Creating Brand in Russia - Case Study Example

Creating Brand in Russia Table of Contents Abstract 2 Introduction 2 Brand Name 2 Fashion Industry Market in Moscow (Russia) 3 Porter’s Generic Model 4 PLEESTIC Analysis 5 Competitive Advantage through Industry Analysis 7 Porters Five Forces Analysis 7 Brand Basics Strategy 11 Brand Strategy 11 Brand Equity Strategy 12 Significant & Sustainable Sources for Brand Competitive Advantage 12 Sales Strategy 17 Promotional Strategy 18 Need-based Strategy Implementation 18 Kotler’s Model for Consumer Analysis 19 Conclusion 20 References 21 Bibliography 26 Abstract The purpose for the study is to develop a brand in Moscow market with a strategy of high quality and reasonable price. There are various potential advantages and threats to develop a brand in this market that are discussed in the study. Introduction The potential market force of Russia has influenced the fashion industry of apparel and designers wear. The Moscow market has been attractive to all manufacturers of luxury merchandises. The market already consisted of consumers of such merchandises and there are other consumers still searching for enhanced quality at a reasonable price. The demands for such merchandises are increasing every year (ITMM, 2010). Brand Name The name of the brand will be IT brand, it means the quality possessed by individual that have the capability to attract others. “With “IT” you win all men if you are a woman—and all women if you are a man. “IT” can be a quality of the mind as well as a physical attraction” (Basinger, 1999). IT brand will offer trendy and moderate fashionable fine quality apparel and accessories at a reasonable pricing strategy that starts from 10$ for accessories and maximum 350$ for an evening wear. IT brand represents an image of a girl being trendy who attends various social events. It is a good example for the brand image and used for marketing the merchandises (Comenas, 2009). The brand name is in English language, therefore when it expands it can be introduced in the international market and will be helpful in adding intangible value to the brand (Anholt, 2004). Fashion Industry Market in Moscow (Russia) The Russian market is huge and has lot of potential in the fashion industry. The retail sales in Russian market accounted for $441.76 trillion dollars in the year 2008. There was a positive growth in the recent year and the future of the fashion business is expected to grow more. The market is yet to develop and there lies the opportunity for exploring the market to tap the advantage of the market (Vinnik, 2010). The clothing, accessories, and footwear are the second largest retail sector subsequent to food retailing in Russia. This shows that being the second largest sector the competition will be higher but the opportunity will also be more in this sector. Introduction of fashionable clothes and accessories with differential offering will capture the market as there is lot of potential in this specific sector. In 2008 it accounted to 40 billion euro (Vinnik, 2010). The segment that the business will operate in is women’s wear and accessories. The major focus will be upon providing high fashionable wear at a rational price and nice quality. It is important to mention that main buyers in Russia are women. That is why development in this segment is profitable (Vinnik, 2010). The Russian market has not been competitive yet thus there is a promising market for the new business in the fashionable wear and accessories category (Trade Council, n.d.). How Competitive Advantage Is Created For the Brand Porter’s Generic Model PORTER’S GENERIC STRATEGIES Broad Narrow Cost Leadership Cost Focus Differentiation Differentiation Focus (Jo Osman, 2001). The branding strategy should be targeting the broader segment with the lower cost pricing strategy. This strategy option is best suited for entry level in the Moscow market. The market is huge for the fashionable apparel and thus the strategy of broader target segment with the reasonable pricing strategy will provide a competitive advantage to the brand in gaining success (Jo Osman, 2001). PLEESTIC Analysis Political The political influence primarily affects the business operation through the different polices that it makes in the business environment. The policies related to the apparel taxation create huge impact upon the industry as it tends to raise the price and effects the market competition (Oxford College of Marketing, 2009). Legal The legal system influences the likelihood of consumers buying or using services. The legal barriers might affect the entry to the apparel market in Moscow. The licensing policy and legal documentation might delay the operations in the market increasing the cost to the business (Oxford College of Marketing, 2009). Economical The market of Moscow has been attractive for the fashionable apparel and there are enormous opportunities for growth. The demands in the market for fashionable apparel have made the market more competitive and have increased the opportunity level too (Oxford College of Marketing, 2009). Environmental The business environment for the fashionable apparel has shown a positive result in the Moscow market. Moreover, there are many brands and luxury brands that operate in the Moscow market. The success of brands proves the potential advantage of the business environment of the market (Oxford College of Marketing, 2009). Socio-Cultural The society and culture of Russia is more into fashion. Especially the Moscow region and the influence of the fashion industry have made a positive affect in the consumption behaviour of the consumers. This has increased the demand for enhanced quality of fashionable apparels. People demand for quality apparels at an affordable price (Oxford College of Marketing, 2009). Technology The application of technology in this industry helps to craft variety of fashionable apparels at a greater speed as well as helps in making availability of the product in the market as soon as possible. The technical advancement and application helps in reducing the price of the product that makes the level of profit to increase (Oxford College of Marketing, 2009). International In the Moscow market there are many international brands. The market is influenced by the international brands like Zara. The problem is the fight with the international brands in terms of quality and price. Generally the prices are higher and there is opportunity for the brand to develop its market share (Oxford College of Marketing, 2009). Competition The Moscow market is highly competitive with national and international brands operating in highly populated markets like malls. The demand for fashionable apparel and more for international brands have made the market more competitive (Oxford College of Marketing, 2009). Competitive Advantage through Industry Analysis Porters Five Forces Analysis (The College of St. Scholastica, n.d.). Potential Entrants: The Russian market is growing in this segment and Moscow has huge potential. There are every possibilities of new entrance of other firms in the competitive market. As there is opportunity and potential in the market in coming years more brands might flow in. The strategy of the company should be to develop a market for the brand. The development of market for the brand will provide competitive advantage over the other brands that will enter the Moscow market (The College of St. Scholastica, n.d.). Suppliers: The products are mostly imported which are premium in nature and rest are produced by the different brands themselves. Like Zara produces its own merchandises and makes available to all its retail outlets (The College of St. Scholastica, n.d.). The strategy of the company should be towards creating a value chain in a systematic way. This strategy will help the brand in gaining competitive advantage over the cost of the product and the potential sources of differences. Value chain will help the brand in systematic alignment of all the activities providing added benefit to the brand (The College of St. Scholastica, n.d.). Buyers: As there are direct consumers in this industry, they have huge bargaining power. With the quality of merchandises, rational pricing and good quality will convince the buyers for procuring at the price decided (The College of St. Scholastica, n.d.). The brand strategy should focus on providing quality merchandise with the reasonable price strategy that is different from their competitors in the Moscow market and only then it will create a competitive advantage for the brand (Prude University, n.d.). Substitute: There is no close substitute for fashionable apparels that are of fine quality, fashionable design and reasonable price in the market. There are cheap, moderate and premium pricing apparels in Russian market. Mostly premium merchandises are imported or procured from outside the country (Prude University, n.d.). The brand should also look to focus upon the innovative product development strategy that will provide the market with unique products. This strategy will provide a competitive advantage to the brand as through this they can create an assortment of products that will not be easy to substitute for the buyers. This will help to create brand loyalty among the consumers (Prude University, n.d.). Industry Competitors: Main brands in Russia are Mexx, Zara, D&G, Emporio Armani, 4You and Oggi. Zara has 31 own mono brand stores in Russia. It falls under the medium price segment. Armani has 10 own boutiques and mono brand stores and 220 multi brand stores in Russia and it falls under the premium price segment. Dolce & Gabbana has 3 own boutiques and mono brand stores and 65 multi brand stores in Russia and it falls under the premium price segment. Oggi has 250 own mono brand stores in Russia. It falls under the medium price segment. Mango has total 60 own mono brand store and franchise that falls under the medium price segment. Calvin Klein has 33 own mono brand stores and 16 franchises in Russia and falls under the premium price segment. Naf-Naf has 72 own mono brand and franchise stores in Russia and falls under the medium price segment. Mexx has 133 own mono brands and franchise stores in Russia and falls under the medium price segment. United Colours of Benetton, Sisley has 75 own mono brand store in Russia and falls under the medium price segment (Vinnik, 2010). The strategy of the brand for creating competitive advantage should be based upon the need-based positioning strategy. The application of this strategy will be based upon providing valuable product offerings to the consumers according to their needs, and through this strategy customised apparels will also be made available for capturing the attention of different segment of consumers (Vinnik, 2010). (Vinnik, 2010). The figure depicts that maximum sales are from the Bijouterie boutiques in trade centres. This location and format has shown more sells in Russia. That is why we will be producing trendy accessories along with women’s wear (Vinnik, 2010). Brand Basics Strategy The brand that is to be built is for fashionable apparels at a rational pricing strategy. This is to be well communicated to the consumers as they have expectations and perceptions in different manner. The expectation towards the brand will be of providing high quality fashionable apparels at a reasonable price. For this, the broader market segment with a lower pricing strategy will be the best suited one. Brand Strategy The brand is to be launched in Moscow in the high selling point market. With promotional activities’ it needs to gain advantage by conveying and properly communicating with the consumers about the brand and its offerings (The Pennsylvania State University, n.d.). The promotional strategy is important as it provides the awareness and creates attraction towards the brand that is an advantage to generate large number of loyal consumers. This will provide a competitive advantage to the brand (The Pennsylvania State University, n.d.). Brand Equity Strategy The brand being well communicated, the perceived quality with pricing strategy will help in developing the brand equity in the market. It is the consumers that makes the success of a brand by accepting it and procure merchandise of the brand. This way it helps in building brand equity (Berry, 2010). The brand strategy should aim to develop the brand equity that will help the brand to grow in the future market. For the long term success of the brand it is very important for the brand to follow the strategy of brand equity. Creation of brand equity will enable the product offered under the brand to gain additional mileage and benefits and would enable the brand to accrue the payback from its identity as a brand (Berry, 2010). Significant & Sustainable Sources for Brand Competitive Advantage For a sustainable and significant brand’s competitive advantage, the brand should build distinctive capabilities that are unique in nature and that can not be easily replicated by other competitors. The distinctive capabilities of the brand can be developed through the product offerings. The product that is of better quality and is being offered at a lower price other than the competitors with different unique apparels will make the brand sustain and significantly grow in the Moscow market (Stolyarova, 2010). Through the market analysis a significant and sustainable brand competitive advantage can be achieved. In Russia, fashion is still the issue that provides to split the society. A fashion statement in Russian market is de facto a financial statement and generally the most common issue of discussion is the procurement of certain branded clothes or not to buy them. Lower social status is generally seen as preventing barriers to enter into the world of fashion. This is a bigger challenge in the Russian market and this belief has to be broken. But with introduction to new quality apparels with rational pricing might attract all types of consumers and will overcome this barrier (Stolyarova, 2010). The market analysis and development of strategies can be better understood through the application of the TOWS model. TOWS Analysis is an efficient method of uniting a) internal strengths along with external opportunities and also threats, and b) internal weaknesses along with external opportunities as well as threats in order to develop a strategy for the business or brand to achieve success in the market (Weihrich, n.d.). (Weihrich, n.d.). The strength of the brand is its unique merchandise that is quality products with reasonable price. The involvements of young designers help in providing the youth collections that attracts the market. There is an opportunity in this segment in Russia, especially in Moscow. To tap the opportunity young personal and designers are being introduced that will generate business in showing their creativity in designing better quality fashionable products (Weihrich, n.d.). The strategy of innovativeness can be achieved through the personnel strategy. The involvement of young fashion designers and differential product creation will provide a competitive advantage in the market. The differential apparels created by the designers for the brand will enable in targeting a broader market segment as a wide assortment can be made available as per the taste and preferences of the consumers (Weihrich, n.d.). There are many external threats from the business environment of Moscow. There are numerous competitors and they come under the premium and medium pricing segment. But the internal strength of the company can overcome the external threat through the young person design of fashionable merchandises with a reasonable pricing strategy with quality (Weihrich, n.d.). The threats can be overcome only when the internal strength are made strong enough to fight the external threats. It can be minimised by using the company’s internal forces against the external threats to gain maximum advantages from the market (Weihrich, n.d.). The strategy of offering products of better quality but of reasonable price will increase the competitiveness of the Moscow market and it will force the competitors to fight for the market share. The strategy of the brand in generating brand equity will provide a competitive advantage in the market and help in competing and gaining more consumers towards the brand (Weihrich, n.d.). The internal weakness can be minimised through the opportunities that are present in the market. There is a market for this segment and it has enormous potentials. To decrease the cost of the company, sales volume needs to be increased with the same quality of fashionable merchandizes. There is huge population and demand for fashionable merchandises that will generate business and help the brand and company develop in this market (Weihrich, n.d.). The designing of fashionable merchandizes requires skilled and creative persons and to find them is not that easy. This threat can be minimised by hiring not only from Moscow but also from other parts of the country. This will help in developing various unique merchandizes as per the taste and preferences of Russian people (Weihrich, n.d.). The strategy of the need-based positioning will help in reduction of threats toward the brand. This strategy is based upon the consumers. The consumers’ needs and wants identification and product development according to that will benefit the brand. A unique identity creation of the brand will enable to create the brand image in Moscow market. The brand image and value development through the need-based positing will help the brand to grow and expand in the future market and aid in increasing the brand equity (Global Foresight Inc, 2006). Weaknesses can be overcome through the structuring of well built team of young personnel and unique quality merchandizes that will serve the entire Moscow market at a reasonable pricing strategy (Global Foresight Inc, 2006). The threats from the competitors are always there. These can be minimised in terms of quality offering and pricing strategy. Differential offerings strategy in the merchandizes will help in reducing the threats in this particular market (Global Foresight Inc, 2006). There is an opportunity of growth and the brand strategy must be developed in the way that can capture the market and help in raising the sales. Internal industry competition is huge in Moscow market as there are many renowned brands that are from Russia as well as from other parts of the globe. Competing with these brands requires development of strategic plan that will help in the sustaining and growing strategy of the brand (Weihrich, n.d.). Sales Strategy The strategy is to attract the consumers those who are looking for high quality fashionable apparel at a reasonable price and can wear them at any occasions. Normally people look for quality and price attached to it. But the offering that this brand will be providing is not only of quality at a reasonable price but also apparels for any occasions. The price will be in the medium segment of pricing in Moscow as there are premium and medium price range segment that other brands are offering. With better quality at medium price range, it will attract more consumers and increase the revenue (Plan Ware, 2009). Cash, cheques and debit and credit card instruments are allowed to use as a medium of payment. In case of cheques, the merchandizes will not be delivered or given as along as the cheque is not cleared. Vendors’ credit system will be there up to certain percentage and a credit discount will be allowed if payment is made within the stipulated time frame. This strategy will help in controlling the financial aspects that are important for any brand to survive and grow. To maintain the liquidity and stability it is important to focus upon this strategy that will help the brand to develop better financial position in the Moscow market (Plan Ware, 2009). Promotional Strategy To promote the brand at the initial stage, it is necessary for huge advertisement and promotional activities. For this purpose to minimise the cost alliances, fashion shows will promote the brand and it will be easily noticed by the market. Media partners will be a help in promoting the brand and this will result in an increase in business in the long run. This strategy will generate added advantage for the brand to get a better market share and also help in creating brand awareness (Infopeople Project, 2007). Need-based Strategy Implementation The fashion industry frequently changes style as there are changes in the consumers’ demand. Supercentres and mega stores have been present in the market for a long time. Consumers’ expectation, demand and preferences quickly changes in the fashionable merchandise as they are more prone towards the latest fashion. In this industry, it is difficult to fill the consumer gap as the fashion trends change quickly and to be quick, the merchandizes need to be manufactured and made available in the market within a short period of time. Or else the merchandize might become outdated and capital blockage might occur with huge inventory (Global Foresight Inc, 2006). This strategic implementation of technology in business will help the business activities run smoothly and enhance the development of the business (Kim, 2010). The need-based strategic approach with the help of technology will be able to meet the consumers’ demands at the right time with the offerings of fashionable cloth that are designed according to the preference of the consumers (Global Foresight Inc, 2006). Kotler’s Model for Consumer Analysis (Marks & Fisher, 2001). Philip Kotler distinguished three components “Need: a lack of a basic requirement; Want: a specific requirement for products or services to match a need; Demand: a set of wants plus the desire and ability to pay for the exchange” (Kotler, 2010). Customers will prefer merchandise that is based on their perceived value. Satisfaction is the level to which the real use of merchandise is equivalent to the perceived value when the procurement is on a process. “A customer is satisfied only if the actual value is the same or exceeds the perceived value” (Kotler, 2010). Moscow market has shown demand for enhanced quality of fashionable apparel. There is a huge market for the brand as consumers are more. Along with this there are more competitors, but with a proper marketing mix strategy like enhanced quality at reasonable price, will make the brand more popular in the market. As a result, the business will expand (Kotler, 2010). Conclusion The opportunity for growth in the Moscow market is evident as the expenditure level of consumers’ has increased by 14.8% on fashionable apparels from the year 2002 to the year 2007 (Grail Research, 2009). This shows the growth of the market as there is an increasing demand for fashionable apparels that too at a reasonable price. The opportunity is huge and establishment of a brand with enhanced quality at a reasonable price will succeed in the Moscow market and there is an opportunity for expansion (Grail Research, 2009). References Electronic Sources Berry, T., 2010. Brand Aid: The Basic of Branding. MPlans. [Online] Available at: http://articles.mplans.com/brand-aid-the-basics-of-branding/ [Accessed December 03, 2010]. Basinger, J. 2000. Silent Stars. Wesleyan University Press published by University Press of New England. Carlson School of Management, 2006. Marketing Matters. University of Minnesota. [Online] Available at: http://www.csom.umn.edu/Assets/73690.pdf [Accessed December 03, 2010]. Comenas, G., 2009. Edie Sedgwick Biography. Warholstars. [Online] Available at: http://www.warholstars.org/stars/edie.html [Accessed December 03, 2010]. Global Foresight Inc, 2006. Report on Industry Trends. Massachusetts Department of E & S Education. 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