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Carpanelli Furnitures Country: Kazakhstan Name Matricula 1 . Syed Ali Rizvi 823621 2 . Anuar Baitulakov 822528 3

Carpanelli in Kazakhstan, 2015

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Page 1: Carpanelli in Kazakhstan, 2015

Carpanelli FurnituresCountry: Kazakhstan

Name Matricula

1.

Syed Ali Rizvi 823621

2. Anuar Baitulakov 822528

3. Milica Barovic 823092

4. Yessymkan Oralbayev 813379

Page 2: Carpanelli in Kazakhstan, 2015

Kazakhstan and Italy relations

Source: http://atlas.media.mit.edu/profile/country/kaz/

Page 3: Carpanelli in Kazakhstan, 2015

Kazakhstan and Italy relations

• Crude oil and gas together account for the most tradable good between the two countries

• Kashagan oil field – largest offshore human discovery in the last 30 years*

• Strategic partnership agreement in trade (2009)• Temporary visa-free regimen for Italian citizensSince 2001operator

An exciting discovery of a young adventurous born-in-Naples Italian guy, Pasquale Caprino (aka Son Pascal) in a program on Deejay TV called Pascalistan

Page 4: Carpanelli in Kazakhstan, 2015

Suppliers are already

established and will just extend to Kazakhstan

branch

PORTER’S 5 FORCES ANALYSIS

INTERNAL

RIVALRY: LOW -

MEDIUM

THREAT OF NEW

ENTRANCE: LOW

BARGAINING

POWER OF

BUYERS:

MEDIUM

THREAT OF

SUBSTITUTION:

LOW

BARGAINING

POWER OF

SUPPLIER: LOW

Absence of such type of furniture

companies providing similar types of value for

the customers

Possible competition from other European

furniture brands, but also increasing trend for uniqueness and

exclusivity

Exclusive and glamour furniture itself is not a prime necessity and there

are several alternatives

Products offered are exclusive, unique, and

glamour, industry profitability is relatively

high and market coverage is limited by major cities

Page 5: Carpanelli in Kazakhstan, 2015

Intensity of rivalry.

• The business area where the branch is supposed to be deployed has little-to-nonexistence rivalry due to Carpanelli’s niche differentiation factors such as the fact that Carpanelli products “are made with selected materials, precious woods and exotic essence, enriched by elaborate inlays handmade as many years ago, with mother of pearls details and precious stones and precious metals.

• All the creations are, in fact, designed for customers with international profile, more and more selective and refined. Every single piece is recognizable by a registered inlay trade mark, symbol of authenticity and in the meantime precious decoration.

Competitors.

• There are several market players that manufacture and sell furniture in Kazakhstan. They are represented by Zhanna Trading House, Sergio Interiors, and Azimut furniture shop. However, there is none that provide exactly same furniture as Carpanelli does.

Page 6: Carpanelli in Kazakhstan, 2015

Industry growth. • Potentially, Carpanelli Kazakhstan branch can be a extended into more

bigger markets of Russia and Belarussia thanks to Common Eurasian Economic Trade Union which is formed between Kazakhstan, Russia and Belarussia starting from January 2015.

Product differentiations. • Carpanelli branch in Kazakhstan is considered to be unique. Relatively

low competition in furniture industry of this kind certainly increases attractiveness.

• Taking into account potential market niche conquer, it is possible to decrease price or add additional customization services in the future.

Threat of new entrants.• The extravagant, handmade, glamour furniture industry attractiveness

might motivate other entrepreneurs to establish an identical branch for their company, and thus, the threat of entering by other players is very high (due to the development of internet technologies it is relatively quick to spread the news and get noticed by other competitors even over sees). Due to pioneering market entry, Carpanelli Kazakhstan branch is promised to stand firmly by gradually conquering market niche and increasing number of customers.

Page 7: Carpanelli in Kazakhstan, 2015

Threat of substitutes.• The furniture industry where Carpanelli operates is unique for

Kazakhstan furniture market. Therefore, at the initial stage, there is a great chance of acquiring a business niche. The quality and exclusivity is very high for a reason of higher attractiveness from customers. Higher premium price for such quality and exclusivity is charged and therefore, is aimed at the customers with higher level of social status and economic/financial position.

Bargaining power of buyers.• Bargaining power of buyers becomes Medium - Low due to the

fact that is not a prime necessity and there are possible alternatives from other European brands.

• Carpanelli Kazakhstan branch aim is to make every customer satisfied with the quality and service provided thereby charging premium price. Buyers possess less control over which products or services to choose from in the given differentiating furniture industry and therefore, buy.

Page 8: Carpanelli in Kazakhstan, 2015

PEST Analysis

Page 9: Carpanelli in Kazakhstan, 2015

Political. As a member of the Eurasian Economic Union, the country offers the possibility to expand any business outside its borders into other Eurasian countries, which is an advantage in case for future growth. Kazakhstan is considered as a politically stable country due to the fact that the political fluctuations that can be observed have a small repercussion.

Economical. Kazakhstan is has transition economy and also one of the richest of the world in terms natural resources such as gas, oil and precious metals. Purchasing power of the Kazakhstan population is relatively high and this situation should not change in the short-term future as the inflation rate is low. According to this description, it is possible to state that Kazakhstan represents a fairly good market for a new foreign business regarding the access of customers to products and services, especially in the product sector.Social. Even if the country seems to have a high social development in comparison with the rest of the Eurasian region, it still shows a high gap of 28.6% between the richest and poorest sectors according to the Gini index. Nevertheless it still has a high population with a high purchasing power. As it presents a high educational level, it is possible to state that the population is eager to analyze their new options in order to differentiate from the crowd for which Carpanelli Kazakhstan branch should be considered as an option for most of the people that might need it.

Technological. There is a high Internet penetration (62.2%) in the country. There is also almost a complete coverage of mobile and Internet services through the country. This allows Kazakh population to access Carpanelli local website easily and choose make orders by visualizing the product line from their home and/or mobile devices.

PEST Analysis

Page 10: Carpanelli in Kazakhstan, 2015

Competitive advantages.• It is very important for any kind of business to have relative

competitive advantage in order to be able to create added value for it’s customers and satisfy the demand in a better and more convenient way. It is strongly believed that our customer’s expectations are the key benchmark that has to be analyzed and relevant solutions need to be provided.

• One of the major competitive advantage that Carpanelli products had inherited is the fact that their products had been developed within the company and inherited family traditions dating back hundreds years ago. Our team strongly believes that one of the most important competitive advantages that Carpanelli products and services has, is the fact that they are actually the first ones who introduce the glamour, hand made, exclusive furniture products in Kazakhstan.

• It has also been noted that majority of the companies that manufacture and sell furniture are aimed for general public. On the other hand, the furniture manufacturing concept that Carpanelli Kazakhstan branch provides is concentrated especially on the rich layer of society and is available in Russian/Kazakh languages.

Page 11: Carpanelli in Kazakhstan, 2015

Resources. To make the business established and prosper, the Following key resources are needed: Marketing division. Marketing plays a very important role in the introduction of new type of customizable furniture industry with the world wide known brand, thus, there was a need of good marketing division. Therefore, highly trained and skillful marketing staff were needed.

Key Partnerships. Any business cannot progress without a decent financial endorsement; for this reason our team plans to approach Carpanelli headquarters and acquire very strong support and interest in going further with this idea. Providentially due to the possibility to extend market to Russia, Armenia and Belorussia our team strongly believes that Carpanelli officials will be willing to cooperate in this direction.

Customers. Following sections of the public are our target group that we are interested in:

Rich E-Shoppers: People who are active online shoppers that have the possibility to buy exclusive products with high premium price.

• Oil and gas industry management workers: People who work in oil and gas industry that have the possibility to purchase exclusive products.

• Kazakhstan National company workers: Especially during and before national holidays these employees have been credited with high bonus payments.

• Residents of Astana, Almaty, Atyrau regions who have very high standard of living.

Core competencies. The core competences are the main drivers, which help to differentiate Carpanelli products from its different competitors in the market. Inherited Family quality dedication, craftsmanship, techniques for assuring exceptional hand made product, and strong attention to exclusivity and glamour are those Core competences that Carpanelli posesses.

Page 12: Carpanelli in Kazakhstan, 2015

Porter’s Value chain.• In order to get the most winning positions or to become a market leader, it

is highly advisable for Carpanelli to undertake Porter’s value chain analysis to unveil its strong relationship between activities that reflect business performance. Alongside with this kind of analysis, makes it clear what are the competitive advantages of the branch to be opened.

• Firstly, it is required to outline the main stakeholders and to connect the activities. The stakeholders list consists of:

• Developing Team. It is a group of people who have a high level of competence and professionalism, that work on the marketing methodologies and techniques applicable to Kazakhstan citizens. It is one of the most crucial features to become a market leader.

• Local Business establishment. Another essential part of conducting business in Kazakhstan: arrangements of Mobile studio shows in National “Korme” exhibition center and other types of visual representation of furniture possibilities.

• Company Employees. There must be this necessary item of a company life-cycle that adds value to get higher level of efficiency and effectiveness.

• As soon as the stakeholders are identified and the activities are clarified with regards to Porter’s value chain, it is vital to examine and divide the business’ strengths into 2 groups: primary and secondary (supporting) activities. See next slide Figure # 2.

Page 13: Carpanelli in Kazakhstan, 2015

Figure 2. Porter’s Value Chain

Page 14: Carpanelli in Kazakhstan, 2015

Primary activities. Inbound Logistics. First and important goal of the inbound logistics is to find and outsource the service of a distribution to strong distribution networks present in Kazakhstan. Another crucial target is to contract with the Kazakhstan local business partners such as “Korme” exhibition center officials. It is considered to have marketing negotiations with the developing team in order to increase the popularity of Carpanelli products.

Operations. Carpanelli target is to increase the popularity of the Carpanelli brand among target clients and make them get used to a new opportunity for having high quality, hand made exclusive furniture. The methodologies used are quite simple and easy to understand: initialization of Carpanelli branch in Kazakhstan with further business expansion to Eurasian Economic Union market. Carpanelli brand will be promoted to increase the popularity and brand recognition. Surveys will be conducted on satisfaction with the Products. Further, the marketing strategies will be generated on the basis of acquired statistics.

Outbound Logistics. Updating the Carpanelli local website content and increasing awareness of the brand by presence in Exhibition centers as well as securing the Astana Expo 2017 boot spot.

Marketing and Sales. Marketing is crucial part of the business running. Due to that promotions during Studio Mobiles exhibitions, Astan Expo 2017 Exhibition etc, are the key priority of Carpanelli to take advantage off of this, it is necessary to create/set the pace for the differentiation in the market by a competitive cross promotion marketing strategy. Active usage of banners are the means of promotion of company’s product – website and its further mobile app development opportunity, as well as the generic means of printed ads hanging on the ads wall boards of Huge Corporations with the flyers given by dedicated staff.

Service. Possibility of life time warranty as an after sales service provision keeping in mind several straight forward limitations and purchasing warranty option.

Page 15: Carpanelli in Kazakhstan, 2015

Secondary (support) activities.Firm infrastructure. • This part deals with planning and controlling the core business activities. • Minimized business cost flat organization structure is adapted by

Carpanelli in Kazakhstan. • Centralized management system is used to be able to plan and control.• Technology development (R&D). Mainly, the service of intelligence team

is needed to create marketing and promoting strategies. • Human Resource Management. In order to achieve high rates of

performance, there must be core valuable assets in the local branch. Our team is focused on the people search who have already had a positive experience in active marketing and brand recognition increase initiatives and have some competences and potentials in this field. Evaluation of employees’ performance will be based on their individual performance.

• Procurement. This side is out of the company’s focus. However, with the future possibility to use huge potential of Kazakhstan local forests to be used as a material for the product.

Page 16: Carpanelli in Kazakhstan, 2015

SWOT analysis Strengths:1.The furniture manufacturing differentiation concept stands out as a unique service to offer the match between demand and supply of exclusive products;2.Local website that has Intuitive navigation, personal account and search;3.Useful and relevant content;4.Customer-centric furniture design;5.Creative team;6.LT customer relations;7.Unique differentiation factors;8.The ability to connect people from specific segments of “social origins” in order to provide comparative advantage.

Weaknesses:1.Not ready, outdated local web service content and design;2.Confusing structure and navigation;3.Absence of important skills (i.e. website development, networking);4.Lack of possibility to co customize the furniture using on line tools;5.Challenge of establishing reputation using brand identity which is New to the Kazakh market; 

Opportunities:1.Probability of 100% niche acquirement; 2.No real competitors at real time in the exact furniture manufacturing concept;3.Posibility to expand to EEU;4.More effective marketing tactics;5.New design trends to better convey communication with the potential customer;6.Seek advertisement in Astana Expo 2017;7.Possible joint collaboration with “KORME” exhibition center.

In order to leverage strength, an attacking market strategy is built:1.Customer migration to web strategy;2.Customer contacts via e-mail use, Facebook group, company flyer ads, exhibition Studio mobile etc.;3.Market creates a chance to enjoy the maximum benefits available since there is no entry barrier and no competition; 

In order to tackle weaknesses, existing opportunities are used and are a foundation for building strength for attacking strategy:1.Refine customer contact strategy;2.Marketing strategy;3.More friendly website design and interface;4.New markets strategy development;

5.Avoid lack of communication channels provided to potential clients, thus creating better marketing strategy,

 Threats:1.Emergence of new competitors/players;2.Possible political issues with logistics due to sanctions applied to Russia and their indirect effect for Kazakhstan;3.Changing customer needs (economics recovery);4.SPAM & unsolicited advertising;5.Fraudulent activity;6.Initial misperception of the team’s values which deteriorates the business idea market position.

A leverage strength based on minimizing threat the business idea encounters – building defensive strategy:1.Partner with complementary elite exhibitions and partners;2.Build own customer reviews;3.More attention web accessibility and personal accounts;4.Affiliate more with marketing opportunities for better brand recognition;5.Emphasis on social networks.

Defensive strategy to counter-strike weaknesses and threats:1.Find reliable web developers who build local website with proper content;2.Establish the staff with highly qualified professionals in marketing and communication  

Page 17: Carpanelli in Kazakhstan, 2015

Distribution channelsIt is worth mentioning that some distributors in Kazakhstan focus only on specific types of furniture market. In this regards, it had been decided to segment the Carpanelli furniture lines and identify in case there is a correlation between the Carpanelli specific segment of furniture and the respective segments of furniture that the distributors specialize in. It had been therefore decided to present in below text the names of the distributors and the specific furniture segment that the distributor has been specializing in (in case the distributor’s policy assume segmentation/specialization) otherwise it will be mentioned that the distributor is able to specialize in all segments of furniture products. In addition to that, after the presentation of general information about the distributor, it had been decided to provide the potential possibility and reasoning for cooperation and relevance of Carpanelli product lines with the below mentioned distributors.

Page 18: Carpanelli in Kazakhstan, 2015

Distributors (1)• Company «Divo Divan» - is one of the largest distributors of

upholstered/soft furniture in Kazakhstan (mainly specializing in distribution of all kind of sofas). The company had been present in the Kazakhstan market for over 5 years, and during that time «Divo Divan» Company has managed to establish itself as a reliable partner for the acquisition of high-quality and stylish furniture for the home and office. The company has also been constantly developing and exploring the tastes and needs of the customers, and a range of network salons «Divo Divan» is a real reflection of the Company’s strive and respect for the customers. «Divo Divan» Company’s retail network is presented by the best sofa manufacturers of Russia, Ukraine and Kazakhstan, such as «Blest», «ADC», Zlata - Mebel, ARS, Romira, Dalio, Davidos, sit, color sofas (Russia), «NEXTFORM», Kazakhstani Quant.

• Since Carpanelli SpA has a diverse lines (more than 17 lines/designs) of exclusive sofas it could be interesting to contact the «Divo Divan» Company and try to establish some potential business partnership. Taking into account that currently «Divo Divan» Company does not have European furniture manufacturers in their business partner portfolio, it could be a great opportunity for Carpanelli SpA to get into this cooperation and start doing business with «Divo Divan» Company in specific sofa segment.

Page 19: Carpanelli in Kazakhstan, 2015

Distributors (2)• “Zhanna” has worked successfully in Kazakhstan since 1992. During

this time, managed to pass all stages of development of commercial activities. Starting with the sale of clothing, the company gradually shifted to delivery of furniture from the Baltic states, then from Germany, Holland, Belgium. Later Furniture Center "Joan" was to give preference to Italian furniture, because Italy - the undisputed world leader in the production of stylish and quality furniture. There about 4 thousand companies, creating almost 40% of the world's furniture.

• The following brands are presented: Nieri, Loft, A.R. arredamenti, Turri, Angelo Cappellini, Carpanelli, Giorgetti, Valcucine, Lube, Giemme, Mantellassi, Zanaboni, Della Rovere, ORA Acciaio.

• “Zhanna” - the largest furniture distributor in Kazakhstan and Central Asia with a network of specialized shops totaling an area of about 10,000m2.

• Upon customer special requests, a customized design is executed according to the practices of the furniture companies presented. The staff constantly maintains their skills, help in the selection of furniture based on the individual customer requirements and conditions of the room. Source: http://www.zhanna.kz/partner.aspx?CatalogId=30643

Page 20: Carpanelli in Kazakhstan, 2015

Distributors (3)• Company “DomusA” was founded in 2004 and presents exclusive

finished materials and accessories from the best European manufacturers in Kazakhstan market.

• Company “DomusA” is not only specializing only in furniture but has diverse products and services among which a unique collection of lighting, sanitary ware, marble, ceramics, furniture, carpet and leather coverings, windows, doors, stairs, flooring and terraced floors, fireplaces and designer accessories that allow the customers to create the interior of any style - from modern to palatial luxury, to embody the most exquisite designs. Company works directly with European furniture brands such as Veneran, Vincent Sheppard, VV, Twils, Smania, Selva, Stella del mobile, Savio firmino, Montbel, Poles Salotti, Mobilidea, Randola, Cantori etc. It could be a great opportunity for Carpanelli SpA to get into this cooperation and start doing business with “DomusA” Company in all segments of Carpanelli products.

Page 21: Carpanelli in Kazakhstan, 2015

Distributors (4)• “Azimut” Company is a furniture manufacturing company in

Kazakhstan. Company has its own production facilities, high-quality materials and components are used from leading furniture manufacturers, advanced equipment and advanced technologies allow to occupy a leading position in the furniture industry. For production Company uses: laminate, natural veneer, solid fine wood, heat-resistant plastics and accessories from leading manufacturers. In addition to that, Company acts as a distributor for several foreign furniture manufacturing companies from Belarussia.

• Absence of the European high quality furniture manufacturer in the portfolio of the Company could be used as an opportunity for the Carpanelli SpA to get into cooperation and start doing business in Kazakhstan in cooperation with the company. It is also worth mentioning that “Azimut” specializes in sales and distribution of all kinds of furniture types.

Page 22: Carpanelli in Kazakhstan, 2015

Distributors (5)• Sergio Group Company was founded in 1998, which was marked by the

appearance on the market of Kazakhstan completely new commercial brand - world leader in production the Italian kitchen furniture - Scavolini, recognized and loved a wide range of connoisseurs of high quality and comfort.

• The next stage of development - the emergence in 2002 of the interior salon Sergio Interiors, combines in his concept of all the possibilities for creating a full image of a modern home. In 2008, Sergio Interiors showroom was presented in the capital of our Republic - the city of Astana.

• Today Sergio Group is a member of more than 30 world famous furniture brands such as Scavolini, Natuzzi, Minotti, Poliform, Flexform, Flou, Canella, Toncelli, Santarossa, Bontempi Casa, Angelo Cappellini, Besana, and many others. In the salons Sergio Interiors presented exclusive accessories and tableware from famous European manufacturers - Villeroy & Boch, Christofle, Lalique, Alessi, Guzzini, WMF, CreArt, and many others.

• Expositions of salons Sergio Interiors divided into different stylistic areas - from modern to classic - with finished interior solutions, allowing customers to feel and visually represent furniture in its interior.

Page 23: Carpanelli in Kazakhstan, 2015

Segmentation and targeting• In order to solidify Carpanelli’s positions as a #1 furniture for

medium to high income class, segmented age is 35+ in Astana and Almaty cities (both account for 13% of the total population). Pop (Astana) = 778,200. pop (Almaty) = 1,475,400 as of Jan 1, 2013.

Segment

Description and user profile Main benefits sought

Main criticalities emerged

35yo-45yo

Young and ambitious. Usually owners of entertainment places (lounge bars, restaurants, petroleum stations, casinos, retail shops, supermarkets)

This segment mainly buys Carpanelli’s Contemporary and Glamour lines.

This segment has little children who might ruin furniture. For this reason they might be buying expensive furniture less.

45+ People with a solid established career. Usually, they work at higher echelons of government bodies and national companies

This segment is meant to buy Contemporary and Classic lines.

Adherence to old soviet heritage lifestyle by being a strong patriot of local furniture manufacturers.Source: http://www.stat.gov.kz/faces/wcnav_externalId/publicationsSocialDevelopment?_afrLoop=213155429347515#

%40%3F_afrLoop%3D213155429347515%26_adf.ctrl-state%3Dis3j4x9ny_76

Page 24: Carpanelli in Kazakhstan, 2015

Segmentation and targeting

• Positive implications• furnishing of an increasing premium-class number of homes

both in Astana and Almaty will continue (tendency is to continue for the next 3-5 years) due to population wealth accumulation, increase of GDP per capita, strength of the national currency, local prices stabilization

• residual government entities will continue moving from Almaty to Astana establishing new offices

• by furnishing top management government body cabinets, Carpanelli brand awareness will increase

• Italian furniture quality is considered to be one of the best in the country. Soviet hunger for Western European luxury will be still evident for the next 5 years

Page 25: Carpanelli in Kazakhstan, 2015

Segmentation and targeting

Three leading furniture distributor players (80% of the furniture market): Azimut Group (both in Astana and Almaty), Zhanna and Sergio Interiors (in Almaty) - potential consumers will be targeted through a trustworthy and positive image of the retail stores (3 market leaders) through mass media advertising and city billboards. Additional facilitating distributors are revealed for additional market conquering (Divo Divan, DomusA, Mebel).

It is assumed to occur no potential conflict of interest – negotiation practices with distributors: sign “exclusivity” conditions so that the abovementioned distributors are the only suppliers of the Carpanelli furniture on the Kazakhstan market

35+ segment is placed at the following entities:• Public government bodies (parliament and ministry cabinets)

• Big holdings’ top management (Samruk-Kazyna, Baiterek, Zerde – total 4)• National companies (KazMunaiGas, KazTransGas, KazakhTelecom, KEGOC – total 35)

Page 26: Carpanelli in Kazakhstan, 2015

Positioning

• Based on the targeted market of luxury patrons we have high value in positioning of the firm. The values prepositions perceived by the customers are competitive with the small market and with the competitors.

• Carpanelli has been looked by the customers as the benchmark in the High end Furniture market providing elusive designed furniture.

Page 27: Carpanelli in Kazakhstan, 2015

Luxury

Inlays, Floral Designs

Exclusivity

Brand Identity

Points of Parity:1. Rich Furniture brand

Page 28: Carpanelli in Kazakhstan, 2015

4+1 P Model

Product

Carpanelli line is divided into 3 main product lines.1. Classic2.Contemporary3. Glamour

Price

Carpanelli price range is quite high with the least being 1200EUR.

Promotion

Carpanelli mainly do their promotion through furniture fairs especially “Salone Del Mobile” Milan

Place

Carpanelli is currently operating in 7 countries worldwide, however their manufacturing plant is situated in Italy (Desio)

Personal Selling

As the increase in demand for customized products Carpanelli has approached to personalize furniture for customers under contracting line

Page 29: Carpanelli in Kazakhstan, 2015

4+1 P Model

• Product• Price• Promotion• Place• Personal Selling (Customization)

Page 30: Carpanelli in Kazakhstan, 2015

Market Value perceptions

Durability Design Uniques Detailing Material Quality

Build Quality

Carpanelli

Zhanna

SergioAzimut

Value CurveHigh

Low

*Datasource: http://www.italiankazakh-visit.com/files/presentazioni/Plenary%20DELOITTE%20-%20General%20Description%20of%20Manufacturing%20and%20Trade%20in%20Kazakhstan.pdf

Page 31: Carpanelli in Kazakhstan, 2015

Marketing Strategy

• Target: well-off customers • Economic rise of Kazakhstan market has

changed the trend in the high end furniture market, many customers are opting for exported furniture from the conventional local producers and the other Russian based producers. This change in trend has enforced Foreign companies to enter countries niche bazaar.

Page 32: Carpanelli in Kazakhstan, 2015

*Source: Deloitte Survey Kazakhstan

Market Growth•The global crisis has only slightly affected the Kazakhstan furniture market •Between 2006 and 2010 the CAGR was 11% •The Kazakhstan market is valued at US$ 500 million, with roughly 80% of demand met by imports •The major suppliers are China, Russia, Belarus, Ukraine, Poland and Italy •Imports include not only finished goods but also parts for further assembly •Domestic major production areas include Almaty, Western Kazakhstan and Pavlodar, producing chairs, office furniture and kitchens. •The key retail players focus on medium-to-upper end furniture whose outlets are Zhanna, Akniet, Azimut, Bravo and Sergio, Scavolini and Eco Mebel •In 2007 the 70 thousand m2 MEGA, Lumir and Armada centers opened

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Marketing Strategies

• Distribution Strategies • Branding Strategies• Relationship marketing• Digital / online marketing (Emails)• Niche marketing• Word of Mouth Cultural relevance.

Page 34: Carpanelli in Kazakhstan, 2015

Demand Forecast• Because of lack of data for the entire spectrum of the population, data on spending

habits, consumer preferences, and their monetary assets which are presented in the report were estimated but the estimation is performed in the most possible accurate way in accordance with the available secondary data

• Thus, forecast is done taking into consideration following information found:• Supply does not satisfy current demand in the furniture market of Kazakhstan and more

entrants are expected• The economy is expected to grow at a high rate• This will further develop the consumer base and increase willingness to purchase furniture• Presently mid and high end consumers have preferences towards Italian style• Analysis of the competitors • Segmentation of Kazakhstan furniture market into 4 primary segments• Focus on high class and exclusive furniture for consumer group with income over 4000$ per

month• High-end furniture market absorption ability• Population of the city where majority of people with income higher than 4000$per month live

Page 35: Carpanelli in Kazakhstan, 2015

Four Primary Furniture Market Segments

• Four primary furniture market segments can be differentiated by production category and target consumer group. The market shares of each segment can be reflected in triangle shape with largest share on the bottom: Exclusive furniture for

consumer group with income over

$10,000 per month. High class furniture for consumer group with

income within $4,000- $6,000 per

month Mid-level furniture for consumer group with income within $2,000-

$4,000 per month Moderate (lower-level)

furniture, for consumer group with income

below $2,000 per month

4321

Page 36: Carpanelli in Kazakhstan, 2015

Analysis of Main Competitors

• Our focus is on the high class and exclusive furniture customers• High class furniture is currently mainly represented by Zhanna Trade

House, and partially by Azimut furniture shop• Zhanna Trade House has a net of specialized furniture shops with

major retail capacity in Almaty and Astana, with 50% and 30% accordingly.

• The rest 20% are covered by regional shops• The main portion of the customers of Zhanna are households with

average income of USD4,000-USD6,000 per month• Benchmark prices in Zhanna: • Bed- USD1,500- USD3,500 • Sofa- USD1,000- USD5,000 • Dining table with 12 chairs- USD1,500- USD5,000

Page 37: Carpanelli in Kazakhstan, 2015

Analysis of Main Competitors

• The exclusive furniture market in Kazakhstan is for 80% represented by Sergio Interiors

• A significant portion of the consumers is mainly concentrated in Almaty. • Comparing Almaty and Astana consumers, most of the clients have base homes in

Almaty which they furnish with high profile furniture whereas in Astana they have so called economy class accommodation with furniture of less exclusive quality

• Wealthy people prefer Almaty for residence and purchases (i.e. cars, furniture, accessories, etc)

• Sergio Interiors sells exclusive furniture to a segment with income exceeding USD10,000 per month

• Benchmark prices offered by Sergio Interiors: • Bed- USD6,500 • Sofa- USD8,000- USD16,000 • Dining table with 12 chairs- USD12,000- USD18,000• Average exclusive furnishing of the homes in Kazakhstan is done for minimum

USD70,000

Page 38: Carpanelli in Kazakhstan, 2015

High-End Furniture Market Absorption Ability• To appraise current high-end furniture market absorption ability, an

experience of “Grange” furniture saloon can be taken as an example• The Grange saloon entered the high-end furniture market in February

2005 by introducing a new brand to Kazakhstani market, GRANGE (France), which is well-known throughout the globe as producer of elite furniture of classic design

• The brand is oriented on a high-end buyer• For the period of the first 6 months, the saloon sold over 50 pieces of

the furniture• Benchmark prices in Grange furniture saloon: • 1. Bed- USD6,000 • 2. Sofa- USD4,000 • 3. Dining table with 12 chairs- USD5,000 - USD10,000

Page 39: Carpanelli in Kazakhstan, 2015

Quantification of Demand

• The most significant component of the market absorption capacity is the quantification of demand

• The main difficulty comes from the fact that official income data, and other determining factors that allows for the segmentation of populations, is not easily available

• The underlining difficulty is that wealthy populations, particularly those within the former Soviet Union, are determined never to formally disclose their actual wealth due to tax reasons

• At the same time they value being publicly associated with wealthy class and spend considerable funds on posh products which can directly relate them to the Kazakhstani elite

• Given a data-poor environment, the relevant socio-economic data partially maintained by secondary information sources have been used to determine and assess the wealthy and higher middleclass segment of the Kazak population used for Carpanelli furniture demand forecast

Page 40: Carpanelli in Kazakhstan, 2015

Marketing Budget and Demand Forecast

• According to the latest available data in World Bank database income share of highest 20 % is 38.3%

• GDP of Kazakhstan in 2013 was 231,876,282,134 US$

• Highest 20% owes 231 876 282 134,00*0.383=88 808 616 057,322

• Taking into consideration the fact that the most of wealty people live in Almati which has population of 1,507,737 and all other factors previously mentioned in the paper the estimation on potential customers can be done

• Our focus is on the high class and exclusive furniture customers, thus on the consumer group with income over 4000$ which according to our estimation represent 30% of population of Almaty: 1 507 737*0.3=452 321 people

Advertising ExpensesFurniture Exposition in Milan (26$/

sqm+vat22%)*100sqm=3172$Furniture Exposition in Almaty

24$/sqm*100sqm=2400$

Total Marketing Expenses 5 572$

Page 41: Carpanelli in Kazakhstan, 2015

Financial Statement Estimation

• Since the Carpanelli furniture prices can be set within the boarders of Grange furniture saloon prices , we consider Grange saloon as a good base for estimation of number of products sold during the year, thus we take

• 150 (number of products) for the first year• Trough competitor analysis it is found the most popular high end furniture products in Kazakhstan

are bad, sofa and dining table with 12 chairs and thus prices of the same furniture in Carpanelli are estimated based on its exclusive furniture competitor prices:

Bed 7000$ Sofa 10000$ Dining table with chairs 15 000$• Thus, the average value of single purchase is taken to be 7000+10000+15000)/3=10 667 $• Different scenarios are made based on quantity of furniture sold and costs of goods sold• Optimistic scenario: Quantity sold is taken to be 150 (based on direct competitor’s report from 2005.) COGS are taken to be 30% (based on the previous experiences of the owner of Carpanelli )

Page 42: Carpanelli in Kazakhstan, 2015

Financial Statement Estimation

• Pessimistic scenario: Quantity sold decreased to 84 (taking into account 2 big currency devaluations that happened in period

between 2005. and 2015. which made imports more expensive and thus less attractive) • After the 25% devaluation of the Tenge on February 4, 2009 the exchange rate was set to 150 tenge per dollar +/-

5 tenge. • In February 2014, the National Bank of Kazakhstan announced devaluation of the national currency. The new

exchange rate of tenge was 185 tenge to 1 US Dollar. (Previously being 155,5 tenge to 1 US Dollar)-19%devaluationDevaluation has been carried out in order to increase foreign competitiveness and support commodity producers of Kazakhstan in world market.

COGS are taken to be 50% (based on the previous experiences of the owner of Carpanelli )• Since current supply does not satisfy demand in the furniture market of Kazahkstan,also in the market are represented

only few serious competitors (Zhanna has retail capacity of 80% in Kazahkstan in high end furniture and exclusive furniture market in Kazakhstan is for 80% represented by Sergio Interiors) we can say the economy is expected to grow at a high rate

• Thus, we can take yearly growing rate to be 12% in optimistic scenario and 10% in pessimistic (based on real data, between 2006 and 2010 the CAGR was 11% )

• We took distributer’s percentage on net sale for rendering their services to be 10%, since it is the most common scenario in most of ex soviet union countries (based on the experiences of the entrepreneurs from Serbia we interviewed ,as well based on the information we gained from the employee of one of the biggest furniture distributer in Kazakhstan).

• Negotiation between distributors and Italian companies goes smoothly, and not high percentages on net sales for distributers are needed to make them cooperate with recognizable companies as Carpanelli is.

Page 43: Carpanelli in Kazakhstan, 2015

Estimated Income Statement for the First 3 Years of Operation

• Optimistic scenario:

• Pessimistic scenario:

2015 2016 2017Revenues 1 600 050 1 792 056 2 007 103Cost of goods sold (30%)

480 015 537 617 602 131

Marketing expenses

5 572 5 572 5 572

EBIT 1 125 607 1 260 011 1 399 400Distributor’s service fee 10%

112 560 126 001 139 940

Gross Profit 1 013 047$ 1 134 010$ 1 259 460$

Page 44: Carpanelli in Kazakhstan, 2015

Estimated Income Statement for the First 3 Years of Operation

• Pessimistic scenario: 2015 2016 2017

Revenues 896 028 985 631 1084 194COGS (50%) 448 014 492 815 542 097Marketing expenses

5572 5572 5572

EBIT 442 442 487 243 536 525Distributor’s service fee 10%

44 244 48 724 53 652

Gross Profit 398 198$ 438 519$ 482 872$

Page 45: Carpanelli in Kazakhstan, 2015

Conclusion

• According to the financial analysis done, Kazakhstan furniture market offers large opportunity for Carpanelli

• Furniture market in Kazakhstan has a considerable potential for European importers, mainly due to existing gap between ‘exclusive’ and ‘high class furniture’ suppliers which marks out a potential niche for European high quality furniture targeting growing higher middleclass households with income between USD 4,000 to USD10,000

• Another motive for European furniture companies to enter Kazakhstani market is a qualitative factor of demand which is marked by growing customers’ preference towards European contemporary furniture styles, which are rapidly replacing previously trendy ‘soviet-era’ style