Case study 

“Russian Expansion”
  

SWOT Analysis
 Strengths
• In spite of these conditions, in contrast to some Asian markets, where
local brands and producers dominated (e.g. the market share of Japanese
imports is only 11%), all major competitors were present in the Russian
Federation (Russia), and local consumers appreciated the foreign brands
which accounted for 53% of the market volume. The individual spend on
cosmetics was still lower in Russia than in Western markets (compared to
average spends of €90.40 in Europe vs. €89.40 in the U.S.) reaching
€56.00 on average. But compared to the average of €14.00 in other
growing markets, and peaking at €121.40 in the target audience, this was
an attractive prospect. These market characteristics, combined with its
relative proximity – Stefan was glad to see that it would be feasible to
move freight with trucks – made Russia the most promising next move on
the company’s expansion path. 
• New Horizon paragraph 2
  Opportunities
• Compared to other regions, the per capita
consumption of cosmetics is still small. This is
very tempting for companies that want to
develop, because this market has the potential
to be developed.
• There are heavily competing in this industry in
Russia.
• Two main market Moscow and S.t Petersberg
are close to Hamburg. Transportation is cutted.
 Challenges=threats
• . A full 12 documents had to be filed for import
(compared to say 11 for India, 8 for Brazil, 5 for
China, Germany, Switzerland, US; 4 for UK,
Mexico) and CrèmeCo’s distribution
department in Hamburg struggled to collect
the necessary information on time.  New
Horizon pargragh 3
• Burdensome import procedures
• Transportation of goods in winter is not stable.
• No professional logistics service provider. The
bargaining power of buyers is low.
• Human resource
• Financial supplier
• Direct / indirect export via intermediary :revenue
,partner’s role and investment (Indirect)
• Contractual entry modes, e.g. licensing(not used)
• Co-operation, e.g. joint venture, strategic
alliance(used)
• Investment, e.g. greenfield investment,
acquisition (not used)
 advantages/disadvantages
• Indirect export:Understanding of the local
market, with a proven sales system but
Partners is not part of the company and to
some extent does not follow the company's
advice.
 licensing
• Advantages: It is a fast way to generate income from
international markets, as there is no manufacturing or sales
involved. In this strategy, internationalization takes place
through taking advantage of an existing company’s pipeline and
infrastructure in exchange for a small percentage of revenue.
• Disadvantage: is that a foreign company is not part of the
parent company. Therefore, there is a risk that the licensee will
become a competitor if the license agreement expires. Also, the
licenser gives a lot of control over the quality of the products
and services the licensee will provide, and this could damage
your reputation.
joint venture Investment, e.g. greenfield investment, acquisition 

• Disandvantage:Big investment means risks

• the challenge of finding the right partner—not just in
terms of business focus but also in terms of compatible
cultural perspectives and management practices.
• Second, the local partner may gain the know-how to
produce its own competitive product or service to rival
the multinational firm. 
• Once the contract ends, however, the local company
may take the knowledge it gained from the joint
venture to compete with its former partner.
• I think we should establish a logistics center in
the middle of Moscow and St. Petersburg,
which are the two most densely populated
regions in Russia, and unite the two partners
to establish a branch office with the head
office for the entire Russian business(joint
venture), both to facilitate expansion and to
avoid bad competition.