Grenoble Graduate School of Business: International Marketing MBA Assignment$80-100, $100-120, $120-150, $150-$200, $200-300, $300-$450, and above $450), and threegeographies (Moscow/Moscow region, St. Petersburg/Leningrad region, and the rest of Russia)(
Baker and Kirsanova, 2007)
Three mobile phone operators MTS, Vimpelcom and Megafom control about 85 percent of thecountry's entire cellphone subscription market according to the CEO of VimpelCom Alexander Izosimov (Smith, 2006; O'Leary, 2008).Mobile phone distribution channels are dominated by two major retailers. The first is Euroset,which is also the third-largest retailer in Russia, and the second is Maxus, which operates under theSvyaznoy brand. Both Euroset and Maxus sell mobile phones as well as service contracts on behalf of Russia's major mobile-phone operators. Maxus focuses more on high-tech products and value-added services, while Euroset emphasizes low prices and zany marketing (Jason, 2005). BothEuroset and Maxus agree that increasing customer reach through new branch networks arestrategically critical and that margin can be 30 percent higher in the regions than in Moscow (Jason,2005).Handset sales growth in the Central & Eastern Europe and Middle East & Africa regions are driven by the success of the top 3 vendors, with Nokia's impressively growth and both Sony Ericsson andSamsung gaining at the expense of Motorola, which continues to struggle due to a lack of newmodel activity. Nokia dominates leadership of the cellphone market in EMEA, rising to its highestlevel ever, with a market share of 51 percent in Q2 2007 (IDC, 2007). Samsung has overtakenMotorola in handset revenue terms with 17 percent market share. Sony Ericsson continues to recordgains in major markets, with CEMA and Western Europe representing two of its three strongestgrowing regions, and hols a 14 percent market share in the EMEA region. Motorola slipped tofourth place in 2007, down one place from the first quarter of 2007 with a 6% market share, andcontinues to pay the price for market share gains with low-cost handsets and over-reliance on theRAZR line. LG Electronics holds a market share of 4 percent (Baker and Kirsanova, 2007;Economist Intelligence Unit, 2005; Theler, 2006; IDC, 2007). However,
Samsung was the leader inhandset sales in Russia in 2006 with 30 percent market shares, followed by Nokia with 26.5 percentmarket shares and Motorola with 17.3 percent market shares (Baker and Kirsanova, 2007; Smith,2006).
Market entry and development strategies
Businesses must choose between a variety of alternative market entry strategies, each offeringdifferent degrees of risk and control over their operations. Obviously, the decision of how to enterthe Russian market will carry a significant bearing on the results as risk and returns are both likelyto increase along with increasing commitment to Russia, and to be greatest in the case of investment entry modes. Fallon and Jones (2004) outlined what should motivate the choice of aparticular entry mode in the Russian market.All top five mobile manufacturers entered the Russian market primarily by means of exporting.Exporting is the marketing and direct sale of domestically-produced goods in another country.Since exporting does not require that the goods be produced in the target country, no investment inforeign production facilities is required. Like the top-five cellphone manufacturers, new entrantswould be expected to enter Russia through exporting in collaboration with locally-baseddistributors or agents in order to gain insider knowledge of the market and legal constraints,leverage the existing distribution channels, save costs and minimize risks (Fallon and Jones 2004).Being able to rely on
existing distribution channels to distribute products is critically important in a big and dispersed country like Russia (Bush, 2005). To that aim, Euroset increased it sales network
Petit P. 2008