SBU 240 45 International Business - Fall 2022

To: Prof. Marshall

From: Jacob Hetu
Date: October 10/10/2022
Re: Final Executive Summary for Toyota in the United States of America and Russia

Introduction

The purpose of this final summary brief is to provide a high-level summary of the global
opportunities within the United States and Russia for the Toyota Motor Company. This brief
will accomplish that goal by providing a comparison of business opportunities and market
conditions, political and cultural issues, and lastly, business operations and tips for each
respective country. Each of these topics is important in understanding the challenges and
differences when entering into a foreign market.

Global Business Opportunities & Market Conditions

The geography of Russia and the United States (U.S.) are different and play an important
role in the economy of each respective country. Russia borders North Asia and the Artic Ocean
and extends to the North Pacific Ocean. The United States borders the North Atlantic Ocean
and the North Pacific Ocean. Alaska is not far from Russia geographically. Even with Alaska’s
immense size, Russia is 1.8 times bigger than the U.S. This is an important consideration when
selling automobiles because the need between the two countries will vary depending on
location, terrain, and climate. For example, compact cars are better in dense American cities,
while 4 x 4 vehicles are more suited for Russian tundras. Natural resources between both are
fairly similar. They consist of resources like oil, natural gas, coal, rare earth elements, and
timber (Nation Master 2020). Gasoline and deiseal are both viable fuel sources. The
abundance and access of natural resources directly affects a nation’s economy and spending.
The economy of the United States and Russia are similar in structure in theory, but differ
greatly in performance. In 1991 the Union of Soviet Socialist Republics (USSR), or more
commonly known as the Soviet Union fell. Since then, Russia has become a mixed economy like
the United States. United States GDP is almost five times as much as Russian GDP. Russian GDP
is 12th in the world while the U.S. is number one (Bajpai, 2022).

Geographical and economic conditions are closely related to technological conditions as

well. Technology is one the United States greatest markets. Russia is highly reliant on Western
imports of high-tech goods such as semiconductors and computer systems (Poitiers et al, 2022).
They import about 19 billion annually. Russia seems to focus on methods that have proven to
work, rather than new ones. For example, older manufacturing processes and older facilities
that rely on man power than machine power. A recent exodus of car manufacturers due to
Russia’s war with Ukraine has forced Russia to transfer control of the Renault group to the
Russian Government. Russia reopened a century old antiquated manufacturing plant that was
first used by Ford. Toyota has recently shut down production in Russia, but may wish to
reconsider since there is an automobile manufacturing vacuum in Russia currently.
Alternatively, The United States is the largest producer of high-technology manufacturing with
a 31% global share (National Science Foundation, 2018). This includes aircraft,
semiconductors, computers, pharmaceuticals and so on. The U.S. is also able to source in
demand critical parts for automobile manufacturing that Russia cannot.

Political Economy and Cultural Issues

Culturally, the populations of Russia and the United States reflect these differences. The
United States population is around is almost three times higher per kilometer even though
geographically Russia is larger. Life expectancy is higher in the U.S. It is nine years longer for
males and only four years longer for females. Russian birthrate is lower and the deathrate is
higher. This is most likely due to the availability of quality healthcare and better living
environments. The U.S. beats Russia by far in terms of Political stability and Civil Rights. Cost
of living is cheaper and the climate is much more favorable. (Country comparison, 2022). The
Official language of the U.S. is English. Spanish is the most widely used second language with
some other languages mixed in (Morrison, 2006 pg 546). Russian is the official language with
a literacy rate of around 99%. The United States much more religious than Russia. Russia
does have a focus on education, but U.S. education surpasses Russian education in tertiary
 education. Language is the biggest difference between Russia and the United States. Despite
the differences, education in both countries is commendable and a focus of both
governments. The education system is set up fundamentally the same with preschool,
primary, secondary, and continuing education after high school. Christianity is the majority in
both countries. However, Russia is less religious overall, where the United States has a more
diverse religious culture.
The greatest difference between the two countries is the Political aspect. It is also the
greatest risk that needs considered when beginning to think about entering the Russian market.
This section goes into more detail than may be warranted, but it does so in hopes to stress the
great importance and risk associated with the Russian Political system. Russia and The United
States have vastly different systems of government. The United State government is led by the
President, who Currently is Joe Biden. It is comprised of three branches, legislative, executive,
and judicial (The United States Government, 2022). Every member of the congress, the
President, and the Federal courts are elected by the citizens. State and Local governments have
powers granted to them by the Federal Government, and the powers that are not are reserved
are reserved by the State and its people. The U.S. is considered truly a “republican form” of
government. In 1993, Russia was declared a democratic, federative, law-based state with a
republican form of government. Russia has a president as the dominate figure and a prime
minister as the secondary. In theory, Russia acts this way. However, it is believed that
President Vladimir Putin holds virtually all the power. He has ruled Russia since 2000 and is
widely regarded as a dictator (Shvili, 2022). The Russian president appoints almost all of
Judicial branch and can appoint no more than 10% to the Federation Council. Putin
consolidated power and also controls Russian media. Even though elections are held, they are
regarded as shams since the laws are always changed in his favor. Poll workers must be a part
of Putin’s United Russian Party legally and votes are counted behind closed doors. In essence,
Russia is more closely a totalitarian dictatorship, hiding being a façade of democracy. Toyota
runs the risk of having its Russian assets seized like the case of Renault having its assets seized
by the state government.

Business Operations & Tips

 Organizational structure and global strategy are crucial to a firm’s success. Toyota
Production system (TPS) is a highly efficient system of Lean Six Sigma. Toyota takes this
continuous improvement system and tailors it to its needs creating a highly efficient system
(Peterka, 2021). Toyota managers will have to carry this ideology over to Russia and utilize if
effectively if they wish to tap the Russian market. Resources and technology will not be as
widely available as in the United States.

There is a greater power distance between Russian executives and workers than
American Executives and workers. Russians are used to being told what to do bluntly and less
likely to approach their bosses with issues (Hofstede Insights). Russians also understate their
personal successes and talk and live more modestly than Americans. This can make American
style financial incentives less appealing for Russian workers. Dominant behavior is saved for the
boss, not among peers. They are less likely to be motivated by peer success (ibid). Americans
are not as threatened by uncertainty where Russians are. Russians feel very threatened by
ambiguous situations and are either extremely well prepared, or take time to focus on
relationship building to prepare better (ibid). Managers will need to prepare better to take
extra precautions to quelch uncertainty before it happens. Russians have a high degree of
long-term orientation. Russians deal with problems pragmatically as a result of often not
having enough resources (Morrison, 2006). While, Americans are more prone to strive for
quick results than long term goals. This is evident in the business setting with profit and loss
statements issued quarterly in American Business (ibid). Russian executives and managers may
not be as receptive to short term goals. Women make up a high percentage of the workforce in
Russia, however very few women make up senior management. Western women working in
Russia will be showered with old-fashioned courtesies, but will still not be respected as much as
their male counterparts (Warburton, 2020).

Conclusion

Toyota has a vast history of catering to the needs of the worlds market with many
different models of automobiles utilizing lean manufacturing and its highly praised Toyota
Production System. Due to this, it has become a leader in the automobile industry. As
previously stated, the Russian car market is in need of automobile manufactures, however the
greatest risk is the political aspect and situation of Putin led Russia. Often, it is said in business
that the greatest rewards have the greatest risks. Russia has an educated and motivated
workforce that can be industrious and successful. Russians have proven to be as resourceful
and motivated as their American counterparts due to their own cultural upbringing. Typical
American management technics will need to be adjusted to the Russian culture and way of life.
Toyota executives and managers will need to utilize their continuous improvement techniques
and apply them to management of a Russian workforce. If they can do that, Toyota can fill a
manufacturing vacuum left by the exodus of car manufacturers in Russia. However, the risk of
Russia seizing control of Toyota assets cannot be completely overlooked. In conclusion, this
risky endeavor could prove to be greatly profitable for Toyota on a Global Business Perspective
if precautions are taken to ensure control of Toyotas assets.
References

Country comparison. Hofstede Insights. (2021, June 21). Retrieved October 2, 2022, from
https://www.hofstede-insights.com/country-comparison/russia,the-usa/

Country comparison russia : United States. Worlddata.info. (n.d.). Retrieved September 5, 2022,
from https://www.worlddata.info/country-comparison.php?
country1=RUS&country2=USA

Bajpai, P. (2022, August 18). Emerging markets: The parts of Russia's GDP. Investopedia.
Retrieved September 5, 2022, from
https://www.investopedia.com/articles/investing/120615/emerging-markets-analyzing-
russias-gdp.asp

Peterka, P. (2021, November 24). Toyota production system: Benefits of toyota production
system (TPS). SixSigma.us. Retrieved October 11, 2022, from https://www.6sigma.us/six-
sigma-articles/benefits-of-toyota-production-system-tps/

Shvili, J. (2021, April 9). What type of government does Russia have? WorldAtlas. Retrieved
September 5, 2022, from https://www.worldatlas.com/articles/what-type-of-
government-does-russia-have.html

Marcus, S., Poitiers, N., Grzegorczyk, M., & Weil, P. (2022, July 8). The decoupling of Russia:
High-tech goods and components. Bruegel. Retrieved September 5, 2022, from
https://www.bruegel.org/blog-post/decoupling-russia-high-tech-goods-and-components

Morrison, T. & Conaway, W. (2006). Kiss, bow, or shake hands: The bestselling guide to doing
business in over 60 countries (2e). Avon, MA: Adams, Media.
National Science Foundation . (2018, January 24). Report shows United States leads in science
and Technology as China rapidly advances. ScienceDaily. Retrieved September 5, 2022, from
https://www.sciencedaily.com/releases/2018/01/180124113951.htm#:~:text=The%20U.S.
%20is%20the%20largest,share%20over%20the%20last%20decade

NationMaster. (n.d.). Russia vs United States Geography Stats compared. NationMaster.com.

Retrieved September 5, 2022, from
https://www.nationmaster.com/country-info/compare/Russia/United-States/Geography

The United States Government. (2022, July 14). Our government. The White House. Retrieved
September 5, 2022, from https://www.whitehouse.gov/about-the-white-house/our-
government/

Warburton , K. (2020, January 15). Women in business in Russia. World Business Culture.
Retrieved October 11, 2022, from https://www.worldbusinessculture.com/country-
profiles/russia/women-in-business/