Background

Two key factors have inspired Pleven Municipality to start developing international marketing. First, alterations of the internal market and economic recession in the country in particular, which has badly influenced the investment process in Bulgaria in the last years. This has had a most severe impact on the industrial activity of certain state and public organizations, dealing with design, building and producing construction materials, which have slowed down industry and led to major unemployment within the business.

Secondly, municipality management considered the products of construction companies to be highly attractive abroad and in particular for the construction market in the Russian Federation. In 1996 the Construction Chamber and Pleven Municipality united their efforts in stimulating investment activity, construction work and improving public utilities. The decline in the construction market, the low ability of customers to buy and reduced investments for new construction works have placed a restraint on widening the potential of construction companies. Therefore the two institutions have started to seek credits and successful business abroad.

Practice

In 2001, the Pleven Municipal Council of Pleven decided on creation of a construction consortium between Pleven Municipality, Parkstroy and Injstroy companies as well as private initiatives from town. K. Makedonski, deputy mayor of Pleven Municipality, was elected Chairman of the Consortium. The goal of this initiative is to launch the products on Russian construction markets, and more particularly in Moscow.

In the last decade, modern buildings and contemporary cultural, administrative and living (for over a 10 000 families) facilities were constructed. They appear to be a strong guarantee for the potential and quality of the working process of construction companies in Pleven.

The marketing solutions of the municipal administration have gone through the following stages:
1. Research of marketing environment in Russian construction market
2. Decision acts about entering these markets
3. Setting up business contacts with managerial body of Moscow city
4. Defining methods of approaching this market
5. Deciding on structure of marketing complex

Research of marketing environment has pointed out to a positive attitude of Russian customers towards Bulgarian construction companies. They consider it reliable and high tech production. A preliminary research was performed on the effectiveness of the system for supporting foreign companies in Russia by the government and about factors helping (preventing) business enterprises. On the whole the political and juridical situation for setting up business contacts was evaluated as positive. Based upon this, a decision was taken for entering the Russian construction market. The municipal administration has undertaken efforts in establishing contacts with the governing body of Moscow city and to sign a contract for co-operation with the Moscow central district, thus supporting the business initiative of the brand new consortium.

In May 2001, a Moscow delegation, led by Juriy Lujkov visited Pleven and participated in the International business forum Invest in Pleven . The forum focused on presenting the construction work and observation of already constructed buildings, streets and parks in town. Within this visit a contract for cooperation was signed between the Municipality of Pleven and the Central Administrative District of Moscow. The contract comprises 6 directives, one of which is building of sites in the new region Kurkino of Moscow city, with an overall area of 50 000 sq. m. The most suitable method for entering the Russian market appeared to be the joint enterprise.

The contract signed on 25 September 2001 resulted in the setting up a company, registered at the Moscow Registrar s House as a limited liability company Consortium Pleven 2001 MP , and in December 2001 the company obtained authorization for construction works and building premises and facilities all over the territory of the Russian Federation. Due to this acknowledgement, the joint company is already capable of participating in competitions for building sites in Russia.

Finally, decisions had to be taken regarding the structure of the marketing complex so as to fit the local Russian environment. Regarding pricing policy, the consortium intends to place lower prices in order to cover a larger share of the market.

Results

Registered limited liability company Consortium Pleven 2001 MP ;
- License for construction works and building premises and facilities all over the territory of Russian Federation obtained;
- Preparation of documents necessary for participating in competitions for building of sites in Russia.