Limited market growth due to antitrust laws (25% market share cap) Expensive warehouse rental space Bureaucracy and political barriers to entry Difficult and confusing government regulation Problem Statement 1 . Careful failed in creating brand recognition and familiarity within Russia. 2. Careful did not allow ample time to gain the expected market share in Russia. 3. Carouser’s first three store locations in Russia were not in ideal areas.
Problem Analysis To establish a loyal following of customers and increase market share, Careful needed to develop brand recognition within Russia in a very short time. Since the brand was relatively unknown throughout the country and only had three stores by the time it exited, consumers did not have time to understand what Careful offered, why Careful was different and even recognize the company’s logo. If Careful would have been successful in acquiring Seventh Continent, this brand recognition could have been much easier to develop since Seventh Continent already had an established allegations with the local population.
In addition, Seventh Continent could have provided Careful with the knowledge of domestic business relations (e. G. , local vendors and suppliers, local laws, customer preferences), knowledge that would only come from a company who is already successful in that market. Another problem was Carouser’s decision to pull out of the Russian market within four months of entering, not allowing ample time to gain market share. From a business perspective, a short-term goal is something that can be measured within 12 months, but Careful made the decision to exit Russia after only one quarter of results.
This could have been justified if Careful did not spend three years performing extensive research on the Russian market and how to be the most successful. The decision to exit the country in such a short time contradicts the research findings and initial business strategy developed from these findings. From another perspective, Careful stating that it was unable to gain market share is an invalid claim. According to the Harvard Business Review, market share is more easily attained on items that are infrequently purchased, not ones that are frequently purchased.
Careful cited that the first store attracted a majority of food shoppers, specifically people who were looking for bread. “Frequently purchased products are generally low unit-value items such as foods or industrial supplies. The risk in buying from a lesser known, small-share supplier is lower in most cases, so a purchaser can feel free to shop around” (Buzzer). Therefore, the ability to seize market control would certainly take much longer than four months. A third problem was the Carouser’s first Russian stores were not in ideal locations.
For example, the first location in Billion Shopping Mall was difficult o get to, was not prominently visible within the mall, and catered to lower- income families. While many of Carouser’s products are targeted to lower- income families, this group does not have disposable income to make larger purchases and become long-term, regular customers that can help increase Carouser’s market share. Identification and Evaluation of Alternatives Problem: Careful failed in creating brand recognition and familiarity within Russia.
Alternatives: 1 . Acquire a local partner (other than Seventh Generation). Pros: By acquiring a local partner, Careful can gain extensive knowledge of mommies business relation. Also, a partner would have an established presence in Russia including different licenses and a local workforce. Cons: As Careful experienced with Seventh Generation, acquiring a local partner can be very risky and expensive. Also, the two business cultures and ideals may not match, causing the acquisition to be very difficult and impede growth. 2.
Promise price matching or lowest price guarantees to beat competition while gaining market share. Pros: By becoming the price leader against competition, Careful can bring in new consumers based on price alone. Once the company gains market hare, it will already have a strong customer base. Cons: By offering very low prices, Careful could possibly be sued for dumping and be kicked out of the market. Also, Careful would most likely lose revenue and not create any profit while offering these low prices. Problem: Careful did not allow ample time to gain the expected market share in Russia. . Stay in the market for a much longer period of time to see if growth was obtainable. Pros: By staying in Russia longer, Careful could create a stronger market presence, gain brand recognition, build a loyal customer base and re- iterative if any problems arise (such as a recession). Cons: If Careful continued to lose money by staying in Russia, it would be very difficult to get that money back from other markets. Also, a long-term lost may cause investors to lose confidence in the company and would ultimately harm Careful not Only locally but in every market. . Only open one store to begin and grow once that store is successful. Pros: By only opening one store upon entry to the market, Careful would get to know that market intimately and invest all time and energy on that store. Also, this would lower the risk of entering the market too aggressively. Cons: This alternative goes against Carouser’s overall buss news strategy and would not allow the company to become a market leader in the short- or medium-term. 3. Contouring the business plan around the recession.
Pros: By altering the business plan once the recession hit instead of staying the course, Careful could adapt to the situation and may be more successful. Cons: It may be costly to slow implementation plans that were already started such as new construction and investments. 4. Create smaller, more tangible goals and re-evaluate success based on those goals. Pros: By judging success by achieving smaller goals, Careful could see the potential of being in the market and better strategies growth. Also, this WOOL_SLD make it easier to make adjustments over time.
Cons: Again, this alternative goes against Carouser’s overall business strategy. It may also not seem aggressive enough for investors who are looking for rapid growth and profitability. Problem: Carouser’s first three store locations in Russia were not in ideal 1. Open stores in prime locations. Pros: By opening stores in locations that were more accessible and with customers who have a larger spending income, Careful could be more Cons: These locations will most likely be more expensive in terms of construction, rent and taxes, and may also be hard to acquire due to competition.
With these high costs, it may be difficult for Careful to become a price leader. 2. Open an online store. Pros: By having an online presence where customers can make purchases, Careful does not necessarily need as many physical stores, if at all. Also, an online store opens doors to a much broader audience. Cons: Online shopping is still considerably young in Russia and security is a concern for Russian consumers. Also, online shipping, delivery and payment services could become a logistical nightmare. 3. Open multiple stores at once.
Pros: By opening multiple stores as once, Careful could be more aggressive, a tactic that allows for mass expansion. Also, Careful could gain a strong market presence a lot more quickly. Cons: Opening multiple stores at once is very expensive and is very risky. If the stores were not successful, liquidation would take a long time and could et very costly. Recommended Course of Action and Implementation Plan Based on the problems identified above, there are a number of different actions that Careful can take when re-engaging with Russia.
First, the company needs to go in stronger than before and not pull out too early. While Careful has a strict corporate plan when entering a new market, given the company’s track record in Russia, it must readjust its strategy and be sure that it is understood throughout the corporation and enforced from the board of directors down to the store managers. Additionally, investors just be notified in advance of this strategy to adjust their expectations. Careful must stick with this strategy and allow enough time to assess and re-assess goals. Careful also needs to practice what it preaches.
When opening the second Russian store, Careful signed a Memorandum of Understanding with the government that promised a certain amount of investment into development and the community. Since that store was only open for a very short time, it did not allow enough time to meet these goals and develop as promised. Given that a large obstacle to Carouser’s success in Russia was not acquiring local Company, Careful should kick into Other potential partners. A good partner could be Zoon. Our, the largest and most trusted online retailer in Russia. Zoon. U is not like a traditional online shopping website such as Amazon as it operates primarily with cash-based sales and does not include home delivery. Instead, consumers purchase an item online and visit one of the over 2,000 pickup points throughout the country (primarily around Moscow and SST. Petersburg) and pay for and pick up the items. By acquiring or merging with Zoon. Our, Careful can obtain trust from the Russian people, obtain more brand awareness, have insight into local business practices, and have the platform to launch an online store.
Going further into a partnership with Zoon . Our, Careful could open three stores near the densest group of pickup points, which do not necessarily need to be in downtown or “premium” locations. These stores could also act as a distribution center for door-to-door delivery of online purchases, similar to Giant’s PeaPod delivery service in the United States. Careful could hire local couriers to deliver the products, which would be beneficial to the Russian communities because it would add jobs.
Deliveries would be guaranteed by a certain time and backed as Papal does for credit card purchases, which would create mutual trust between Careful and customers and decrease security concerns. By creating a secure platform and having purchases guaranteed, Careful can create a high level of trust with the Russian population. Current online purchasing trends in Russia include payment at pick-up locations and most of these payments are made with cash. Turning the population to using credit cards and trusting Internet sales could benefit Careful and allow them to e a leader in the online industry in Russia.