certain rate of standardization in order to maintain a franchise image. Otherwise franchising does not operate in the way it should. (Czinkota et al. 2005, 366)

Both licensing and franchising allow to enter the market with the minimal investment, nevertheless, the degree of domination over the activities here is not elevated enough, and to reach a higher de-gree of control, the firm still has to invest directly, which refers to another king of entry mode strat-egy. It is crucial to admit that franchising is mostly developed in such business areas as services or retail. (Fernandes, Gouveia & Pinho, 2014)

2.3.4 Other contractual modes

There also other kinds of contractual mode as Contract Manufacturing and Management contract, which will be shortly described below. (Albaum & Duerr, 2008)

Contract Manufacturing is a mode of entry similar to licensing and investment entry and being a cross between those. The main trait is that an industrial company of any production field contracts with another company in the foreign market in order to engage the last one for product manufactur-ing. (Albaum & Duerr, 2008)

Current entry mode does not require huge financial investments, as well as time and executives. It is also a fastest entry mode according to Albaum & Duerr (2008).

Otherwise, it also has a disadvantage as sharing the know-how with potential rivals, which can be interpreted against the original company in future.

Management contract between foreign companies give the right to control their daily perfor-mance even if they are located in different countries. This kind of contract does not give right to

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take decisions on investment of capital, long-term liabilities, reglaments. This kind of contract reflect the owner’s intention of intervention into foreign company’s activity. (Albaum & Duerr, 2008)

2.3.5 Investment entry modes

Investment entry mode can be interpreted under different names like: Foreign Direct Investment (FDI); Subsidiaries, which are also divided into solely owned subsidiary and wholly owned subsidi-ary; Ventures. (Schlegelmilch, 2016)

The Organization for Economic Co-operation and Development (OECD) defines Foreign Direct In-vestment (FDI) as ”a category of investment that reflects the objective of establishing a lasting interest by a resident enterprise in one economy (direct investor) in an enterprise (direct investment enterprise) that is resident in an economy other than that of the direct investor”. (OECD, 2018)

FDI entry mode proposes an elevated level of control over the business (Chung & Enderwick 2001; Bradley 2005). FDI is not only a high financial commitment mode, but also a transfer of know-how, competences, management, marketing, production processes and other resources. (Bradley, 2005)

Foreign Direct Investment mode is by far the riskiest and costly for a firm, as the payback sycle is extended and occasionnaly takes decades. Within the framework of this approach, investments are made during the establishment of a new enterprise or in the purchase of assets on the market with the goal of not only economic but also geographical penetration of the market. (Bradley, 2005)

As a result of such activities, the risk of both economica nd political failure, that is, damage to repu-tation on a global scale, is also quite high. However, it is fair to mention that in case of successful outcome, the company gets maximum domination over the fabrication and marketing of the product range or service on the market, thereby increasing its efficiency in the local market. (Bradley, 2005)

Applying this approach, the company must adequately assess its opportunities of rapid transfor-mation to the new market, especially the creation of business processes in conditions of operations in this particular country. Firstly, thanks to the differences in culture and structure between coun-tries. (Bradley, 2005)

To enter the new market, the firm can use both owned assets and capital and of local firms. Evi-dently, the autonomous entrance to the market, that simultaneously includes the building of produc-tion sites, registration under country’s legislation, the creation of logistics and the search for final clients is a rather lengthy process and takes, sometimes, many years. Since time plays a crucial role in the business world, companies use mergers and acquisitions of local companies in order to shorten the period of adaptation and development of the market by creating their own assets from scratch. (Jolly, 2015)

According to Faeth (2009) and Bradley (2005) there are a few aspects that have an impact on for-eign direct investment. Both include market size as a crucial motive on the decision with the choice to which market the company shall open to.

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Major decision-making concepts involve market size of target country; proximity; need to follow the pattern of competitors’ activity in order to find out the challenges; previous investment experience. (Faeth, 2009)

Given the specifics of this work, at the moment it is necessary to dwell in a little more detail on the definition and forms of mergers and acquisitions. Mergers and acquisitions, as mentioned above, relate to a direct investment strategy. Both processes are making part among the riskiest ones, ex-pensive and hard activities in business. Yet, their predominance is indicative of the fact that mergers and acquisitions in the modern times have transformed into an evidence of omnipresent globaliza-tion. Mergers and acquisitions, as an association of foreign and local capital, on the territory of the country, also give a significant impetus to progress, and an escalation in the scale of the company's operations, immediately following them, creates jobs and increases GDP. (Jolly, 2015)

Sole venture is a unification of two or more companies into one, where all assets and liabilities pass to the acquiring company, while the acquired companies cease to exist. The reasons for foreign company acquisition can be: geographical changes; the acquisition of specific assets like manage-ment; know-how; diversification; cheaper and accessible raw material in the host country; financial diversification. (Schlegelmilch, 2016)

The acquiring company purchases a part of all of the shares. Hence, the shareholders of the ac-quired company can be deprived of the shares of the new one. Is is vital to mention that under the terms "mergers and acquisitions" it is frequently understood that not only the mergers and acquisi-tions of companies themselves, the sale of its own divisions, the alienation of subsidiaries and the complete restructuring of the company's internal structure as well. (Schlegelmilch, 2016)

For a company the overall prosperity depends on the decision on right company acquisition. One of the advantages can be a quicker start in the new environment due to acquired companies who have an experience operating in that environment, new products and a short revenue period due to im-mediate return on investments. (Schlegelmilch, 2016)

Joint Venture, according to Fernandes et al. (2014) an a joint venture means that two or more companies, legally and financially independent of each other, cooperate with each other. The part-ners remain independent, but pool their strengths and resources to some extent, in order to jointly implement specific projects and achieve business goals.

Within the framework of this method, a new joint venture is being created by local and foreign in-vestors. Also, there is a chance that a foreign company purchases a part of a local company, or con-trarily, although the latter scenario is extremely rare. (Fernandes et al., 2014)

Frequently, this type of partnership is in line with with a shortage of finance for the enterprise itself or with specific laws of the country that provide guidance for local market players. For companies, this approach is usually associated with an average risk, but a significant number of major market players believe it quite risky in the Russian market, since even in countries with markets that are very close in structure, conflicts between partners related to the core business principles are very likely as marketing and investment. If we consider Russia from the point of view of the basics of do-ing business, it is impossible not to note the fundamental differences in culture and organization of

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interaction of individual market components with each other. So, approaches that appear to be logi-cal and reconciled to foreign partners can turn out to be uncommon for Russians and foreigners. The main drawback of current approach is for sure the complication of fast decision-making, particu-larly if it comes as part of a global policy change for a large international company. (Fernandes et al., 2014)

However, Bradley (2005) mentions that essential advantages from International Joint Venture are: Access to know-how and products; Reduction of political risks; Reinforcement of competitivity; Ac-cess to resources. Usually Joint Ventures are not as expensive as acquisition. It may be also charac-terized by higher profit, risk minimization due to collaboration with experienced local company (Al-baum & Duerr, 2008).

2.3.6 Exporting

Еxporting supposes an indirect entry, via distributors, subsidiary branches, etc. This approach is ap-plied in order to explore the focus market. There is no doubt that the process demands full aware-ness on level of commitment, resources and risk involvement (Porter, 2008).

Article by Chung & Enderwick (2001) discusses that the exporting does not comprises low resources commitment & low investments. However, it is disadvantageous because of low profitability and de-crease in control over the company.

After getting more information and experience on new market it is easier to identify needs of target market. Consequently, it will be fair to suggest options to increase the presence on the new market and change for another strategy (Bradley, 2005). Bradley (2005) affirms that exporting is part of a growing commitment to internationalization.

Direct exporting means the fact of direct sale of a product/service by producer to importer or buyer physically based on a foreign country. The company takes over all the operational activities related to work, searching for distributors, dоcumеntation and cеrtificatiоn of prоducts. (Karagulian, 2015)

Direct еxpоrt assumеs that the compаny can:

• use its own trading potential; • establish an office abroad; • collaborate with trading agents or distributors; • conclude a licensing agreement with a foreign producer /service provider; • open a trading company abroad; • create a manufacturing unit/ agency abroad, etc. (Karagulian, 2015) The last two points are not relevant for small and middle business at the initial stage. In general, even large enterprises at the present stage are rare to resort to so-called "investments from scratch". (Karagulian 2015, 21)

Direct export mode is convenient for SMEs since usually small enterprises do not possess a sufficient resource resource and management forces. (Morschett, Schramm-Klein & Zentes 2015)

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Direct export has advantages as well as disadvantages. Talking about advantages of this entry mode, it is safe to say that companies have an opportunity to govern the choice of foreign markets and the choice of foreign representative companies. Exporting player gets feedbacks from the target market, which can be helpful in terms of service or product improvement and, consequently, sales increase. Additionally, companies are able to better protect trademark, patent, the image of the company and other intangible or intellectual property. (Schlegelmilch, 2016)

Furthermore, direct subsidiary of the branch requires an investment in commercialization based in a target country. That is why this mode supposes that the producer disposes of his own marketing departments operating in the new country. (Schlegelmilch 2016; Albaum & Duerr 2008)

With indirect exports, the company makes an agreement with a reseller in the national market, which operates well on external markets. Resellers are often aware of various sorts of details that necessary for successful market entry and further operations. Indirect exports are suitable for an entrepreneur who has no experience of export activities. As a rule, beginning businessmen do not know the nuances of export activities very well and do not have specially trained personnel for this. Indirect export requires less marketing efforts, however as the exporter has less control over the product range in a foreign market, the company loses significant control over the marketing pro-cesses. (Schlegelmilch, 2016; Albaum & Duerr, 2008)

Indirect distribution of products can be carried out by means of: Representations in a country of for-eign business enterprises and firms; and Foreign trade enterprises and associations. Foreign busi-ness enterprises and firms in Russia represent a wide range of consumers abroad. They may be in-terested in the offered goods or services as a result of an advertising campaign, participation in vari-ous exhibitions. According to Schlegelmilch (2016) depending on the specific circumstances, it is possible to use several export intermediaries operating in different markets in different countries. This makes sense if the scale of the company's economic activities is large enough. In general, the question of finding a foreign intermediary is rather complicated and it should be given a lot of atten-tion.

2.4 Entry barriers

According to Gable & Sharma (2017) entry barriers rely to restrictions that prevent new participants to enter the market. The barriers represent the constraints that future potential players will face during a tentative to enter new markets.

Porter (2008) mentioned in his report 6 major entry barriers, which should be taken into account when planning market entry. Those are: economy of scale; product differentiation; capital require-ments; switching costs; access to distribution; channels of distribution. However, we can also high-light the importance on awareness of government policies of different countries. The difficulties rep-resented by entry barriers may be of different levels depending on country and status of potential market of operations.

Research conducted by Blees, Kemp, Maas & Mosselman-Zoetermeer (2003) reveals that there are 37 entry barriers among which are the following. Government policies - are one of the major en-try barriers. Due to various legal regulations and restrictions, companies are limited and sometimes

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prevented from market entry. Absolute cost advantage - a term used to explain the ability of a company to show higher operational performance than a rival in terms of higher levels of produc-tion, sales of goods or services, using the same amount of resources. Cultural distance was de-fined by G.Hofstede (2001) as “the collective programming of the mind distinguishing the members of one group or category of people from another". Different values, backgrounds, religion, prefer-ences and etc. represent a real constraint for companies, especially when the cultural difference be-tween countries is dramatic, which is not a case for Russia and French entrant. (Hofstede, 2001)

Strategic barriers are created consciously by the activities of the firms themselves, which prevent the penetration of new firms into the industry. They are as follows: Restrictive pricing; High degree of product differentiation. Experienced companies prevent the entry of new firms by offering a wide range of goods or services substitutions, so that the new firm will find it difficult to find its niche among the abundance of trademarks and long-term contracts with suppliers and customers. It will be difficult for a new firm to find resource suppliers or a supply market if such contracts exist in the industry. Vertical integration, agreed price policy, availability of reserve capacity, additional invest-ment in equipment (for entering company) are also crucial points to take into account. If the old firm has excess production capacity, then at the first threat of entry a new firm may increase output to a level limiting entry, and the new firm will lose the amount of irreversible costs. Furthermore, advertising costs increase the output in the industry required for the organization for efficient pro-duction and lower the expected profit. (Blees et al., 2003)

For a potential competitor, it is important to assume what pricing will be set in the industry after it enters the market. The larger the size of the output of a potential competitor, the lower the price should be for this additional offer of the service to be sold. But the lower the price after entry, the more time to recover the costs of penetration into the industry, the riskier the entry becomes. (Blees et al., 2003)

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3 RESEARCH FOR RUSSIAN RECRUITMENT MARKET FOR BIG FISH INTERNATIONAL

To start analyzing the market environment for Big Fish International, it would be fair to learn more about company’s specialization, main activities an internal processes. The purpose of this chapter is to find out if Big Fish international could expand to the Russian market, and if yes, to identify the best entry options for Big Fish International on Russian market taking into account conducted analy-sis. Current research is of a strategic significance for the company since it will have an impact on the entire performance and organization in whole. It is important to acknowledge all risks and con-straints as well as opportunities for company’s functioning.

3.1 Main activity of Big Fish International

Main activity of BFI consists of so-called ”ART”, which stands for A – Assessment, R – Recruitment, T – Training.

Assesment: Execute qualitative and quantitative analysis of a company’s performance and compare its resources around several approaches such as TOSCA (Target Orientated Skill Calibration)/ CRI (Client Relationship Index)/ SRI (Supplier Relationship Index) – trademarked tools of evaluation de-veloped by BFI. (Big Fish, 2018)

Recruitment: BFI specializes in Executive Search, Middle Management and Transition management recruitment, which require a process commitment and know-how about the sector and its key play-ers. BFI is in charge of research by means of active and proactive approach, which comprise job ad-vertisement spreading in a constantly increasing number of search channel like job boards and schools’ alumni associations. (Big Fish, 2018)

Active research is a cornerstone in the company’s recruitment activity. Data base comprising more than 60 000 of Buyers (Procurement) and Supply Chain professionals not only in France, but all over the world. The data base allows the BFI team to establish an appropriate to a recruitment assign-ment selection of candidates who may correspond to needs of a client and will be contacted with a job offer. Interested candidates receive the evaluation questionnaire which is a tool of evaluation of hard and soft skills, experiences, motivation and professional achievements. After the pre-selection of all “valid” profiles, the Client receives a “short list” of candidates who are interviewed later on. (Big Fish, 2018)

Training: The program focuses on the collective change and development not only for a concrete team, but for a whole enterprise. The activity comprises a direct intervention into a company’s per-formance in order to transform an organizational structure breaking through an existent one which allow to establish certain dynamics to help to better achieve corporate goals and improve “business” results; develop a team in terms of transformation program and create a motivational mind-set in employees working habits, depending on their background and their professional experience; regu-late the Contact enabling all company members to develop each individual level of communication. The program is focused on enhancing Communication skills with all level’s teams, suppliers, clients etc. (Big Fish, 2018)

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As mentionned before, this paper focuses on Recruitment activity of BFI, since this particular activity remains to be essential for the agency. Due to previous recruitment assignments and a long period of over 17 years of operations BFI has acquired a solid network all over the world composed of pro-curement and supply chain specialists. As mentioned, BFI has or had subsidiaries in France, Canada, Germany, Poland and Algeria. This presence was mostly assured by a network of trained and in-volved consultants, as well as partner-ambassadors based in UK and USA. (Big Fish, 2018)

In order to manage its large network of candidates, clients and prospects BFI uses a CRM tool called Ad-men. The tool is a vital for the company, since is allows to keep track of any action entered by a consultant. Nowadays, Ad-men accounts for over 60 000 persons in its data-base, which contains all kinds of assignement related documetnation as CVs, qualification questionnaries, exchanged e-mails, etc. Managing this kind of ”heavy” and complex tool requires discipline in order to keep the data-base structured and complete. (Big Fish, 2018)

3.2 PEST analysis of Russian recruitment market

In order to characterize the market environment in Russia, the first tool I have chosen is PEST anal-ysis, which will allow me to define essential external factors influencing companies’ operations from different points.

During the analysis will determine the main factors affecting the company from the outside, divided into several categories: political, economic, social, technological. There is also an option to conduct a complementary research according 2 more criteria, which are environmental and legal, if applica-ble.

It is important to consider that every positive point in each factor represent opportunity, and also negative points will represent a constraint for market entry.

Political factors

Russia is a semi-presidential republic with the President in the head of the state and the Prime Min-ister in the head of the Government. Russia’s legislative branch is represented by Federal Assembly-Parliament which consists of two chambers: The Council of the Federation and the State Duma. (Constitution of the Russian Federation, 1993)

Currently Russian president is Vladimir Putin elected in March 18th, 2018, while the Prime Minister’s place is hold by Dmitry Medvedev. Country’s main Law is prescribed in the State Constitution (Con-stitution of the Russian Federation, 1993), where all human and civil rights are described. After a rough change caused by a collapse of the communist USSR in 1991, Russia shifted to a completely different outlook with capitalist and democratic approaches.

Considering Political factors having impact on foreign businesses entering or already operation on Russian market, it would be fair to mention bilateral sanctions between Russia, European Union and the USA starting from 2014 after Ukrainian crisis and inclusion of Crimea to Russia. As a result, Rus-sia was excluded from the Group of 8 (G8) that is intended to find solutions to global issues. How-ever, the Group does not have any official statue and aims to align certain approaches and direc-tions of collaboration. Nowadays, the Group is called the Group of 7 (G7). (BBC, 2013) Current Civil

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War in Syria remains to be a detrimental factor of the conflict between Russia and the West, caused by political goals that both sides are pursuing. In 2018, the Russian Federation underwent a major withdrawal of the Russian ambassadors after the case of poisoning of a former Russian military of-ficer and double agent – Sergei Skripal. (Quirk, 2017)

Nowadays, Russia remains to be an ambiguate climate for business development because of ab-stract legislation, corruption and bureaucracy, which remain to be one of the most essential factors that hamper the growth and make Russia unattractive for foreign companies. (Quirk, 2017)

Russian economy, as the world economy, is not stable and tends to have its raises and falls. The last economic crisis in Russia of 2014 caused by “Ukrainian crisis” and precipitous drop of oil prices. The analysts insist that the economy growth in Russia won’t reach humble 2% yearly. Russia's GDP growth in the third and fourth quarters of 2018 did not exceed 1.7%. In the first quarter of 2019, the indicator may slow to 1% or lower, suggested the head of the Ministry of Economic Develop-ment (MED), Maxim Oreshkin. The minister explained this tendency by increased uncertainty and volatility in the financial market, which are partially related to sanctions. Forecasts on the Russian economy were lowered in the second half of the year and almost all influential international institu-tions ranged from the Fitch rating agency to the World Bank. At the same time, according to esti-mates by the consulting company McKinsey, the 2018 World Cup football brought Russia a certain increase in GDP. According to McKinsey, 1.2 trillion rubles was spent on preparations for the World Cup, invested in the construction of transport and sports infrastructure, in landscaping. And starting from 2018, GDP will be replenished with a contribution from tourism - up to 70 billion rubles annu-ally, due to an increase in both domestic (up to 26%) and foreign (up to 18%) tourist flow. (News.ru, 2018)

In early July, according to reports, first six months of 2018, the ruble fell against the dollar by more than 8% and that this is considered to be the worst result among all national currencies in the post-Soviet space. Today, the main risk factors for the domestic currency are Western sanctions and the loss of investors by Russia. If before there was a direct correlation between the price of oil and the value of the ruble, now it is almost nonexistent. If the United States imposes sanctions on the Rus-sian government debt, the ruble could fall by 15% immediately (up to 73 rubles per dollar). (Bloom-berg, 2019)

However, weak currency rate represents a good opportunity for foreign businesses to penetrate the market, since it will allow to benefit from lower fixed and variable costs on domestic operations, and consequently, to earn a higher margin. This point is playing an essential role in decision making. On the other hand, this kind of approach is not considered to be effective in long term in B2B service sector. It may be explained by high dependence of the recruitment sector on its clients, employment and unemployment rate, which accounted for 4,7%. (RT, 2018)

According to Russian Federal State Statics Service (2018) average salary level accounted for 42,555 rubles or 589 euro (currency converted for a period of May 2019). Extraction of crude oil and natu-ral gas sector is taking a leading position, since the average salary level is reaching 131,682 rubles

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(1,822€). Whereas the lowest renumeration level is present in textile sector – 19,396 rubles (268€). (Russian Federal State Statistics Service, 2018)

According to Russian Federal State Statistics Service (2019) the population of the Russian Fed-eration accounts for 146,8 Millions of people, which consists of 75% of urban population and 25% of the rural one. Comparing with previous years there is observed a slight shrinkage of the popula-tion from 146,9 Millions in 2018 till 146,8 in 2019. In addition, data shows that the birthrate also decreased in comparison with 2017, which means that the overall population is ageing as well. Women population in Russia account for 54% of the population, whereas men are only 46%, which makes a dramatic gap between both genders. (Russian Federal State Statistics Service, 2019)

According to the Constitution, the Russian Federation is a secular state that gives the right of free-dom of conscience and freedom of religion, which allows to "practice, individually or jointly with others, any religion or no religion, freely choose, have and spread religious and other beliefs and act in accordance with them". This kind of tendency indicate that the potential market in terms of work-force is decreasing. Since the mid-1990s, the overall mortality rate in Russia remains one of the highest in Europe (15–16 deaths per 1000 population). The premature mortality of men of working age in Russia is 2-4 times higher than in developed Western European countries, the USA, Canada, Australia, Japan. The indicator of life expectancy at birth is lower for Russian men by 14-19 years, and for women by 5-7 years. As for the death rate of the general workforce the number decreased from 198313 persons in 2017 to 194933 in 2018. (Russian Federal State Statistics Service, 2018)

Operations of Big Fish International are built around the recruitment and it is fair to consider the unemployment level to understand the offer capacity. The unemployment rate in Russia in June 2018 reached 4.7%. In December 2018, the labor force at the age of 15 years and older was 76.3 million people (52% of the total population of the country). (Russian Federal State Statistics Service, 2018)

In terms of cultural aspects, there is no dramatic difference between Russia and France (BFI’s headquarters). According to Hofstede’s Model (Hofstede insights, 2018) Russians represent a lower level of individualism, which indicates on high degree of dependency on relationships, whereas French tend to be more independent on society in which they belong. In comparison with France, Russian society remains to be oriented to hierarchical pattern of behavior; they require a higher level of confidence and argumentation, as well as background information. (Hofstede, 2018)

BFI can benefit from Russian technologies from the point of view young IT talents who can bring an added value and improve Big Data application, which is vital for the company since one of the its main advantages are data base of talents working in Supply chain and Purchasing departments. The company might also benefit from the growing potential that is present in Russia after the implemen-tation of sanctions. The country is focused on development of internal resources that were ne-glected, since Russia was very dependent from external resources and their know-how. (Blanchard, 2017)

The threat is represented by a technological gap between Russia and Europe. In terms of industrial production, the heritage of Soviet era requires serious investments for replacement or machinery

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update. Undoubtedly, it dramatically affects the production and GDP, but not the service sector. In terms of the current research, it would be fair to learn more about the way Russia is developing and encourages the technical development. As mentioned above, USSR left a significant heritage of en-gineering and all kinds of scientifically oriented schools, which served as a solid knowledge and method base for contemporary engineers, scientist and IT specialists. (Blanchard, 2017)

Yandex and Mail Group, Russian tech companies constantly work on innovations in world of IT. Both companies are considered as leaders of the Russian IT market and known for all kinds of encour-agements of young talents. For instance, Yandex is often sponsoring and organizing contests and student Olympiads in order to promote the sector and support talented specialists. Also, the com-pany organizes Summer and Winter school, so that the students could develop their skills and ex-change the knowledge with peer mates. The best students happen to be recruited by the company as they graduate the university. (Yandex, 2019)

Also, Yandex conducts closed beta testing of the service to search for Yandex Talents vacancies. The site of the service is now closed for those who are not involved in testing. However, one of the links leading to Yandex Talents allows you to find an HR bot named randomly, who selects vacan-cies, asking the user questions. The bot asks the name and age of the user, the place and length of service of his former or current job, city of residence, the area in which he wants to find work and asks other questions. (Yandex, 2019)

In conclusion, it is fair to admit that Russian technologies and especially the IT industry are devel-oping as fast the rest of the world by means of research of new talents and fresh blood via student contests. All of the above-mentioned points are leading to the conclusion that Big Fish could benefit from the Russian expertise. The development of a new recruitment platform specialized for Procure-ment and Supply Chain talents as well as the constitution of another would play an important com-petitive advantage in comparison with the rivalry.

3.3 Porter’s 5 forces analysis application

Next step in order to evaluate the real potential and the possible success of the Big Fish is the Por-ter’s 5 Forces analysis. As mentioned above, current analysis refers to 5 points covering next as-pects, like: the bargaining power of customers, the bargaining power of suppliers, the threat of al-ternative products, the risk of new entrants on the market, the intensity of the rivalry between the competitors.

To begin with, at first place, it is fair to consider and review the Competition in the industry, since it is one of the key points while researching any market. After carrying out a sourcing on the Internet in order to identify the biggest market actors. During the estimation, there will be taken into account several factors, like: client portfolio, extent of internationalization of the company, spe-cialization employees and also the turnover (if provided).

Different statistics indicate that in 2019, the total volume of the Russian market for HR services, ac-counted for 880 billion € showed an increase of 12.2% comparing to previous years. The recruit-

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ment market grew by 7.7%, which is considered to be an even more optimistic scenario than for-casted. The recruitment and outsourcing market looked even more optimistic - the service for the temporary staffing of employees showed an increase of 12.2%, and the outsourcing market by 14.7%. (Kelly Services, 2019)

A global research identified a wide range of recruitment and assessment agencies, without a specific orientation and different pricing. According to “Motton Pik” and “Person Agency” web-portals, spe-cialized in rating of the recruitment agencies, the best recruitment agencies were identified. (vhre.ru, 2018). The rating is based on verified (written) customer reviews of the quality of work of these companies. Among local rivals, there are few important ones that are also represented in Eu-rope, like Hays, Manpower, Kelly Services, Adecco, that use international standards of recruitment and represent a serious competition for BFI, not only in recruitment sector, but also in training and career management. (Hays, 2019)

The risk of the new market players is never excluded. The recruitment activity does not suppose strong entry barriers. It does require talents, premises and process development, but it does not play a drastic role and won’t take much time. Entry barriers might be conditioned by legislation. Usually, the time required to open a firm varies from 24 to 72 hours if all documents are delivered on time. (1Start, 2019)

In Big Fish International’s case the Suppliers represent a minor role, since the company belongs to the service sector. Mainly, the major expenses consist of rent, salaries, office supplies, facility man-agement and of course IT costs. (Big Fish, 2018)

Attention should be paid to renumeration and the way it will be composed. Consultants in Big Fish get a fix salary of a certain level, depending on the seniority and experience, plus a percentage after every recruitment. (Big Fish, 2018)

The activity of Big Fish, as any other business, depends on its customers and their needs. Big Fish focuses on industrial companies, service providers and wholesale distribution. The expertise of BFI is turning around Purchasing and Supply Chain departments. (Big Fish, 2018)

The international companies listed below, that represent a huge potential for Big Fish. According to Forbes (Forbes 2019), the 15 biggest international companies in Russia are the following:

Company name Turnover in 2018,

(Billiard, RUB) Activity Country of origin

Groupe Auchan 414 Retail France

Metro Group 305 Retail Germany

Japan Tobacco International 245 Tobacco industry Switzerland

Philip Morris International 234 Tobacco industry Switzerland

Toyota Motor 230 Automotive industry Japan

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Ikea 200 Retail Sweden

PepsiCo 172 Food & Drinks USA

Volkswagen Group 171 Automotive industry Germany

Mercedes – Daimler 157 Automotive industry Germany

Leroy Merlin 152 Retail France France

Procter & Gamble 141 Consumer Goods USA

British American Tobacco 139 Tobacco industry UK

Nestle 120 Food & Drinks Switzerland

Mars 114 Food & Drinks USA

Danone 107 Food & Drinks France

Table 2. 15 Biggest international companies in Russia (Forbes 2019).

The majority of the listed companies have already worked with Big Fish International. This repre-sents an opportunity for BFI to approach its ex-clients and offer its services.

The recruitment sector is in direct concurrence/substitution with the job portals like HH.ru (HeadHunter.ru) that enable to complete the work by means of different algorithms, enabling to find an appropriate CV and qualify the profile. The relevance of job search in our time not only does not decrease, when compared with previous decades, but, on the contrary, is becoming higher. Some people quit, others get fired, some want to change their jobs for some reason, others just face the need for change. But if earlier everyone used the classic method, so to speak buying a newspaper - searching for ads - phone calls - appointment of interviews; today, two, and most often, even the first three points of this method can be safely deleted, because people have access to the Internet. (Kelly’s services, 2019)

As a candidate, searching for work via the Internet can significantly reduce time, avoid downtime in lines and prepare documents, find a vacancy of interest and respond to it or write a letter to the or-ganization by sending a resume by e-mail and briefly telling about yourself. (Kelly’s services, 2019)

However, special attention in this matter should be paid to finding the most suitable site for job search, because there are many options, but not all resources can provide professional services and help to finally find a job. (Kelly’s services, 2019)

In Russia, the recruitment undustry did not have clear rules and regulation principles. In order to create a synergy between the recruitment agencies, it was decided to create an association (Russian Association of Private Labor Agencies) that would determine those rules and principles in order to successfully co-exist on the market. (Russian Association of Private Labor Agencies, 2018)

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Among the members of the association, there could be found such companies as, MPH Vostok, STS Group, Ancor, Brunel, Adecco, Fircroft, GI Group, Manpower Group, Unity and Open Group. (Russian Association of Private Labor Agencies, 2018)

The research carried out by a Russian Association of Private Labor Agencies (translated from Rus-sian) that concluded et evaluated the key indicators of the recruitment sector in 2017. According to APLA the market capacity accounted for 66,3 milliards of rubles, which equals to 810 milliards euro (2018). (Association of Private Labor Agencies, 2018)

APLA claims that the Russian recruitment market in 2017 showed growth of 15% comparing com-pared to 2016. Such growth has occurred for the first time in the last 3 years. The total number of vacancies transferred to agencies increased by 28% compared to 2016. (Association of Private La-bor Agencies, 2018)

The vacancies that were transferred to recruitment agencies are divided into 2 types. First type, called professional selection, represents the selection of top management roles, e.g. managers and specialists. The second type comprises a selection of the same types of roles that do not require any specific experience or special training. (Association of Private Labor Agencies, 2018)

The average cost of recruitment of a senior role remained unchanged in comparison with 2016 and accounted for about 296 thousand rubles (3,5k euro in 2017). The outcome appeared to be promis-ing, since the industry was suffering from a greatest decline in activity, after the 2014 crisis, when companies there tend to fill the maximum of vacancies on their own and give the most specific re-cruitments to agencies. (Association of Private Labor Agencies, 2018)

In 2017, employers sought to select permanent staff on their own. However, the revival of the econ-omy in a number of sectors contributed to an increase in demand for external recruitment, for ex-ample, in the production and sales of consumer goods, heavy industry, energy, and the ago-indus-trial complex. At the same time, the growth in the number of vacancies handed over to agencies outstripped the rate of their turnover: in addition to managerial, expensive and difficult to fill vacan-cies, recruiters were getting mass recruitment projects where the number of employees is significant and the cost of the service is low. (Association of Private Labor Agencies, 2018)

The average cost of a position in mass recruitment decreased by 37% and amounted to 50 thou-sand rubles, (621 euro in 2018). In the mass recruitment sector in 2017, there was a big revival of the market. This might be explained by a postponed need in recruitment that companies could not afford during previous two years. The association claims that, in the context of the struggle even leading companies are not ready to overpay. According to their estimations, Russian market today requires cheap, effective solutions in this area. That is why today numerous digital services, robots, chat bots and other tools to increase the speed and reduce the cost of mass recruitment services are developing. (Association of Private Labor Agencies, 2018)

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3.4 Summary of results of PEST and Porter’s 5 forces for Big Fish International

So, each of Porter’s 5 forces has a medium or high impact on the industry. To support competitive-ness, it is necessary to monitor and analyze the market, as well as make timely changes for success-ful development. Summing up, it should be noted once again that each of the 5 forces has a strong or medium effect on the industry. In order to remain competitive, it is necessary to consistently monitor and analyze the state of the market, work correctly with the information received, apply it in time in order to successfully exist in the market and develop.

As follows from PEST analysis, there was found out that Russian economy was highly impacted by the 2014 crisis and conflict in Ukraine, which caused for Russia numerous sanctions. This period was, undoubtedly, challenging for recruitment industry as for others. The economy appeared to get back to normal by 2016 and the activity rose again.

As the potential of the recruitment industry grows, more recruitments could be available. It is also fair to consider the recruitment for the existing European clients that gained BFI as a reliable part-ner in recruitment of purchasing specialists. Such partnerships could be benefiting for the agency from the contractual point of view.

Economy increase contributed to the growth of the recruitment industry. For several previous years in Russia, this sector has been prophesied by a dramatic fall, or even the disappearance of a service as such. The reasons were different: from robotics and automation to the expansion of personnel selection departments within companies. However, the external recruitment market not only does not disappear, but also demonstrates an increase. The service is transforming and developing, and technology do not represent a risk for recruitment agencies, but a tool for a recruiter.

In case of Big Fish International, it is necessary to find out a real potential of the market and evalu-ate the possible demand from the potential clients. The main advantage of Big Fish in contrast with its rival recruitment agencies is a narrow specialization and expertise in purchasing and supply chain departments.

As mentionned in introduction, by 2018 Big Fish International has collected a solid candidate data-base accounting for almost 60 000 persons. This data base comprises different kinds of candidate related information. It allows recruitment consultants to store CVs, questionnaires, salary infor-mation, skills, feedbacks etc. The data-base is declared as BFI’s main force, since it allows to carry out a quick and efficient research and find candidates corresponding client’s requirement. (Big Fish, 2018)

Nevertheless, any candidate data has to be constantly updated and maintained in order to remain competitive on the market. The faster the qualified candidate is delivered, the better the agency’s image is. On the other hand, managing a data-base of 60 000 persons and keeping it up to date is a tough task. The data-base developer provided BFI with a possibility to refresh candidate profiles via LinkedIn. The only drawback of this method is that it is manual and requires significant time invest-ment, which makes it relatively impossible. (Big Fish, 2018)

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Getting Russian developers to provide BFI with a solution that could allow consultants to maintain the date base up-to-date and be able to deliver the candidates faster and in a more efficient way. Starting a new automatically updated data-base on Russian market could enable BFI to gain in com-petitive advantage combinating the efficiency with rapidity. (Big Fish, 2018)

As an option, BFI could benefit from a technological development that will contribute to the business as a competitive advantage. For example, development of a mobile application that will regroup all candidates and will allow to interact with the candidates in order to provide complementary career development services. No doubt, that this question is to be discussed an requires a further research that is not considered in this paper. (Big Fish, 2018)

From the above-mentioned research, there was found out that the recruitment sector is finally boosted by a postponed demand that was caused by the 2014 crisis. The professionals claim that the industry is mostly driven by the recruitment of senior level specialists. There is no doubt that this type of recruitment requires a qualification and specialization of agency consultants, which BFI is able to provide, as well as the quality of the service due to rich and multicultural experience. (Kelly’s Services, 2019)

A growing number of executives are realizing the benefits of KPI management. The recruitment pro-cess is beginning to be perceived as well amenable to standardization: cost, time, overall satisfac-tion of the selected employee, working period, which ultimately allows him to be very clearly meas-ured. These parameters are prescribed in the agreement on the level of service delivery, and the client receives the flow of candidates and closed positions he needs. (Big Fish, 2018)

In addition, it is fair to find an approximate number of people working in Purchasing/Procure-ment/Supply Chain Departments. In order to have a clearer glance on the number, we can use LinkedIn as this social network reuniting all professionals on one platform. The research shows us a fair amount of people involved and proves the existence of purchasing specialists in Russia. (LinkedIn, 2019)

The research finds out that the number reaches for more than 22,5 K people in Russia working in Purchasing, which represent a huge opportunity for Big Fish to run its business. It also reflects loca-tions of procurement sites. (LinkedIn, 2019)

Another point that Big Fish International could benefit from, is the Client base. The former client experience is a positive point: having a decent collaboration experience with French headquarters leaves a positive opinion on the image of whole company, its methodology and recruiters. Plus, working with the central organization, means being familiar with the whole company culture, which makes it easier to identify the “right candidate”. Approaching directly companies’ HQs in order to promote the new business branch abroad and offer its services is a benefiting point for BFI.

As for Recruitment portals and Job Boards, they do not represent a real threat to the business, as they serve as complementary service, that allows to establish a contact with the recruiter and the candidate.

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There is still a certain competition between an internal recruitment (made by company HR depart-ment) and recruitment agencies. As mentionned before, the companies still tend to delegate very specific recruitments to agencies, since they provide better selection and qualification of candidates due to the know-how developed by agencies. Therefore, BFI, with its specialization in Purchasing and strong experience in the field, will bring an added value to clients’ purchasing departments.

3.5 Survey on potential of business expansion for Big Fish International

Survey or a feedback collection may be another alternative way of research. An employee survey is an excellent tool to collect internal insights. Feedbacks collected from employees can give opinions and ideas, which would be helpful for company managers in order to develop their business in a right way. Collection of the information, whether it is anonymous or not, provides an overall image and different opinions of company staff. Both professional and personal opinions are a good source of pros and cons of going international and give ideas on further development. (Mason, Chang & Griffin 2005)

First of all, it was decided to carry out an anonymous survey with a focus on employees’ opinion, whether the business could work. It will also allow to reflect the overall attitude to business expan-sion project and the enthusiasm of the team to potentially participate in the project. Even though the question was not asked directly, an anonymous commentary would be helpful. The reason for anonymity of the survey is the cultural aspect of the question. This is where Hofstede’s cultural di-mensions (2018) would play a role. The key indicator in this sense is Uncertainty Avoidance, that reflect the tolerance to an unorthodox ideas or behavior (Hofstede insights, 2018) According to the graph that was discussed above (p. 19), the Uncertainty Avoidance reaches a score of 86. According to Hofstede’s insights (2018) high score reflects the avoidance of projects that seem to be vague and lack certainty. Therefore, the anonymity is a good tool to push respondents to express their true opinion, without putting to risks a personal relationship with their colleague carrying out the research, and moreover, coming from the country that is economically and politically questionable for them.

In October 2018 the personnel of Big Fish represent 14 persons that are both recruiters and associ-ates. The survey was conducted during a weekly meeting, when the whole team was present. First of all, the team was presented the market research carried out beforehand. Based on the research and conclusion that were presented, each person was kindly asked to answer the survey paper with only one question. The survey was conducted on anonymous base to avoid any prejudicial attitude. However, the respondents were asked to mark their roles and seniority level. Roles and seniority play an important role, since the reasoning will, most probably, be founded on their own experi-ences, perceptions and enthusiasm.

The survey was carried out in a simple and old-fashioned way, consisting of paper handouts, that included, as mentioned, Feedback – positive or not, years of experience, and free commentary. The given time varied from 10 to 15 minutes, right after the survey in order to the guarantee not only honest appreciation, but also a heated by the presentation reaction. There is no doubt that the va-lidity of such experience might be questionable, but, once again, it still allows to understand the

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real enthusiasm about the project. As a future research suggestion, it would be fair to carry out personal or group interviews, since it will give a better overview on the opinion and readiness if the team to invest themselves in a certain way into the potential project.

The personnel were asked the only one question: What do you think of expending the activity to Russia? As explained before, the only open question lets the respondents a free way to develop the subject and provide ideas, thoughts, suggestions. Moreover, the unformality of the survey let respondents a certain liberty of self-expression. (See appendix)

After the survey, the overall attitude appeared to be positive. Based on the market research that was presented beforehand, the Big Fish employees and partners gave their opinion and made their suggestion on the project. As we can observe people’s position in the company and their working experience have an influence on the decision. In general, the participants are quite open and curi-ous about this project. There were also those, who could not compose a definite opinion, since they did not have enough background information about Russian business climate or had a certain preju-dice about the country and market environment.

The main point of the survey is the internal review that is based on personal opinion of people work-ing for Big Fish. Importance of those opinions consists in the depth and the full awareness of the past and current contexts of the company. This is why they are competent to give a relevant fore-cast for certain projects in line with past successes and strategic mistakes. Participants gave their their point of view and suggestes reasons why BFI should expend its activity to Russia; what risks could be taken into account before undertaking any actions towards the expansion.

Even if the result appeared to be positive, the research also found out some negative or mixed thoughts that about the project. Such answers were motivated by the negative image of country’s economy or bribery cases, which were not mentioned directly. This fact, apparently, restraints peo-ple from investing into Russia, since the threat does not seem appealing to potential market players. These ones have to be necessarily taken into accounts as potential risks and cannot be neglected.

Although, it is fair to suppose that the research cannot be considered in its absolute and has to be perused as a part of the total research that current report is devoted to. However, it gives a clear vision on the team’s position, their enthusiasm, open-mindness, fears and mistrust. All of this infor-mation was important for further consideration of the project. The survey also showed its imperfec-tion from the contextual point of view. Personal interviews can surely give more detailed answers, but carrying them out is a difficult task, since it requires time from senior staff, that is very scarce due to their other business activities.

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4 RECOMMENDATIONS FOR THE MARKET ENTRY

This part is devoted to the core subject of the research: the possibility of Big Fish International to expand to Russian market and propose the best options for it, taking into account the research that was carried out beforehand, enabling to assume all risks and opportunities.

First of all, the form of the market entry has to be determined. After describing all of them above, it was concluded to propose 2 possible and realistic opportunities of the entrance: via franchising or joint venture. The decision on the entry modes was made as the conclusion from the external envi-ronment analyses, that seemed to be coherent with the subject.

To begin with, there is another development suggestion to make. Before expending its activity, Big Fish International should concentrate on digital development built around the management of the data, which became very crucial. Today, Big Fish International uses a software enabling keep track of candidates’ records, like CVs, contact information, attached documentation, recruitment assign-ments, recruiters’ commentaries. Additionally, there is a wide range of other options that serve as a support, like invoicing information, side billing records from job portals or other services.

The application in Big Fish has never been filled in properly, because of its complexity and the dura-tion of the process, which is quite time-consuming. Another essential point is updating of CV data base, which has to be updated. There is no possibility to automatize the process, which requires a manual update from LinkedIn. Summing up, the current data management system has to be re-viewed and updated.

In terms of the report and recommendations chapter, it is essential to suggest an alternative way of data management. The digitalization and externalization of the whole process will change the way that BFI operates and collects information about candidates. The possible update via its website, enabling to create a Big Fish International social network where the candidates would create their profiles, update their CVs and other information about their experiences; where the members would be able to exchange news and, also, look for job opportunities. The model is definitely repeating some existing professional networks, but the BFI network would regroup all Purchasing, Procure-ment and Supply Chain professionals.

Big Fish International would benefit from this kind of update from the global point of view, since this action will contribute to internationalization of the company. The digitalization of the business model will bring the company on the totally new level. The evolution in the way that Big Fish International runs its business will be an important step in the company’s history. However, it is still important to take into account risks represented by the economic stability of the country.

Entering Russian market with such business model approaching to a professional network will be an absolute competitive advantage in comparison with other recruitment agencies that are operating in its traditional way.

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Theoretical research showed that the most suitable mode of entry are Franchising or Joint Venture. These entry modes could allow to penetrate the market easily and will ensure the market awareness of the counterpart.

The Franchising mode of entry being the most frequent way of market entry for retail and services, requires a minimum of investments from the Franchising side. BFI will sign a long-term contract with a Franchisee, who will run the business under Big Fish International trademark, guidance and business model. The franchisee, in return, will pay a franchise fee with a frequency negotiated in the contract.

Additionally, it is important for a franchisor to convince the candidate of the profitability of his brand, target market or flagship service, but not only. The communication must also be focused on the future franchisee, and especially on the benefits he will receive by joining the franchise. The key success to find a right franchisee is to highlight the experience, expertise and history of the fran-chise to explain that it is a proven concept and has been successful. Talking about the support and training offered is undoubtedly a significant asset to reassure budding franchisees.

Training is another important part of the Franchising. It is crucial to train the personnel and espe-cially consultants, in order to ensure the quality of expertise and provide the high-class services to the clients. Also, the new consultants of the Russian department have to be aware of the process and be able to deliver the right candidates. It is essential to highlight the communication between the offices in order to exchange the experiences and updates concerning the business. Such collabo-ration will lead to a successful operation and will maintain the level of service quality.

There is no doubt that this mode of entry is both benefiting and risky for BFI. On the one hand, the franchising offers superior chances of success compared to isolated businesses due to financial facil-ity from franchisee fees and share of investments; mutualization of know-how, which represent sig-nificant resources for fast development at the national level.

On the other hand, the franchise is contract binding two businesses that agree to follow particular obligations and be responsible for acknowledgement of drawbacks that this agreement can bring. The franchisee has to follow certain norms and requirement established beforehand by the franchi-sor who remains to be a source of innovation and progress in business concept and to provide with the stability of the network.

Franchising can burden a franchisee’s ambition for total independence after a certain time that drives the minds of certain entrepreneurs.

Another possible entry mode via an investment entry mode such as Joint-Venture, where 2 entities to form a joint venture, usually with the aim of achieving a certain position in a market or develop-ing a specific product. Cooperation can be planned in the long and short term, which is an option for BFI in order to broaden its activity. An opportunity to create a joint venture with an existing recruit-ment agency with its network, expertise and client base can be a key success for BFI.

The suggested joint venture will be existing in terms of a contract signed between two sides; they will determine expenses, risks and repartition of benefits. Since the major reason for setting up a

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joint venture is to lower the threats between certain market plаyеrs, and to give a mutual chance to generate a decent profit.

Secondly, the fact that one of the sides is more familiar with the market specification than another decreases the chance to fail on a new market by cost savings and ensuting a strong position on a market, which is essential for Big Fish in order to increase a client awareness.

Besides, one of the biggest threats and risks for BFI in this case, may be the relatively high coordi-nation effort between the co-signer of the agreement. For instance, extended guidance and coordi-nation, long decision making processes, as well as the mediation of misunderstandings and interest conflicts caused by cultural differences, as for intеrnatiоnal jоint vеnturеs. They can also cause ob-stacles and difficulties Whеn businesses start their collaboration by merging and sharing resources, there is of course a threat of corporate information leakage and brand expertise details to a partner who is also a competitor. Benefits and risks must therefore be carefully weighed in advance. Luckily, in the best scenario, there is a balanced exchange of methodologies and know-how between the parties.

On the other hand, the more co-signers implicated in the project, the more management gets com-plicated and the harder it is to control joint projects. Both parties have to devote an equal time and effort into the project, so that one does not “drop out of the game” and loses control over the whole project, as well as the sustainable relationship with the partner. It is vital for both partners to main-tain an equal level of contribution to the project in order to avoid project failure.

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5 CONCLUSION

As of the purpose of the research being finding out of Big Fish International could expand to Rus-sian market and if yes, define the best options to enter the market based on external analysis. The theoretical part of the research gave us a clear vision on the entry strategies and methodology that contributes to a decision making.

In the second chapter of the research, the external FMCG market in Russia was analysed and its key trends were identified. At the moment, the market has gone through a period of active growth, sur-vived two economic crises and is almost in stagnation, showing weak (at the level of 1-3% per year) growth. At the same time, the market players, strengthening the current level of competition, how-ever none of them has an expertise and specialization in Purchasing. Especially, that the proposed digitalization and data management pattern will completely change the way that company operates. From the client perspective, the market represents a huge opportunity, since some of the biggest companies have their representation in Russia, which also confirms the possibility to organize a pro-fessional network.

As for the entry mode of entry, the ideal scenario would be a Franchising mode or a Joint Venture with an existing recruitment agency that has a better awareness on a market situation, know-how and its expertise. Whereas Franchising enables franchisees to launch a business with an existing BFI business model and the know-how. Establishing a Joint Venture or franchising in Russia is a way to avoid all kind of risks with minimal investments. Both of them have their pros and cons and there is no a perfect entry mode.

As a result of this research it is fair to say that Big Fish International can expend its limits to Russian market under contracting and investment modes. The concrete choice depends on the proposals from the counterpart. It is absolutely clear that entering new market and getting success means bringing something new and innovative to stand out of the ordinary range of agencies with a stand-ardized offer. That is why before expending further internationally, Big Fish International has to carry out a global digital transformation of the business in order to be able to manage a huge data flow (consisting of CV, questionnaires, evaluations graphs and other candidate related documents).

This research that was ment to research Russian market of recruitment and give us the answers about its potential for BFI was concluding. It allowed to get a better and deeper glimpse on Russia’s political influence on the overall economy and industries, demonstrating that the 2014 crisis caused a sharp economy downturn and, therefore, impacted the service industry. Market research carried out with Porter’s 5 Forces analysis tool (2008) introduced us current market players and the role that they play and if they threaten at any point BFI presence in Russia. The research found out that there is still potential for BFI as a narrow-specialized agency. Plus, a business model update consist-ing of digitalization will allow to the company to enter the market with a competitive advantage and will make BFI to stand out of other recruitment agencies. Only after this kind of transformation, the company can consider the market entry to Russia via Franchising or Joint Venture. The survey car-ried out within the team based in Paris (BFI’ HQ) showed the overall enthusiasm and interest in the project, as well readiness to collaborate and invest themselves into a further expansion.

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APPENDIX

Orthography and punctuation were preserved.

Table 1: Internal Research (Diana Malaniia 2019)

Feedback Years of exp.

Role in

Big Fish Free Commentary

1

Positive 26 Business Partner

“Based on the research, we have a clearer vision of the market. We might start discussing current subject and find out if the business model that we are follow-ing today is applicable in Russia.”

2

Positive 14 Business Partner “Good perspective to expand the business. Opening a new entity in Russia and its nearest countries like Ukraine and Belorussia was already considered a cou-ple of years ago, but was not pursued, since the country was in the crisis faze. Today, after the re-search, presented by my colleague, we could consider this project again.”

3

Positive 8,5 HR Consultant “I would be happy to know that BFI expands further to the East. The technical development point inter-ested me. We could create something completely new and innovative in collaboration with Russian part-ners.”

4

Negative 10 HR Consultant “Russia remains to be quite a complicated market. The currency fluctuations and bribery cases do trou-ble the project. Also, the language barrier plays an important role. Probably later, we could expend our team to Russia, but I feel it quite risky at the mo-ment. “

5 Positive 4 Administrator “Great opportunity for BFI to become a global player.

It will allow us to make clients talk about us. “

6 Positive 17 Business Partner “About 5 years ago, we were proposed to enter the

Russian market. At that point, we did not feel mature enough to operate our business there. It could be

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also interesting to work on other digital transfor-mation projects with Russian IT talents, as an op-tion.”

7 Hesitating 2 Junior HR Consult-

ant “I cannot see the real reason for doing this, since we can still operate from distance or imply our Polish de-partment to reach our Eastern clients.”

8

Positive 5 HR Consultant “I consider Russia as an expending market, where it is still possible to do lots of things. The culture is to-tally different and, probably, we can still observe the “remains” of USSR heritage, especially in hard indus-try; it does seem to me as an important step for BFI.”

9

Positive 18 Business Partner “Moving forward and expending the activity is a right path to become a global player and share our exper-tise and deliver the high-quality services to the cli-ents.”

10 Positive 7 HR Consultant “It is important to develop the network abroad, so

that we could make the local players familiar with Big Fish.”

11 Positive 11 HR Consultant “Very ambitious project. We have to first examine this

question. The research that we were presented by Di-ana”

12

Positive 4 HR Consultant “Expanding the Big Fish community sounds like a good proposal. It will definitely require investments, time and serious work. I would be very curious to work on it and transmit my experience to the new colleagues.”

13

Hesitating 9 HR Consultant “I have a mixed feeling about this project. Not sure, if Big Fish as a new entrant is ready to face the concur-rence. We could still approach, as proposed by Diana, our French clients and offer our services in their for-eign entities.”

14

Hesitating 5 HR Consultant “It’s a difficult question. It requires probably some time to see the pros and cons; risks and opportuni-ties. We should make a team brainstorming to take the final decision.”