1. in
Azerbaijan
Group 8

2. Objective
 To analyse the relevant factors involved in
successfully introducing, marketing, distributing, and
selling the Snuggie in Azerbaijan.
 Goal
 Penetrate the Azerbaijani market profitably and
grow at an annual rate of at least 10 % for the next 5
years.
2

3.  Difficult to gather accurate data on Azerbaijan
 Financial data and market data is sparse
3

4. 4
Phase I
Planning
and analysis
(from HQ)
Phase I
Planning
and analysis
(from HQ)
Includes:
- Product data
- Market analysis
- Entry strategy
Phase II
Planning
and analysis
(from AZB)
Phase II
Planning
and analysis
(from AZB)
Includes:
- Local presence
- Analysis of 4 P’s
- Growth strategy
- Financial analysis
Phase III
Execution
of strategy
Phase III
Execution
of strategy
Includes:
- Product
- Price
- Place
- Promotion
- Management
and admin
Phase IV
Evaluate and
adapt
Phase IV
Evaluate and
adapt
Includes:
- Adapt to market
conditions
- Evaluation of
growth strategy
Continuously evaluate and adapt operations

5. 5
Phase I
Planning &
analysis
Phase I
Planning &
analysis
Includes:
- Product data
- Market analysis
- Entry strategy
- Growth
strategy
Includes:
- Product data
- Market analysis
- Entry strategy
- Growth
strategy
Phase IIPhase II Phase IIIPhase III Phase IVPhase IV

6.  What is a Snuggie?
 The Snuggie is a sleeved blanket which
offers both the comfort of a blanket,
and the freedom of a shirt or blouse.
 Price
 Less than £10 in the United Kingdom
 Why the Snuggie?
 Strong sales in other markets (> 20 million units in one year)
 Low cost and relatively easy to distribute (small and light)
 Azerbaijan is cold in the winter
6
IIIIII IIIIII IVIV
Phase I - Planning and
analysis

7. 7
IIIIII IIIIII IVIV
Phase I - Planning and
analysis
 PEST:
 Political
 Sufficiently stable political environment (Economist)
 Highly corrupt (Corruption Perception Index)
 Government increases efforts to join WTO
 Economic
 Annual growth of economy has exceeded 10 % since 2000
 Stable currency - moderate averaged inflation, but strong fluctuation (hedging strategy)
 Low import tax on textiles (5 %)
 Social
 Positive attitude towards Western goods
 90 % speak Azeri
 Technological
 Lack of central heating and cold winters
 Unreliable electricity supply
 Low, but growing Internet user base

8. 8
IIIIII IIIIII IVIV
Phase I - Planning and
analysis
 Porter’s
5-forces
Buyer
bargaining
power
Buyer
bargaining
power
(High)
Dependency
on a few large
retailers
Substitute
product
threat
Substitute
product
threat
(High)
Simple
blanket is a
substitute
Supplier
bargaining
power
Supplier
bargaining
power
(Low)
Switching cost
non existent
Medium
competitiv
e rivalry
Medium
competitiv
e rivalry
New
competitor
threat
New
competitor
threat
(High)
Product is
easily
imitable

9. 9
IIIIII IIIIII IVIV
Phase I - Planning and
analysis
 Transportation and shipping

10. 10
IIIIII IIIIII IVIV
Phase I - Planning and
analysis
 Entry mode: direct exporting
 Best option since the market is relatively small to commit
resources
 Local agent and company manager on-site
 Production in China
 Low-cost labour; economies of scale
 Shipping is affordable (low weight product)
 Flexible, allows quick up-ramping of supply and vice versa
 Entry scale: small
 Target top 20 % income segment: most disposable income, over 1.8m
potential market
 Target customers in main urban areas, mainly Baku, the capital
 Entry timing: late fall 2011
 Cold period starts (tº down to - 10º C)
 New Year’s Day (1 January): major holiday in Azerbaijan, tradition of gift
giving
 Main competitor, Slanket, not in the market
 1st
mover advantage
 Also, Slanket is too expensive

11. 11
IIIIII IIIIII IVIV
Phase I - Planning and
analysis
 Organic growth strategy
 Maintain export office
 Increase staff to four towards year 5
 Innovation: follow up regular Snuggie with:
 Luxury Snuggie (cashmere)
 The Doggie Snuggie
 Patterned Snuggies (Zebra pattern etc.)
 Evaluate regional expansion (?)
 Baku warehousing hub
 Free trade agreements - Georgia and Turkmenistan

12. 12
Phase IPhase I
Includes:
- Local presence
- Analysis of
4 P’s
- Financial
analysis
Includes:
- Local presence
- Analysis of
4 P’s
- Financial
analysis
Phase II
Planning &
analysis
Phase II
Planning &
analysis
Phase IIIPhase III Phase IVPhase IV

13. 13
 Local presence
 In Azerbaijan, relationships are crucial to business success
 several visits before we commit  building trust
 Local sales office staffed by experienced expatriate manager
 Our agency AZPROMO coordinates between us and:
 Mr. Elmar Farajov (Head of International Projects, Min. of Trans.)
 Selim Ariturk, Economic/ Commercial Officer (US Embassy)
 Narqiz Nasrullayeva-Muduroglu, Executive Director (US Chamber of
Commerce, Baku)
 Sales office:
 Leased from Baku Cargo Terminal
 Flexible space for up to 4 employees
 Expatriate manager
 Intern (year 2 onwards)
 2x Assistant manager (year 2 and 5)
IIIIII IIIIII IVIV
Phase II - Planning and analysis

14. 14
 Product
 Snuggie: blanket with sleeves
 Strong branding (Western name sounds “trendy”)
 Snuggie logo on product
 Descriptions on the package in Azeri language
 Price
 Market-oriented pricing
 Adjusted PPP* = (PPP of top 20% of population)
(PPP of USA)
 Price = (US Retail Price) x (adjusted PPP)
 Retail Price: $7.29 (5.83 Azerbaijani New Manat)
IIIIII IIIIII IVIV
Phase II - Planning and analysis

15. 15
 Place
 Warehouse: at Baku Cargo Terminal
 Retail outlets (75 % of supply):
 Since the majority of people prefer shopping in
large retail stores
 Sell at “Ramstore”, “Continental”, and “New World”
 These are high-end supermarkets and malls
 Demo stand inside the Ramstore mall
 Petrol stations’ convenience stores:
 SOCAR stations (15 locations)
 Teleshopping (20 % of supply):
 Proven track record of sales via this channel
 Additional positive effect on promotion
 Online shopping (5 % of supply):
 Low but growing number of Internet users
 Preference for immediate purchase in shops
IIIIII IIIIII IVIV
Phase II - Planning and analysis

16. 16
 Promotion
 Start campaign in early fall 2011 to generate awareness,
 In time for cold winter season
 Emphasis
 Popularity in the West: “20 million sold in the US”
 Energy savings (alternative to electric heating in winter;
homes have no central heating)
 Snuggie as a perfect gift (New Years’ tradition of gift
giving)
 Emotional appeal (family, etc.: collectivist society)
 Media
 TV (teleshopping):
 through ANS TV, Lider and MTV (young and
trendy)
 Newspapers: popular media
 Demonstrations at shopping malls
IIIIII IIIIII IVIV
Phase II - Planning and analysis

17.  Cost
2011 2012 2013 2014 2015
Order Amount Snuggies $68,914.29 $76,571.43 $84,228.57 $91,885.71 $99,542.86
Production Cost $68,914.29 $76,571.43 $84,228.57 $91,885.71 $99,542.86
Transportation Cost $30,150.00 $33,500.00 $36,850.00 $40,200.00 $43,550.00
Overhead Cost $106,675.00 $109,400.00 $127,400.00 $130,400.00 $148,400.00
Total Cost $274,653.57 $296,042.86 $332,707.14 $354,371.43 $391,035.71
IIIIII IIIIII IVIV
Phase II - Planning and analysis

18. IIIIII IIIIII IVIV
Phase II - Planning and analysis
2011 2012 2013 2014 2015
Retail 258428.57 268000.00 273742.86 275657.14 273742.86
TV 75805.71 84228.57 92651.43 75805.71 54748.57
Online 25119.2571 55820.5714 92103.943 167461.714 253983.6
Total Revenue 359353.54 408049.14 458498.23 518924.57 582475.03
 Revenue

19. IIIIII IIIIII IVIV
Phase II - Planning and analysis
 Income statement
End of Financial Year 2011 2012 2013 2014 2015
$
Revenue 359,353.54 408,049.14 458,498.23 518,924.57 582,475.03
Employee Cost 80,000.00 83,000.00 101,000.00 101,000.00 119,000.00
COGS 114,785.00 128,900.00 158,290.00 172,080.00 201,470.00
Administration and other cost 50,400.00 54,000.00 57,960.00 62,916.00 67,707.60
EBIT 114,168.54 142,149.14 141,248.23 182,928.57 194,297.43
Finance cost 0.00 0.00 0.00 0.00 0.00
Tax (20%) 22833.709 28429.829 28249.646 36585.714 38859.486
Net Income 91,334.83 113,719.31 112,998.58 146,342.86 155,437.94

20. IIIIII IIIIII IVIV
Phase II - Planning and analysis
 Break even
 Break Even Point = 34 301 units
 After approximately after 6 months

21. 21
Phase IPhase I
Includes:
Product
Price
Place
Promotion
Management
and admin
Includes:
Product
Price
Place
Promotion
Management
and admin
Phase IIPhase II
Phase III
Execution of
strategy
Phase III
Execution of
strategy
Phase IVPhase IV

22. 22
 Management and administrative tasks
 Continuously monitor important figures
 Sales (and location)
 Inventory
 Maintain relationship with sales outlets and distributors
 Assess need for more staff
 Regular reporting back to HQ in the US
 Evaluate 4 P’s
 Product
 Price
 Place
 Promotion
IIIIII IIIIII IVIV
Phase III - Execution

23. 23
Phase IPhase I
Includes:
- Adapt to
market
conditions
- Evaluation of
growth
strategy
Includes:
- Adapt to
market
conditions
- Evaluation of
growth
strategy
Phase IIPhase II Phase IIIPhase III
Phase IV
Evaluate
and adapt
Phase IV
Evaluate
and adapt

24. 24
 Evaluate sales figures
 Distribution channel reconfiguration?
 Change marketing mix?
 Evaluate growth strategy
 Evaluate competition
 Realistic?
 Evaluate market conditions
 Repeat analysis from Phase I if deemed necessary
IIIIII IIIIII IVIV
Phase IV - Evaluate and adapt

25.  Our analysis in Phase I and Phase II predicts we
will be able to successfully introduce the Snuggie
into the Azerbaijani market in 2011. We will be
profitable in year 1.
 Year to year growth in the following 4 years will
be approximately 10 %.
25

26. QUESTIONS?
26

27.  Appendix A Proof of price
 Appendix B Complete financial analysis
 Appendix C References
27

28. 28

29. Appendix B – Complete Financial Analysis
29
Microsoft Excel
Worksheet

30.  BCT, 2007. [online] Available at : http://www.bct.az/en/services_equipment.asp [Accessed 19
November 2010]
 Datamonitor,2010 . [online] Available at
:http://www.marketlineinfo.com.ezproxy.webfeat.lib.ed.ac.uk/library/DisplayContent.aspx?
N=4294669485 [Accessed 16 November 2010]
 Deloitte,2010. [online] Available at : http://www.deloitte.com/assets/Dcom-Global/Local
%20Assets/Documents/Tax/Intl%20Tax%20and%20Business
%20Guides/2010/dtt_tax_highlight_2010_Azerbaijan.pdf [Accessed 21 November 2010]
• Earth Trends,2003. [online] Available at :
http://earthtrends.wri.org/pdf_library/cp/eco_cou_031.pdf [Accessed 18 November 2010]
• FITA,2010. [online] Available at : http://www.fita.org/useful/archives/231.html [Accessed
18November 2010]
• Petrolplaza,2010. [online]Available at :
http://www.petrolplaza.com/news/industry/MiZlbiY5NzY0JjQmMTYmOTAmMQ%3D%3D
[Accessed 20 November 2010]
• Prant,2006 . [online] Available at http://www.prant.net/?page=lo [Accessed 19 November 2010]
 The Street,2010. [online] Available at: http://www.thestreet.com/story/10660101/snuggie-
cashes-in-where-others-failed.html [Accessed 15 November 2010]
 U.S Department of State,2010. [online] Available at : http://www.state.gov/r/pa/ei/bgn/2909.htm
[Accessed 18 November 2010] 30
Appendix C – References