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
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
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
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
Editor's Notes
Currently, we are at the end of Phase II – your decision today will influence when we can begin Phase III (execution of strategy)
Analysis of market data for Azerbaijan
Tools used: PESTLE, Porter’s 5-forces
Analysis of various market entry strategies
Tailored to fit the market and product specifications
Development of a 5-year financial plan
Calculation of relevant costs
Sales projections
Ultimately: is this going to be profitable?
*Use past tense (Phase I and Phase II were performed previous to this moment in time which is the board of directors meeting)
Analysis of market data for Azerbaijan
Tools used: PESTLE, Porter’s 5-forces
Analysis of various market entry strategies
Tailored to fit the market and product specifications
Development of a 5-year financial plan
Calculation of relevant costs
Sales projections
Ultimately: is this going to be profitable?
http://www.internationalbusinesslawadvisor.com/2010/01/articles/business-transactions/from-startup-to-global-domination-in-60-snuggies-or-less-or-what-the-snuggie-can-teach-you-about-going-global/
What is a Snuggie?
produced in China
Threat of entry of new competitors
High threat – product is easily imitable
Threat of substitute products or services
High threat – simple blanket is a substitute to the Snuggie
Bargaining power of buyers
High – dependency on a few large retailers
Bargaining power of suppliers
Low – switching cost virtually non existent
Intensity of competitive rivalry
Low – no direct competition in the early stages of Phase III
Western entrepreneurs act as agents for U.S. companies in Azerbaijan, and an increasing number of Azerbaijani trading firms have established solid track records as partners with Western firms. For U.S. firms not willing to commit resources to the relatively small market of Azerbaijan, an agent or representative may be the best initial approach. In many instances, using a local agent is better, especially if the U.S. good/service is new to the market. For more competitive and developed market segments, a distributor provides
the best option for business development. Verifying the financial bona fides of prospective partners can be difficult. Given this challenge, potential exporters should plan to visit Azerbaijan to build personal relationships, set up local sales networks, or establish partnerships with local agents or distributors. Not-for-profit trade chambers, such as the American Chamber of Commerce in Azerbaijan (Baku), the U.S. – Azerbaijan Chamber of Commerce (Washington, DC), and AZPROMO (Azerbaijan Trade and Investment Promotion Foundation in Baku) may provide good market insights and help locate well-established local partners. (Doing business in Azerbaijan)
Azerbaijan has signed bilateral free trade agreements with seven states of the former Soviet Union, although the trade liberalizing provisions of most of the agreements have not yet taken effect. Azerbaijan signed agreements with: the Russian Federation (September 30, 1992); Moldova (May 26, 1995); Ukraine (July 28, 1995); Turkmenistan (March 18, 1996); Uzbekistan (May 27,1996); Georgia (June 10, 1996); Kazakhstan (June 10, 1997), and Tajikistan (July 13, 2007). (Doing Business in Azerbaijan)
Analysis of market data for Azerbaijan
Tools used: PESTLE, Porter’s 5-forces
Analysis of various market entry strategies
Tailored to fit the market and product specifications
Development of a 5-year financial plan
Calculation of relevant costs
Sales projections
Ultimately: is this going to be profitable?
JUSTIFY CHOICE OF RETAIL STORES
Majority prefers to shop in retail locations
Touch and buy
Grab snuggie on the way
Collectivist society (Hofstede): advertisements featuring happy families – emotional appeal
Analysis of market data for Azerbaijan
Tools used: PESTLE, Porter’s 5-forces
Analysis of various market entry strategies
Tailored to fit the market and product specifications
Development of a 5-year financial plan
Calculation of relevant costs
Sales projections
Ultimately: is this going to be profitable?
Analysis of market data for Azerbaijan
Tools used: PESTLE, Porter’s 5-forces
Analysis of various market entry strategies
Tailored to fit the market and product specifications
Development of a 5-year financial plan
Calculation of relevant costs
Sales projections
Ultimately: is this going to be profitable?