Business and marketing in Baltic region II

1
Business and marketing in Baltic regionII

• Tiit Elenurm
• Estonian Business School
• tiit.elenurm_at_ebs.ee

2
HOW HISTORY AND CULTURAL HERITAGE INFLUENCE
BUSINESS IN THE BALTIC COUNTRIES

• Background of living under the command of foreign
  rulers (700 dark years of serfdom). Only
  Lithuanians have had their kings.
• Protestant religious tradition in Estonia and
  Latvia versus Catholic religion in Lithuania.
• Open to cultural and business influences from
  different larger cultural areas (Scandinavian,
  Russian, German
• Small nations know other nations and are able to
  understand their differences.
• Diaspora.

3
The Hanseatic League free trade of Middle Ages?

• The Hanseatic League (The late Middle Ages)
  consisted of a network of about 70 cities in the
  countries surrounding the Baltic Sea, which
  associated themselves for protection and
  enlarging of their commerce.
• The Hanseatic merchants had a strong influence
  also on cultural, political and judicial
  development of the BSR, and gave rise to close
  political links in the region.
• Still there is a lot of intra-regional trade in
  the region, and the Baltic countries have their
  neighbors as their main trading partners.

4
Fons Trompenaars how culture influences
management practices
Matrix by Fons Trompenaars

decentralized
Incubator
Guided missile
USA
Sweden
formal
informal
France
Germany
Family
Eiffel tower
Spain
centralized
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Baltic customers are they different from the
old Europe?

• Importance of money money is the measure of
  many (if not all) things and money provides
  security. Individual success and not being a
  loser is high priority.
• Openness to new situations, readiness to test new
  products and technologies
• Fancy car and a new home as a tool of social
  recognition
• People are only getting used to loan-based
  consumption style but consumption loans have
  increased rapidly during recent 2-3 year.
• Rapid construction of super- and hypermarkets
  during recent years. Consumers switching from
  food markets to modern hypermarkets

6
Values of Baltic people

• Asta Kaal, Emor (based on RISC survey)
• Estonians are more similar to Spaniards than to
  Finns as flexible adaptators to changes and as
  self-centered experience-based self-developers.
  Everyone is maker of its on destiny. Although
  temperament is different.
• Latvian inhabitants pay attention to their looks
  as the opportunity to express their personality
  and are ready to give up other conveniences in
  the name of that and the feeling of security.
• Lithuanian inhabitants consider the feeling of
  togetherness on the level of the society and
  family important.

7
Baltic consumers are they different from each
other?

• Values research (RISC survey) conducted by TNS
  companies in three Baltic countries
• Among younger Lithuanian and Estonian people
  there is significantly more than in Latvia such
  consumers who first and foremost look to find
  pleasures in everyday life, who put their
  feelings before rationale.
• Products and services can better be sold on
  emotional arguments in Estonia and Lithuania, but
  in Latvia the success of pleasure-offering
  campaigns will probabaly be considerably lower.

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Differences between Baltic consumers II

• Environmental and socially responsible marketing
  arguments are more attractive in Latvia than in
  Estonia and Lithuania. Latvian people are more
  interested in social agendas and more willing to
  put common goals before ones own. Therefore
  sponsorship has more influence and
  environmentally clean/ natural stamps
  influence purchasing decisions.
• Lithuanians are most optimistic towards all kinds
  of marketing and take for instance shopping as a
  lot of fun. Estonians are most sceptical. These
  attitudes are opposite to the advertising
  expenditure, which per capita is highest in
  Estonia and lowest in Lithuania. This means that
  Estonian market demands more effort from the
  marketers, while in Lithuania more ordinary
  campaigns and messages might work.

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4P view on marketing in the Baltic region (1)

• Products as markets are more saturated than 5
  years ago and cost advantage in subcontracting is
  diminishing, innovative new product development
  is gradually becoming more important. Many
  enterprises are however trapped in subcontracting
  for 1-3 foreign importers or producers in the
  same field of business.
• A positive example Baltika Group re-defined its
  mission from production to international fashion
  retailer http//www.baltikagroup.com/index.php?pag
  e3

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Products continue

• Selling system services instead of separate
  touchable products mobile parking (EMT),
  e-banking (main commercial banks), Skype (now
  owned by eBay but created by an Estonian team) .
• ..but also special office furniture and designed
  furniture for hotels AS Standard
  http//www.standard.ee/index.php?id476lang1

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Place

• Booming construction of super- and hypermarkets
  . now when economic growth is high, parking
  slots are not empty as on this picture
• See also my home store http//www.jarvekeskus.ee
  /. Good mix of different stores and services for
  busy customers.
• Virtual place essential for computer hardware
  but also for real estate business and even for
  second-hand cars. Lithuanian www.autoplius.lt
• lt rated as the most customer-friendly by
  Estonian business newspaper Äripäev.

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Price (1)

• Limited market scale has to be taken into
  consideration.
• Although middle class is growing, pricing methods
  that enable differentiated pricing for rich and
  poor might be part of smart marketing campaigns.

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Price (2)

• Real estate and housing boom
• In Tallinn 10 year ago a standard flat ca 60 sq.
  m. was 150 000 crowns, now the same flat is 1,5
  million crowns.
• Price of a square meter in a new house often
  around 30 000 crowns (1917 EUR)
• Global property guide http//www.globalpropertygui
  de.com/country.php?id64
• in Tallinn good flats are11 more expensive than
  in Brussels. In central Tallinn prices of flats
  skyrocketed 55 during a year. The most expensive
  real estate in Blatic countries is however in the
  centre of Vilnius.

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Promotion

• Client loyality programmes not always tailored
  to priorities and time use of different client
  groups. From where to get a good wallet for all
  client cards ?
• Active promotion campaigns by telecommunication
  operators after introducing phone number mobility
  but more attention could be devoted to retaining
  old clients.
• Promoting political parties a rapidly
  developing field of marketing. Can you market a
  political party in the same way as a toothpaste
  or as a mobile phone? In Estonia outdoor
  political advertising banned during pre-election
  period.

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K-Kohuke case
K-kohuke (curd covered with chchocolate) was
introduced before municipal elections in October
2005 by K-kohuke. Quite similar to the logo of
the Centrum Party
AD-Idea author of the campaign
Story and intrigue as promotion stools
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Share of different media types in Estonian media
market in 2006
The source - TNS Emor advertising expenditure
survey Adex
17
Estonian media advertising market volumes in
2005/2006

Total market 86,6 million euro
Source TNS Emor advertising expenditure survey
Adex
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Additional P-s as Baltic countries are moving
towards service economies

• PEOPLE shortage of service- minded highly
  qualified sales staff
• PROCESSES reliable logistics often a problem
  for smaller producers
• POWER big retailers dominate the value chain
• PROVISION OF SERVICES smart hardware (mobile
  phones, cameras etc.) turns selling to consulting
• PUBLIC RELATIONS people start speaking about
  ethical approach to customers and nature
• PHYSICAL EVIDENCE fancy building or CRM
  supported by extranet and web-based client
  communities?
• POLITICS in small countries there is lack of
  policies but enough politics. Also between
  representatives of marketing and other functions.

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How to motivate customer service staff a
challenge of low unemployment

• Survey by Emor
• In 2006 the Estonian Customer Service Index was
  3,32 points (on the scale of 4). According to the
  data from the Estonian Customer Service Index
  survey the customer service skills, or the
  "softer skills", somewhat exceed the sales and
  professional skills and the level of telephone
  customer service exceeds the level of face to
  face service.
• The public sector institutions and companies in
  the fields of telecommunication, tourism and
  banking achieved the best customer service
  results in direct customer service in commerce,
  clothing stores stood out.

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Business to business marketing

• In the field of B2B marketing personal networks
  are important in a small country although Baltic
  countries together with Slovenia have better
  position in corruption index than other East
  European countries Estonia 24th Slovenia
  28th, Lithuania 46th (Czech republic also
  46th), Latvia 47th.
• In the World bank easiness of doing business
  ranking http//www.doingbusiness.org/EconomyRankin
  gs/
• Baltic countries also have quite good global
  position Lithuania 16th, Estonia 17th, Latvia
  24th. No other new EU member states with so
  good ranking.

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Corruption and marketing

• If corruption is everywhere, there is no place
  for real marketing in business transactions
  between private companies and public
  institutions.
• Marketing in the private sector is also biased,
  especially about one of 4Ps place.

22
E-readiness by 100 quantitative and qualitative
criteria Source Economist Intelligence Unit
23
A Baltic view how it can be possible that London
is a big financial center?

• In Estonia and in other Baltic countries you need
  to go to the bank office quite seldom. You can
  use e-banking for usual bank transactions but
  also for opening time deposits, trading stock and
  buying investment fund units. Large
  organizations, including public utilties and
  telecommunication companies use e-invoices.
• You can make mobile payment from your bank
  account alternative to using a bank card.
• In 2006 82,9 (in 2001 21,8) annual income
  statements in Estonia were presented to the
  Taxation office via the e-taxation website.
• Mobile parking by sending SMS messages

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Exports and imports of the Baltic States by
commodity groups, 2005 () I part
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Exports and imports of the Baltic States by
commodity groups 2005, II part
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Exports of the Baltic States by countries, 2005,
EUR mln,
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Imports of the Baltic States by countries, 2005,
EUR mln,
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Baltic countries have rich or dynamic neighboring
markets around the Baltic Sea
Broader area of the Baltic Sea - 80 million
consumers
Source Enterprise Estonia
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Useful websites for monitoring business
environment in Baltic countries

• http//www.imf.org/external/country/index.htm -
  International Monetary Fund
•  http//www.balticnet.com/FrameE.html - many
  links by an internet solution provider 
• http//www.baltictimes.com/ - a virtual
  newspaper
• http//www.worldbank.org - the World Bank
•  http//www.ebrd.org - European Bank of
  Reconstruction and Development
• http//www.tukkk.fi/pei/bre/ - Pan-European
  Institute (Turku School of Economics and Business
  Administration)
• http//www.balticdata.info - Advisory Network for
  the Northern Dimension
•  

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Useful websites - continued

• http//www.trigoncapital.com/ - a leading
  investment bank
•  
• http//www.balticfund.com/ - an investment fund
•  
• http//www.investor.ee - financial data, good
  search engine
•  
•   http//www.elta.lt/ http//eta.ee/eng/ -
  news agencies
• http//www.eas.ee Enterprise Estonia
• http//www.liaa.gov.lv Latvian Investment and
  Development Agency
• http//www.svv.lt/ Lituanian Development Agency

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Useful websites - continued

• http//www.ettk.ee/eng/ - Estonian Confederation
  of Employers
• http//www.hurmaster.ee - general information
  about Baltic countries by sectors and message
  board for commercial offers
•  
• http//www.binet.lv/english/database/select.htm
  - Riga based, commercial offers
•  
• http//www.interbaltic.com/ - by
  Interdevelopment Oy, finding business partners
•  
• http//www.zzz.ee/tbr/ - journal Baltic
  Review, full text of some articles
•  
• http//www.balticsworldwide.com/ - by City
  Paper, more for tourists