Informal institutions

Time Warner Inc.

Time Warner is the Global leader in media and entertainment, decided to expand their market of TV content to Russia.

Institution based view

From institution based view Russia is very interesting country and it’s very important for Time Warner to understand country from this perspective.

Formal institutions

Modern Russia is presidential Republic with strong charismatic leader Vladimir Putin, who is running country for over 13 years. How it impacts on business? Mr. Putin has his own people in whole government from top to bottom. They are faithful, reliable and comfortable for him, and they own all the most important and significant resources in country. In that way government can control any industry in the country. It creates barriers for small and medium businesses by high taxes and difficult forms of accounting and registration. It happens because they don’t want to see you strong, otherwise you will have impact on government and they will lose strong positions in country.

So, if Time Warner Inc will decide to provide TV channels such as HBO or CNN they will face some difficulties. Firstly, Russian law does not allowed to be independent on cable television providers. If you want to be commercial channel you can’t do it alone. In Russia cable channels provided in sets of thematic channels, for example as a consumer you can purchase set of channels about Martial Arts, but you can’t purchase only one channel. This measure was created by government for protection small unpopular local channels from bankruptcy. Why governments care about small commercial channels? Government is present in every industry in Russia and if any small firm which partly owned by some guy from gov. will became a bankrupt, it may affect on government personal capital at all. Another barrier is huge amount of taxes for foreign companies. If you are foreign company you will pay taxes at the each level of your organizational structure. The last barrier is censorship. Censorship is also formal institution which not allowed you to provide the same content for different countries.

Informal institutions

In case of Time Warner informal institutions in Russia will be represented by religion, business culture behavior and consumer decisions in conditions of limited rationality.

Formally by constitution of Russian Federation, Russia is a secular state, without any established religion. It’s not true. In recent years Russian church had strengthened its position in the country as an informal institute. For example, in recent years you can feel more and more public reprimand when you state that you are atheist. Church becomes stronger and stronger from day to day in Russia. How it will impact on mass media business of Time Warner? Time Warner will own popular TV series “ The Game of Thrones” and it’s profitable and successful project. A few years ago if this series was exist on Russian TV, Russians will not care about anything. But now, and I am absolutely sure that someone will go to the court and say something like that: ” hey this series insult my religion, by propaganda of paganism” and court will support it and prohibit this series.

Another informal institute is business culture behavior of Russians. This is about style of business negotiations and partnership. If I have some resources (in our case it is airtime) and you ask me to sell it to you, even if your offer is super profitable for me and this is should be deal of the century for me, you still need my resources and it’s mean that you need me much more than I need you. From this approach Time Warner should understand the behavior of managers of companies which they want to deal.

Third thing from institutional based view which Time Warner should understand is Russian purchasing mentality as set of norms and beliefs. The three basic types of it in Russia, I will buy it because it is more expensive, I will buy it because all my friends and relatives do that and I will buy it because nobody wants it. Misunderstanding of these three basic types can cause huge mistakes in strategic planning.

Дата добавления: 2015-11-16