Prof. Schlevogt’s Compass No. 52: High time to say comeback – Why MNCs belong back in Russia

By returning to Russia now, foreign companies can regain lost ground ahead of competitors – time for Truth and Reconciliation 2.0 There is a time for goodbye – and a time for reunion. When foreign companies beat a hasty retreat from Russia in 2022 amid the Ukraine conflict, they framed their departures as a moral necessity. In truth, for many, it was a costly act of panic: abrupt, politically driven, and strategically short-sighted. Now, as the global business climate is tempered by a more sober reality, the moment has come for foreign multinationals to reconsider – true to the old wisdom that illness is best treated early, before it turns chronic. Returning to Russia is not merely an opportunity for commercial redemption; it is a strategic imperative for those seeking long-term relevance in one of the world’s most critical markets – and an exceptional opportunity for first-time entrants far-sighted and bold enough to seize it. The Great Exodus: Wandering into the commercial desert In the aftermath of Russia’s Special Military Operation in Ukraine, hundreds of multinational corporations suspended or terminated their operations in Russia, while the smarter ones chose to stay. Household names in consumer goods, automotive, retail, and food service exited with dramatic announcements, citing reputational concerns, stakeholder pressure, or political uncertainty. Yet the consequences were severe. For a host of companies, departure meant surrendering years – sometimes decades – of investment in market development, infrastructure, local partnerships, and customer loyalty. Businesses sold assets at steep discounts, abandoned supply chains and sales networks painstakingly built over extended periods, and ceded market share to domestic competitors or foreign rivals eager to fill the vacuum. In doing so, they consigned themselves to navigating a diminished global business landscape of their own making. McDonald’s offers a vivid example.

In 1990, the iconic burger chain became the first US fast-food chain to establish a presence in the Soviet Union. It soon grew into one of Russia’s most prestigious employers, while its restaurants became landmark venues for family celebrations and even wedding “feasts”. Read more EU energy crisis caused by policy mistakes – Rosatom chief Building its business system across the country – restaurants, personnel, supplier ecosystems, logistics hubs, and structurally embedded brand trust – took decades. When McDonald’s precipitously concluded that operating in Russia no longer aligned with its values, it left behind 850 restaurants and 62,000 jobs across the country. The withdrawal meant abandoning a market that, together with Ukraine, had generated about 9% of its global revenues and cost McDonald’s an estimated $1.2–$1.4 billion in earnings charges. Yet the greater loss was strategic. Business systems cannot simply be reassembled by flipping a switch. Once forfeited, rebuilding market position is path-dependent: With capabilities dismantled, local replacements rooted, and habits transformed, the business must be reconstituted from scratch. Russia, too, had to absorb costs. Consumers were deprived of familiar brands, workers lost jobs, and sectors dependent on foreign expertise faced disruption. But the market void proved short-lived. Russian firms swiftly adapted and claimed the ground multinationals had abandoned, giving rise to a new generation of domestic incumbents – stronger, more confident, and politically ascendant. McDonald’s former Russian business now operates successfully under the domestic brand Vkusno i Tochka (Simply Tasty, Period), created by Alexander Govor, a Siberian entrepreneur who took over its assets in 2022. He stands as a powerful new incumbent with whom McDonald’s must first come to terms before being able to r