RUSSIAN PURCHASING POWER & WESTERN AUTOMAKERS
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2.Why do you think the kit-assembly approach was not more successful in Russia? It was a common automaker production/distribution strategy employed in much of the world's emerging markets, but was not working in Russia.
â?¢Complete knockdown kits (CKDs) and semi-knockdown kits (SKDs) are methods used by some of the major global automakers like GM when it enters a smaller emerging market
â?¢Kits utilize local low-cost labor for much of the final assembly, and little capital has to be actually injected into the country to initiate production
â?¢Russian market, however, was not a small market (more than 1 million new cars sold there in 2000 alone (the market actually hit 2 million new cars in 2007)
â?¢GM in the past had tried bringing in Chevy Blazer kits, but had made a major cultural mistake in that the actual kits had been built in Brazil, a country with a terrible product quality reputation in Russia
â?¢Kits would only be effective if there were limited low-end choices to average consumers; but high-quality used cars periodically flooded the Russian market - resulting in high-quality and low priced competition for kit market segments
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The Russian's Rouble collapse moved the structure of the Russian automobile market in several ways. The tumble of the Rouble pushed up the price the exporters would receive for their cars. In addition, the Russians would be able to export their cars easily and get more Roubles for their exports. At the same time, the fall of the Rouble made it difficult for the importers to thrust into the Russian market. The cost of importing cars would be much higher and at high prices it would be difficult to sell cars n Russia. The crumple of the Rouble made it difficult for the Russain consumers to afford Western cars. The weak Rouble also inflated local demand because seeing the value of ...
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