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Wimm-Bill-Dann in Russian Market - Research Paper Example

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PESTL: WBD arrived on the scene just after the implosion of Soviet Union in 1991, which inflicted tremendous stress on the Russian economy. The migration from a centrally planned economy to a free-market economy called for tough measures which included cutting subsidies to money-losing farms and industries, decontrolling prices and restructuring state owned enterprises followed by enabling structures that govern private property, regulating financial markets and enforcing taxation.
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Wimm-Bill-Dann in Russian Market
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Download file to see previous pages By the end of 1999 the wages of common people tumbled by 30% and their pensions by 45% in value.
These factors had a cascading effect on the economy resulting in high fuel and grain prices, which coupled with inefficient agricultural production that almost halved livestock rendered supply of raw milk the weakest link in the supply chain for the dairy industry. While it was estimated that 35%-80% of a family budget was spent on food, the economic situation in the country demanded that producers keep their prices low. The other factors that had a bearing on competitive rivalry were access to financial resources, wider product range and efficient distribution. This in turn meant tight management controls on production and distribution costs especially to reach produce to regions where the purchasing power was lower than in cities like Moscow.
Sources of competition (Five forces): Before WBD arrived on the scene the Russian dairy sector was either regional or city-centred. They were making packaged milk, kefir (a fermented dairy drink), soured cream, butter, cream, and cottage cheese. The packaging technologies available to the small players were not able to provide long shelf life and limited their geographical reach. As the regional dairies were catering to markets as far away as 500 miles, under utilisation of production facilities, high logistics and distribution costs pushed up the prices. The economic crash of 1998 and the erosion of the rouble made the consumer highly price sensitive.
WBD spotted a business opportunity in the situation. By expanding its product range and longer storage facilities the company felt that it could reach wider markets, offer low prices and utilise business opportunities offered by a liberalised economy. WBD actively pursued the policy of regional expansion, expanded its product portfolio and continuous advertising helped the company capture 30% each in the national dairy and juices markets.
The situation also prompted western companies to relocate their production facilities to Russia in order to trim costs and be able to compete there. Therefore during this period the company had to contend with the entry of new international players such as Campina, Danone, Erhmann and Parmalat. WBD relied on branding, quality control, expanding product range and continued diversification as the strategy for fighting competition.
The recovery of the economy in the new millennium saw changing trends in consumers becoming wealthier, more westernised, inclined to spend more and demanding high end products. Consumers began demanding healthy diets, more products with biologically active ingredients, special product lines for children with various multi-vitamin and other supplements.
SWOT: As WBD set its sights on becoming the nation's leading food producer early on the company had a head start on competition. The company began implementing the idea by a multi-pronged strategy: product development, distribution, quality control, packaging, marketing and geographical expansion beyond Russia's borders into other CIS countries like Kyrgyzstan and ...Download file to see next pagesRead More
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