In the interaction of industrial market participants, some distances interfere with the efficient cooperation of partners. It is possible to distinguish the distances between Russia and other market participants, which will be stated below (Ghemawat 2001, 17)
Cultural distance occurs when partners work with foreign markets, and there may be certain misunderstandings between them. The economists analyzed the relationship between the Novocherkassk Electric Locomotive Plant and the Azovstal Metallurgical Plant. It can be seen that it was the cultural distance that was formed in 2014 between Russia and Ukraine that led to the technological distance (Moshkov 2021, 1834).
Administrative distance makes it difficult for a company to enter the market. An example is the mandatory certification system in Russia. The law “On Certification” was adopted in 1993; 80% of the range of services and goods falls under compulsory certification (Moshkov 2021, 1830). Simultaneously in the European Union, only 4% of the product range is subject to mandatory certification.
Geographical distance, which is the physical distance of partners in the business market from each other. To reduce this distance, partners open their representative offices in the region where their counterparty is located (Moshkov 2021, 1833). Magnitogorsk Iron and Steel Works opened its representative office in Shanghai (China), as it actively cooperates with Chinese suppliers on the purchase of equipment, raw materials, and materials.
Economic distance is a serious circumstance that complicates the development of economic relations between Russia and other counties. This inconsistency prevents both Russia and Ukraine from joining the World Trade Organization. Ukraine demonstrates an unwillingness to participate in forming a Customs Union in the common economic space, which is being created by Russia, Belarus, and Kazakhstan (Moshkov 2021, 1832).
References
Ghemawat, Pankaj. 2001. Distance Still Matters: The Hard Reality of Global Expansion. Harvard Business Review.
Moskov, Alexander. 2021. “External Economic Factors of Development of The Industrial Structure of The Economy of The Pacific Russia. “Journal of Contemporary Issues in Business and Government 27 (2): 1828 – 1836.