Insightegy Consultants

Avoiding ad hoc approaches to capturing regional opportunities allows the firm to successfully penetrate new markets and secure strong returns on investment.

For international companies working in Russia nowadays, growth in this fast developing market has become a priority on the corporate agenda. Logically it follows that many of these firms see the source of rapid growth for their business in Russia stemming from regional expansion. However, this process isn't a foregone conclusion; if the right framework isn't adopted, firms are left with a loss-making white elephant. By learning from the experiences of firms who have successfully captured the Russian regional markets to become localized multinationals, managers can apply the secrets of success to their own expansion strategies:

  1. Successful international actors in Russia (for example, BBH, Coca-Cola, McDonalds, Nestle, Valio) first gain a stronghold in one regional market by winning a leading market share and firm brand awareness. This provides a stepping stone for their forthcoming expansion in the market.

  2. At the relevant juncture, they develop a clear regional attractiveness map which serves as a basis for prioritizing entry to regional markets.

  3. Following rigorous analysis of the opportunities available to the firm, three strategic options remain:
    • Option 1: The brand follows the assets: acquisition/construction of a local production facility followed by investments in marketing, branding and local distribution
    • Option 2: The assets follow the brand: strong brand awareness building in a regional market due to the local distributor's activities followed by production localization (acquisition or Greenfield)
    • Option 3: Structured combination (clear distribution of regions for each of the above options)

  4. They have execution plans which detail all needed activities, timelines, key deliverables and milestones in each of the regional markets and clearly provide for responsibility distribution among key personnel

  5. Recognize the importance of a strong local organization in regional markets

An ad hoc method to regional expansion is highly inefficient in terms of time and cost. The experience of multinationals who have managed to create successful localized organizations shows that a systematic method is required for optimum results.

This subject will be addressed in more detail at a workshop called Avoiding Erratic Growth in Emerging Markets.

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