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Pufferfish

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Pufferfish

  1. 1. GROUP 12 1
  2. 2.   What are the characteristics of the Russian market, and what opportunities and threats does it present?  What is the best way for Pufferfish to enter the Russian digital signage market?  What segments of the Russian digital signage market could be targeted?  Who are the potential customers for Pufferspheres M & XXL?  Who could Pufferfish choose as potential partners in Russia? RESEARCH QUESTIONS GROUP 12 2
  3. 3.  PRESENTATION OUTLINE GROUP 12 3
  4. 4.  GROUP 12 4 COMPANY PROFILE  Idea developed by two students in their final year led to the inception of Pufferfish Displays Ltd.  Today the company develops dynamic digital display systems  Products are known as Pufferspheres  Not only do they provide commercial solutions, but also are actively engaged in artistic and scientific research project  Their clients include Eurovision, O2, NASA, Google, IBM, Budweiser and others
  5. 5.  PRODUCT DESCRIPTION GROUP 12 5
  6. 6.  RUSSIA: COUNTRY ANALYSIS GROUP 12 6
  7. 7.   Transformation from a centrally planned to a free market economy (1990s)  Increasing GDP growth rate ECONOMIC ENVIRONMENT GROUP 12 7 Moderately conservative GDP growth forecast (Ministry of Economic Development)  Government achieved social and financial stability and supported core businesses  Predictions positive despite recent global crisis
  8. 8.  V. Putin: democratization, liberalization and “de- bureaucratization” of the country  Trade liberalization and aims for WTO membership  IPR: party to international agreements, however numerous violation cases among businesses  Member of numerous global organizations as a USSR successor (IMF, UN, G8, CIS and others)  Developing stronger legislative system  Improving corporate transparency  Corruption and bureaucracy  seek local consultancy POLITICAL ENVIRONMENT GROUP 12 8
  9. 9.   Growing government spending on R&D and technology  Targets to become a leader by 2020  Increasing IT sector (20%-30% annually)  Growing use of ICT in business  Technology growth  potential for digital signage market and Pufferfish Ltd. TECHNOLOGICAL DEVELOPMENT GROUP 12 9
  10. 10.   Salesmanship a key factor (differentiation)  Personal relationships with business partners  Arrangement of meetings can be a difficulty  Russian language or an interpreter forbusiness discussions  Lack of immediate verbal feedback during presentations  Bilingual business cards  Russian promotional materials  Corruption common: keep in mind the Bribery Act 2011 BUSINESS CULTURE GROUP 12 10
  11. 11.   Less competitive than the Western countries  The Russian society rarely realize the role of the informational content of digital signage  This sector has huge potential in Russia  The development of the digital signage market is expected to spread from cities with a large business infrastructure, such as Moscow and St. Petersburg DIGITAL SIGNAGE MARKET IN RUSSIA GROUP 12 11
  12. 12.  LCD DISPLAYS  Sony, Mitsubishi Electric and Mediavisor: displays for indoor use in conference halls, exhibition centers, tv studios, shopping malls, airports, casinos, hotel foyes etc.  Winmate industrial displays: can survive extreme outdoor temperatures of up to -40ºC  LED DISPLAY  Local producers: «Дисплейные системы» (Display Systems), «ВЭЛКОМ» (Velcom), НАТА-Инфо (Nata-Info) and ПАЛАМИ (Palami) POTENTIAL COMPETITORS GROUP 12 12
  13. 13.  PORTER’S FIVE FORCES GROUP 12 13 Supplier Power – High  Lenses from a North American company  Screens from a UK company Buyer Power – Moderate  High-end digital signage and audio- visual product distributors like Auvix  Only a few distributors in Russia that specialize in distribution of AV equipment  Distribution not monopolized: choice New Entry Threat – Moderate  The main producers of digital spheres, Magical Planet digital video globe and OmniGlobe are not yet in the Russian market  Pufferfish will have a first mover advantage  As the market competition for digital spheres is not intense, it provides opportunities to new entrants Substitute Threat – High A wide range of LCD and LED displays Lower price Competitive Rivalry – Moderate  LCD and LED flat screen manufacturers: Sony, Mitsubishi Electric and Mediavisor  Pufferspheres: completely new products with attractive features  Potential to create a niche in the digital signage market in Russia
  14. 14.  GROUP 12 14 S.W.O.T STRENGTHS  Unique Product  Customization of Products  Sustainable competitive advantage  Manufacturing excellence  Content creation and design WEAKNESSES  Lack of brand recognition in Russia  Insufficient information on the website
  15. 15.  GROUP 12 15 S.W.O.T OPPORTUNITIES  Emerging market  presents a big opportunity for doing business  Government plans for continuous economy modernization  High disposable income in Moscow and St. Petersburg  Target segments  Olympic stadium, trade fairs, seminars THREATS  Bureaucracy  Corruption  IPR legislation  Poor distribution  Unreliable partnerships  Increasing entry barriers
  16. 16.  16 TARGET CITIES: MOSCOW Advantages: • Capital and business center of Russia • Well-structured distribution channels • The biggest amount of shopping malls • Well connected to other Russian and foreign cities Disadvantages : • Registering a company is expensive and time consuming • Challenging to find qualified local partners • Not enough skilled workforce and salaries are high Integrated Systems Russia: • In 2009 Moscow attracted 66% of the total visitors, followed by 12% its region and 4% in St. Petersburg
  17. 17.  17 TARGET CITIES: ST. PETERSBURG Advantages: • Strategic location and an ice-free harbour • Perceived as the cultural capital of Russia • Trade fairs, corporate events and club parties • Well-developed distribution channels Disadvantages: • High salaries • Limited number of experienced managers • High property and land tax
  18. 18.  GROUP 12 18 TARGET CITIES: INVESTMENTS
  19. 19.  GROUP 12 19 MARKET SEGMENTATION ADVERTISING  Widespread advertising market  Main media: television, radio, print and billboard  Shift from traditional methods to modern methods  Great potential in the market  Media agencies that may be interested in the spheres: Starcom, Mindshare, Mediacom  Price a major concern ENTERTAINMENT  Numerous cultural events taking place all year round  Sochi Winter Olympics  2018 FIFA World Cup  Night clubs
  20. 20.  GROUP 12 20 MARKET SEGMENTATION CORPORATE  Presence of large banks and companies: Sberbank, Gazprom, Sibneft  The need to narrow down the target market in terms of size of businesses  A significant part of marketing in Russia takes place through trade shows taking place at local business complexes  Expocenter is the largest business complex in Moscow
  21. 21.  GROUP 12 21 MARKET SEGMENTATION GOVERNMENT  Russian congress tourism considered to be gradually developing in Moscow and St. Petersburg  Moscow and St. Petersburg: 44 international congresses in 2008  State-owned institutions can be a good target: Luzhniki stadium, State Duma, Russian Academy of Science EDUCATION  Lack of competitor presence in the Russian market beneficial  Target: private institutions, universities and research centres  Application of product: Moscow State University, St. Petersburg State University
  22. 22.  RUSSIAN MARKET ENTRY STRATEGY GROUP 12 22
  23. 23.   A step-by-step process of firm internationalization  Market knowledge (experience)  increasing commitment  Start with direct exporting THE UPPSALA MODEL GROUP 12 23
  24. 24.  Advantages  control over brand and overseas operations  eliminates cost of intermediaries  Challenges  selecting distribution channels  sales negotiations  shipment, payments and documentation handling  Consultancy and advice organizations (contacts in Appendix 5&6) DIRECT EXPORTING GROUP 12 24
  25. 25.  ESTABLISHING A JOINT VENTURE  Requires:  setting up a legally independent company that is jointly owned by two or more otherwise unrelated firms  sharing some of the parent companies’ resources with the purpose of developing competitive advantage  Can take various forms, the most common being a 50/50 shareholding in a company GROUP 12 25
  26. 26.  JV: ADVANTAGES & DISADVANTAGES Advantages  Reduction of risk through sharing of the project  Facilitation of entry into a market  Synergy and competitive advantage  Quick profits Disadvantages  Difficulties arising from varying organizational and national cultures  effectiveness GROUP 12 26
  27. 27.  FORMING A JOINT VENTURE IN RUSSIA  In general no restrictions on foreign participation in a JV, except for certain industries such as banking and insurance  Relatively easier for foreign investors  liberalization of the state registration process for joint ventures  liberalization of the foreign currency legislation  Main problems  recurring change of legislation  state authorities failing to conform to established terms and procedures for provision of consent, approval, registration and issuance of licenses GROUP 12 27
  28. 28.  FORMING A RUSSIAN LEGAL ENTITY GROUP 12 28
  29. 29.  JSC OR LLC?  Limited Liability Companies (LLC) and Joint Stock Companies (JSC)  In an LLC, each participant is eligible to leave the company at any time and for no specific reason  This increases the risk for Pufferfish whose operations may be disrupted due to its partner’s withdrawal  LLC legislation covers a wider range of issues and requires undisputed voting decisions of LLC participants, which is unfair to the participant holding a majority share GROUP 12 29
  30. 30.  GROUP 12 30 MARKETING MIX PRODUCT Three levels of product  Actual product: technicality  Core product: ease of use, portability, attractiveness  Augmented product: warranty and repairs (extremely important for Russian corporate buyers) PRICE  The Puffersphere is positioned as an original, exclusive and therefore highly priced product
  31. 31.  PROMOTION  Working with local partners  Expocentre: hosts some of the biggest trade shows for the digital signage market  Press advertising: RBC one of the largest media groups  expensive: ½ page advert = £7,000  Journals: InAVate  cheaper: 2 pages = £1,800  Company website in Russian language GROUP 12 31 MARKETING MIX PLACE  Distribution partners
  32. 32.  GROUP 12 32 • Auvix is a good distributor choice • However, unpredictable market conditions • Pufferfish needs to seek local cooperation with distributers, marketing agencies and consulting agencies POTENTIAL PARTNERS
  33. 33.  DISTRIBUTION ВИАТЕК (Viatech) • Distributor of multimedia equipment in Russia, also offers integrated AV solutions. • It has 13 years of experience  Clients: • Government and educational institutions (like economic faculty of the Moscow State University) • Entertainment sector ("dancing fountains" in St. Petersburg, The Grand Kremlin Palace) • Corporate sector (Lukoil, Hilton hotel)  ВИАТЕК’s clients speak very highly of the company’s project quality GROUP 12 33 POTENTIAL PARTNERS MARKETING  Reason: lack of information about target market and efficient promotional strategy Grifon Consulting House (ГРИФОН- ЭКСПЕРТ) • Group of marketing companies in Moscow and St. Petersburg • 12 year experience in Russia  Provides the following services: • marketing research, brand promotion, benchmarking and competitive intelligence, marketing strategies etc.  Clients: • Pepsi, Knauf, Nissan, Orion Choco Pie, Gazprom, Lukoil etc.
  34. 34.  GROUP 12 34 POTENTIAL PARTNERS CONSULTANCY • Reason: Russia is a highly corrupt and bureaucratic country with a complicated tax system AMB Consulting • Operates since 1998  Offers: • Professional accounting and tax advice, international corporate relations, legal services (legal advice, corporate law, arbitration, licensing), strategic development, management and other  AMB is considered one of the most reliable and highly professional Russian audit and consulting companies ADVERTISING  Reasons: Need of attracting new customers and increase sales  MEDOR • Has representative offices in both target cities and holds more than 8 years market experience  Company provides full-cycle advertising: • Design, online advertising (including creation of a website), outdoor and indoor advertising, direct mailing, event and transport advertising  Clients: • Bosch, Toyota, Tretyakov State Gallery etc.
  35. 35.  GROUP 12 35 POTENTIAL PARTNERS UNIVERSAL OPTION ACE Consulting Company • Conduct market research, promote the product and receive consulting services  Services for foreign companies • Represent company in Russia, promote products or services on the Russian market, conduct market research, register a company in Russia, develop financial schemes and help find a local partner or supplier  Advantages: convenient, cheaper and easier to conduct  Disadvantages: chance of getting poorer service
  36. 36.  GROUP 12 36 CONCLUSIONS & RECOMMENDATIONS • Despite some difficulties, such as high bureaucracy and corruption, Russia is a promising market for Pufferfish Ltd. • Pufferfish should be aware of the cultural differences between the UK and Russia, both in terms of national and business culture, and should not neglect the possible consequences of the Bribery Act Target cities: • Moscow and St. Petersburg Target markets: • Advertising, entertainment, corporate, government and education
  37. 37.  GROUP 12 37 CONCLUSIONS & RECOMMENDATIONS Entry Strategy: • Follow the Uppsala internationalization model, starting with direct exporting and further considering a sales subsidiary through a joint venture in three to four years time We propose that: • Pufferfish continues working with its current distributor, Auvix, as it has a good brand image in the Russian digital signage market Nevertheless company needs local cooperation in: • Marketing, advertising, consultancy and distribution
  38. 38.  GROUP 12 38 APPENDIX 1: CALENDAR OF IMPORTANT EVENTS FOR PUFFERFISH
  39. 39.  GROUP 12 39 APPENDIX 2: LIST OF COMPANIES CONTACTED Congress and exhibition centers (Moscow) 1. World Trade Center (http://www.expobusiness.ru/company/?id=610) Conferences, Exhibition space rental & services (E-mail: intercongress@wtcmoscow.ru) 2. Info-space (http://www.info-space.ru) Sales Department Coordinator (Natalya Alekseeva, bny@info-space.ru) Art-director (Natalya Savrasova, event@info-space.ru) 3. ОАО “GAO VVC” (http://vvcentre.ru/exhibitions/rent/) E-mail: info@vvcentre.ru 4. Expocenter (http://www.expocentr.ru/en/contacts/) Exhibition-Related Services (E-mail: usluga@expocentr.ru, servicexpo@expocentr.ru) Advertising Services (E-mail: exporec@expocentr.ru, Chijevsky@expocentr.ru) Communications, Audio and Video Services, Internet (E-mail: telcom@expocentr.ru) Expocenter’s general contractor is ExpoConsta, ZAO (E-mail: sales@expoconsta.ru, Web: www.expoconsta.ru) 5. MOSGD (Moscow State Palace, http://www.mosgd.ru/en/) E-mail:info@mosgd.ru 6. Concert Hall "Crocus City Hall" (http://www.crocus- hall.ru/eng/contacts/) Е-mail: info@crocus-hall.com 7. GKD (State Kremlin Palace, http://www.gkd-kremlin.ru/organize/info/) E-mail: gdgkd@mail.ru 8. Dom Soyuzov (http://www.domsojuzov.ru/contacts.html) E-mail: zal220@yandex.ru Event-companies 9. Mdmpalace (http://www.mdmpalace.ru/index.php?np=11) E-mail: reklama@mdmpalace.ru, art@mdmpalace.ru, arenda@mdmpalace.ru 10. Concert agency “Star Empire” (http://imperiyazvezd.ru/doc/contact/) E-mail: info@imperiyazvezd.ru 11. Adam Smith Conferences (http://www.adamsmithconferences.com/en/contact_us.php) Email: info@adamsmithconferences.com, moscow@adamsmithconferences.com 12. "Euroconcert Promo Group" E-mail: euroconcert@mail.ru 13. Tom-Master E-mail: moscow@tom-master.ru 14. Show-pro (St. Petersburg, www.showpro-tech.ru) E-mail: cibercut@yandex.ru 15. INTERNATIONAL MUSIC CORPORATION I.B.RECORDS London, E-mail: info@ibrecords.co.uk St. Petersburg, E-mail: info@ibrecords.ru 16. “FARECSPO” (Professional organizer of congresses and exhibitions, www.farexpo.ru) E-mail:office@orticon.com 17. Congress-Exhibition Company “EMPIRE” Moscow (E-mail: imperia(at)imperiaforum.ru) St. Petersburg (E-mail: imperia(at)imperiaforum.ru) 18. Screenagency (http://www.screenagency.ru/en/company/) (Moscow, St. Petersburg etc.) 19. Alsima (St. Petersburg) Mikhail Yamshchikov, Director General: +7 (921) 963-72-67, E-mail: director@alsima.su Alexander Martyanov, Technical Director +7 (921) 958-39-99 , E-mail: alsima@alsima.su Maxim Popov, Chief of Design Department, E-mail: max-expo@mail.ru Visual suppliers 20. Agency Live-Stage (http://livestage.ru) E-mail: info@livestage.ru, tech@livestage.ru
  40. 40.  GROUP 12 40 APPENDIX 3: EMAIL CORRESPONDENCE WITH POTENTIAL PARTNERS IN RUSSIA
  41. 41.  GROUP 12 41 APPENDIX 3: EMAIL CORRESPONDENCE WITH POTENTIAL PARTNERS IN RUSSIA
  42. 42.  GROUP 12 42 APPENDIX 3: EMAIL CORRESPONDENCE WITH POTENTIAL PARTNERS IN RUSSIA
  43. 43.  GROUP 12 43 APPENDIX 4: IMPORT TARIFFS FOR PUFFERFISH PARTS IN RUSSIA
  44. 44.  GROUP 12 44 APPENDIX 5: LIST OF CONTACTS AT UKTI
  45. 45.  GROUP 12 45 APPENDIX 6: LIST OF CONTACTS AT RBCC
  46. 46.  APPENDIX 7: FORMING A RUSSIAN LEGAL ENTITY LIMITED LIABILITY COMPANIES (LLC)  Involvement based on participation interests  Establishment and operation less taxing and time consuming  No legal requirements to issue shares or perform any procedures related to establishment and issuance of securities  More flexible and mobile  Each participant is eligible to leave the company at any time and for no specific reason, without the consent of other participants JOINT STOCK COMPANIES (JSC)  Involvement based on shares  The liability of members limited to the value of their shares  Large financial resources and technical expertise  possible to have large scale production  Possible to invest a lot of money in R&D  design, better quality products GROUP 12 46

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