Russian Vodka Market example essay topic

1. What were the two reasons why the Western distillers were interested in entering the Russian vodka market? They believed that they could lure the Russians into their own brands of vodka. By using famous brand names and their good selling skills they felt that they could grab onto a market of Russian drinkers that were eager to "trade up" to Western brands.

2. When the Western distillers entered the Russian market it created a new external environment. List the elements of the firms' external environment, and for each identify all examples of that element that are contained in the article. Legal Environment: Organized crime has taken much control of the vodka market. And about 50% of the market is said to be "illegal" which is untaxed, counterfeit, or bootleg. The police have attacked the illegal aspects of the market but there are still a lot of sales going on within the streets.

Economic Environment: Based on recent surveys, about 80% of Russians drink vodka on a regular basis. This is proven by the consumption of an estimated 250 million cases in 1996. Russia has been going through economic turmoil as well as fighting with low incomes. This, I believe, is directly related to the increase in taxes, and the imposing of import duties. These duties were aimed helping local vodka producers compete with the new Westerns and the former Soviet Republics. As stated in the article, more restrictions were introduced in 1994, regarding advertising including television advertising.

Absolut vodka was struggling because it was estimated that less than 2% of the populations could afford to buy a bottle. They were marketing for the higher-income people and this proved to fail. Competitive Environment: The Russian producers began to come up with new ways to package and advertise by using Vladimir Dongan as the pitchman. He put is picture on the label of 25 brands of vodka. He said "The foreigners fight for the money of the wealthy, and I flood the market and let the people choose". This was obviously working for him.

He priced his bottles at $5 and $10. His sales figures were much higher than the foreigners. "Russians are coming back to Russian vodka, and we " re helping with attractive new brands" says Edward Kusmitsky. There have been more than 400 new brands entered into the market which has blown away the foreign competition.

3. What were some marketing mistakes made by the Western distillers? They aimed to reach the wealthy drinkers of Russia, which was the wrong approach, due to the limited number of sales. Russians consider vodka the "water of life".

Western companies understand that their strategies will take a very long time to take effect, but they insist that they will not give up. The Smirnoff company did not take income levels, distribution, and brand-loyalty into careful consideration. This was a crucial mistake for them. The wanted to launch an inexpensive brand of vodka called Break Vodka, but since the low end of the market was overcrowded, this attempt was rejected. As of now, Smirnoff's idea to add "made-in-Russia" labels has yet to take off.

They have even been forced to lower costs of their bottles to around $11. All of this shows how Westerners have made mistakes in marketing strategies and I believe that they are rethinking how to market to brand-loyal Russians..