Market Situation Influence

The largest influence of the occupational healthcare market is, roughly speaking, its absence. The idea is to create a niche, which will unite occupational safety and labor protection with healthcare industry. The market of occupational safety services is currently lacking of elaborated effective system and proper expertise of specialists. Medical market is overcrowded with all varieties of healthcare services and the number of its providers is extremely high, there is also a necessity in some fresh direction for the industry. Therefore, establishment of a brand-new sphere of business on the market is definitely demanded nowadays. There might appear a plenty of companies, which would be interested to get involved into this kind of a project through concluding Global Strategic Partnerships or establishing Joint Ventures with the foreign company-expert in this industry.

However, besides all the potential benefits, there are a plenty of risks that current market situation brings. Again, the instability of world and Russian economic brings negative impact on majority of start-up businesses, especially on the foreign market. Currency fluctuations, inflation, changes to taxation occur quite frequently and were the reason of failure for enormous amount of St. Petersburg enterprises. Nevertheless, there is a possibility to benefit even in conditions of crisis. For example, to acquire the company, which is no more capable to operate on the market, or merge with it. The cost for M&A would be significantly decreased if the company suffers a lot because of crisis.

Thus, it is wise to suggest that even complex situation on the market may be both, challenging and beneficial for the entering company is the proper strategy is applied.

8.3 6.3 Systems’ Differences Caused Challenges

Differences between Russian and Finnish Occupational Healthcare systems are enormous – entitled OH services providers, the extent of government participation, reimbursement of expenses for employer, the list of mandatory procedures, the whole system of Russian OHS is absolutely dissimilar with the Finnish one. The only similarity is the responsibility of employer to organize and maintain Occupational Safety and Healthcare of workers properly. And presumably, that is the main point of bringing this industry on a new level, the purpose is to facilitate employers duties.

Again, the main difficulty may become the greatest advantage. The whole idea would not be such perspective, if systems were similar and there would be no improvements needed for Russian OHS. The possibility to transfer responsibilities to organize and control the Occupational Safety and Healthcare of employees to the single organization, which will take care of workplace safety, of compliance with all the standards, of employees medical check-ups once in a prescribed time and of their healthcare overall will undoubtedly be demanded.

The main challenge is to merge two industries into one singe, since occupational safety and employers’ healthcare services are provided in different spheres of business. The major difficulty arises in legal aspect, whether medical organization will be able to obtain accreditation on providing occupational safety services, or vice versa. Since there were no cases yet, it is almost impossible to find information on the possibility of that procedure.

Another challenge is the difference in standards for workplace conditions and frequency of inspections of premise and employees, etc. There are great changes to be made in Finnish OHS system before its integration to the Russian market.

And the last but not least challenge is the potential difficulties with Federal Labor Inspectorate - a single centralized system of federal government agencies, which implements the state supervision and control of compliance with labor protection requirements within the organizations. Due to some cultural differences the majority of state organizations which insect workplaces for compliance with regulations are bribable. That is how the large part of employers solves occupational safety and healthcare problems, it is enough to bribe Inspectorate on a regular basis. There is also a risk, that even with complete compliance with all required standards, Inspectorate would not accept workplace condition without a bribe. So, the initial idea to provide outsource services for OHS would be applicable for the part of honest business owners, who strive to maintain favorable working conditions in their enterprises despite the presence of “easier” ways.

Conclusion

After deep research it may be confidently suggested, that the idea to enter Russian Occupational Healthcare Market is well-timed and fresh enough to succeed. Taking into consideration all potential difficulties of the current market, all the systems’ difference caused complexities and assessment of entry strategies according to the proper criteria, the conclusion may be presented as below.

The strongest challenge revealed is the difficulty to unite occupational safety and healthcare industries in one organization from the legal point of view. It is necessary to obtain accreditation for providing services in occupational safety and labor protection sphere together with the certificate entitling organization for providing healthcare services, which is very difficult and time-consuming process to complete. Therefore, the option of creating a Wholly Owned Subsidiary is inappropriate for that case.

The wisest decision, that can be done here, is establishing a Joint Venture or Global Strategic Partnerships with two organizations, one of which is a medical organization and another is an organization accredited for providing occupational safety and labor protection services. There is also an option to acquire those, however the cost of two enterprises is likely to be unaffordable.

As it was already mentioned before, the main difference between Joint Venture and Global Strategic Partnerships (Alliances) is the fact, that in the first case parties invest resources to create a separate business entity, whereas alliances are created for achievement of common goals together. Both options have advantages and disadvantages, as it was stated in the comparison table. In Global Strategic Partnerships the most favorable features are high extent of flexibility, meaning simplicity of entering or leaving the market under any circumstances, less risks and cheaper entrance, but at the same time not enough control and integration, consequently less stability and profit. Moreover, this mode is quite fragile, therefore long-term objectives would be hardly ever achieved.

As for Joint Venture strategy, there are more barriers to enter the market and the speed of operational start at this case would be significantly less, but there are few advantages which make sense. With higher level of stability and control, there are more chances to succeed on the market. With the united knowledge of Russian system specifications and Finnish elaborated experience in the industry, the common project would certainly take strong position on the market and is likely to be profitable for the parties. Efforts combined by powerful businesses would more likely be able to create a new niche of OHS service and therefore accomplish long-term goals.

Undoubtedly, deeper research and analysis will reveal some new aspects of each potential entry mode and probably will change the picture. I am looking forward to continue investigating the topic in my final thesis and hope to get more acquainted with hidden nuances and finally come up with new opinions and ideas.

The principle of Russian control goes deeper than radical delegation of authority to a local CEO, however. The experience of the best joint ventures suggests that it is a good idea to put actual majority ownership in Russian hands as well. In fact, only five Western partners of the 33 joint ventures we studied own more than 50% and none more than 55%. This advice puzzles many Westerners, especially now that the law permits 100% foreign ownership, but the reasons are straightforward. Ownership has the same effect on Russians that it has on anyone else—it encourages responsibility, adaptability, and hard work. The potential benefits heighten motivation; the risks sharpen the mind. In a country where both the law and the business environment are moving targets, a one-sided bargain is an especially poor bargain.

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