“Whether Go Global Or Not?”

Whether Go Global or Not?

Course: Introduction to Marketing

Instructor: Matt Bartelsian

Assignment: “Whether go global or not?”

AUA / MBA 1

Year 2008

Before deciding whether to go global by selling Bjni in Georgia we have to understand the marketing environment of Georgia, demographic, economic, natural, political, cultural and technological forces, test consumer behavior, analyze competitors. At the end of our research, we will come up with conclusion whether Bjni has to go global, by entering the Georgian market of bottled waters, or Sukiasyan family have to sell the company.

Macro environment of Georgia

Georgia is a small country (69,700 sq km) with a population of approximately 5.1 mln. The biggest Diaspora in Georgia is Armenian (approximately 8.1%), which is very important factor of an Armenian product in Georgia. Life expectancy is 64,8 years. In 2006 Georgia’s GDP growth rate was 8.8%, making Georgia one of the fastest growing economies in Eastern Europe. According to the World Bank Georgia is “The number one economic reformer in the world” because it has in one year improved from rank 112th to 18th in terms of ease of doing business. Recently the Governments has reduced the number of taxes from 21 to 14 and introduced the flat income tax of 12%. It has significantly reduced the number of licenses a business requires, and introduced a “one-window” system that allows an entrepreneur to open a business relatively quickly. Georgia is a low-income, developing country, but it has wealthy segments of high-income consumers as well. This makes Georgia attractive for starting a business.

The political regime in the republic changed several times during the independent period, and the country suffered extensive internal clashes, sometimes qualified as civil war. The clashes between the opposition and the government that took place last November and the tensions arising about the upcoming parliamentary elections in May will most likely result to more chaos and political instability in the country. In 2006, trade relations were plagued by politically motivated interruptions when Russia imposed bans on all Georgian exports of wine, fruits, vegetables and mineral water. The unsteady situation in the country will definitely affect on the business.

In terms of government bureaucracy, Georgia has improved a lot recently and nowadays we should note that the government runs an efficient system for helping foreign companies invest.

In the particular case of Armenia and Georgia, we should notice that both countries are in the same international trade system (WTO).

In terms of culture, Armenia and Georgia are very closely related. This can be very useful for Armenian investors to start any type of new business in Georgia and the same with Georgian businessmen. It will be very easy for entrepreneurs from both nations to adapt to the cultural values of both societies. Therefore, from the cultural point of view it will be much uncomplicated for an Armenian investor to do business in Georgia.

Georgia is known for the abundance and variety of mineral waters and is one of the leading countries in this respect. There are more than 500 types of mineral waters, but the most favorite are Borjomi, Sairme, Nabeglavi, Zvare, Java, Kugela ect.

On the other hand, competitors of Bjni in Georgia use very old technology. Consequently, they do not produce high quality mineral waters.

Deciding Whether to Go Global

On one hand, it is obvious that Georgia is a water country, there are many producers of mineral waters there, and some have good name not only in Georgia, but also abroad. Competitors in Georgia are strong and competition seams to be difficult. This is the main threat of entering the market of mineral waters of Georgia. In addition, factor of possible political turmoil may result to unwanted consequences.

Another problem of Bjni will be transportation costs and importing taxes of Georgia. The price of Bjni is expected to be a little higher, than prices of Georgian waters. Georgian waters in Georgia cost nearly 0.35-0.50$. Nearly the same that Armenian waters in Armenia. Exporting costs, income taxes, marketing costs will make the price of Bjni from 0.60-0.85$, which is much higher than the main competitor’s Borjomi’s price.

On the other hand, water producers in Georgia use very old technology and methods of production, while Bjni uses modern European technology, which brings higher quality. Georgian consumer will hopefully appreciate the high quality of Bjni. Big Diaspora (more than 250,000) of Armenians in Georgia is another guaranty for Bjni’s success.

SWAT analyzes shows the main strongnesses, weaknesses, opportunities and threats of Bjni more visible.

Strengths

Weaknesses

Higher quality

Better management and marketing

Higher price

Lower knowledge of the market

Opportunities Threats

Big Armenian Diaspora

Different taste and new category

Political environments of Georgia

High level of competition

In order to decide whether to go global or not, it is also important to answer following questions about the company’s ability to operate globally: Does Bjni have enough money to run a business in Georgia? Does Bjni have the skills to succeed in Georgia?

After analyzing the experience of entering Bjni into the Russian market, where Bjni spent more than 20, mln US dollars on setting distribution network and had a big success, it is obvious,