A.

External Analysis (Industry) Classify the following factors of international and

industry environment by selecting the factors which have a positive impact-
opportunities, mark “O” or negative impact-threats mark “T”. In the case where there
is no significant effect mark (-). Also add two other opportunities and threats of great
importance for the international activity of the company.

ENVIRONMENTAL AND SECTORAL FACTORS O, T, or (-)

1. Reduction of barriers (custom tariffs, quotas) to international O
trade
2. Technical barriers to international trade T/O
3. Economic integration of countries (EU, NAFTA, ASEAN, etc.) O
4. Use of internet for international business O
5. Improvement of the transport systems O
6. Level of maturity of the internal market O
7. Appearance of emerging markets as manufacturers T
8. Appearance of emerging markets as consumers O
9. Concentration of the ownership of the companies -
10. Increasing power of retail O
11. Appearance of new products T
12. Changes in consumer behaviour T
13. Unpredictable changes of economic conditions T
14. Potential political instability or government change T

1. Reduction of barriers (custom tariffs, quotas) to international trade

Tariffs and taxes increase the cost of your product to the foreign buyer, and may affect
your competitiveness in the market. That tariff reduction creates many economic
benefits. Proponents of the WTO have emphasized its positive results by pointing to
reductions in the cost of living, increases in income, and improvements in efficiency.
Russia’s custom tariffs on alcoholic beverages or spirits where Emeperador Inc.’s
products fall under is 20%. It is the same rate with the imposed VAT. Compared to
other countries from country profile, Russia has the most lenient and cheaper
import taxes, duty, and excise tax imposed on alcohols.

2. Technical barriers to international trade

A technical barrier to trade (TBT) is any regulation, standard or procedure that could
make exporting goods to another country more difficult. TBTs are often greater obstacles
to exporters than tariffs (import fees). Russian Federation’s TBT are import tariffs,
requirements and documentation pf importation, labelling or marking requirements,
temporary entry, prohibited and restricted imports, and custom regulations.
All importers of alcohol products must have an activity license to produce or
distribute and store such products, placing a burden on importers that should be
applied to distributors. In addition, pursuant to the new customs union licensing
regime, importers must obtain an import license for each type of alcoholic
product under a burdensome and time-consuming process.
Other than that, TBT for alcoholic beverages are just the import taxes, duties, and excise
taxes imposed together with the WTO regulations on trading such goods.
 The World Trade Organization’s Technical Barriers to Trade Agreement aims to reduce
these barriers to trade, as do most free trade agreements. The goal in both cases is to
create a more open and competitive marketplace.

3. Economic integration of countries

Economic integration can reduce the costs of trade, improve the availability of goods and
services, and increase consumer purchasing power in member nations. Russia is the
EU's fifth largest trading partner and the EU is Russia's largest trading partner,
with a two-way trade in goods value of €232 billion in 2019. In 2019 Russia was the
origin of ca. 40% of EU imports of gas and 27% of EU imports of oil. Due to the
large value these imports, EU’s trade deficit with Russia (€ 57 billion in 2019) is
only second to EU’s trade deficit with China. Russia and Philippines are both
members of ASEAN and APEC. Russia and Ph have bilaterial relations in different
fields for the past 40 years. There is also an ongoing agricultural trade between
the two countries which started last 2019.

4. Use of internet for international business

One of the immediate impacts of the use of the internet in international business was the
expansion of market for goods and services. A study of the relationship between
expansion of the use of internet and the level of international trade revealed a significant
relationship between the two elements.

In 2019, nearly 83 percent of the Russian population aged between 15 to 75

years accessed the internet. Hence, the internet penetration marked a
29 percent growth since 2009 and 4.85 percentage point increment compared to
the previous year's figure.

Russians spent over seven hours surfing the internet on a daily basis, which was
nearly an hour longer than the daily average measured in 2018. Mobile devices
were the most employed gadgets for going online in 2019, with smartphones
being significantly more popular than the rest of such appliances. The most active
smartphone users for such purposes in Russia was the young population aged
between 12 and 24 years, as of February 2019.
Update: 2020, 90% - ranked 8th worldwide
RUSSIA – 90%
US – 96%; 3RD
GERMANY – 86%; 13th
AUSTRALIA – 86%; 33rd
HUNGARY – 77%; 62nd

The Federation is in constant development with regard to online commerce. With

its 118 million active users on the Internet, it occupies the seventh place among
the countries with the highest number of users globally. E-commerce accounted
for just 1.4% of Russia's economy in 2019, according to research firm Data
Insight. In the first four months of 2020, 65 million Russians decided to shop
online. Indeed, after the COVID-19 pandemic, e-commerce penetration in Russia
has increased from 7% of total retail sales in 2019 to about 11% in 2020
5. Improvement of the transport systems
Because of its intensive use of infrastructures, the transport sector is an important
component of the economy and a common tool used for development. This is even more
so in a global economy where economic opportunities have been increasingly related to
the mobility of people and freight, including information and communication
technologies. When transport systems are efficient, they provide economic and social
opportunities and benefits that result in positive multiplier effects such as better
accessibility to markets, employment, and additional investments. The outcome of
improved capacity and efficiency where transport provides employment, added value,
larger markets, as well as time and costs improvements. The overall demand of an
economy is increasing.

Transport Strategy of Russia for the period up to 2030 developed by the Ministry
of Transport of the Russian Federation provides the following:
 creation of a basic transport network without bottlenecks and holes;
 elimination of disparity in the level of development of the country's
regional transport infrastructure;
 implementation of priority infrastructure projects that ensure the unity
of the country's transport infrastructure;
 development of the transport network based on national transport
corridors;
 convergence of national transport corridors with international transport
corridors of European and Asian transport systems.

The developed Transport Strategy of the Russian Federation until 2030 was a
reference point for entering the world transport community, increasing the export
of transport services and implementing the transit potential of the country in the
International Transportation Corridor system

6. Level of maturity of the internal market

7. Appearance of emerging markets as manufacturers
“Emerging markets” is a term that refers to an economy that experiences considerable
economic growth and possesses some, but not all, characteristics of a developed
economy. Emerging markets are countries that are transitioning from the “developing”
phase to the “developed” phase.

Currently, some notable emerging market economies include India, Mexico,

Russia, Pakistan, Saudi Arabia, China, and Brazil.

8. Appearance of emerging markets as consumers

9. Concentration of the ownership of the companies
10. Increasing power of retail
The intensive development of retail chains and high-level of increasing of their power
caused the shifting of powers, changes of positions and the establishment of new
relationships between the members of marketing channels
 Russian retail sales were estimated at RUB24,560.8 billion and are projected to
grow at a CAGR of 4.3% during 2016-2021 to reach RUB30,254.9 billion by 2021.

In the first four months of 2020, 65 million Russians decided to shop online.
Indeed, after the COVID-19 pandemic, e-commerce penetration in Russia has
increased from 7% of total retail sales in 2019 to about 11% in 2020.

11. Appearance of new products

f growing competition for more mature and discriminating markets is a
major trend for the next decade, the pursuit of improved product quality
and of excellence will be an essential management response. New
product development is a vital part of marketing policy for all companies
and organisations, as it represents one of the key means by which
corporate renewal is achieved and a future secured. 

Successful new products can set industry standards.

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12. Changes in consumer behaviour

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13. Unpredicatble change in economic conditions

In the commercial world, change may be regarded as the only constant. Predictable change can
be managed, but it is the unpredictable change that usually causes problems. For the
commercial manager, responsible for producing profitable income for a business, trying to
anticipate the future , will always be difficult. Changes in demand, resulting from fashion or
technology are just two of the problems that confront the commercial manager. But there are
also events which may not be obviously predictable, but which may give rise to new
opportunities or alternatively, produce unexpected threats to the income supply or to business
operations in general.
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How to prepare

Producing the business plan, outlining how investment and resources are to be used profitably, is
the commercial manager responsibility. As part of the planning process it is prudent to prepare
separate contingency plans to cope with various possible eventualities. This is especially
important for large organisations, as their size and organisation tends to preclude a rapid
response to changing conditions. Whereas, smaller companies tend to have greater flexibility,
enabling a faster reaction to changed conditions and opportunities.

15. Political instability

The standard definition of political instability is the propensity of a government collapse
either because of conflicts or rampant competition between various political parties. Also,
the occurrence of a government change increases the likelihood of subsequent changes.
Political instability tends to be persistent.
Economic growth and political stability are deeply interconnected. On the one hand, the
uncertainty associated with an unstable political environment may reduce investment and
the pace of economic development. On the other hand, poor economic performance may
lead to government collapse and political unrest. However, political stability can be achieved
through oppression or through having a political party in place that does not have to
compete to be re-elected. In these cases, political stability is a double edged sword. While
the peaceful environment that political stability may offer is a desideratum, it could easily
become a breeding ground for cronyism with impunity. Such is the dilemma that many
countries with a fragile political order have to face.

16. Premiumization –
the action or process of attempting to make a brand or product appeal to consumers by
emphasizing its superior quality and exclusivity.

It is an opportunity for EMPI because empi is already 21 years in the industry and
Emperador Inc. is the Philippines biggest liquor company and the world's largest brandy
manufacturer. It means EMPI has establish their reputation enough for them to market their
products emphasizing its superior quality and exclusivity.

Premium-and-above brands are forecasted to increase their volume

market share by approximately one percentage point between 2019 and 2024,
as the premiumization trend continues to influence market developments.

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growth

17.