With the transition to a market economy, Russia became a significant market for Japanese manufacturers in the 1990s. In the same period, Japanese companies began to enter the Russian market themselves. There is, however, little existing research into entry strategies used by those companies for their entry procedure. In this paper I have selected Canon as a case study and investigated the unique features of the marketing environment in Russia as well as the impact these features have had on entry strategies used in the region. The purpose of the paper is to assess whether entry strategies, theory and practice developed in Western free-market economies is being used to help guide the Russian market, to analyze how Japanese companies have responded to those markets and the kind of entry strategies they have adopted thus far.In 1997 Canon set up the Moscow office of its Finnish corporation ‘CANON NORTH-EAST OY’ and began exporting directly to Russia. Canon's entry mode to establish its subsidiary outside Russia cannot be explained under existing theories. Why, when it began to export directly, without using Japanese trading companies, did it establish its subsidiary in Finland and not in Russia? Takeda's Entry Model argues that a company begins by exporting, then establishes a sales subsidiary in the actual market, ultimately establishing its own production subsidiary. However, Canon chose to establish its sales subsidiary in Finland primarily because it was too great a risk for them to use the target country. The company claimed that they could not predict how corporate tax would change because the legal system in Russia was so unstable. Subsidiaries have to abide by local law. It was therefore, risky for Canon to undertake operations in Russia. In addition, the key merit of establishing subsidiaries is that a company will be able to realize the “completion of sales”. However, in Russia, if a Canon subsidiary based in Moscow imported directly to Russia and did not use local distributors, it would not be able to compete with those Canon products imported by independent local distributors. Consequently Canon chose Finland. The established market entry modes are applicable in Russia, but must be modified in relation to the specific features of the Russian market. If the foreign market is not ruled by law, as in Russia, a company may decide to establish a sales subsidiary offshore.
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