Download William R. Caffee

Entry into the Russian Market
William R. Caffee, III
AMBA 606D
November 20, 2005
Introduction:
To be discussed:
• The Apple iPod and why we should
be entering the Russian market.
• The Russian Demographics and
Economy and its relevance to the
entering iPod’s entry.
• The social infrastructure and political
and regulatory system in Russia and
its affect on the iPod entering the
market.
Marketing Consultants:
• Globaltek was hired to explore
the possibilities for Apple to
expand its horizons and market
its highly popular iPod in Nigeria
and Russia.
Apple iPod
• With the introduction of the Apple iPod, Apple has reinvented itself.
• In December 2001, the iPod weighing 6.5 ounces was introduces to
the world holding 1,000 songs as a digital music player.
(www.macobserver.com)
• It is a portable device which plays digital music and videos and
weighs less than 6 ounces.
• With iPods with a capacity of 60 GB and able to store about 15, 000
songs and up to 20 hours of battery life, it places the iPod at the top
of the portable electronics market. (www.apple.com)
• The iPod features also include calendars, games, clocks in addition to
the music and videos.
Apple iPod Popularity
• Apple sold over 6.4 million iPod during the fourth
quarter of FY 2005. (www.macminute.com)
• The iPod posted 220% growth in iPods sold from the
same period of time last fiscal year.
(www.macminute.com)
• The Apple is a globally recognized brand name and
the iPod’s popularity is international. It extends over
cultural, language, racial, and religious barriers.
• Everyone wants an iPod.
Apple iPod and Russia
• With the iPod’s popularity
growing nationwide, Russia
would seem to fall in line with the
other countries demanding
Apple’s latest technology.
Russia’s History
• In 1922, the Union of Soviet Socialist Republic was
established as a federation which installed the
community as owners of land and property.
(www.studyrussian.com)
• The communist state was born hence the friendship
with Germany pre-Hitler.
• After World War I and II, the U.S.S.R. declared war
on Japan.
• In1953, they detonated their first hydrogen bomb
and four years later, they developed ballistic missiles
and launched the first satellite.
Apple iPod (cont’d)
• Apple has setup iTunes as a program and database with
over 2 million songs used to download popular music for a
small fee.
• The iTune software is an excellent program and rated #1
for music and video downloads. (www.apple.com)
• The iPod can also be used in conjunction with you car
stereo as opposed to playing a bunch of individual
compact discs.
• In January 2006, they will be introducing an even smaller
iPod. (www.appleinsider.com)
Russian History (cont’d)
• In 1979, U.S.S.R. invades Afghanistan.
• In 1985, Gorbachev took power and one year later,
Chernobyl nuclear plant meltdown occurred.
• In 1991, a new commonwealth was established and
was open to all former members of the Soviet Union.
From this, they were attempting to move towards a
more demographic society.
• The Russian stock market fell in August 1998.
• In 2000, Vladimir Putin became the Russian leader.
Russian Demographics
•
Russia’s male population is dwindling and the mortality rate has dropped to
59.8 years from 64.3 years in 1966. (www.fas.org)
•
The mortality rate doesn’t include the spread of AIDS, infectious diseases,
and suicides.
•
The mortality rate is directly related to the reduction of government
sponsored health care.
•
The population is on a downward trend, its expected to be around 130
million in 2020. (www.fas.org)
•
Due to the economic decline, unemployment has increased and the
country’s health has decreased.
•
Schools have deteriorated and their science and technology base has
decreased tremendously.
•
Nonetheless, the Russian economy is due for a turnaround.
Russian Economy
•
Since 1991, the Russian economy has been up and down and very
inconsistent.
•
In 1991, the Soviet Union collapsed.
•
In 1998, the bottom fell out of the Russian economy and the country was
devastated by the ruble’s drop in value.
•
GDP per capita (USD 4000) has fallen by about 40 % since 1992.
(www.studyrussian.com)
•
The economy has started to grow again since 1999 with annual growth
rates of 4-9%. (www.studyrussian.com)
•
The economic outlook is very good: in 2002, direct net investments into the
country have been positive for the first time since many years, and the
Russian government is producing healthy surpluses, mainly due to high oil
prices. (www.studyrussian.com)
Infrastructure
• The country’s infrastructure is vital to a
global ventures success.
• There must be an adequate
transportation and communications
network.
• There are two types of infrastructure; soft
and hard.
Hard Infrastructure
• Tangible
• Transportation networks are air,
rail, and sea
• Utilities like energy, gas, and
water.
Soft Infrastructure
• Intangible
• Education, health, human services,
and legal
• Soft infrastructures are as vital as
hard and can also be as costly to
maintain and upgrade.
Social Infrastructure
• Assist or impede?
• Cultural foundation including
religion and ethical conditions)
• Labor force
• Human capital
Social Infrastructure
•
Out migration has caused a labor shortage forcing Russia to
depend on foreign workers. (www.fas.org)
•
Industrial employment has declined while business sector
employment has increased.
•
Women underrepresented in the industrial sector still faced higher
unemployment.
•
Labor trend are a result of the shift from the Soviet-era economy
and the rapid changes to worldwide technology. (www.fas.org)
•
As a result of the technology change, the wages have been
increased and so has wealth inequality.
•
The elite in Russia receive the high-quality education, but since
1989 the enrollment rate have consistently gone down. There is
also a skilled teacher shortage as well.
Social Infrastructure and iPod
• Culturally, Russia is transitioning, with a
huge increases in the Muslim population
and the increase in illegal immigration.
• The religions of Russia should have no
bearing on the importing of the iPod into
Russia.
• With the poor economy, Russia should be a
rip environment for unethical behavior and
fraudulent activities. Apple must heighten
security and closely monitor the Russian
activities in relation to the sales of the iPod.
Political and Regulatory System in
Russia
•
Political laws and changes - Laws like the Russian law on
Technical Regulations N184-F3.
•
Political instability - With the economy problems, poor
health, and high unemployment could pose as a breeding
ground for the government to collapse or be forcibly
removed.
•
World terrorism - The entire world is under siege by
terrorism from radical groups. Thus fear is created and
mistrust throughout the world.
Political and Regulatory System in
Russia and the iPod
• With N184-F3, Russia is making an attempt
to be more import friendly with the new
technical regulation.
• This regulation is a plus for Apple and the
importing of its iPod.
• The goal of this regulation is to eliminate
barriers to trade and encourage free
movement of goods. (www.esimcom.com)
• Definitely a plus for the iPod.
Conclusion
• Russia is experiencing a critical period in its history
where its decisions made during this transition will
restore this country to its natural glory or it will
collapse and no longer exist like other historical
Greek and Roman empires.
• Apple must perform its due diligence and make an
informed decision which is based on all aspects of
Russia.
• The iPod can be the medicine this sick country
needs. It could inspire and influence economic
growth .
• The iPod can be successful in Russia and a win-win
situation for all parities involved thereby revitalizing
the Russian economy and making Apple even more
profitable.
References
•
NY Times Chronicles History Of Apple's iPod, Including Steve Jobs
Swipe At Michael Dell (2003). Retrieved on November 19,2005 from
site http://www.macobserver.com/article/2003/12/01.12.shtml
•
Even smaller iPod shuffle may debut in January (2005). Retrieved on
November 19, 2005 from site
http://www.appleinsider.com/article.php?id=1373
•
Apple posts record revenue of US$3.68 billion (2005). Retrieved on
November 19, 2005 from site
http://www.macminute.com/2005/10/11/apple-q4-results/
•
Russia's Physical and Social Infrastructure: Implications for Future
Development (2000) Retrieved on November 19, 2005 from site
http://www.fas.org/irp/nic/russia.html
•
A short overview of the Russian history (2005). Retrieved on
November 19, 2005 from site
http://www.studyrussian.com/history/history.html
References (cont’d)
•
Hill, C.W.L. (2005). International business with global resource CD, Power
Web and world map (5th ed.). New York: McGraw Hill.
•
Russia Country Analysis Brief (2005). Retrieved on November 19, 2005
from site http://www.eia.doe.gov/emeu/cabs/russia.html#back
•
Russian Federation’s New Federal Law on Technical Regulations (2004).
The Retrieved on November 19, 2005 from site
http://www.esimcom.com/aak2_0_1_2/simcom_about/ab_russia_Law184
F3.asp?L1=1&L2=7
•
Doing Business in Russia (2005). Retrieved from the site on November
19, 2005 http://www.buyusa.gov/Russia/en/doing_business.html
•
www.apple.com (2005). Retrieved from the site on November 19, 2005.