The paper "Criteria Used to Enter the Russian Automotive Industry" is a great example of a Marketing Case Study. The automobile industry in Europe has staggered significantly after the recent 2008-2009 global financial crisis. Apparently, Russia was not an exception to the financial crisis. The sale of cars significantly dropped in the year 2014 as a result of the sanctions from the West regarding the Ukraine controversy and a drop in the prices of oil. The decline of the Rubble also impacted negatively on the automobile sector (DeBoard 2015).
Many companies operating in Russia have made declarations of shutting down their operations in the giant country. For instance, the General Motors Company stated that it would shut down its factory operations in Russia and close its Opel brand. Nissan Company, on the other hand, halted its production in Russia for 16 days in the previous month. At the onset of the year 2015, the auto market in Russia experienced the continuous implications of a weak economy, a rise in the interest rate and price increments. In the coming month's findings by companies, such Volkswagen indicates that the situation is not bound to change anytime soon. The shooting of the Malaysian Airliner also subjected the automobile industry to an adverse reputation.
The country witnessed a significant economic recession during the last half of 2014. It suffices to observe that the country is Europe’ s second-largest market for automobiles. Therefore, the continuous recession in the sector will result in the termination of the production activities of the major companies such as Ford, Renault-Nissan, Volkswagen, and General Motors. Regardless of the uncertainty and turmoil witnessed in the sector, most of the automobile companies have expressed continued commitment towards investing in the market.
The main challenges that have impeded the smooth success of the industry encompass the existing geopolitical tensions, neo-mercantilist trade policies, overreliance on gas and oil revenues and the poor network of highways and roads. Analysis and Evaluation of Market Opportunity and Market Entry Strategy Russia’ s market opportunity in the automobile sector does not favor new market entrants as a result of declining market sales. The current political situation and the weak macroeconomic conditions will compel the automotive market to stagnate over the next few years.
To be precise, the industry will exhibit the worst performance in 2015, 2016 and probably 2017. However, there are indicators that the industry will recover by 2020. At the time of its recovery, the number of sales of light automobiles will increase to 3.3 million units. It is worth noting that the industry had anticipated 4 million sales units in 2020 prior to the crisis. The indications are clear; that the actual performance of the giant economy about the production and sale of automobiles will be lower than the expected performance.
Moreover, the estimated performance still faces some threats that may result in a further decline in the sales units. The slow pace of modernization, unclear support from the market, and the fragile political and macroeconomic situation pose a threat to the sales estimates (Berger 2014). It is evident that some of the manufacturers have taken note of the increasing decline in the market performance to shift production to other countries. As a result, local production in the country will decrease resulting in the importation of vehicles that the country produced before the termination of some of the production activities.
Decree 166 will lead to the expiration of the local manufacturers’ preferential terms. The decree will also yield a decline in the import duties thereby subjecting the local producers to the weak cost competitiveness. It is also evident that the current subsidies will not impede the growth of imports in the giant economy. The increase in imports will result in a decline in the profitability of the smaller volume production models. The estimates indicate that the country will import 40% of the automobile units that it produces locally in the future (Berger 2014).
The other hazards to the industry include the reduction in the local content in the manufacturing sector, reduced localization of the suppliers and rendering the contracts of the manufacturers to be obsolete.
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