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SEP-OCT 2015

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leases for more favorable terms in a softer real estate market. " T h e m a i n c h a n g e t h a t We s t e r n companies have seen is that the margins coming from Russia have decreased quite sharply over the last 24 months because of the ruble devaluation, but also because the market is generally maturing and businesses and consumers are demanding more for their money," says Raymond Mcglinchey, Finance Director, Russia for Pfizer LLC in Moscow. "So, there is a lot of pricing pressure across all sectors, but it remains a key strategic market for most," he says. This content was adapted from the CoreNet Global report, "Russia: Balancing Risks vs. Rewards," by Beth Mattson-Teig. Read the article in its entirety, as well as hundreds of other documents, on CoreNet Global's Knowledge Center. has 5,700 square meters of leased office space, primarily in Moscow. The Russian capital, which is currently home to more than 12 million people, is the economic center of the country and the primary location for domestic and multinational corporations' (MNC) headquarters. St. Petersburg is slightly smaller, at five million people and an economy that typically operates similar to a "mini Moscow," with relatively high levels of disposable income and a diversified income. Strategically, Pfizer had a policy decision 10 years ago to set up facilities in all of the world's capital cities, including Paris, London and Moscow. That presence is very visible from a marketing and branding perspective, and it also created good strategic reach for its products, notes Winston Smith, Director Operations Management, Global Operations for Pfizer EMEA. "We plan to be in Moscow for the long-term, but we typically don't entertain lease agreements beyond five years," he says. Such short-term lease commitments are the norm in Russia as companies mitigate the risks of market volatility. Given t he current crisis, t he near- term priority for companies operating in Russia is on managing costs. International corporations are consolidating operations and rightsizing portfolios, as well as renegotiating G lobal corporations operating in Russia are managing a delicate balancing act that combines both long- and short-term strategies. Russia is considered by many global companies to be a strategically important market. The country of more than 143 million people is home to a sizable consumer market and a large supply of natural resources, and it also is on the doorstep of Europe. Despite its recent challenges, the Russian economy ranked 10 th in the world in 2014 with a GDP of $1.86 trillion, according to data from the World Bank. Companies choosing to do business in Russia also face a number of headwinds related to its political situation and economic crisis that has been fueled by political sanctions, falling oil prices and devaluation of the Russian ruble. The World Bank is projecting a negative growth outlook for the country in 2015-16, with the economy expected to contract by 3.8 percent in 2015, followed by a more modest decline of 0.3 percent in 2016. Businesses are mindful of the risks and proceeding with caution, but to some extent, national and international firms are used to maneuvering in a market that is prone to volatile swings. Operating in Russia these days is pretty much business as usual for firms such as Pfizer. The company first landed in Russia more than a decade ago and currently Multinational Corporations Weigh Risks vs. Rewards in Russia Beth Mattson-Teig is a Minneapolis, Minn.- based writer and editor. She specializes in commercial real estate and fnance topics and writes both articles and white papers for several U.S.-based trade and business journals. BY BETH MATTSON-TEIG EMERGING MARKETS 28 the LEADER | September/October 2015

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