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Lenta of St. Petersburg, Russia,[object Object],Presented by,,[object Object],Shriti Chhajed,[object Object],GNOV09RM125,[object Object]
Russian Business Environment,[object Object],Political and Macroeconomic Issues,[object Object],1990 – 2000: Russia struggled for survival,[object Object],2400% inflation,[object Object],Ruble loose 50% of its value,[object Object],2000 – 2010: Putin’s Goal – 7% annual growth in GDP,[object Object],Growth largely driven by high oil prices,[object Object],2004: SMEs contributed to 13% of GDP,[object Object],Economic success contributed to larger cities,[object Object],Average monthly per capita income 350% & 40% above national average in Moscow & St. Petersburg,[object Object],St. Petersburg – 2nd largest city, 4.5m population,[object Object]
Russian Retail Environment,[object Object],Russia – Dynamic underdeveloped business environment,[object Object],Rising consumption levels,[object Object],Fastest growing food market in Eastern Europe,[object Object],Difficult labour laws – Soviet influences,[object Object],Lack of work ethics,[object Object],Lack of loyalty to the employer,[object Object],Unwillingness to work hard,[object Object],Government, the greatest barrier,[object Object],Russian customers are not demanding,[object Object]
The company – Lenta,[object Object],1992 - Oleg Zherebtsov founded Lenta as a wholesale candy business,[object Object],1993 – 1st small cash & carry retail store,[object Object],1997 – 3 smalll retail stores,[object Object],1998 – ruble collapsed, layoff 75% of workforce, warehouse cash & carry chain selling both grocery and selected non food items,[object Object],2005 – 9 stores in St. Petersburg,[object Object],Competitive Advantage,[object Object],Low prices,[object Object],Smaller margin than competitors,[object Object],Convenience of being 24 * 7 open 	,[object Object]
The Store,[object Object],“To give you what you want & need”,[object Object],“Offer you the most value for your money”,[object Object]
Competition,[object Object]
Suppliers,[object Object],Direct relationships with multiple suppliers to keep the prices low,[object Object],No wholesaler in between,[object Object],High purchasing power,[object Object],No distribution warehouse, direct to store deliveries,[object Object],100-120 deliveries/ day,[object Object],10% imported products – problems with customs,[object Object]
Inventory Systems,[object Object],POS systems reading barcodes,[object Object],Monitored using SAP computer system,[object Object],Track fast & slow selling products,[object Object],Monitor inventory levels to avoid stock outs & excess inventory levels,[object Object],Analyze POS data for better decision making,[object Object],Expansion becomes manageable,[object Object]
Government Relations,[object Object],Uninvolvement of Govt. in day to day operations to monitor safety,[object Object],No government Quality check authority,[object Object],Random inspection by government agencies – closed down alchohol aisles,[object Object],Tax rate in St. Petersburg – 24%,[object Object],Lenta established a tax reserve – "Yukos effect",[object Object]
Financials,[object Object],Transaction in Rubles,[object Object],Financial statements in USD,[object Object],Lenta had 4 Americans on its Board of directors,[object Object],Lenta was looking for loans from western financial institutions,[object Object],Intense Financial Growth,[object Object],Internal cash flows,[object Object],Debt Financing,[object Object]
Lenta’s HR Challenges,[object Object],Hire 500 people, 20 for managerial roles,[object Object],HR department – new in Russian market,[object Object],Clash in Lenta's values and Russian market – customer service ,[object Object],Lack of managerial talent in Russia,[object Object],High attrition rate,[object Object],Profit sharing plan – to retain & motivate its managers,[object Object],Expansion of HR department – include T & D,[object Object]
Marketing & Advertising,[object Object],Marketing & Advertising - .35 to .38% of sales,[object Object],First mega supermarket in St. Petersburg,[object Object],Loyalty card program – discount to cardholders,[object Object],Personalised their communications with the customers,[object Object],Advertising promoted 3 key customer benefits,[object Object],Low prices,[object Object],Easy & fast shopping,[object Object],Convenience of being 24 hours open,[object Object],Billboards, Radio & monthly shopping circulars,[object Object],Metro Radio – 3m people daily,[object Object],Advertising for new store opening,[object Object],Inform the public of the opening (2-3 weeks),[object Object],Promote the opening day celebration,[object Object]
Building a new store,[object Object],Land - Lease of 49 years frm local government,[object Object],Approval of plan from loacal government – fire marshalls, environmental agencies, construction agencies, sanitation department,[object Object],Conflicts between agencies,[object Object],Corruption – approval on time,[object Object],High cost to build - $ 20m,[object Object],Buy extra land to sublet for complimentary businesses,[object Object]
Lenta’s Strategy,[object Object],Lenta has 2 options:,[object Object],Open more stores in St. Petersburg,[object Object],[object Object]
No foreign players
Existing Relationships with suppliers

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Lenta Of St. Petersburg, Russia