N is successfully competing with foreign companies, primarily Chinese, in those segments where small-order products are required, without trying to master mass production. Of course, in terms of the price/quality ratio, Russian products are inferior to those of European manufacturers, but compared to China, Russian companies win out due to their proximity to clients and willingness to flexibly adapt to their requirements. And since production remains small-order, the demand for imported components can still be met through so-called “parallel imports.”
Example 3. Manufacturer of road construction equipment
Though at the beginning of 2022, another Russian company – let’s call it B, had been operating for more than 20 years and had staked out a considerable place in the market, the departure of large importers after the introduction of western sanctions, had a positive effect on its business. Now, the company has up to a third of the Russian market and is only afraid of Chinese competitors, which have a much bigger line of equipment. At the beginning of 2022, the share of imported components was 15-20% for B, with plans to bring it down to zero in a year or two.
This is not a very big market: the annual turnover barely exceeds $1 billion. However, the development of new models depends on investments that will not pay off very soon, as well as scientific research, which requires trained specialists.
Russian universities, according to businessmen, are hardly able to provide this. The problem lies not so much in the inability of university laboratories to fulfill orders, but rather in the fact that, to get high-quality and reliable results, many years of mutually beneficial cooperation between business and companies is required. Most companies, however, prefer to limit themselves to cheap, one-time orders, which are not beneficial for universities and are done by them to tick boxes.
Example 4. Door manufacturer
This is a small company (we'll call it D) that would be considered a small business. It specializes in custom-made doors for apartments – for the exterior, interior, kitchens, balconies. A few years ago, D purchased European equipment to manufacture high-quality metal exterior doors.
This year, one of its door-making machines broke down. A year ago, this would not have been an issue – they would have ordered the necessary spare part from the manufacturer in Europe. Now, that has become an extremely expensive operation, involving looking for the part from middlemen in other countries. If you try to replace the part with something similar, the expensive machine simply stops running. Now D has had to reduce its range of products, and it has no idea when it will be able to fix the broken machine.
Seemingly, many other small businesses based on high-tech European equipment will have similar problems. Take most modern Russian printing houses: whereas large printers can come up with the money to purchase needed components through complex and expensive logistics channels, small printers do not have this ability.
Some conclusions from the examples
Most Russian companies have adapted to the sanctions to one degree or another. Those in the business-to-business market have been the biggest winners.