1. University of Ljubljana – Faculty of Economics
Undergraduate program – UPEŠ
Course: International Business
Coordinator: Gregor Pfajfar Ph.D.
Study year: 2013/2014
“International Business” Course
Seminar Paper:
“Speak” for Russia
GROUP MEMBERS:
Monika Nikolovska (19544465)
Angela Protikj (19544544)
Angela Ristova (19511175)
Aijamal Tursunalieva (19101891)
Svetoslav Georgiev (19116927)
Ljubljana, May 15th
2014
Ljubljana, May 15th
2014
2. 2
Managerial Summary
What is “Speak”?
“Speak” is a glass. A different kind of glass. Glass with design that is distinctive and
extraordinary then ever seen. It stands out. And it rocks.1
However, it fulfils its purposes as
drinking glass matching to any kind of drink preferences. So, apart from this uniqueness, what is
so special about “Speak”?
“Speak is created and designed under the collaboration of the glass company “Hrastnik” and “S
project” as a product that stands out from regular drinking glasses, but it also spreads different
message – it brings higher value whilst creating opportunities for young people in need.
As our purpose is to spread this product to the Russian market, further in this paper we
try to explain how this uniqueness and value can be transferred abroad. We will start with basic
market evaluation for product like this operating on the Russian market taking into account the
market potential, size, the growth and the demand. Some of the main findings from this part are
that the the Russian glass market is definitely one of the most dynamic ones for glass industries
including the innovation aspect. However, the constructional and float glass industry is much
more developed and advanced, and being mostly invested to, in comparison with the
container/drinking glass. However, we must take into account the extreme unavailability of
information about the Russian market, despite knowing the language, and searching in Russian,
One big plus for the Russian market is the entry in the WTO since 2012, which will lead to freer
trade and also to market-based pricing. Analyzing the competition on the market, we came across
very strong and many competitors which have established themselves on the market. There are
glass 57 producers in Russia, pread in different regions throughout the country and have high
technology available and high diversity in the production. Continuing with the research, we think
that we should benchmark to their prices, distribution channels and promotion. That way we can
get closer to the market, at least in the beginnings, understand the market needs and have good
foundation for future success and growth in Russia.
Working on the segmentation, we are thinking of not much specific segments. Basically,
is the population in the major Russian cities: Moscow, St. Petersburg, Sochi, Novosibirsk,
Yekaterinburg etc., aged between 18 and 60, modern people, wishful for new experience, wishful
for personalized products and someone searching for the ultimate gift for their loved ones.
As for the promotion and advertising, we think that PR should be of main focus in the beginnings
– PR events can welcome and introduce a new brand into the market and also can bring insights
of further possible improvement of machinery, equipment, production tools and design for
Hrastnik. We also thought that we should have on-line store, so that we can take up on big
orders. This will be also promoting personalized products especially for HO-RE-CA. Also we
1
http://vimeo.com/55885006
3. 3
were thinking of indirect channels – agents that will help us establish collaboration with
restaurants, hotels, bars, events and catering. However, as “Speak” has special value added in the
Slovenian market with the charity foundation, we think that we should also promote and spread
the value added on the Russian market too, which can be achieved with finding specific cause on
the market and working with intermediaries for such partnership.
Studying International Business we have learned that spreading and succeeding on the
Russian market is best achieved with local partner. That is why we have to distribute with a
Russian trading company with which we will work B2B and sell to retailers and HO-RE-CA.
Also, such a distributor must have relationship with customs’ house broker for ensuring about
following rules and regulations and easing the transport process.
As shortly mentioned above, “Speak” really has special value added with the causes. But, also
the main value is the differentiation. It is the uniqueness and the interesting and the innovative
design. We were also thinking about personalization, in fact: engraving names, dates, symbols,
also different colors, and with that responding to customer needs. Another idea that we had, and
which also affects the promotion of the product, is the establishing of a hashtag trend (#) that, as
proven so far, is very popular and helps building brand names (we were thinking to use those
personalized glasses with names, dates or whatever a customer would want, like object for
sharing on the social networks, just like Coca-Cola’s “Share with”).
Within the contents in this paper, we are providing examples of such companies,
promotions and ideas for execution which can really help growing on the market. We considered
further expansion in the future, with involving the other Hrastnik products, having owned sales
subsidiaries and strong partnerships with and representation on beverage producers.
4. 4
Table of Contents
1. Introduction ……………………………………………………………………………… 5
2. Market evaluation for the “Speak” product in Russia ……………………………………5
2.1. Market potential and market size………………………………………………… 5
2.2. Size of market in terms of volume ……………………………………………… 6
2.3. Size of market in terms of value ………………………………………………… 6
2.4. Past, present and future growth ………………………………………………….. 7
2.5. Drivers of demand for this product………………………………………………. 7
2.6. Description of consumers ……………………………………………………..… 8
2.7. Main competitors in the industry………………………………………………… 8
2.7.1. Domestic competitors …………………………………………………… 8
2.7.2. Foreign competitors …………………………………………………...… 9
2.7.3. The market positions of competitors …………………………………… 11
3. Market entry analysis …………………………………………………………...……… 12
3.1. Customer segmentation ……………………………………………………….... 12
3.2. Positioning ……………………………………………………………………... 13
3.2.1. Brand positioning …………………………………………………….… 13
3.2.2. Product positioning …………………………………………………….. 14
3.3. Market entry mode selection …………………………………………………… 14
4. Marketing plan …………………………………………………………………………. 15
4.1. Adaptation/standardization of the product …………………………………...… 15
4.1.1. Description of key product features ……………………………………. 16
4.1.2. Packaging ………………………………………………………………. 16
4.2. Market communications ………………………………………………………... 16
4.2.1. Communication objectives ……………………………………………... 18
4.2.2. Communication message ………………………………………………. 18
4.2.3. Communication budget ………………………………………………… 18
4.3. Distribution and sales management ……………………………………………. 19
4.3.1. Market channels and intermediaries …………………………………... 19
4.4. Pricing policy …………………………………………………………………... 19
4.4.1. Taxes …………………………………………………………………… 19
4.4.2. Tariffs …………………………………………………………………... 19
4.4.3. Pricing ………………………………………………………………..… 20
5. Managerial recommendations ………………………………………………………..… 20
6. References …………………………………………………………………………….... 21
5. 5
1. Introduction
Differentiated glass work has been bringing satisfaction to customers all around the world
within many years. The experience accompanied with any beverage can completely affect the
state of mind and increase amusement and enjoyment. Such an experience is completely
achieved with the “Speak” glass. I am speaking from all my group members for sure, when I say
that such a distinctive product was at first in front of us. It spun our heads at the moment, and we
immediately knew which product is going to be our project for. And why Russia? Because we
thought that the knowledge of Russian language and culture by some of our team member will
help us understand the market, make good decisions about the segmentation, pricing,
marketing… and all in all succeeding in the Russian market and building the “Hrastnik” and
“Speak” names into a strong brand on the market.
Starting with our project work, we focused mainly on the Russian market growth, practices and
tried to combine that with the Russian culture, perceptions of the consumers and include that into
our marketing plan. Further on in this paper is presented exactly that within more details and
extensive analysis about the market.
2. Market Evaluation for the “Speak” product in Russia
2.1.Market potential and/or market size
The total area of Russian Federation is 17,075,400 km2. Around 143,864,000 people live
on the territory of Russia2
. Most important demographic and economic indicators will help to
evaluate the size and the potential of Russian market. Details and numbers are shown in the table
below.
Real GDP Growth (%
growth)
4.5 4.3 3.4 1.3 0.9
Inflation (% growth) 6.9 8.5 5.1 6.8 6.0
Population Aged 65+:
January 1st ('000)
18,513.6 18,132.0 18,253.6 18,510.8 18,781.3
Population Density
(persons per km2)
8.7 8.7 8.7 8.8 8.8
GDP Measured at
Purchasing Power Parity
(international $ million)
2,222,098.9 2,376,931.4 2,502,649.8 2,536,970.4 2,604,971.1
ConsumerExpenditure(US$ 759,932.7 904,117.8 969,857.0 1,054,246.0 1,096,887.6
2
http://www.euromonitor.com/russia/country-factfile
6. 6
million)
Annual Gross Income (US$
million)
1,104,853.9 1,321,178.6 1,415,344.3 1,536,728.1 1,597,846.9
Annual Disposable Income
(US$ million)
923,827.5 1,076,877.5 1,151,001.2 1,248,850.7 1,296,794.5
It should be noticed that the concentration of population in different parts of the country is not
similar. The same can be said about the economic activities and growth / regression. Within our
project we have chosen the most urbanized and densely populated regions and cities of Russia.
They are Moskow, Saint-Petersburg, Sochi, Kazan, Novosibirsk, Siberia, Tagil (Verkhniy and
Nijniy) and Kaliningrad. More than 41,5 million people live on the afore mentioned lands. These
regions and cities are also the richest ones. So, for instance, economy of Moscow accounts for
around 22% of Russian GDP3
.
2.2. Size of Market in Terms of Volume
In general, the capacity of the Russian market of tableware dishes (dining, kitchen utensils,
etc.) can be estimated rather arbitrary, since it is a part of the market of goods for the home, and
the market of tableware was never estimated and analyzed separately. The market of drinking
glasses was not evaluated independently neither. However, it can be assumed that tableware
market accounts for about a third of the market volume of all goods for the home. Thus, we can
suggest that, if the market for goods for the home makes $ 1.6-1.8 billion a year, the volume of
tableware market is approximately $ 550-600 million. The share of dishes used for dining is
about $ 360 million4
.
Russian market of glass tableware is presented by imported and domestic products. In 2011 the
volumes of imported and Russian goods on the glass market made 45% and 55% respectively.
The import predominance over export is explained by the narrow variety of Russian glass
tableware, and also by its quality, which does not always meet international standards5
.
2.3 Size of Market in Terms of Value
The market is presented by ceramic and porcelain tableware (27% of the whole volume
of tableware in value terms), glass table decor items (23%), metal tableware including tableware
from stainless steel and tableware with non-stick cover; cost-iron, aluminum, zinc-coated and
enameled tableware; plastic tableware including silicon one (12%). Glass tableware market is
stable. In 2011 the glass tableware market size was $700 million in value terms. The positive
3
http://en.wikipedia.org/wiki/Moskow#Overview_2
4
http://ref.rushkolnik.ru/v35741/?page=2
5
http://houseware-expo.com/eng/market/glass_tableware_market.html
7. 7
dynamics of the increase in glass tableware production has been observed in Russia. The highest
growth is seen in restaurant glass tableware segment. The sales of restaurant glass tableware
have risen 15% in comparison with the previous year as a result of HoReCa market growth6
.
We can conclude that dishes for dining that are made of glass account 23% of $ 700 million, i.e.
approximately $ 161 million. The market for drinking glasses only will be logically a bit smaller.
2.4.Past, Present and Future Growth
According to various estimations, the volume of the Russian tableware market as a whole
will increase by 20 - 40% and is going to be approximately $ 1 billion in monetary terms in the
near future. About half of this amount will be earned in glass dinnerware market. To a lesser
extent this will be reflected in the capital market, as recently regional development has become a
priority for a larger number of people7
.
2.5. Drivers of Demand for this Product
Consumer demand for the dishes is determined by several factors. The main demand drivers
for the glass are:
- Natural replacement of dishes when they cannot be used anymore because of the damage
- The formation of new households (new marriages, new housing that affect purchasing of new
dishes)
- Dishes as a subject for donation
- Drinking glass as present for some occasions
- Buying tableware products, including glass, without a specific reason.
The first factor is dominant when purchasing tableware. According to various assessments, the
weight of this factor can be estimated at 50-60%. Despite the fact that the items of cookware
refer to the durables, sooner or later they need to be replaced. The drinking glasses are among the
most fragile and breakable category of tableware. The weight of second factor can be estimated
at 20-25 %. The crisis in the housing market and the general deterioration of the economic
climate could seriously affect the appearance of new households in the short term but in the
medium - and long-term decline may be compensated by increased demand. During the crisis
some families cannot afford to buy new additional glasses and postpone purchasing for better
times. Buying cookware and especially drinking glasses as "gifts" is based on old traditions in
Russian society. Pulse demand or buying some tableware items without a need can provide 10-
15 % of the demand in good times.
6
http://www.gifts-expo.com/eng/competitors/6_4.html
7
http://horecahouse.ru/novosti_rynka_horeca_1.php
8. 8
This suggests that the demand for glass products cannot fall completely. There will always be a
demand for tableware and, most of all, drinking glasses. The effects of the mentioned factors
vary depending on the periods when the purchasing power is lower or higher8
.
2.6. Description of Consumers
Style of hotels, restaurants, cafes, bistros and other catering places are determined to a large
extent by decorations, serving items and accessories. These details trigger the attention of
consumers voluntarily or involuntarily. Not every visitor prefers obsessive patterns, ornaments
and writings on the glasses. Several decorators agree that classic colorless tableware accessories
fit best the interior and the style of HoReCa’s most sectors.
Our product, Speak glass is perfect for supplementing and decorating the catering places and
homes. We also see our potential consumers as highly interested in innovative products, new
interesting designs, and unique features of Speak product. Our customers are those that intend to
be different from others and appreciate the distinctiveness, i.e. spinning and transformation of the
stable glass holder into the compact candlestick.
2.7. Main Competitors in the Industry
There are around 57 Russian glass manufacturers. A lot of them specialize in production of
float glass that is used in buildings, bottles, tableware and dishware. The drinking glasses are
manufactured by both domestic and foreign producers. The quality of the glass manufactured by
many of the Russian manufacturers is low, which gives breathing space to foreign players to
enter the market and sell quality glass products through imports. Due to this reason a big portion
of the market share in Russia's glass market is held by foreign players.
*Who are the main competitors?
2.7.1. Domestic Competitors
The biggest Russian producers of glass are “Opytnyj Stekol’nyi Zavod”, “Star’Glass” and
“Dyatkovo Crystal”.
8
http://gendocs.ru/v35799/%D0%B0%D1%81%D1%81%D0%BE%D1%80%D1%82%D0%B8%D0%BC%D0%B5%D0%B
D%D1%82,_%D0%BA%D0%B0%D1%87%D0%B5%D1%81%D1%82%D0%B2%D0%BE,_%D1%8D%D0%BA%D1%81%D
0%BF%D0%B5%D1%80%D1%82%D0%B8%D0%B7%D0%B0_%D0%BC%D1%8F%D1%81%D0%BD%D1%8B%D1%85_
%D0%BA%D0%BE%D0%BD%D1%81%D0%B5%D1%80%D0%B2%D0%BE%D0%B2_%D0%B8_%D1%81%D1%82%D0%
B5%D0%BA%D0%BB%D1%8F%D0%BD%D0%BD%D1%8B%D1%85_%D1%82%D0%BE%D0%B2%D0%B0%D1%80%D0
%BE%D0%B2?page=3
9. 9
«Opytnyj Stekol'nyj Zavod» (the exact English translation sounds like Experienced Glass
Factory) is one of the largest Russian producers of pressed items: glasses, shot glasses, ice-cream
bowls, beer mugs, ashtrays, candlesticks. It is located in Gus-Khrustalny, the traditional center of
Russian glassware production. The factory was built in 1960 and in 2011 ARC International
became an owner of controlling interest of OSZ. It aims at manufacturing a wide range of high-
quality products with modern design at competitive prices. The items of the glassworks are
popular all over the world. The products are exported to Italy, Spain, France, Germany and to the
other countries of the near and the far abroad. Since 2013 the factory has started to produce
around 175 tons of glassware per day.9
Joint-Stock Company “Star’Glass” has 219 years of experience in glass manufacturing, offers
wide variety of produced goods and perfect quality. In 1785 the Chernyatinsky glass-melting
factory was founded and production of window glass was launched. In 1875 it started with glass
house goods production. In 1999 Chernyatinsky glass plant received status of joint-stock
company and was incorporated into a group of companies Star'Glass. Today Star’Glass produces
more than nine hundred types of world-class glass items made of forty-two sorts of glass, and
exports them to thirty-nine countries all over the world as well as supplies millions of Russian
consumers with glass products. It specializes in production of different kinds of glasses: sheet
and blown glass, industrial and interior glass blocks, industrial glass products, protective welding
glass and house goods such as glassware, consumer goods and drinking glasses.10
The OJSC "Dyatkovo Crystal" is a modern, dynamically developing enterprise, which provides
the production of a most extensive range of crystal products. The factory was started in 1790.
The glass items that it offers include wine-glasses, goblets, glasses, mugs, jugs, decanters, flower
vases, vases for laying (vases for fruit, sugar bowls, saltcellars, and trays), dishes, services,
souvenirs, ashtrays, candlesticks, sports prizes, corporate prizes and gifts. The idea "To Any
Taste" became the motto of the factory. A lot of inexpensive glassware of a very wide range was
produced there alongside with very complex and expensive sets, sets of items made by hand,
details of architectural decoration for cathedrals and palaces.11
2.7.2. Foreign Competitors
Today the part of Russian market glassware filled with imported glasses is mostly represented by
3 tableware company: ARC International (France), Bormioli Rocco (Italy) and Pasabahce
9
http://osz-glass.ru/eng/about/about/
10
http://www.starglass.ru/en/?m=about
11
http://www.dcrystal.ru/html/eng/history.php
10. 10
(Turkey). They account for maximum sales not only in Russia but also in other markets all over
the world. 12
Arc International is a French manufacturer and distributor of household goods. It is the
leading manufacturer of crystal and glassware in the world. Armed with its know-how in
glassware, it developed globally and markets today a full range of tableware products in more
than 160 countries. Arc International is present in five continents with production sites (France,
USA, China, UAE, Russia)13
. Arc International remains an undisputed leader for the past 10
years in Russian glass market. Offering the consumer affordable wide range of
dishes the company has secured good position. First of all, the success has been
achieved due to its successful marketing and distribution policies. Constant
updating of assortment also contributed to the popularity of the brand. ARC
International has 5 official distributors across RF: 4 in Moscow ("Besant", "DP Trade,"
"Domark" and "Glossary") and one in St. Petersburg ("Aqsa")14
.
Arc International purchased a majority share in “Opytnyj Stekolnyj Zavod” in 2011. In the report
of French manufacturing group from 2011 it is indicated that OZS employed 1184 people. The
goal of Arc International is to win market share. It already has a 32 percent market share of the
glassware market in Russia and Eastern Europe. It estimates the sector's annual growth will be
about 15 percent.15
Bormioli Rocco is an Italian manufacturer of tableware, glass containers and
plastic packaging with a consolidated industrial footprint in Europe. The Bormioli
Rocco Group has 10 European production plants, 3 foreign sale offices, 2
decoration facilities and 12 Outlet Stores. It operates in over 100 countries. It is
the market leader in Italy and a great ambassador of the "Made in Italy" on
international markets16
. Established in 1825 as a small glassworks, the Company over the years
has perfected its ability to develop innovation and technology hand in hand with the knowhow of
its original master glassmakers. It comprises 4 Business Units, employs 2,800 people and exports
worldwide. The sales in Russian market are also very important for Bormiolli Rocco. It
announced results of operations for the fiscal year 2011 and revenue was €554 million.17
Turkish Paşabahçe is the second largest glass manufacturer in Europe and
the third largest in the world. It adds 2-3 new designs for its products daily
12
http://ref.rushkolnik.ru/v35741/?page=2
13
http://uk.arc-intl.com/upload/Sites/Corporate/en/ACTIVITES/Report2011.pdf
14
http://ref.rushkolnik.ru/v35741/?page=2
15
http://www.tabletopjournal.com/1/post/2011/12/arc-international-announces-upgrades-to-its-russian-
glassware-factory.html
16
http://www.housewares.org/HousewaresConnect365/Detail?com_uid=55504
17
http://www.businesswire.com/news/home/20120502006296/en/Bormioli -Rocco-2011-Financial-
Results#.U3Cim761yDY
11. 11
and exports 66% of products abroad18
. Paşabahçe is a glass tableware division of Şişecam
industrial group, which is involved in glass and chemicals production. By pursuing sales and
marketing organization outside Turkey and forming logistics hubs in Europe Paşabahçe also
initiated investments for production abroad in order to strengthen its position on a global scale.
In this context, a glass tableware plant in Posuda, the Russian Federation was bought in 2003.
Posuda Ltd. has attained full capacity of production on a new product range with the well-known
Paşabahçe quality19
.
In the year 2012 the total sales of Paşabahçe accounted 761,3 million Turkish Liras
(approximately €268,6 million). The portion amounting 355,1 million TL (€125.2 million)
represents the sales of goods abroad20
.
2.7.3. The Market Positions of Competitors
Producer Name of
product
Height,
mm
Diameter,
mm
Capacity,
ml
Price per
glass, €
Name of
online-shop
Steklarna
Hrastnik
Speak 105 88 320
Opytnyj
Stekolnyj Zavod
Granenyj 110 73.8 250 0.24 Nikaposuda.ru
Opytnyj
Stekolnyj Zavod
Evropeyskiy 106 78 250 0.25 Rproject.ru
Dyatkovo Crystal Pinvill 95 60 235 4.37 Gus-hrustal.ru
Arc International Islande 165 58 300 1.11
PosudaOk.ru
Arc International Cabourg 122 67/75 360 6.31
Bormioli Rocco Cortina 163 60 300 0.90
Bormioli Rocco Ypsilon 159 77 320 2.03
Paşabahçe Karaman 138 68 295 0.42
Paşabahçe Centra 141 61 290 1.15
From the table we can see that Russian Opytnyj Stekolnyj Zavod offers glass for the lowest price
among other glass manufacturers. The glass “Granenyj” (“Faceted”) is a very simple example of
OSZ products. There are no specialties and the quality of the glass is not that high, so the price is
also very low. The target group is consumers in inexpensive catering segments like snack bars,
school and student mensa, bistros etc.
18
http://www.gatetoturkey.com/turkey_a_z_made_in/01721/
19
http://theglassfactory.se/english/exhibition/east-meets-west-turkish-glass/
20
http://www.pasabahce.com/getattachment/Yatirimci-iliskileri/Yonetim-Kurulu-Uyeleri/Annual-Activity-
Report.pdf.aspx
12. 12
Production of Dyatkovo Crystal products is labor- and capital-intensive. The products are
decorated in sophisticated manner and a high attention is paid to the design and elegance of each
glass. The target group consists of influential, rich and aristocratic individuals.
French Arc International is presented by variety of products that are of different values. As it can
be seen in the table, comparatively lower price is about €1.11 per glass. The highest price can
vary at the level of €6.31. Thus, Arc International targets on middle and high-income segments
of Russian market.
Italian Bormiolli Rocco uses average pricing for its drinking glasses. The lowest price at which
they offer Cortina glass is 90 cents and highest price shown on PosudaOk online-shop is for
Ypsilon glass that is more than €2.
Paşabahçe is able to produce products at affordable price and of high quality. Some goods are
exported from Turkey and the largest portion is produced on Paşabahçe Posuda Ltd in Russia.
The price range of one glass differs from 42 cents to €1.15. There is a big variety of products
offered and the prices change insignificantly.
The examples of glasses are taken to give a notion about the prices of competitive glass
producers. However, the drinking glasses differ in shapes, designs, physical parameters. The
Speak glass is unique since it can spin and other glasses do not have such feature. The second
specialty about Speak glass is that it is sold in a set with a glass-holder that can be used as a
candlestick. Other glasses that were compared do not include any supplements That is why the
price of additional candlestick is not included in the price of the glass. Thus, we should set a
higher price for our Speak glass. Since we regard Speak glass as premium good and we focus on
upper that middle and high-class representatives, the price per glass can be around 5-7 euros.
3. Market Entry Analysis
3.1. Customer Segmentation
Regarding the specificity of the product that we are offering, the market should be
entered onto two different aspects. First, Speak should be available to end-customers and final
buyers going through retailers. Under this option, we can divide the market into segments only
with geographic segmentation. Our best choice of segments to target is just the population in the
biggest Russian cities – the cities that we are introducing out product into (Moscow, Saint-
13. 13
Petersburg, Sochi, Kazan, Novosibirsk, Siberia, Tagil (Verkhniy and Nijniy) and Kaliningrad),
aged from 15 to 60 (and above). We assume our target to be people wanting something new,
something different. People that wish to be involved in recent trends, that want to experience the
extraordinary and that would like to possess something unique. And of course, those that can
afford to pay some premium for such purchase. Further segmenting and specifying groups on the
market is not much needed as the Speak product is a glass that can be used for any purpose by
anyone. On the other hand, out other “customers” and more important side on the market that we
are attacking is the B2B market, taking into account the intermediaries and agents working in
partnerships on the Russian market. An example for a company we are looking for is a company
that is familiar with the market, its trends and perspectives, a company that is specializes within
the HORECA segment. Also, considering the huge distances and differences between the biggest
Russian cities that we are going into, the partners must be local in the specific cities and have
close and strong relationships with hotels, restaurants, cafes and retail selling points. We were
thinking about trading agencies, restaurant services companies and caterers (specific examples of
such companies are stated below in the paper).
As explained before in the “Market Potential” part, it is obvious that the territory of
Russia has different concentration of population and also different development levels. Out of
the approx. 140 million consumers, 73% live in the urban area and those represent 85% of the
purchasing power. However, there are huge gaps between the rich and the poor, and throughout
the years there has been developing middle class and upper-middle class. Those are the intervals
that we were considering tackling. Those should be out primary focus and target market. We
think that this is the segment that can bring long-term profit potential to the company In addition,
Russian market is still an emerging market which gives Speak more opportunities to expand with
its market share.
3.2. Positioning
3.2.1. Brand Positioning
The Russian glass industry is highly saturated, technologically developed and highly
competitive. Anyway, the Speak brand has differentiation ability by itself. There are many
reasons how the Speak name distinct from the competitors: (i) It is represented with unique,
different and innovative design not currently present on the market; (ii) We were also thinking to
connect the brand with a project for a higher purpose, to continue the practice in Slovenia
abroad. Researching, we found huge number of charity organizations, mostly located in Moscow
but working throughout the whole territory of Russia. E.g.: “Grant Life Foundation”21
– group
21
http://www.giftoflife.eu/
14. 14
providing help to children with cancer, “Action for Russia’s Children”22
- charity that aids
underprivileged, disabled and homeless children, “Charities Aid Foundation, Russia”23
– group
connecting private donors to local charities. Speak could find a niche in these organizations and
develop different aid need, that would become recognizable for the brand. (iii) As Slovenian
brand, Speak can enjoy positive perception on the market as Slovenia is seen as Slavic country
from the EU and is strategically important.24
3.2.2. Product Positioning
The market in which the product is operating is obviously need-based, with the major players
being the HoReCa group and end-consumers for home usage. With the specific focuses on the
advertising and promotion discussed below, the awareness of the customers about the product is
expected to be on a very high level. Of course as mentioned, the product is uniquely positioned
with the design and it is not comparable with the competition on the market, always fulfilling the
gap of providing something new. This offer of course must be rewarded with a premium and
have a bit higher price that ordinary drinking glasses. Thus, we suggest targeting the middle and
upper-middle classes on the market.
3.3. Market Entry Mode Selection
Considering the nature of the product and its production process, obvious mode for market
entry is export. As we are familiar with the large distribution network of “Steklarna Hrastnik” we
consider direct exporting would be the best choice. When the goods are arrived in Russia,
partnership with sales representative is needed. That should be a company that is familiar with
the glass market, regular practices and operations of HoReCa segment as well as events and
happenings in the regions where the brand is present. Considering the size of the Russian market
and the geographical distances in regions there must be different representatives in the different
cities. We came across some companies that could provide representation. For e.g.: NEO
DÉCOR in Yekaterinburg (trade company – equipment for caterers)25
, V.A.M. MOSCOW (also
for catering)26
, M-Media (sales representative company working in the territory of whole
Russia)27
and “Trade House Baron” (Торговый Дом Барон)28
specializing in the HoReCa
segment.
22
http://www.actionarc.com/
23
https://www.cafonline.org/about-us/international-network/caf-russia.aspx
24
http://www.sloveniatimes.com/making-the-most-of-opportunities
25
http://qlaster.ru/enterprises/detail/190816
26
http://qlaster.ru/enterprises/detail/438871
27
http://ra-imedia.ru/
28
http://baronhleb.ru/
15. 15
However, as we would like the opportunity to provide customized products on the Russian
market, an option is to have engraving machine available closely to Moscow, for fast
customization. This would be the only investment in the Russian market and with it, we can
enable selling personalized glasses, which will increase the market value of the product
(explained in details below).
4. Marketing Plan
4.1. Adaptation/Standardization of the Product
Product adaptation on the Russian market or any other market can be done only through
adequate promotion. The product that we are entering the market with is inflexible for change
and it should keep its originality and design. The adaptation on the Russian market is going to be
done through promoting the product in the most suitable, localized way to get Russians’
attention. Also, the engraving of the glasses will be enabled also with Cyrillic alphabet in order
to make the order more optional and with additional choices for the Russians. Since we cannot
foster the specialty of the product with changing designs and the product it’s not something that
needs changing in order to enter another market, a great focus should be on the packaging and
promotion. Russians are very well known for their patriotism, traditional values and respect for
homemade products. Since the product is foreign and we want them to accept it as their own in
order to make it profitable we need to promote it mainly with their Russian vodkas. The
promotions will mainly demand temporary alliances with the producers of vodka, which will not
make further obligations on both companies and will be promotional and profitable for both
sides. We suggest “Русский стандарт” (Russian standard) Vodka and “Smirnoff” Vodka. We do
not suggest changing of the packaging, only if the promotion is demanding otherwise. The
packaging should be unique in order to create a recognizable brand and easy spotting for the eye
of the customer.
For standardization, in fact, the product can be easily sold without any modifications because it
does not require adaptation of design. In order to achieve economies of scale it has to be looked
further on other segments of joining the market. An advantage is that we do not have to follow
strict rules to satisfy consumer preferences, because with joining the market with this kind of
product we are trying to initiate consumer preferences and create global awareness. We are
trying to create customer’s desire and then satisfy it.
16. 16
4.1.1. Description of the Key Product Features
The key characteristics of the product are that it is unique, innovative, luxurious and
something that the customer has rarely seen on the market. However, it will not impress
everyone. The key accent is put on those which are combining pleasure with drinking and who
will be impressed that the Speak glass has a design which is made to give them additional
enjoyment. On the other hand, there are also features as a service. The service will be engraving
people’s orders on the glass. So that will also be a key feature for the product provided through a
service. It is an adequate way of attracting customers with involving them also to bring value to
the product and feel like part of its creation.
4.1.2. Packaging
In order to create brand awareness the package has to create a unique and eye-catching
appeal to the customers. The already existing package is not catchy, it very look alike like every
other bottle or glass package on the market. A special effort of creating something more strange
but catchy to the human eye will be very beneficial. An obvious example for this is that we are
trying to promote a glass, but not any glass, a glass that has the ability to spin and not spill its
containing liquor, a glass that could have your name or favorite quote engraved on her. That is
catchy because it is not usually seen. Consumer are attracted by the unusual, that is why our
product its unusual in the first place. The most creative employees which came up with the
Speak design in the first place, should devote some quality time for designing the same
uniqueness also for the package of the glass. Also functionality aspects have to be taken into
account. The packaging should be strong, protective for the glass and not so costly because it is
the glass what is going to be used by the consumers, not the packaging. But it has to ensure
safety for the product. We had several ideas about the packaging, thinking of making several
designs in the form of traditional Russian symbols (matryoshka, balalaika, bear etc), but when
we though this point through, creating various designs will just differentiate the product by the
packaging, and the brand will not be recognizable, which is a disadvantage for a market which is
not familiar with the product. One, functional, luxurious and catchy design will be highly
necessary for the glass to self-promote successfully.
4.2. Market Communications
Even long before entering the market the social media should be already crowded with
information and promotion material about the product. The main focus is the social media and
imposing trend with hash tags. The social networks are the best promoter nowadays so we will
highly engage in the occupation of Facebook, Twitter, Instagram and forcing hash tags (example:
#hrastniktrend, #speakglass) connected with the company and the products that will become a
17. 17
trend and help the company to build a global brand name. The smart phones have a lot of
affection on the community so we will also make a brochure application which will enable the
customers to check the new coming from the products, inform themselves about the prices and
even order the wanted products via the application. Create a fan page like Do you speak? ,
adopted on Russian language and Cyrillic alphabet in order to reach more customers (the ones
that do not understand English well). The first step with social media will enable us to reach to a
certain number of customers. Also the Media Speak section at the existing web pages is not
representing anything, neither is promoting the product. It is suppose to state event and galleries
in which the Speak glass was present, but there is just confusing text and some word documents,
and the photo gallery is not even accessible. Advertising and promotion need to be parallel right
away when the social media influence begins. Billboards advertisements in the biggest cities may
be too expensive so for the beginning it is more economical to test the market’s advertisements
absorption through other channels. The most appropriate promotion in the beginning will be
employing promoters to make promoting tours in HO-RE-CA. Russia alone has 150,000 public
catering facilities and 7,000 hotel properties. They will have to devote their presentation
especially to the highest ranked employees and owners of the hotel, restaurant or café, in order to
impress them, and convince them that the product will bring additional value to their business as
satisfying customers in addition of them buying the product. In every way we are promoting
directly to our potential customers. If there are problems with not enough imposing influence on
the Russian market an agency like Havas Media can easily help. They are a promoting agency
and are functioning on every field of promotion and advertising enabling creative development
and successful emerging on the new market. They have also two offices in Moscow.29
We were thinking also about some events that could help the Speak brand promoting.
PIR Expo30
today is one of the top ten largest exhibitions for hospitality industry professionals
and an important international event. The thematic division into the most important areas of the
hospitality industry allows paying maximum attention to each target audience individually,
present new-brand innovation products. trends, and successful business solutions in a full and
accurate manner, create target and highly qualified programs for training, business, and
presentational events for all the categories of the HO-RE-CA industry professionals. All of this
makes it possible to carry out the most efficient and fruitful work, establish contacts solely with
the representatives of the target audience.
Also, we have found an event called “Mir Stekla” - in translation: “World of glass” – which is
international exhibition for glass and welcomes a lot of foreign companies. Despite the PR such
events can bring insights of further possible improvement of machinery, equipment, production
tools and design for Hrastnik.
29
http://www.havasmedia.com/
30
http://pirequipment.pir.ru/en
18. 18
IDEA: We have decided to give an idea to the Steklarna Hrastnik in relation to promotional
strategy .Manufacture of new innovative bottles so called “Special edition for Russia” which
also will lead to creation of the “new brand-vodka” for a largest russian alcohol producer. Since
Steklarna Hrastnik is going to introduce “Special edition for Russia” that is unique and
anticipates high sales because of the uniqueness, the main focus should be made on the largest
local alcoholic drinks producer wich is “Synergy Group” .Speak glasses will be complements to
the unique bottles of Steklarna Hrastnik and should be sold inseparable in a set with a bottle of
vodka to a particular customer for example restaurants and bars.
4.2.1. Communication Objectives
Our main marketing communication objectives will be based on creating brand awareness
and presenting the glass as a complementary good with customers most favorable liquors.
Ensuring that our presence on the market is noticeable and the customers have spotted the
product will be the most important objective to achieve. Later on, hopefully, if we succeed to
create a brand and distribute successfully the product in HO-RE-CA, manage to take place on
promotions, and create a trend on the market, the main focus should be increasing sales as much
as possible and start promoting also other products under the same brand name.
4.2.2. Communication Message
The best message can be send through direct marketing communication with the customers,
that is why previously we suggested direct promotion to the owners of HO-RE-CA. Furthermore,
indirectly, the social media will create brand awareness in B2C world, because that will not be
able through the HO-RE-CA promotion, which are B2B.
4.2.3. Communication Budget
Inside numbers cannot be obtain in this case because we are completely external to the
company and we do not know how much money is the company willing to spend for marketing
purposes. In any case, in the beginning since the advertising of the product, also in Slovenia, is
not very aggressive, we insist on concentrating mainly on marketing and make the brand
recognizable. Maybe the PRs, promotions, billboards or advertisements that will need to be
financed by the company will be expensive in order to impose an aggressive marketing strategy,
but that is the key components of selling the product in the first plays, so hopefully, the
investment will pay off later.
19. 19
4.3. Distribution and Sales Management
4.3.1. Market Channels and Intermediaries
We will use indirect marketing channels through agents which will be our local partner
(wholesaler) to help us selling our product to our target markets. So the chain will go like this:
manufacturer-intermediary-customer.
Our chosen partner is “Kaliningrad Restaurant service” specializing in the HO-RE-CA segment
which is selling equipment for hotels, bars, restaurants which are our target customers. Our main
focus is on “GLASS & BAR SUPPLY” segment. Company established regular direct supplies
from all over the world and they are pleased to offer essential are popular items at competitive
prices. Through the intermediary we can establish a good B2B relationship with our prestige
restaurants, hotels, bars.31
4.4. Pricing Policy
4.4.1. Taxes
VAT in Russia is charged on the realization of goods, works and services on the territory of
Russia and on the import of goods into Russia. VAT is 20 % -standard rate of goods, works and
services.
Taxpayers consist of:
• Organizations, including foreign legal entities carrying on activity in Russia;
• Individual entrepreneurs;
• Individuals, who, in accordance with the Customs Code of the Russian Federation, are
considered taxpayers in respect of goods imported or export operations.
4.4.2. Tariffs
Import tariff is an obligation when importing goods into Russia whether by a private individual
or a commercial entity. However, duty and tax rules vary by type of importer. The valuation
method is CIF (Cost, Insurance and Freight), which means that the import duty and taxes payable
are calculated on the sum of the value of the imported goods, the cost of freight, and the cost of
insurance. Duty can be ad valorem or specific, i.e. based on units of measure such as weight or
piece count. In addition to duty, imports are also subject to VAT.32
31
http://kaliningradbar.ru/en/
32
http://www.rusimpex.ru/Content_e/Custom/Poshlin/readposition.php3?section=13&group=70&position=19
20. 20
According to the rules of the Russian Customs Tariffs, import of glass and glass products is
import taxed. It is calculated as 15% of the customs value or in euros per piece of drinking glass
according to Section XIII: “ARTICLES OF STONE, PLASTER, CEMENT, ASBESTOS,
MICA, ORSIMILAR MATERIALS; CERAMIC PRODUCTS; GLASS ANDGLASSWARE”,
Chapter 70: “Glass and Glassware”.33
4.4.3. Pricing
To determine the price of the product we considered value-based pricing. In our opinion, we
cannot compare Speak and benchmark to other products’ prices on the market due to the
distinctiveness and the value added. Not at all considering the production cost, we thought about
charging 18.00EUR for 1 glass and 28.00EUR for set of two glasses, while emphasizing the
charity donations. This premium is of course calculated with the personalization that would be
offered: engraving, coloring and of course such customized product must have a premium.
Compared to the price in Slovenia, and considering the standards of living in the major cities in
Russia, we think that this price is easily affordable. Also, we were considering reducing the
number of glasses sold for providing help to a child in need. Instead of 7162 sold glasses, that
number should not be higher than 5000.
5. Managerial Recommendations
Before even starting this project, we have had a real positive perception about the success
that the “Speak” brand could achieve on the Russian market. The ideas that we presented can
really increase the value shared of the product to the customers and provide growth on the
market for Steklarna Hrastnik.
Further on, the company can engage in exports for all the products, and have wholly owned
sales subsidiaries in the largest cities that we suggested. Also, partnerships with local companies
are of extreme importance on the market, but also it is extremely available considering the
numerous beverage producers in Russia.
To sum up: We are sure that the “Speak” glass is excellent for vodka.
33
http://www.russian-customs-tariff.com/SectionXIII/Chapter70.html
