russian federation
RUSSIAN FEDERATION Market network Plan & Sales volume forecast
Geographical division Russia is the largest country in the world, covering ninth’s of the Earth land area. It is the ninth most populated country in world. It extends across the whole of northern Asia and 40% of Europe, spanning 9 time zones. Russia Federation administrative structure is divided in 8 Federal Districts. See below Federal Districts are made of Provinces, Territories and Republics, comprising a total of 83 Federal Subjects. •Federal subjects: 46 provinces (oblast), 21 republics, 9 territories, 1 Jewish autonomous oblast and 2 federal cities
Northwest region
South Russia
Ural
Northern Caucasus
Siberia
Central Russia
Far East
Volga
Potential population spectrum Russian population and Harley-Davidson’s target spectrum Total Russian population: 150 M Property income
Target audience by age group
Other income Entrepreneurial income Labour remun. (Includes Hidden wages)
19.000.000 men
21mll. russians earn over 25000RUR/month
Potential population spectrum Russia: geographical and demographic coverage of proposal Region Northwest Central Volga South Russia Ural Far East Siberia Caucasus Total
Region population 13.463.000 37.125.000 30.157.000 13.715.000 12.255.000 6.460.000 19.545.000 6.187.000 138.907.000
Males Females Total
in Russia 65.317.000 76.291.800 141.608.800
Regional pop Cover age Northwest Central Volga South Russia Ural Far East Siberia Caucasus Total
6.212.000 12.065.270 19.611.000 11.982.000 11.295.000 3.388.000 12.627.000 0 77.180.270
9,69% 26,73% 21,71% 9,87% 8,82% 4,65% 14,07% 4,45% 100,00%
Region Northwest Central Volga South Russia Ural Far East Siberia Caucasus Total
Total population 13.463.000 37.125.000 30.157.000 13.715.000 12.255.000 6.460.000 19.545.000 6.187.000 138.907.000
geogr aphical cover age population 6.212.000 12.065.270 19.611.000 11.982.000 11.295.000 3.388.000 12.627.000 0 77.180.270
Male 46% 54% 100,00%
Urban population Rural population
Main cities pop cover age 6.212.000 11.853.000 6.375.000 2.739.000 2.995.000 1.157.000 4.651.000 0 35.982.000
100,00% 98,24% 32,51% 22,86% 26,52% 34,15% 36,83% 0,00% 46,62%
101.402.110 37.504.890 138.907.000
46.771.681 17.299.115 64.070.796
46,14% 32,50% 65,03% 87,36% 92,17% 52,45% 64,60% 0,00% 55,56% 35-45 yeas old 13.247.334 4.899.699 18.147.033
Out of the 77 million reached by setting up in the selected regions, 35 million people Leave in cities we are proposing to set up a dealership, that is a 26% of total Russian population.
Factors impacting plan Considerations: This analysis is based fully on geographical demographic concentration. Other variables to consider: • Regional standards of living • Average wage of population in the regions and cities to be considered • Major sources of income for inhabitants by regions/cities • Regional distribution of male and female population • Further analysis of weather conditions Opportunity investigation: • Motorcycles brands represented in the region/city • Local motorcycles clubs for information • Motorcycle registrations data if (any) existing • Car sales by brand • Luxury goods sales and brands represented • On the field investagion
Potential audience by region Russian Federation
Population by Federal Districts and major cities
Potential audience by region Central Russia
One of the most populated districts in Russia, about 27% of total population in Russia and With higher income per capita. It is also most modern and advance social strucutre. Major city and capital Moscow and Moscow region Hold about 50% of population of district but other cities are aslo important in terms of population.
Potential audience by region South Russia
South Russia only holds about 10% of Russia population. Nevertheless its climate conditions are more attractive for riding. Various riding clubs already operate in the region. The area has 3 major cities which would cover the whole region, are well developped and offer main western products and services. It is a 1 day riding distance from Moscow with no major risks on the way and good connections between cities. Secure and easy for logistics
Potential audience by region Volga ?
?
20% of Russian population leave in Volga region having 4 cities with over 1m. Inhabitants and 2 almost reaching the 1m. Almost 50% (67m.) of Russian population leave in Volga+Moscow Districts which are neighbord regions. That is: highest amount of people leave in a small portion of total Russian territory Reported GDP per capita is below the national average, and the regional wage levels are one-sixth below the national average. .
Potential audience by region Ural
Major industrial aera in Russia that holds 9% ot total population and ivery much concentrated around two major cities, Jekaterimburg and Cel’abinsk. Ural motorcycles manufacturer is located nearby Jekaterimburg which gives a good motorcycle riding culture to inhabitants.
Ural economic region has a large [[Gross Domestic Product]] (GDP), mostly due to the urban economic activity. The GDP per capita is above the national averageThe city is among the 4 most important cities of the country economically for its industrial activity. In terms of income, inhabitants are still a step below Moscow and St. Peterburg. Weather conditions are very similar to Moscow region.
Potential audience by region Northwest region
Northwest region is very vast only holding a 9,6% of total Russian population. In this region main activity occurs around St. Petersburg and Kaliningrad areas. Highest influence from neighbord European countries giving a much western than found in other Russian areas. No other dealer than the actual HD St. Petersburg is projected mid term in this region.
Potential audience by region Siberia
Siberia holds about 14% of total Russian population most of it concentrated in south Siberia. Weather conditions are extreme and riding season very, very short: from May to mid September. Even do it is very far north, the total population of Krasnoyark deserves the analysis to set up a small dealership operations.
Potential audience by region Far East
Potential audience by region Northern Caucasus
No dealers are projected in this region. Conflict area & war zone
Network plan Projected mid/ long term dealer network in Russian Federation is 26 Harley-Davidson dealers. At the moment we have 4 already operating * + 2 short term opening **. Areas of coverage
3
1
4
Northwest region •St. Petersburg1 * •St. Petersburg2
2 Siberia
Ural •Jekaterimburg** •Cel’abinsk •T’umen
3
•Novorsibirsk •Barnaul
•Krasnodar* •Rostov •Volvograd
Northern Caucasus
•Vladivostok •Chabartovsk
Omsk Irkutsk
6 South Russia
Far East
6 Volga
Central Russia •Moscow x 3 (2)* (1)** •Voronez •Tula •Belgorod
•Niznij Novgorod •Samara •Saratov
Ufa Kazan Perm
RUSSIA SALES VOLUMES – SCENARIOS 1- 3 Scenario 1 with projected network Year 2012
2010 network 4 H-D Moscow H-D Moscow 2 St. Petersburg H-D Krasnodar
Central R Central R Northwest South R
2011 network 2010 network H-D Moscow 3 H-D Yekaterimburg H-D Samara H-D Niznij Novgorod
Year 2013
number of dealers 12
number of dealers 16
8 Year
Central R Ural Volga Volga
2014
Year 2015
number of dealers 20
number of dealers 25
Average sales x dealer 70 80 90 100 110
Total sales
Average sales x dealer 70 80 90 100 110
Total sales 1.120 1.280 1.440 1.600 1.760
Average sales x dealer 70 80 90 100 110
Total sales 1.400 1.600 1.800 2.000 2.200
Average sales x dealer 70 80 90 100 110
Total sales 1.750 2.000 2.250 2.500 2.750
840 960 1.080 1.200 1.320
2012 network 12 2011 network H-D Volvograd H-D Voronez H-D Novorsibisk H-D Kazan
South R Central R Siberia Volga
2013 network 16 2012 network H-D Rostov H-D Vladivostok H-D Ufa H-D Tula
South R Far East Volga Central R
2014 network 20 2013 network H-D Belgorod H-D Omsk H-D Cel'abisnk H-D Saratov
Central R Siberia Ural Volga
2015 network 25 2014 network H-D Perm H-D Chabarosvk H-D Tumen H-D Irkustk H-D Barnaul
Volga Far East Ural Siberia Siberia
Sales volume projections Key factors: 1. 2. 3. 4. 5.
Partner profiling Channel plan Logistics plan Calendarization Geographical network coverage
• To reach some conclusions and proposals we consider the following data: – – – – –
Russian Analysis HDE expectations from Russian market Resources allocation Market characteristics by region Previous experience from HD staff in the field
Sales volume projections 1.- Partner profiling Option 1: Getting as many partners as dealers we plan. Due to the country characteristics, the option of small scale partner will difficult and delay the market development, feasability of network plan and therefore the sales forecast and calendar for both. The business per dealer needs to be leveraged with return and opportunity cost for investors.
Option 2: Getting regional partner to run various sites and/or act as 3PL & IOR. The total business opportunity will take advantage of sinergies and know-how of big scale partners. This option will lower entry cost, lower impact of issues faced in each site at all phases of process and operations. It will simplify management and communication for H-D Russia subsidary.
Propose to follow option 2 2.- Distribution plan This refers the prospecting, appointment and set up methodoly and conditions scheme to be applied in Russia. We require to determine and adapt the above to meet the target plan. We have to do a flexible thinking exercice to make the business attractive to those partners in limited potential areas and major issues.
Sales volume projections 3.- Logistics We identify logistics as amajor milestones for H-D Russia and for dealers other than in major cities: Moscow and St. Petersburg. This includes: transportation from EDC (if this is the case), Stockage, delivery times, burocracy, and of other risks inherent of operating in Russia. The size of the country, spread of cities, infrastructures and other variables will difficult independent “one by one” model set up. It makes sense it would be easier for an big size organization with experience on this matters, business structure, back up and resources to support and share with H-D Russia part of the organization of Logistics.
4.- Market outreach calendar Network Plan and sales must be reviewed and adapted to a conservative calendar under actual prospecting and appointing system,
5.- Geographical network coverage Proposal is to go from west to east. Start developping by Central region, South region and Volga. - General socio-economical conditions above russian average, - Easier logistics - Population coverage of about 60 % of Russia and
Geographical division Russia is the largest country in the world, covering ninth’s of the Earth land area. It is the ninth most populated country in world. It extends across the whole of northern Asia and 40% of Europe, spanning 9 time zones. Russia Federation administrative structure is divided in 8 Federal Districts. See below Federal Districts are made of Provinces, Territories and Republics, comprising a total of 83 Federal Subjects. •Federal subjects: 46 provinces (oblast), 21 republics, 9 territories, 1 Jewish autonomous oblast and 2 federal cities
Northwest region
South Russia
Ural
Northern Caucasus
Siberia
Central Russia
Far East
Volga
Potential population spectrum Russian population and Harley-Davidson’s target spectrum Total Russian population: 150 M Property income
Target audience by age group
Other income Entrepreneurial income Labour remun. (Includes Hidden wages)
19.000.000 men
21mll. russians earn over 25000RUR/month
Potential population spectrum Russia: geographical and demographic coverage of proposal Region Northwest Central Volga South Russia Ural Far East Siberia Caucasus Total
Region population 13.463.000 37.125.000 30.157.000 13.715.000 12.255.000 6.460.000 19.545.000 6.187.000 138.907.000
Males Females Total
in Russia 65.317.000 76.291.800 141.608.800
Regional pop Cover age Northwest Central Volga South Russia Ural Far East Siberia Caucasus Total
6.212.000 12.065.270 19.611.000 11.982.000 11.295.000 3.388.000 12.627.000 0 77.180.270
9,69% 26,73% 21,71% 9,87% 8,82% 4,65% 14,07% 4,45% 100,00%
Region Northwest Central Volga South Russia Ural Far East Siberia Caucasus Total
Total population 13.463.000 37.125.000 30.157.000 13.715.000 12.255.000 6.460.000 19.545.000 6.187.000 138.907.000
geogr aphical cover age population 6.212.000 12.065.270 19.611.000 11.982.000 11.295.000 3.388.000 12.627.000 0 77.180.270
Male 46% 54% 100,00%
Urban population Rural population
Main cities pop cover age 6.212.000 11.853.000 6.375.000 2.739.000 2.995.000 1.157.000 4.651.000 0 35.982.000
100,00% 98,24% 32,51% 22,86% 26,52% 34,15% 36,83% 0,00% 46,62%
101.402.110 37.504.890 138.907.000
46.771.681 17.299.115 64.070.796
46,14% 32,50% 65,03% 87,36% 92,17% 52,45% 64,60% 0,00% 55,56% 35-45 yeas old 13.247.334 4.899.699 18.147.033
Out of the 77 million reached by setting up in the selected regions, 35 million people Leave in cities we are proposing to set up a dealership, that is a 26% of total Russian population.
Factors impacting plan Considerations: This analysis is based fully on geographical demographic concentration. Other variables to consider: • Regional standards of living • Average wage of population in the regions and cities to be considered • Major sources of income for inhabitants by regions/cities • Regional distribution of male and female population • Further analysis of weather conditions Opportunity investigation: • Motorcycles brands represented in the region/city • Local motorcycles clubs for information • Motorcycle registrations data if (any) existing • Car sales by brand • Luxury goods sales and brands represented • On the field investagion
Potential audience by region Russian Federation
Population by Federal Districts and major cities
Potential audience by region Central Russia
One of the most populated districts in Russia, about 27% of total population in Russia and With higher income per capita. It is also most modern and advance social strucutre. Major city and capital Moscow and Moscow region Hold about 50% of population of district but other cities are aslo important in terms of population.
Potential audience by region South Russia
South Russia only holds about 10% of Russia population. Nevertheless its climate conditions are more attractive for riding. Various riding clubs already operate in the region. The area has 3 major cities which would cover the whole region, are well developped and offer main western products and services. It is a 1 day riding distance from Moscow with no major risks on the way and good connections between cities. Secure and easy for logistics
Potential audience by region Volga ?
?
20% of Russian population leave in Volga region having 4 cities with over 1m. Inhabitants and 2 almost reaching the 1m. Almost 50% (67m.) of Russian population leave in Volga+Moscow Districts which are neighbord regions. That is: highest amount of people leave in a small portion of total Russian territory Reported GDP per capita is below the national average, and the regional wage levels are one-sixth below the national average. .
Potential audience by region Ural
Major industrial aera in Russia that holds 9% ot total population and ivery much concentrated around two major cities, Jekaterimburg and Cel’abinsk. Ural motorcycles manufacturer is located nearby Jekaterimburg which gives a good motorcycle riding culture to inhabitants.
Ural economic region has a large [[Gross Domestic Product]] (GDP), mostly due to the urban economic activity. The GDP per capita is above the national averageThe city is among the 4 most important cities of the country economically for its industrial activity. In terms of income, inhabitants are still a step below Moscow and St. Peterburg. Weather conditions are very similar to Moscow region.
Potential audience by region Northwest region
Northwest region is very vast only holding a 9,6% of total Russian population. In this region main activity occurs around St. Petersburg and Kaliningrad areas. Highest influence from neighbord European countries giving a much western than found in other Russian areas. No other dealer than the actual HD St. Petersburg is projected mid term in this region.
Potential audience by region Siberia
Siberia holds about 14% of total Russian population most of it concentrated in south Siberia. Weather conditions are extreme and riding season very, very short: from May to mid September. Even do it is very far north, the total population of Krasnoyark deserves the analysis to set up a small dealership operations.
Potential audience by region Far East
Potential audience by region Northern Caucasus
No dealers are projected in this region. Conflict area & war zone
Network plan Projected mid/ long term dealer network in Russian Federation is 26 Harley-Davidson dealers. At the moment we have 4 already operating * + 2 short term opening **. Areas of coverage
3
1
4
Northwest region •St. Petersburg1 * •St. Petersburg2
2 Siberia
Ural •Jekaterimburg** •Cel’abinsk •T’umen
3
•Novorsibirsk •Barnaul
•Krasnodar* •Rostov •Volvograd
Northern Caucasus
•Vladivostok •Chabartovsk
Omsk Irkutsk
6 South Russia
Far East
6 Volga
Central Russia •Moscow x 3 (2)* (1)** •Voronez •Tula •Belgorod
•Niznij Novgorod •Samara •Saratov
Ufa Kazan Perm
RUSSIA SALES VOLUMES – SCENARIOS 1- 3 Scenario 1 with projected network Year 2012
2010 network 4 H-D Moscow H-D Moscow 2 St. Petersburg H-D Krasnodar
Central R Central R Northwest South R
2011 network 2010 network H-D Moscow 3 H-D Yekaterimburg H-D Samara H-D Niznij Novgorod
Year 2013
number of dealers 12
number of dealers 16
8 Year
Central R Ural Volga Volga
2014
Year 2015
number of dealers 20
number of dealers 25
Average sales x dealer 70 80 90 100 110
Total sales
Average sales x dealer 70 80 90 100 110
Total sales 1.120 1.280 1.440 1.600 1.760
Average sales x dealer 70 80 90 100 110
Total sales 1.400 1.600 1.800 2.000 2.200
Average sales x dealer 70 80 90 100 110
Total sales 1.750 2.000 2.250 2.500 2.750
840 960 1.080 1.200 1.320
2012 network 12 2011 network H-D Volvograd H-D Voronez H-D Novorsibisk H-D Kazan
South R Central R Siberia Volga
2013 network 16 2012 network H-D Rostov H-D Vladivostok H-D Ufa H-D Tula
South R Far East Volga Central R
2014 network 20 2013 network H-D Belgorod H-D Omsk H-D Cel'abisnk H-D Saratov
Central R Siberia Ural Volga
2015 network 25 2014 network H-D Perm H-D Chabarosvk H-D Tumen H-D Irkustk H-D Barnaul
Volga Far East Ural Siberia Siberia
Sales volume projections Key factors: 1. 2. 3. 4. 5.
Partner profiling Channel plan Logistics plan Calendarization Geographical network coverage
• To reach some conclusions and proposals we consider the following data: – – – – –
Russian Analysis HDE expectations from Russian market Resources allocation Market characteristics by region Previous experience from HD staff in the field
Sales volume projections 1.- Partner profiling Option 1: Getting as many partners as dealers we plan. Due to the country characteristics, the option of small scale partner will difficult and delay the market development, feasability of network plan and therefore the sales forecast and calendar for both. The business per dealer needs to be leveraged with return and opportunity cost for investors.
Option 2: Getting regional partner to run various sites and/or act as 3PL & IOR. The total business opportunity will take advantage of sinergies and know-how of big scale partners. This option will lower entry cost, lower impact of issues faced in each site at all phases of process and operations. It will simplify management and communication for H-D Russia subsidary.
Propose to follow option 2 2.- Distribution plan This refers the prospecting, appointment and set up methodoly and conditions scheme to be applied in Russia. We require to determine and adapt the above to meet the target plan. We have to do a flexible thinking exercice to make the business attractive to those partners in limited potential areas and major issues.
Sales volume projections 3.- Logistics We identify logistics as amajor milestones for H-D Russia and for dealers other than in major cities: Moscow and St. Petersburg. This includes: transportation from EDC (if this is the case), Stockage, delivery times, burocracy, and of other risks inherent of operating in Russia. The size of the country, spread of cities, infrastructures and other variables will difficult independent “one by one” model set up. It makes sense it would be easier for an big size organization with experience on this matters, business structure, back up and resources to support and share with H-D Russia part of the organization of Logistics.
4.- Market outreach calendar Network Plan and sales must be reviewed and adapted to a conservative calendar under actual prospecting and appointing system,
5.- Geographical network coverage Proposal is to go from west to east. Start developping by Central region, South region and Volga. - General socio-economical conditions above russian average, - Easier logistics - Population coverage of about 60 % of Russia and
