Faculty of Business, Economics and Statistic Centre for Business Studies Department of International Marketing Wristwatches in Bulgaria KFK iMAR: International Marketing: Teil 1 (E) – Context & Analysis (040517) Winter Term 2011/12 Lecturer: Prof. Dr. Christina Sichtmann Written by: Richard Biath Taissia Galperina Miroslava Jergusova Mariya Kravtsova Irina Mazur
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Faculty of Business, Economics and StatisticCentre for Business Studies
Department of International Marketing
Wristwatches in Bulgaria
KFK iMAR: International Marketing: Teil 1 (E) –
Context & Analysis (040517)
Winter Term 2011/12
Lecturer: Prof. Dr. Christina Sichtmann
Written by:
Richard Biath Taissia Galperina
Miroslava JergusovaMariya Kravtsova
Irina Mazur
Vienna, January 2012
Table of Contents
1. Bulgaria: General Information.....................................................................................................32. Economic environment................................................................................................................3
2.1 Macroeconomic performance.......................................................................................................32.2 Economic Activity..........................................................................................................................42.3 Financial and economic forecast..................................................................................................4
3. Political environment...................................................................................................................54. Demographic Environment..........................................................................................................65. Socio-Cultural Environment........................................................................................................66. Doing business in Bulgaria..........................................................................................................89. Global marketing research.........................................................................................................10
9.1 Primary data market research......................................................................................................109.2 Secondary data market research.................................................................................................10
10. Wristwatches market in Bulgaria.............................................................................................1110.1 General overview.......................................................................................................................11
10.2 Market segmentation..................................................................................................................1110.3 Recommendations for entering the wristwatches market in Bulgaria..................................13
Appendix 3....................................................................................................................................23Distribution of family income - Gini index.....................................................................................23
35 double taxation treaties, low production and labor costs, manufacturing industries with spare
capacity, strong potential for economic growth, high priority given to attraction of FDI.
9. Global marketing research
9.1 Primary data market research
In Bulgaria primary data can be obtained by different types of surveys: personal (face-to-face)
interviews; personal distribution and collection of the questionnaires; self administered
questionnaires completed by respondents in groups; telephone interviews; and mailed
questionnaires. In the last couple of years the internet usage has grown considerably (Internet
World Stats 2010). The spread of the Internet gives a possibility of conducting online surveys.
9.2 Secondary data market research
The main sources of information are: customs statistics; annual book-keeping reports of
enterprises; banking statistics; information from sample surveys conducted for other purposes
but containing useful information. Some of this data is collected by the National Statistical
Institute (NSI) and some by the National Bank which is formally responsible for compiling the
balance of payments. The NSI (2011) is responsible for Structural Business Statistics in terms of
preparing methodological and technical bases, carrying out the surveys and compiling,
publishing and disseminating the data. The Bulgarian National Bank produces credit institutions
statistics on structural, profit and loss account and balance sheet variables and provides them to
the National Statistical Institute.
In some case, alternative data sources exist for the same item. For example, the NSI has
estimates on imports and exports based on customs statistics and the National Bank has estimates
based on request for foreign currency. Until now, a considerable discrepancy has existed
between these two sources but steps are now in hand to ensure a closer working relationship
between the two institutions and to agree a single set of estimates. (National Accounts for
Bulgaria 1996)
According to article 20 (6) of the Law of Statistics the Bodies of Statistics have the right under
written request to obtain free of charge from other State bodies and register keepers, data
collected by them, which are required in the statistical surveys, included in the National
Programme for Statistical Surveys. The provision of the administrative data is organised by
formal agreements between the NSI and each of the bodies such as Ministry of Finance,
Bulgarian National Bank and others. (Structural Business Statistics Methodology s.a.)
10. Wristwatches market in Bulgaria
10.1 General overview
Wrist watches market in Bulgaria forms an integral part of jewellery market. The jewellery
market in Bulgaria was estimated at US$74.97 million in 2008 and is considered to be the
smallest market in EU following Slovakia. The average growth rate between 2004 and 2009
equalled 6.1%. It is evaluated that on average consumers in Bulgaria spent only US$9.7 per
capita on jewellery compared to nearly US$69.38 in EU in 2008. Joining the EU resulted in
increase in consumer spending on jewellery. However, the financial crisis resulted in fall-back
and stagnation of these values. (The Jewellery Market in Bulgaria, 2009)
10.2 Market segmentation
We can identify two possible market segmentations of wrist watches market in Bulgaria on the
basis of price and different value attributes. According to the segmentation based on prices we
can distinguish the following four major market segments:
Mass Market Watches with a value under $50:
-Fun Fashion Watches
-Sports Watches
-Character and Sports Logo Watches
Middle Market Watches with a value up to $299
Upper Middle Market Watches with a price tag of $300-$999
Luxury and High Luxury Market with price ranging from $1000-$5000+
(Market For Watches, 1995)
As far as the Bulgarian wrist watches market is concerned the two most relevant segments are
the mass and the luxury market. This is due to the fact that Bulgaria’s distribution of income is
unequal with a not very well presented middle class. One important issue is the fact that the
wealthy Bulgarians tend to buy luxury watches abroad.
When taking into consideration the luxury brands, they are oversized presented on the Bulgarian
wrist watches market. However, according to the experts’ estimations, luxury market in Bulgaria
is rather small. As reported by the previous research study in 2009, Bulgaria has approximately
5.000 luxury consumers and this number seemed not to change drastically. There are three major
players on the luxury market in Bulgaria: Cartier, La Tiara and Royal House. It is clear that the
luxury market in Bulgaria has suffered because of the crisis what has caused the decreasing
power of buyers and the increasing prices of high street rentals. On the contrast, the mass market
is dominated by many small manufacturers. (Jewelry/Watches, 2010)
The second type of segmentation is based on different value attributed to watches:
1. Consumers who want to pay the lowest price for a reasonably working watch, replacing
it after it fails.
2. Consumers valuing watches for their quality (long life, good workmanship, material and
design) and willing to pay for it.
3. Consumers who look for usefulness and meaningful emotional qualities, considering that the watch should suite to an important occasion (well-known brand names).
(Watch Segmentation, 2011)
Within this segmentation the first type of consumers is considered to be the most notable on the
wrist watches market. This can be explained by the fact that most of the Bulgarians are very
price sensitive.
Firms entering the wrist watch market should not underestimate the size of the black market.
This can be explained by the geographical location, the access to the Black Sea. The general
value of the black market in Bulgaria is estimated as high as $4.741 billion. This is particularly
true for the luxury watch brands which hinder successful entering of the market. (Bulgaria Black
Market, 2011)
10.3 Recommendations for entering the wristwatches market in Bulgaria
Thus, in conclusion, in order to be successful when entering the Bulgaria wrist watches market
firms should take into account the following recommendations:
It is recommended to seek assistance before entering the market due to high commercial
and market risks, e.g. making contact with Chamber of Commerce in Bulgaria
The use of established networks of partners can facilitate the market entry and help
overcome various obstacles
Firms should target low and focus on mass and middle market watches
The competitive advantage could be achieved by sensitive pricing and/or reasonable
quality;
When developing the marketing strategies and communication activities the main focus
should lie on “survival” values such as religion, hard work etc.;
For some firms it can be reasonable to establish the production facilities in Bulgaria
because of cost advantages and geographical advantage at EU level
The lowest level of internet access in the EU has been registered in Bulgaria with a 45%
share of households with such access>thus offering products via e-commerce is not
recommended.
11. ConclusionConsidering the analysis of market environment concluded in previous chapters it is adequate to
evaluate the wristwatches market in Bulgaria as rather risky, especially in comparison to other
EU member countries. For smaller firms it is highly recommended to follow the model of
Uppsala and enter the market in small incremental steps to gain experience and increase
commitment in the market. For larger firms with more resources a more direct approach might
be desirable, when taking the geographic and cost advantages into account. FDI as for example
establishing a sales branch or even a manufacturing facility might prove viable and is
considerably promoted by the government. However, both small and large firms have to keep in
mind, that the middle market for wristwatches hardly exists and that the luxury brands are
bought largely abroad. Thus, only the mass market representing the low-end can be evaluated as
viable. Nevertheless, there is a keen competition in this segment and thus firms are especially
advised to make use of possible network partners and other institutions to facilitate the entry and
overcome possible obstacles.
Resources1. Axtell, R.E. Essential Do’s and Taboos. The Complete Guide to International Business and
Leisure Travel. John Wiley &Sons, Inc. (2007)
2. Bulgaria – Language, Culture and Etiquette (2011). Downloaded on on November 6 th 2011
from http://www.kwintessential.co.uk/resources/global-etiquette/bulgaria.html
3. Bulgaria, July 2011, Economics. Downloaded on November 10th 2011
from http://www.edc.ca/english/docs/gbulgaria_e.pdf
4. Bulgaria - Why to enter this market (2011), PMR Consulting. Downloaded on November
15th from http://www.pmrconsulting.com/Countries/Bulgaria.html
5. Bulgaria: Introduction (2011). Downloaded on November 1st 2011 from
http://globaledge.msu.edu/Countries/Bulgaria
6. Bulgaria: Risk Assessment (2011). Downloaded on November 2st 2011 from
http://globaledge.msu.edu/Countries/Bulgaria/risk
7. Bulgarian National Bank: Economic Review (2011). Downloaded on November 1st 2011
Bulgaria exports were worth 3270 Million BGL in August of 2011. Bulgaria exports mostly fuels, manufactured goods (clothing, footwear), machinery and transport equipment and chemicals. Bulgaria's main exports partners are Germany, Turkey, Italy, Greece and Romania. This page includes a chart with historical data for Bulgaria's exports.
http://www.tradingeconomics.com/bulgaria/exports
Bulgaria Imports
Bulgaria imports were worth 3233 Million BGL in August of 2011. Bulgaria imports mainly fuels, machinery and transport equipment, metals, raw materials. Bulgaria's main imports partners are Russia, Germany, Italy, Romania and Italy.
Bulgaria reported a trade surplus equivalent to 37 Million BGL in August of 2011. Bulgaria exports mostly fuels, manufactured goods (clothing, footwear), machinery and transport equipment and chemicals. Bulgaria's main exports partners are Germany, Turkey, Italy, Greece and Romania. Bulgaria imports fuels, machinery and transport equipment, metals, raw materials. Bulgaria's main imports partners are Russia, Germany, Romania and Italy.
The total population in Bulgaria was last reported at 7.6 million people in 2010 from 7.9 million in 1960, changing -4 percent during the last 50 years. Bulgaria has 0.11 percent of the world´s total population which means that one person in every 909 people on the planet is a resident of Bulgaria.
The unemployment rate in Bulgaria was last reported at 10.2 percent in the third quarter of 2011. This page includes a chart with historical data for Bulgaria's Unemployment Rate.
In Bulgaria, consumer confidence improved to -41.7 in April of 2011 from -38.6 in January of 2011. In Bulgaria, the consumer survey is carried out 4 times a year on a rotational principle and covers around 1200 people from urban and rural areas. The questionnaire includes 15 questions relating to the financial situation of household, general economic situation in the country, consumer prices, unemployment, major purchases, household savings, financial situation of household, buying a car, buying or building a home and purchases for home improvements. All assessments of present situation or present tendency and all expectations refer to a 12-month-period of variable change.
In Bulgaria, business confidence improved to 20.5 in July of 2011 from 18.9 in June of 2011. In Bulgaria, the business survey in industry measures the level of optimism that people who run companies have about the performance of the economy and how they feel about their organizations’ prospects over the next 6 months. Business confidence surveys can provide useful signs about the current condition of the economy, because companies often have information about consumer demand sooner than government statisticians do.
The Gross Domestic Product (GDP) in Bulgaria stagnated in the third quarter of 2011 over the previous quarter. Historically, from 1997 until 2011, Bulgaria's average quarterly GDP Growth was 1.13 percent reaching an historical high of 13.40 percent in December of 1997 and a record low of -7.70 percent in March of 1998. Bulgaria is one of the lowest income member states of the European Union to which it belongs since 2007. In recent years the country has experienced a fast economic growth. Yet, corruption and a weak judicial system stand on the way of future
expansion. The main sectors of Bulgarian economy are industry and agriculture. Bulgaria produces a significant amount of manufactures and raw materials (iron, copper, gold, bismuth, and coal), electronics, refined petroleum fuels, vehicle components, weapons and construction materials.
This index measures the degree of inequality in the distribution of family income in a country. The index is calculated from the Lorenz curve, in which cumulative family income is plotted against the number of families arranged from the poorest to the richest. The index is the ratio of (a) the area between a country's Lorenz curve and the 45 degree helping line to (b) the entire triangular area under the 45 degree line. The more nearly equal a country's income distribution, the closer its Lorenz curve to the 45 degree line and the lower its Gini index, e.g., a Scandinavian country with an index of 25. The more unequal a country's income distribution, the farther its Lorenz curve from the 45 degree line and the higher its Gini index, e.g., a Sub-Saharan country with an index of 50. If income were distributed with perfect equality, the Lorenz curve would coincide with the 45 degree line and the index would be zero; if income were distributed with perfect inequality, the Lorenz curve would coincide with the horizontal axis and the right vertical axis and the index would be 100. Index for Bulgaria - 45.3 (2007), 26 (2001). Bulgaria is 38. on the list of most unequal countries. (Central Intelligence Agency 2011)
Appendix 4According to COFACE (Compagnie Française d'Assurance pour le Commerce Extérieur), the world leader in trade-credit information and protection, Bulgaria has a country rating of B, thus caution is advised as the political and economic situation is rather unstable. Occasionally unfavorable corporate payment behavior can occur and the probability of corporate default is appreciable. (Bulgaria: Risk Assessment, 2011) It is advisable to secure payments against default by using financial instruments such as securities or bank guarantees.