Infrastructure Reform In The Russian Federation

1. Infrastructure Reform In The Russian Federation Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

2. A Proposal By The Global Infrastructure Firm: Dewey, Cheatum & Howe Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

3. COMPANY OVERVIEW Dewey, Cheatum & Howe, is a global engineering, environmental, and construction management-consulting firm primarily serving both domestic and foreign governments. We have years of experience here in the Americas as well as other locations. We hire and nurture the greatest minds in infrastructure engineering in the world. The proceeding is our rough proposal to the Board of Directors to act and move into play with the Russian Federation’s overhaul of their infrastructure. Following receipt of approval from the Board of Directors, we submitted an official bid to Russia, and are awaiting final word of acceptance of our bid. We at Dewey, Cheatum & Howe are confident in the acceptance by The Federation. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

4. Product Category Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

5. Product Category Dewey, Cheatum & Howe has decided to enter the Russian Market initially not as a full service engineering and construction company, but by focusing solely on road and bridge design and construction. ninth largest economy * over 140 million consumers The Russian Federation has serious infrastructure issues the road and highway situation in Russia are at the forefront of these issues. Many of the roads, bridges and most of the other infrastructure in Russia was inherited from the former Soviet Union. Many operational roads in Russia are not paved. One example of this is a heavily traveled highway that is part of the Russian Federal Motorway commonly referred to as the “Highway from Hell” Russia has approximately 950,000 kilometers of roads and only 776,000 kilometers are paved. To put this into perspective, Russia is twice as large as the United States, and the United States has over 6.4 million kilometers of road and over 4.1 million are paved Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

6. Russia’s emerging markets need and will benefit from road and bridge improvement.   The government handles the majority of Russia’s road and bridge building efforts, there are not very many companies doing this work in Russia.   the timing is perfect for entry. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

7. COUNTRY AND MARKET ANALYSIS: Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

8. Economic Analysis Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

9. Economic Analysis After the collapse of the Soviet Union, the Russian economy had an important changes shifting from a centrally planned economy to a market-based and globally integrated economy. At the beginning of the twenty first century, Russia had its first recovery and started to emerge toward a new system of economy. The IMF and World Bank consider the Russian economy a developing one. For the first ten years after the collapse of the Soviet Union, the Russian economy was growing at a high rate. In late 2008 and early 2009, Russia experienced its first economic recession after ten years of a rising economy. The recession did not last long, as of the late 2009 and early 2010; Russia economy started rising again. Although, the 2008 crisis affected several countries all over the world, the Russian economy was not deeply affected by the global financial crisis. Russia had a budget surplus of 1.4 percent in 2012. in 2012 Russia became a member of the World Trade Organization (WTO). According to the World Bank estimations, the new growing economy in Russia will raise the road system’s share of transportation in the next twenty years by roughly 41 percent in comparison with its level in the early nineteen nineties, which was thirteen percent (The Economy). Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

10. Social and Cultural Analysis Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

11. Social and Cultural Analysis Russia was a huge empire with the Romanov Dynasty starting in the seventeenth century, it continued to grow and make acquisitions until the twentieth century it he the Russians defeat in the 1904 Russo-Japanese War. This led to the Revolution and then the famed communist leader Vladimir Lenin seized power following the overthrow of the Royal family in 1917. The Russian Empire was now The Union of Soviet Socialist Republics (USSR). Following Lenin was another famed communist dictator Iosif Stalin. Stalin was in power until after World War II. During the later years of the USSR, there was serious erosion in the countries transportation systems, and other areas of infrastructure. the Russian Federation is like a small baby in an adult's body, trying to adapt to this modern world and the capitalist market opportunities. Russia is the largest country on the planet in terms of geographical area; this is an ideal opportunity for infrastructure growth The only way to survive in a globally connected world is to be globally connected It encompasses over six and a half million square miles. There is conflicting information available regarding the education; though they are at least highly literate. The higher learning at a postgraduate level is lacking the most structure. These are reasons why we will utilize a great deal of the Russian labor force, yet will be very selective in the Russian locals that we place in professional positions, such as engineering roles. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

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13. Political and Legal Analysis Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

14. Political and Legal Analysis In 2001, Russia enacted a law on the registration of legal entities and sole proprietors. The 2001 law created and centralized process for business registration governed by the Federal Tax Service. The law mandated that the registration of a company and the tax registration be a unified step, often using a one-stop shop model. The tax registration code is entered into a database known as the EGRYUL or also called the Unified State Register of Legal Entities . There are two sets of registrations that have to be completed and the law sets time limits on completing them. The first step is to get registered with the EGRYUL and the second step is to forward the companies EGRYUL information to the social funds and statistic service . It is unlawful for this process to take more than twenty days to complete. Although the 2001 law allowed for an easier business registration process in Russia, it still leaves a little to be desired when compared to the ease of starting a business in other countries. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

15. Vladimir Putin Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

16. BUSINESS STRATEGY Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

17. Strategic Timeline Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

18. Strategic Timeline The construction will officially start in January of 2014. However, the contracts will be signed in the last quarter of 2013. During the four years of the initial contract, some of the individual projects will be bridges in the southern region, an overhaul of the roadways between smaller towns and the industrial zones, roadways between the ports and the industrial zones, and pave the roads that need to meet to modern standards and brought into the twenty first century. We do have a stringent four year timeline explaining the different phases, and the proposed time schedule necessary for each phase. Nevertheless, time can be extended in case the company needs more time to work on certain parts of the project. The project can also be added to and extended if construction progresses so smoothly that Russia would like to extend contracts to Dewey, Cheatum, & Howe to continue infrastructure improvements throughout the remainder of the country. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

19. Strategic Method of Entry Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

20. Strategic Method of Entry Of the six modes available for entry into a foreign market, only two would be feasible for a massive infrastructure overhaul akin to the plan of Dewey, Cheatum & Howe and the entry into the Russian Federation. Exporting, Turnkey contracts, Licensing, and franchising are not really applicable for our entry. The remaining two options are to enter as either a joint venture or a wholly owned subsidiary. While our goal is to work with the Russian government and people, the wholly owned subsidiary is the best choice because it allows for the most control. The standard disadvantages of the highest cost and risk will be somewhat mitigated in the sense that the money that is required to enter the market would not be spent until after there is a contract with the Russian government at a minimum a length that would allow recoupment of our initial costs. in order to better appease both the Government of the Russian Federation as well as its people, we hope to hire a portion of our engineers and other on-site professionals from the Russian workforce as well as the entirety of the manual labor force. Because Dewey, Cheatum & Howe are already an established engineering and contracting firm experienced in infrastructure development, we do not want to acquire any existing enterprises in our target market. Greenfield is more preferable for our needs. Again, a great deal of the decision comes down to the ability to have complete control. This is important for our market entry. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

21. Strategic Target Segment Selection Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

22. Strategic Target Segment Selection Since the roads and bridges Dewey, Cheatum & Howe will build will be for public use, our target segment is the Russian Federal Government. In 2006, Russia established a Commission for Road Safety; this is beneficial to our entry. The various Departments within the Federation that make up this Commission are as follows: The Ministry of the Interior, the Russian Transport Ministry, and the Russian Ministry for Emergency Situations, the Ministry of Public Health and Social Development, the Ministry of Education and Science, and other stakeholders. The targets are the individual leaders of these departments; we need to market our company and submit proposals to them. Analysts at Dewey Cheatum, & Howe are certain that the Russian leaders are aware of the current statistics as they pertain to public transportation, but we need to accentuate the severity for the sake of urgency. The fact that commercial goods can only travel 180 miles per day in Russia, compared to an average of 900 miles per day in Europe is a key benefit of the work we plan to do in Russia. In addition, the fact that Russia’s fatality rate is five times higher than that of the safest rated countries regarding road safety is another huge benefit Russia will gain from our work there. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

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24. Strategic Product Positioning Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

25. Strategic Product Positioning The product that we are offering is a full service job completion. To accentuate the individual factors, we must exhibit how Dewey, Cheatum & Howe has the most highly technologically advanced construction tools among our competitors. These sophisticated construction tools are going to be originating from our assets in the United States. The highest grade of standard tools can be from localized suppliers, such as those in Poland and other neighboring countries to reduce project costs. The tools that necessitate transport from the United States are specialized as facilitate a high occurrence of efficiency often enabling the labor force to multi-task. It will reduce the required time for each task. It is also safer than the standard tools that many competitors would use for these specific tasks, which means that the workers will be working in a safer environment, less exposed to bodily harm. In addition, these specialty pieces of equipment are eco-friendly, which means that it prevents pollution during construction, again unlike the standard equipment utilized by our competitors. Moreover, Dewey, Cheatum & Howe has an excellent repertoire of highly qualified engineers from the United States, Japan and other economic and educational powerhouses worldwide. These engineers have worked in the infrastructure industry for years, and project managers that are extremely experienced in the oversight of the construction. The engineers and other professional staff members all have an international experience or knowledge and have either worked or resided in foreign countries at some point. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

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27. Pricing Strategically Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

28. Pricing Strategically As a redeveloping economy, Russia’s price elasticity of demand in regards to its infrastructure is relatively inelastic. Inelastic price aside, we cannot charge too high of a price because we do not want to upset the delicate and tenuous political relationship between the American and Russian governments. Dewey, Cheatum & Howe will not accept a loss in our pricing strategy, however we will aim to charge an acceptable wholesale type rate to the Russian Federation in our bid to win the initial road and bridge portions of their infrastructure demands. Conservatively, costs for Russia could run from 1-2.5 trillion USD in the short-term. The aim is to maintain a competitive pricing strategy but still enable our company to earn a healthy profit for the benefit of all of our stakeholders. Just because the demand is relatively inelastic, it does not mean that one of our competitors will not attempt to undercut us with a lower cost bid, we must ensure that the decision makers within the Russian government understand the large benefit of awarding Dewey, Cheatum & Howe their current infrastructure contract. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

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30. Strategic Distribution Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

31. Strategic Distribution Russia is the largest country in the world and it has the most natural resources when compared to any other country. Dewey, Cheatum & Howe knows that Russia has the full capability to provide all the materials that we need to build roads and bridges there. We need to enter into arrangements with well-respected, strong, local businesses for local sourcing needs. We also plan to employ a Russian labor force. Forming relationships will allow us to gain business knowledge and cultural knowledge. The project headquarters locations for Dewey, Cheatum & Howe under this project will be in four major cities: Moscow, St. Petersburg, Omsk, and Samara. We chose these four major cities because they facilitate optimally the day-to-day administration of the business end of these ventures. We will also ensure that not only will we follow all local laws and regulations; we will strive to maintain working conditions comparable to those found in the more developed countries, such as our Corporate Headquarters within the United States. We will enter one city at a time. The speed of our expansion will reflect all variables, including the various government entities who grant us the jobs, but we hope to be in all four of the above-mentioned cities by year four, following the timeline. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

32. Promotional Strategy Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

33. Promotional Strategy Dewey, Cheatum & Howe’s promotional strategy will mainly focus on creating jobs in Russia and on the superior experience that Dewey, Cheatum & Howe has acquired over the many years we have spent in infrastructure. Dewey, Cheatum & Howe will accentuate in its bid to the Russian government, that the company has participated in extensive successful infrastructure projects within the United Sates as well as other locations globally. This shows the experience of Dewey, Cheatum & Howe in this industry. In addition, Dewey, Cheatum & Howe will focus on how many local workers and employees will be hired to illustrate the benefits to the Russian economy the large utilization of a local labor force and when applicable local businesses within Russia’s vast borders. The maintain adherence to the timeline and the exceptional completion of the project, this initial overhaul of the transportation aspect of Russia’s infrastructure will require at a bare minimum, over fifteen hundred labor positions. These laborers will be compensated with prevailing wages regarding the different positions within the manual labor force. Our plan is to place approximately a dozen highly qualified Russian civil engineers within our professional workforce at Dewey, Cheatum & Howe for this specific bid. It is our hope that this will strengthen the relationship with the Russian Federation. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

34. PROJECT IMPLEMENTATION AND FUTURE LONG-TERM GOALS Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

35. PROJECT IMPLEMENTATION AND FUTURE LONG-TERM GOALS Implementation of this venture will follow this plan after the bid that Dewey, Cheatum & Howe submits to the Russian Federation is accepted. As described previously, the finalities of contracts are scheduled for signatures and finalization in the third quarter, with the project commencement beginning in early 2014. We are certain that our bid will be accepted and will progress forward, as we here at Dewey, Cheatum & Howe are the best in our field of infrastructure replenishment, sustainment and development. We have various strategies in place to ensure that the power players within the Russian Government know this. The long-term goal is to be awarded future contracts to modernize the remainder of the Russian Federation. We hope fulfill all Russia’s needs with the remaining bridges and roads, but also all aspects of their nation’s infrastructure to facilitate the Russian Economy and Government to fully reestablish its place as a world power. As the largest country in the world in square miles, this could be a very lucrative and stable long-term partnership, keeping a steady supply of business for Dewey, Cheatum & Howe, even in a downturn economy. Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher

36. INFRASTRUCTURE = Growth Danielle Dewey * Amel Chaouechi-Nefatni * Chesley Satcher