Case study of Dremel Europe: price and demand analysis in Russia

Abstract

[EN] Following recent economic and political instability in Russia attributed to, among others, the Ukraine conflict, ruble depreciation and the consumption recession a requirement has emerged of deep analysis into its market and prices. Therefore the present report aims to analyze the relationship between the demand and the price through a study of price elasticity of demand for the Business Unit of Dremel Europe in Russia. In addition, it will determinate macroeconomic and microeconomic factors affecting Russian demand during the current climate the country is facing. Dremel Europe is the world leader in the market segment of Multi Tools and operates under the Robert Bosch Power Tool Corporation. In recent years, Bosch and Dremel were actively working to increase their market share in growing Eastern European markets, especially in Russia, which not only is the largest country in the region, but also experienced a strong economic growth in the last few years. This growth has resulted in an increase in average disposable income, in addition to the number of tool outlets, which reflects many opportunities in the Russian market. Dremel sales structure in Russia was established 10 years ago through the Bosch sales organization. Since then, Dremel has witnessed a rapid growth in Russia, becoming an important growth market. Russia’s prices were established based on Germany prices, which is the European benchmark price for Dremel, and there is not a deep analysis due to the positive response of the market and the limited period that Dremel was operating there. Nevertheless, the recent macroeconomic situation in Russia is stalling the sales and forecasts are not favorable. These, together with the peculiarities and different performance of the Russian market compare with Western European countries, arise the need of a more profound study into the market and the prices in order to personalize and adapt to the volatile and unpredictable Russian market.