Development of a marketing strategy for ego translating company
Disclosure of the essence of the marketing strategy as the most important feature of a modern organization that allows you to use the marketing service to attract and meet target markets. Development of a marketing strategy for "EGO Translating Company".
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| Вид | дипломная работа |
| Язык | английский |
| Дата добавления | 15.09.2020 |
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FEDERAL STATE EDUCATIONAL INSTITUTION OF HIGHER EDUCATION NATIONAL RESEARCH UNIVERSITY HIGHER SCHOOL OF ECONOMICS
Saint Petersburg School of Economics and Management
Department of Management
Development of a marketing strategy for ego translating company
Bachelor's thesis
In the field 38.03.02 `Management'
Educational programme `Management'
Pashkova Polina Andreevna
Academic supervisor
Professor, PhD
E.V. Korchagina
Saint Petersburg 2020
Table of contents
Introduction
1.Literature review
1.1Definition of a marketing strategy
1.2Structure of a marketing strategy
1.3Marketing strategies
1.4Methods for analysis of marketing strategies
1.5Conclusion
2.Methodology
3.Anticipated results
4.The analysis of the activities of “EGO Translating Company”
4.1Short characterization of the organization
4.2Analysis of the external environment of the organization
4.3Analysis of internal environment of the organization
4.4SWOT Analysis
5.The development of a marketing strategy
5.1Segmentation, targeting, positioning
5.2Development of a marketing mix for entering a new market based on 4P model
6.Development of recommendations for the formation of a marketing strategy
Conclusion
References
marketing service attracting target market
Abstract
A marketing strategy is an essential strategic feature of any modern organization. It determines how to apply a marketing structure in order to attract and satisfy target markets and achieve the organization's goals. However, most service companies do not pay sufficient attention to marketing activities. This paper's goal is to develop a marketing strategy for the company “EGO Translating”, which nowadays is one of the leading companies in the field of complex linguistic support. The company is going to enter a new industry. The main methods of the research in the work are secondary data analysis, interview, PEST analysis, SWOT, STP, market analysis, 4P. PEST analysis is a critical element in the analysis of the external environment of the organization. In contrast, secondary data and interviews play a vital role in the study of the internal structure of the company. Thus, the result of this paper is the available tools of the marketing strategy for “EGO Translating”, as well as additional recommendations for its introduction.
Keywords: marketing strategy, segmentation, targeting, positioning, 4P analysis
Introduction
In the new global economy, the strategy has become an urgent priority of the company as one of the most important factors, which can ensure stable development and increase competitiveness. Nowadays, companies should develop a long-term strategy because the competition is increasing, and the market is continually changing. In such circumstances, it is necessary to monitor the changes that occur in the external environment. Companies differ from each other in such options as the specifics of the industry, the presence of competitors, the characteristics of products or services, and others. That is why it is necessary to develop a strategy individually, based on all the factors.
One of the elements of the company's strategy is the marketing strategy, which determines how the company plans to achieve its marketing goals. A marketing strategy is an organization's strategy that combines all marketing goals into a single comprehensive plan. The formed marketing strategy, in turn, determines the marketing complex, which includes the essential elements of the product/service, pricing, sales and promotion. Choosing the appropriate marketing strategy and monitoring its implementation may have a positive impact on the company's performance.
The primary aim of this research is to develop appropriate tools for the marketing strategy for the translation agency “EGO Translating”. The company is going to enter the new market-to to provide linguistic services for the iron and steel industry. The research question is “What are the marketing tools for entering the new industry?” The research question is based on the analysis of the problems, which affect the company's position in Saint Petersburg; competitors; new market conditions, etc.
To achieve the abovementioned aim, the following objectives have to be attained:
1. To examine the literature about the marketing strategy and its types;
2. To conduct industry analysis of the market of linguistic services in Russia;
3. To analyze the current activities of the company; external and internal environment;
4. To make a marketing analysis of the market of the new industry;
5. To segment potential customers;
6. To formulate a marketing strategy and develop a set of marketing activities for entering the new market;
7. To give recommendations on the implementation of the developed tools for the company.
The type of the present paper is a project. The research will be aimed to formulate practical details of creating the strategy. Future research may be limited in the amount of necessary information.
The novelty of the work is determined by the possibility of using the obtained results by “EGO Translating” company. For that reason, detailed research can make a significant contribution to entering the new market.
Its objectives determine the structure of this paper. The first part (the literature review) is theoretical and devoted to the study of the basics of developing marketing strategies and their classification. The second part is methodological and presents the results of a strategic analysis of the industry and the company's activities. The last part presents a description of the process of formation of the marketing strategy for the company “EGO Translating” and the results.
The volume of the final qualification work is 47 pages.
1. Literature review
The concept of marketing strategy is one of the most critical strategic features of any modern organization in the business world. Business environment, with innovative trends and intense competition in the market, is constantly changing, and companies should consider this. Companies have to adapt to changes in the environment and make changes in the internal environment in terms of innovation and competitiveness, training, increased flexibility, improved processes and results of operations. Therefore, it is necessary to develop an adequate marketing strategy.
Critical issues related to marketing strategies were addressed by authors such as Kotler and Armstrong (2013), Wedel and Kamakura (2012), and others. These outstanding scientists initiated research in this field, studying such issues as strategic planning, business organization, market segmentation and marketing complex.
1.1 Definition of a marketing strategy
The concepts of marketing and strategy are sophisticated and versatile. Marketing is one of the fastest-growing disciplines. Therefore, the company needs to be flexible enough and change according to the needs of its customers. The most common definition of marketing is presented by Kotler and formulated as “a type of human activity aimed at meeting needs and requirements through exchange” (Kotler, 2013, p.47). Other authors, for instance, Birch (2010) determine it as “a complex of long-term marketing decisions in the selection of target consumer segments, positioning of the company and its products, as well as the elements of the marketing mix to achieve long-term marketing objectives and accepted based on the analysis of external and internal marketing environment” (Batalova, 2011, p.103).
There is no single optimal strategy, so each firm should determine its position in the industry, its goals, and available resources and opportunities. Thus, a strategy is a plan for achieving the company's goals, which reflects the elements of marketing, financial and production capabilities.
Combining different concepts of marketing strategy, this term may be defined as follows: it is a marketing plan for a company that describes how the organization should use possible resources to achieve long-term goals.
1.2 Structure of a marketing strategy
The fundamental components of a marketing strategy are market segmentation, customer targeting, as well as the marketing mix (Shaw, 2012).
Market segmentation involves selecting the most profitable customer groups for targeting. It is essential to allocate resources to those customers who make a substantial profit and focus on their requirements and expectations. Thus, a deep understanding of customers will help to achieve a sustainable competitive advantage in the market (Wedel, Kamakura, 2012).
The problem of market segmentation involves two issues: the choice of variables or parameters that enable to define segments and correctly group these variables. Examples of variables in the business-to-consumer (B2C) market segmentation process are geographical, demographic, psychographic, and behavioural characteristics. However, in segmentation of the business-to-business (B2B) market, it is difficult to apply such criteria because in this market clients are presented as legal entities and organizations.
Various authors describe their criteria and approaches to business-for-business (B2B) market segmentation to deal with problems. For instance, McKinsey&Company suggests segmenting the market based on the following criteria: final product use, product type, geography, customer behaviour, and company size.
In this research, a traditional approach for segmenting existing clients is presented, as noted by M. Richarm, which includes the following parameters: business characteristics (number of employees), business specialization (a type of activity), location (geographical indication), and profit (the client's share of the company's revenue).
These studies provide a basis for segmentation analysis. Besides, it is significant to analyze current articles with views on customer targeting, which is another significant component of the marketing strategy.
A target market is a market or segment to which a firm sends its marketing messages. As a result of the segmentation process, the company identifies a group of customers that represent the target segment where the company's resources will be concentrated. Determining the target segment, the company relies on the specifics and features of the market, the variety of customers, their needs and preferences, the level of competition and the sales volume. Targeting allows companies to pay more attention to the specific needs of the target segment. The decision to select a particular target segment is crucial, as the company then determines the positioning strategy for it.
The steps for selecting a target segment may be presented as follows:
1. Creating a niche in the product market;
2. Description of consumers/organizations in each niche;
3. Evaluating alternative target segments;
4. Selecting a strategy for the target segment.
Thus, it is necessary to identify possible niches, and then for each niche of interest to determine which positioning strategy will bring the most revenue from marketing costs (Moutinho, 2000).
Kotler and Keller (2013) researched the next significant issue - positioning that will be used in the research. Due to them, it is the design of the company's offers and image that occupies a special place in the consciousness of the target market. Today, the market is a society in which there is too much information that conveys its offer. This is why companies need positioning to be successful in spreading our message on the market (Ries &Trout, 2006).
The marketing mix is the next critical component. There are different definitions of a marketing mix, for example, Jackson and Ahuja (2016) argue that a marketing mix is a set of critical tools that can be adjusted, improved, or modified to meet market needs, gain competitive advantages, and maximize long-term profits. This description fully reveals the essence of the marketing mix concept, which plays a vital role in the process of developing a company's marketing strategy. The traditional classification of the marketing mix is “4P”, which includes such categories as product, price, place, and promotion. The product strategy includes a description of the product/service offered by the company, its characteristics and properties. Pricing is the second element of the marketing mix. Often, the price is one of the criteria for choosing products, and many companies set attractive prices for customers in order to establish their position in the market among competitors. It is necessary to take into account not only the cost of the product or service but also the establishment of discounts and promotions. Location or distribution describes sales markets and distribution channels. Promotion involves the use of various marketing tools to communicate with consumers (Ries &Trout, 2006). As the marketing environment changed, there were also attempts to change or improve this classification. An extended modern version of “7P” is widely known, which also includes physical evidence, people, and process. The “people” element primarily describes those who are directly or indirectly involved in the provision of goods or services (manufacturers, employees, suppliers) (Jackson, Ahuja, 2016).
1.3 Marketing strategies
It is essential to consider the types of marketing strategies described in various sources. M. Porter identified the main competitive strategies: cost leadership, differentiation, and concentration (focus).
First, a cost management strategy determines a significant market share. Due to this strategy, there are different ways to achieve cost leadership, such as mass production, economies of scale, technology, product design, and access to raw materials. Low prices lead to higher demand and, therefore, a more significant market share. However, the cost management strategy has some drawbacks. It does not lead to increased customer loyalty, and if the firm reduces prices too much, it can reduce the company's revenue figure. Accordingly, this strategy is applicable when a business develops, produces, and sells a product more efficiently than its competitors (Allen, Helms, 2006).
Secondly, the differentiation strategy assumes that the company concentrates the efforts on providing a unique product or service, whereas the concentration strategy focuses on a specific market segment. A successful concentration strategy depends on a segment of the industry that has excellent growth potential but is not significant for the main competitors (Allen, Helms, 2006).
Thus, adhering to the Porter concept, the company can choose one of the three proposed strategies, since the author believes that they can enable the company to resist competitive forces in the market.
1.4 Methods for analysis of marketing strategies
Firms use many strategic marketing tools in practice. One of them: Boston Consulting product portfolio matrix (BCG matrix) is designed to help in long-term strategic planning to analyze business growth opportunities. After analyzing the product portfolio, a company can decide where to invest resources and which products to develop, which should be abandoned. This method is also known as the Growth/Share matrix (Figure 1).
Figure 1. Growth-share matrix (“Growth-share matrix”, n.d.)
The proposed method has both advantages and disadvantages. The advantages include ease of use and the ability to choose a product from all possible options. However, only two main characteristics are used in the construction of the BCG matrix - the market growth rate and the relative market share, which are not sufficient for analysis.
The next tool is the McKinsey/GE matrix (McKinsey - General Electric). Another name for this matrix is “industry attractiveness - competitiveness” (Figure 2). The matrix allows evaluating the business portfolio and helps to determine where investments should be directed.
Figure 2. McKinsey/GE matrix (“McKinsey/GE matrix”, n.d.)
Advantages of using the McKinsey matrix:
1. Helps to prioritize limited resources to achieve the best results;
2. Managers become more aware of how their products or business units' work;
3. It is a more complex business portfolio structure than the BCG matrix.
The GE McKinsey matrix is a very similar portfolio valuation structure to the BCG matrix. Both methods are used to analyze a company's product portfolio or business units and help make investment decisions.
The above methods are classic tools of strategic marketing, but there are also innovative approaches, such as ABC-XYZ analysis. It is an integrated analysis of ABC and XYZ. This type of analysis is used to study the assortment in the company, the organization's customers, and other parameters. In this paper, this method is considered from the point of view of customer base research.
The characteristic that is used to classify items in ABC analysis is the turnover for each customer, according to which they are divided into categories A, B, and C. Thus, customers belonging to group A are the most valuable, generating 50% of sales. Category B is average in importance to customers that bring in 30% of the result. Customers of group C make small purchases and bring the remaining 20% of sales.
XYZ analysis distinguishes customers based on their fluctuations in demand for the company's products. The XYZ categories are characterized as follows: group X includes customers with stable consumption, and Y includes customers with fluctuating demand, which may be caused not only by personal reasons but also by external factors, such as seasonality. Category Z includes customers with random access to the company (Buzukova, 2006).
1.5 Conclusion
These studies provide a basis for the description of a marketing strategy, its tools and methods of analysis; however, there is a gap in the literature. All the theoretical works mentioned above will be useful supplementary information for future research. However, currently, there is no literature analysis of the control stage of the marketing strategy, which will not be carried out. This stage involves the direct implementation of strategic tools in the company's activities and evaluation of its effectiveness, which requires significant financial and time resources.
Overall, choosing an effective strategy requires analysis of different alternative marketing strategies and understanding how they work in different environmental and organizational settings.
2. Methodology
Strategic marketing analysis will be conducted. It consists of different stages.
The first stage will include the analysis of secondary data, such as market statistics and key indicators of the company “EGO Translating”. Besides, at this stage, it is necessary to conduct a competitive analysis, which is vital to understand the market of linguistic services and assess the prospects.
The second stage will include the PEST analysis, which will measure four groups of factors: political (P), economic (E), social (S), and technological (T). It will enable to analyze the external environment.
After determining the key macroeconomic factors, the analysis of the company's competitive environment will be performed. To do this, Michael Porter's five competitive forces are going to be used. It will include the analysis of the level of competition in the industry, the threat of new players invading, the threat of substitute products, the market power of buyers, and the power of suppliers.
The next stage will include primary information, such as conducting an interview with the marketing director. The interview will consist of five thematic sections: general information about the marketing of the company, practice and effectiveness, types of strategies, support of marketing projects and the company's management expectations. Several directions during the interview will be discussed: ways to help the marketing division at the company; analysis of new market industry; the main marketing problems; the future realization of the marketing plan in the new industry. This method of research is chosen because the interview may help to solve several important issues. Firstly, detailed information about the subject of the study will be gathered to supplement the lack of necessary data in the literature. Secondly, the interview may help to collect information about the desired results and expectations of the company management. Based on the primary and secondary data, the SWOT analysis will be conducted in order to analyze the strengths and weaknesses, opportunities and threats.
The next stage will include the STP analysis, which consists of segmentation, targeting and positioning. This method is worth using as it enables to determine the characteristics of the target segment. The STP process is a critical issue, as it will enable to segment the potential clients and develop the marketing tools for entering a new industry. Besides, it will allow increasing the expectations of various interest groups, the further distribution of resources, positioning, and tools of the marketing complex.
The integrated STP analysis method will enable to create customer segmentation. The purpose of this method is to distribute the company's potential customers into segments and identify the most important ones.
However, STP analysis has limitations. The stability is influenced by many factors: seasonality of demand, the regularity of deliveries, changes in competitors' prices for similar products, etc. These factors cause instability and therefore lead to an increase in the rate of variation. Thus, the results of STP analysis will be reliable in case of analyzing the indicator for an extended period.
At the last stage, a marketing package would be formulated using the 4P model, which includes four concepts: price, product, location, and promotion.
Thus, based on this strategic marketing analysis, which will be conducted, marketing tools will be created for the company “EGO Translating”, which is going to enter the new market industry-iron and steel metallurgy. It may help to reduce the threat from competitors and new market participants.
3. Anticipated results
The research will present the marketing tools, which may be useful for the company “EGO Translating”, which is going to enter a new market. Except this, it will present the information about marketing factors, which affect the formation of the marketing strategy. The SWOT, PEST, STP, and 4P model analyses will enable to:
· Assess the environmental factors; strengths and weaknesses of the company and to present the results in charts and graphs;
· Analyze the competitive environment and formulate the competitive advantages in the long term perspective;
· Define the stability/instability of purchasing products;
· Allocate the resources, positioning and tools of the marketing mix;
· Target segments of new clients; Support the loyalty of existing ones.
Moreover, the results of the analysis of environmental factors and competitors may show that there is becoming more and more competitors in the industry the company is going to enter. It may influence the activities of the company. Nevertheless, “EGO Translating” has substantial competitive advantages as experience in wholesale trade, the ability to adapt individually to each client, reliability and consistency in the service process.
Besides, the internal analysis may reveal that the company has an increase in sales indicators, which indicates the demand for the product. However, the company's financial position may remain precarious.
As part of the strategy development, STP analysis will enable to determine which promotion tools should be used to communicate with potential customers and consumers.
In the segmentation process, the STP method will help to segment the groups of clients with similar characteristics. This analysis may show that the target segment of “EGO Translating” is foreign companies specializing in the trade.
Overall, marketing tools may help to reduce the threat from competitors and new market participants.
4. The analysis of the activities of “EGO Translating Company”
“EGO Translating Company” is going to enter a new industry market. The company is going to provide linguistic services in iron and steel metallurgy in Russia. The market is widely developed, respectively, there are many competitors. Thus, for entering a new market, the management of the company has decided to develop a marketing strategy.
4.1 Short characterization of the organization
According to the independent international agency, Common Sense Advisory, EGO Translating Group of Companies (founded in 1990) is one of the leaders in the linguistic market in Russia. It is one of the top three providers of linguistic support in Eastern Europe. The structure of the group includes EGO Translating Company CJSC, EGO Translating Company LLC, EGO Translating SB LLC and ANO DPO EGO Translating University.
Table 1 The structural units of the group specialize in the provision of certain services*
|
CJSC “EGO Translating Company” |
“EGO Translating Company” LLC |
“EGO Translating SB” LLC |
ANO DPO “EGO Translating University” |
|
|
A written translation of documents on any subject and field; localization services; simultaneous and consecutive interpretation (linguistic support of business events, negotiations, international transactions, installation supervision and equipment setup). |
Translation and legalization of official documents for individuals and legal entities. |
Full linguistic support for the enterprises of the military-industrial complex; the only one among the translation companies that has its regime and secret department (RNO), all of whose resources are certified by the FSB of the Russian Federation and the FSTEC of the Russian Federation. |
Corporate training in foreign languages; conducting a linguistic audit of staff. |
*Source: Interview with the marketing director
The group provides a wide range of services in the areas of translation and interpretation in 99 languages of the world: legalization and notarization of documents; website and software localization; corporate training in foreign languages; layout and graphic design; consulting on intercultural communications; software development.
The group's portfolio includes more than 2,000 large-scale projects in 50 industries.
Among the customers are such large companies as Rosneft, Gazprom, Novatek, SIBUR Holding, Lukoil, Severstal, Atomstroyexport, AtomEnergoProject, Sberbank, Sheremetyevo International Airport, Russian Railways International, Ilim Group, Nevskaya Cosmetics, Nissan Manufacturing, KAMAZ and many others.
The clients are the most significant players in the event market in Russia: the National Congress Bureau, the World Trade Center, VDNH, Business Dialogue Company, Tourist Information Publishing House, ExpoForum International LLC, ANO Directorate of the St. Petersburg International Cultural Forum, ANO Directorate Krasnoyarsk 2019.
The portfolio of projects includes linguistic support for such significant events:
· The St. Petersburg International Economic Forum (SPIEF), the International Forum and the Technoprom-2018 exhibition of technological development.
· Krasnoyarsk Economic Forum (KEF), automotive Forum “TIAF-2018”, the Russian investment forum, world communication summit, the international forum “the Arctic”; support the inspection Commission of the EXPO 2025.
· Group of companies is the official interpreter of International military-technical forum “ARMY”, linguistic partner of the International exhibition of helicopter industry “HeliRussia”, the official partner of the professional award in business tourism and MICE -- the Russian Business Travel & MICE Award.
· Group of companies is a member of the Russian Union of Industrialists and Entrepreneurs, Association of assistance to the development of business relations “the Chinese Delovoy centre” of the Union of translators of Russia, European Association of translation companies EILA (group Language Industry Assоciatiоn) accredited partner of JSC “Russian export centre.”
Besides, the group of companies of “EGO Translating” is a team of the best in their profession, specialists and experts of the market. The company forms the standards of competencies requirements of the most demanding customers. In order to prepare the future generation of employees in the linguistic industry actively cooperate with the leading higher educational institutions of St. Petersburg.
Annual testing, competitions, master classes help to create a personnel reserve and responsible professionals. Among the awards is a major Russian public award “Russian National Olympus” in the nomination “Outstanding small and medium enterprise business”; the diploma of the winner of the competition “Business developing region”.
The offices of the group of companies opened in Saint Petersburg and Moscow, regional representative offices are located in nine cities of Russia.
4.2 Analysis of the external environment of the organization
Before proceeding to the development of a marketing strategy, it is necessary to analyze the external and internal environment of the enterprise.
First, it is necessary to identify the market for linguistic services in Russia.
The product boundaries of the studied product market are linguistic services for both companies and people. The borders are vast since translations are needed in entirely different areas and industries.
Linguistic services are a particular type of economic activity. Companies provide a considerable number of services, such as:
Written Translation:
· Legal, financial and economic documentation
· Technical documentation: specifications, instructions, survey and technical reports, operation reports, drawings and diagrams, SNIPs, standards, patents
· Tender documentation
· Marketing and promotional materials
· Fiction
· Materials of a scientific nature: research results, articles, dissertations, reviews, etc.
Translation and legalization of documents:
· Official translation of personal, legal, financial and other documents
· Notarization of translator's signature and production of notarized copies
· Apostille affixing
· Consular legalization
· Legalization of translation at consulates
Corporate Foreign Language Education:
· Teaching foreign languages based on industry glossaries
· Linguistic audit of personnel
· Intercultural Communication Training
· Preparation for passing international exams (IELTS, TOEFL, CAE, BEC, etc.)
· Further training and retraining of translators
· Online Distance Learning System
Multilingual localization of sites and applications:
· Creating a copy of the site based on the cultural characteristics of the target audience
· Preparation of technical documentation for software with subsequent localization
· Adapting the interface and technical documentation to cultural and regional features, including working with graphics and media files.
“EGO Translating” operates in the market of linguistic services both in Russia and abroad. This market is promising, as according to LISA, the Russian market of linguistic services and technologies is estimated at $270-320 million per year, while it is multiplying. The share market of translation services is about $250-300 million, and linguistic technologies - $18-20 million.
Figure 3. The volume of the Russian translation market in rubles and dollars (“Объем и динамика …”, 2020)
Note:In rubles In dollars
According to the results of the study, the volume of the Russian translation services market in 2019 grew immediately by 17% and reached 20.88 billion rubles. In dollars, the market volume increased by 14% and reached $ 323 million.
Such significant growth is associated both with high demand for translations, as well as with increased market transparency and the disclosure of recent information:
· Rating participants grew by 16%;
· The cohort of medium and small companies showed outstripping growth rates (21%), including due to the disclosure of information and the emergence of new participants;
· The business volume of companies that did not participate in the questionnaire, but whose indicators for 2018 became visible in the Unified State Register of Legal Entities, increased by 30%.
· Forecasts about market stagnation did not materialize.
If the results of the market assessment are correct, then even adjusted for the disclosure of information by a large number of participants, 2019 was one of the most successful in the history of the industry. The industry has come to an epidemic with a tightly packed wallet.
This spring, industry institutes conducted a series of surveys about the impact of quarantine on business, but their results are mixed. In some of them, large companies (CSA Research) were more affected, in others - small (EUATC). The ATC and FIT surveys showed a 60% decrease in the turnover of most performers in April, while the GALA poll indicates that one-third of the companies are overloaded with urgent work, and as a result, they can grow.
76% of the Russian market generate the energy companies, pharmaceutical companies, legal/financial translation, public sector and localization. The demand in these sectors is sustainable; thus, the catastrophic reduction in the industry, for example, 30-50%, should be expected.
As a rule, the translation industry is resistant to crises, and in 2013-2015 during military actions in Ukraine and the imposition of sanctions, its volume is not decreased in rubles. In the last 5 years, the average growth rate of the industry transfers to Russia amounted to 6.5% per year.
Localization and medical translation, perhaps slightly increasing in volume, as the quarantine has led to increased demand for digital products, games, television series, online advertising.
Hardest hit sector of translation conferences. Most intramural activities have been cancelled. Interpretation is about 3 billion rubles, conferences and sporting events are a little less than half volume. Expect reduction of interpretation at least 1 billion.
Another victim segment -- certified translations. Against the background of closed borders and closed offices, they lost at least six months of work or 12% of annual income, and with the post-quarantine recession, this can result in a 15-20% reduction or up to four hundred million rubles.
Based on current calculations, two scenarios are suggested.
Negative scenario: by the end of 2020, the market size will shrink in rubles at 10.5% from 20.88 billion to 18.7 billion roubles in dollars at 19.5% to $ 260 million.
Positive scenario: by the end of 2020 market size will not change significantly in rubles and dollars will be reduced by 10% to $ 290 million.
The main impact will fall on small companies that operate in sectors of the interpretation and tourism. They will be forced to cut staff and move to related services, e.g. training. Nearly 1,500 industry professionals will lose sources of income.
Large operators will retain the position as a whole, with slight modifications depending on the composition of the portfolio and economic situation.
Figure 4. Number of translation FE (https://translationrating.ru/results2016/)
Presumptive causes of short stature:
· market oversaturation: translators in this quantity are not needed, especially outside the capitals;
· lack of tax culture among freelancers;
· workflow bureaucratization for individual entrepreneurs.
In recent years, companies had not urged performers to legalize (compared to the situation 7-8 years ago, when the bureaus carried out a patent translation campaign, this topic lost its relevance for a while)
Distribution and convenience of electronic money and payment systems, for example, Yandex.Money
An individual entrepreneur with a translation code of activity in Russia is only 7.5 thousand; however, from 11 thousand (ProZ) to 32 thousand (Smartcat) performers from Russia are registered on freelance exchanges.
More than 200,000 job seekers post resumes on the profession of “translator” at HeadHunter.
Table 2 The competitors*
|
Position |
Name of the company |
Revenue 2018 г. In rubles |
Annual growth (ruble) |
Revenue $, |
|
|
rate 61.36 |
|||||
|
1 |
ABBYY Language Services |
828.3 mln rubles |
- |
$13.5 mln |
|
|
2 |
Janus Worldwide |
N/A |
- |
> $10 mln |
|
|
3 |
Translink |
490.1 mln rubles |
0% |
$8 mln |
|
|
4 |
EGO Translating |
N/A |
- |
> $8 mln |
|
|
5 |
Logrus |
N/A |
- |
> $8 mln |
|
|
6 |
TLS Company |
340 mln rubles |
10.7 % |
$5.54 mln |
|
|
7 |
Publishing Center "Transtech" |
277 mln rubles |
36.7 % |
$5.24 mln |
|
|
8 |
Neotech |
N/A |
- |
$4 - 6 mln |
|
|
9 |
Translation agency "Nedra" |
211.7 mln rubles |
- |
$3.45 mln |
|
|
10 |
Treatise |
N/A |
- |
$3.26+ mln |
*Source:https://translationrating.ru/results2016/
The analysis of the external environment involves not only the study of the market but also the assessment of environmental factors.
According to the Federal service of state statistics, respondents identified the most constraining of them. The first is the insolvency of the buyers, which was chosen by 70% of respondents, followed by the high level of taxes, lack of financial resources and high transportation costs. Thus, the macro environment includes different variables and factors that are outside the analyzed company. These variables can be represented by other organizations in the market, people associated with the firm.
To identify key market trends, to analyze factors that affect the company's operations - analysis of selected parameters was conducted using PEST analysis includes four groups of variables: political (P) economic (E), social (S) and technological (T).
Political factors included the following: the unstable political situation in the country, the absorption of small businesses by large corporations, tax increases, the introduction of new standards in trade policy and the regulation of the industry by the Federal Antimonopoly Service (FAS).
The group of economic factors includes a decrease in inflation, an increase in wholesale trade turnover, volatility in the exchange rate of major currencies, an average level of competition and an increase in agricultural production.Besides, it is essential to take into account the pandemic situation in Russia when most companies must work online.
Among social factors, one of the most significant is a decrease in the population, requirements for product quality and level of service, an increase in the consumption of confectionery.
Technological factors include the improvement of logistics systems, the introduction of online sales, and the use of automated technologies.
Thus, based on the analysis of the company, “EGO Translating” should form a strategy that will develop and maintain competitive advantages in the long term. It will help reduce the threat from competitors and new entrants.
In order to perform an analysis of the external environment, besides, for further STP analysis in the framework of developing a marketing strategy, it is first necessary to identify the organization's competitiveness.
To do this, an analysis of Michael Porter's Five Competitive Forces was conducted: the level of competition in the industry, the threat of invasion of new players, the threat of substitute goods, the market power of buyers and the power of suppliers.
· The threat of invasion of new players.
Barriers to entry into the market are high: significant initial capital investments with long payback periods, the presence on the market of structures that have their linguistic material base.
· Bargaining power of buyers.
The principal consumers are people, production associations and enterprises in various sectors of the industry. The most significant power is concentrated in retail chains that create demand for goods. If the quality or price of the product is unsatisfactory, buyers can find an alternative.
The loss of a critical customer can affect the company's sales.
· Bargaining power of suppliers. Small.
· The level of competition in the industry.
The level of competition among companies in this industry can be estimated as average.
The main competitors:
· ABBYY Language Services
· Janus Worldwide
· Translink
· EGO Translating
· Logrus
· TLS Company
· Publishing Center "Transtech"
· Neotech
· Translation agency “Nedra”
· Treatise
“EGO Translating” is a leading Russian language service provider; the company offers a full range of linguistic services and is the only translation company on the Russian market to have a dedicated department for handling classified documentation certified by the Russian Federal Security Service. Therefore, there is high competitiveness.
Moreover, EGO Translating Company permanently improves their employee` productivity. Price competitiveness is high, i.e. the ability to create and offer quality goods and services at lower costs than competitors.
Structural competitiveness is also on the exceptional level, i.e. the ability to impose its products or services regardless of their price, thanks, for example, to their quality, innovation, related services or brand image. The first source of value creation within the company is human capital. In other words, a competitive company is one that is capable of attracting the best talent and keeping it motivated so that it performs its tasks in the best possible way. EGO Translating Company does the best in this point as already confirmed in the description of the company's activities. To sum up, the company has within itself a complex ecosystem, composed of other diverse elements such as human capital, processes, and technology.
However, as competitors still exist, there are presented some recommendations on how to increase competitiveness:
· The level of competition in particular linguistic product markets may be improved by ways to reduce barriers to entry.
· Investment grants and subsidies may increase competition, and by tax incentives to encourage new product development.
· Keeping interest rates low is also a strategy that would encourage investment. Also, keeping them as stable as possible would increase certainty and reduce risk.
4.3 Analysis of internal environment of the organization
The second part of the strategic analysis is the analysis of the internal environment of the enterprise, which is presented with a description of the organizational structure of the company.
The organizational structure is presented below (Figure 5).
Figure 5. Organizational structure of the company
The advantages of such a management structure are coordination between performers; ease of management; clearly expressed responsibility; high competence of specialists responsible for the implementation of specific functions; exemption of line managers from making decisions on some special issues.
Disadvantages: difficulties in maintaining stable relations between various functional services; long-term decision-making procedure; insufficiently clear responsibility, since the manager making the decision usually does not participate in its implementation.
Table 3 Analysis of economic factors
|
Name of indicator |
Meaning |
Value |
||
|
The balance sheet |
The planned balance |
|||
|
Quick liquidity ratio (solvency) |
Cash, settlements and other assets/current liabilities |
1,413 |
1,338 |
|
|
Absolute liquidity (solvency) ratio |
Cash/current liabilities |
0,453 |
0,103 |
The company has its working capital, allowing to cover current liabilities. However, all indicators in the planning period are reduced compared to the reporting period.
The absolute liquidity ratio decreases to the greatest extent since the cash balance at the end of the planning period has significantly decreased compared to the beginning of the planning period.
The share of short-term liabilities has dramatically increased, which has an extremely negative effect on the financial stability of the company. Thus, financially, there are factors, both positive and negative.
The change in the planning period indicates an increase in the business activity of the enterprise, both in absolute terms (revenue and retained earnings), and in relative indicators of the turnover and duration of the turnover of elements of assets and liabilities. However, the duration of the financial cycle increased by one day, due to the outstripping rate of reduction in accounts payable compared with a reduction in accounts receivable.
Despite the growth in net profit, the profitability of products and core activities decreased slightly. Mainly due to the outpacing growth in revenue and costs compared with the growth rate of profit from sales. Return on equity and fixed assets increased, as net profit increased in the planning period compared to the percentage.
Analysis of the financial condition of the enterprise according to the source and planned balance allows drawing the following conclusions:
1. Such factors influence the financial stability of the enterprise in the planning period as the outrunning growth rate of equity compared to the growth rate of the balance sheet currency.
2. In the medium and long term, the reporting and planned balance sheets of the enterprise are liquid, and the enterprise is solvent. However, in the short term, the reporting and planned balance sheets of the enterprise are not entirely liquid. Besides, in the planning period, there is a significant drop in the absolute liquidity ratio due to a reduction in the free cash balance at the end of the planning period. This fact increases the financial risks of the enterprise in the planning period.
3. The planned period provides for the growth of business activity of the enterprise both in absolute terms (revenue from sales, profit from sales, net profit) and relative indicators (turnover of elements of assets and liabilities of the enterprise).
4. The planned period also provides for the growth of indicators of profitability of fixed and equity capital, which indicates the planned increase in their return.
5. In the planning period, there was a slight increase in the financial cycle, as well as a slight decrease in the profitability of products and core activities. (https://www.testfirm.ru/result/7825496015_ooo-kompaniya-ego-transleyting)
Thus, the annual financial plan as a whole may provide an increase in the efficiency of the enterprise.
The following are the results of the comparative analysis of balance sheet and income statement of EGO translating company for the year 2018 that are contained in the database of the Federal service of state statistics of the Russian Federation (Rosstat). The main activity of the organization is the activity of translation and interpretation (NACE code 74.30). The analysis compared the key financial metrics of the organization with the average (median) values of these indicators a specific industry (activity) and all branches of the Russian Federation. The average and the average values of the indicators calculated according to the financial statements for 2018 provided by Rosstat. The average data was taken into account the organization, the total assets of more than 10 thousand rubles, and revenue for the year exceeds 100 thousand rubles. Based were also excluded organizations, statements which had a significant deviation from the arithmetic rules of the accounting reporting. The comparison used the average performance of organizations of comparable scale activities - micro-enterprises with revenues ranging from 10 to 120 million rubles a year. Results of the comparison of each of the nine key performance indicators with the median value made a generalized conclusion about the financial condition of the organization.
As a result, the financial condition of the company “EGO Translating” on 31.12.2018 is much worse financial condition of half of all microenterprises engaged in the activity for translation and interpretation (NACE code 74.30). Thus in 2018, the financial position of the company deteriorated significantly.
When compared with the national average, the organization shows much better results.
It is due to the relatively high rates of enterprises of this type of activity relative to the average in all sectors. The financial position of “EGO Translating LLC” is better than that of the majority of organizations of the Russian Federation that are comparable in the scale of activity, the reports of which are contained in the Rosstat information base and satisfy the above criteria.
Table 4 Revenue and costs 2018
|
Revenue 2018 г.: |
100 mln. rub. |
|
|
Costs 2018 г.: |
98,1 mln. rub. |
Table 5 Financial indicators*
|
Indicators |
EGO Translating,2018 |
Indicators, 2018 |
|||
|
Significantly worse average |
Average |
Significantly better average |
|||
|
Autonomy ratio |
0,55 |
?0,04 |
0,28 |
?0,7 |
|
|
The ratio of own working capital |
0,55 |
?0 |
0,18 |
?0,63 |
|
|
Reserve ratio |
1,75 |
?0,01 |
0,63 |
?2,9 |
|
|
Investment coverage ratio |
0,55 |
?0,08 |
0,39 |
?0,78 |
|
|
Current ratio |
2,21 |
?1,02 |
1,38 |
?3,45 |
|
|
Quick ratio |
1,52 |
?0,6 |
1,03 |
?2,3 |
|
|
Absolute liquidity ratio |
0,11 |
?0,02 |
0,11 |
?0,54 |
|
|
Return on sales |
2,95% |
?0,94% |
3,84% |
?11,3% |
|
|
EBIT Sales Profitability |
2,20% |
?0,66% |
3,10% |
?10,1% |
|
|
Net profit margin |
1,19% |
?0,32% |
2,01% |
?7,88% |
|
|
Interest coverage ratio |
- |
? |
- |
? |
|
|
Return on assets |
9,73% |
?0,76% |
6,12% |
?23,6% |
|
|
Return on equity |
15% |
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