The Competitive Advantage of Russia

Case Solution

Bruce McKern, Lyn Denend, Victoria Chang, Katya Reuk
Stanford Graduate School of Business ()

The Russian Federation (Russia) was the largest of the 15 geopolitical entities that emerged from the Soviet Union in 1991. Despite a series of reforms launched in 1992 to facilitate the country’s transition from its centrally planned economy, Russia was it plunged into a deep recession that was exacerbated by a financial crisis in 1998. It was not until 1999, after eight years of turmoil, macroeconomic stabilization and economic restructuring, that the economy began to grow slowly again. When Vladimir Vladimirovich Putin assumed the presidency on December 31, 1999, Russia was the world’s 10th largest economy and its foreign exchange reserves amounted to $ 8.5 billion. In 2007, the country’s economy was the eighth largest in the world, with reserves of $ 407.5 billion. When the new Russian president, Dmitri Medvedev, was inaugurated in May 2008 and Putin took office as prime minister, Western companies with interests in Russia faced great uncertainty. Would Putin’s chosen successor, under Putin’s powerful and watchful eyes, continue to issue policies and take measures that would make the business environment increasingly unfavorable for foreign investment? Or would Russia’s new regime take a more liberal and democratic course that would allow the country to improve its global competitiveness and allow outside investors to participate in its prosperity? Since the dissolution of the Soviet Union, Russia has made great strides to improve its position in the world. However, it remained to be seen whether the country, particularly under current circumstances, can create and maintain lasting international competitive advantages that many Western critics believe would require a more democratic political regime. This document provides a brief overview of the country and examines the status of China’s competitive advantage within the framework of Michael Porter’s Competitive Advantage of Nations.

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