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Transcript of RETAIL RUSSIA Conference > TOPICS: Why Russia? Market Entry Strategy Practical Advice - Russia...
RETAIL RUSSIA Conference
> TOPICS:
• Why Russia?• Market Entry Strategy• Practical Advice - Russia
Copyright © 2003 MarketOption, Inc.
Presented by: With assistance from:
Copyright © 2003 MarketOption, Inc.
Why Russia?
> Solid Market Fundamentals
GDP Growth: 6.9% so far this year; 6.0% forecast for this and next year
Inflation effectively contained at 15%
> Rapidly Improving External Factors
Relative political stability: market economy rating
Moody’s and S&P Upgrades: Investment Grade
Overall positive change toward Russia business environment
Copyright © 2003 MarketOption, Inc.
Why Russia?
> Russia joins 25 top FDI destinations
> “Russia recorded the biggest positive investment sentiment shift in the entire index, as investor confidence grew 19 percent”
According to AT Kearney, a consulting firm, and its Foreign Direct Investment (FDI) Confidence Index from Global Business Policy Council:
Consumer Sentiment: RECORD HIGH due to higher employment and rising incomes
Copyright © 2003 MarketOption, Inc.
Why Russia?
Planned new market entry by region and its share of first-time investment
Russia in the 3rd place in the world
Copyright © 2003 MarketOption, Inc.
Retail Overview
Consumption growth: 1-2% more than GDP
Disposable income growth: over 30% in 2003
Consumption remains one of the main growth engines
Trade & retail benefit greatly: 8% growth of retail turnover
As a result:
However:
Regional market saturation
Competition is intensifying
Copyright © 2003 MarketOption, Inc.
Retail Overview Russia was ranked first in the Global Retail Development
Index for the World Emerging Markets in 2003
Country
* Source: AT Kearney
RANK
Russia 1
China
India
Ukraine
3
5
20
Poland 28
Main reasons:
Largest European food market
Increasing spending
12 cities with population of 1 million or more
Copyright © 2003 MarketOption, Inc.
Retail Overview
Case Study: Juice Segment Competitiveness
Market Share: 34% 29%
Key Strategies: production, market share, product line development
Market Share: Over 50% 4%
1998
2003
Key Strategies: brand & segment management, regional and international expansion, customer loyalty
Copyright © 2003 MarketOption, Inc.
Market Entry Strategy
Others Experience:
1 out of 6 (less than 20%)
8%
How many companies have been able to grow their revenues and profits by more than GDP growth plus inflation during a five year period?
Q:
A:
Average margin earned overseas compared to home market?
Q:
A:
* Source: Bain & Company
Market Entry Strategy – a must
Key to success: market entry strategy
Copyright © 2003 MarketOption, Inc.
Market Entry Strategy
Company Positioning – growth & profits
Profitable and stable core business at home
Keys to success:
Partners
Markets
Middle Class
Execution
Copyright © 2003 MarketOption, Inc.
Practical Advice - Russia
Key to success: partners
Develop close partnerships: business & personal
Ensure your partners value the relationship
Trust & manage
Key to success: know the market
> Resource: BISNIS at www.bisnis.doc.gov
Distribution channels and main players
Be competitive
Pricing
Copyright © 2003 MarketOption, Inc.
Practical Advice - Russia
Key to success: focus on middle class
Key to success: strategy execution
Flexibility: adjust & adopt
Real income growth: 10% this year; double by 2008
Consumption model becomes more western
Spending:> More than 50% on food products
> Food vs. Non-food – almost double the rate of growth (4.5% vs. 8%)