To Russia with Love: The Complexity of Penetrating New Markets

To Russia with Love: The Complexity of Penetrating New Markets

Svetlana Holt (Woodbury University, USA), Joan Marques (Woodbury University, USA) and Angelo A. Camillo (Woodbury University, USA)
DOI: 10.4018/978-1-4666-6220-9.ch008
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Abstract

Clarwen is a small privately owned company based in southern California, USA. It designs, manufactures, and markets custom-made luxury accessories for men and women. The company is considering pursuing international expansion—primarily into Russia but also into the European and/or Chinese markets—in order to directly increase its revenues by adding potential new customers for its current products. Preliminary market analyses indicate that non-domestic customers are willing and able to buy Clarwen's products. Cultural factors, as well as the need for innovation, are key to Clarwen's expansion strategy. Additionally, an internal environmental scan reveals that the firm's current capabilities are limited, both in terms of production and distribution. Taking into consideration intellectual property and financial risks inherent in going international, especially for a small company, devising an appropriate entry strategy and executing it flawlessly becomes a matter of vital importance. This case examines the socio-economic factors involved in determining what entry mode Clarwen should choose: agents/distributors, franchising, direct marketing, or joint ventures in its attempts to penetrate these markets. Distribution and sales channels, selling factors and techniques, pricing, promotion and advertising, and customer support issues are considered as well.
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Part 2: Retail In Russia: Challenges And Opportunities

Russia’s enormous size and level of economic development present both challenges and opportunities to retail market, which is currently divided among many players, and large retail chains’ share is relatively small. Nevertheless, the Russian retail market is heavily saturated and barriers to entry are high, due to lack of quality warehousing, decayed infrastructure, and uncertain regulatory environment. Since 2011, the economic situation in Russia has been improving compared to the economic downturn of 2009. Russia’s GDP grew by four percent in 2011 and 2012. The inflation rate in Russia was 4.3 percent at the end of 2012. Since 1990, the Russian inflation rate averaged 16 percent, with a record low of 3.6 percent in April, 2012. The unemployment rate was 5.4 percent at the end of 2012, with an average of 8.1 percent over the past 20 years and a record low of 5.4 percent in May, 2012 (Petcu, 2012). Nevertheless, Russia still faces a number of issues which are slowing down its economic development, such as low capital investment, aging population, and relatively inefficient workforce.

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