UNIT 7.

RUSSIA NEEDS MODERNISING

Modernisation was the slogan proposed by Dmitry Medvedev, Russias president, in an article last September called Russia Forward!, published on a liberal website. Should we drag a primitive economy based on raw materials and endemic corruption into the future? Mr Medvedev asked rhetorically. While admitting a vast array of problems, from economic weakness to alcoholism, he painted a picture of a Russia with nuclear-powered spaceships and supercomputers. In short, if Russia managed to modernise, it would once again become a world leader. Although Mr Medvedevs article was dismissed by critics as a mere simulation of action, it inspired lively debate among the elite. Even those who suspected the slogan was fake found they could not disagree with it. Thus discussion focused on different ways to modernise, but did not question the goal itself. The Kremlin had imposed its own agenda. Liberal critics quickly pointed out that modernisation in Russia is impossible without political liberalisation and institutional change. A country with weak property rights and a rent-seeking bureaucracy, they argued, can invent new ways of extracting bribes and robbing businesses, but not of creating intellectual wealth. Most recently Mikhail Gorbachev, the last Soviet leader, said modernisation was impossible without democratic reforms. Yet the experience of Mr Gorbachevs perestroikawhich started with talk of technological renewal but ended in the collapse of the Soviet systemhas persuaded the Kremlin to define modernisation strictly within technological boundaries. Hence Mr Medvedevs warning not to rush political reforms. His supporters argue that only authoritarian government is capable of bringing the country into the 21st century. Consolidated state power is the only instrument of modernisation in Russia. And, let me assure you, it is the only one possible, Mr Surkov told Vedomosti. In Stalins shadow In Russian history, it is Peter the Great and Stalin who are considered the great modernisers rather than Alexander II, who abolished serfdom, or Mr Gorbachev, who opened up the country. Brutality trumps mild liberalisation. In his article, Mr Medvedev described Stalins bloody policies as unacceptable. Yet the idea that a top-down modernisation is the only option available to Russia still dominates the minds of its rulers. We are lagging behind the leading countries by some 50-100 years. We must cover this distance in ten years[This requires] a party sufficiently consolidated and unified to channel all efforts in one direction, Stalin wrote in 1931. As Andrei Zorin, a historian at Oxford University, explains, the efforts of Stalin and Peter the Great involved the forced creation of an educated class capable of generating, or at least replicating, the best Western innovation. Mr Surkovs science town has less in common with Palo Alto than with the closed Soviet research towns that mostly grew out of the gulag system. In the 1930s leading Soviet engineers arrested by Stalin laboured in special prison laboratories within the gulag. After the war, when Stalin required an atomic bomb, a special secret town was established where nuclear physicists lived in relative comfort, but still surrounded by barbed wire. Subsequently hundreds of secret construction bureaus, research institutes and scientific towns were set up across the Soviet Union to serve the militaryindustrial complex. They also spawned a technical intelligentsia. In the 1980s it was this class of educated peoplepermitted more freedom and better food than the rest of the country, but still poorly paid and not allowed to go abroadthat became the support base of perestroika. But it was also this class that was hit by the market reforms of the 1990s. They supported us in 1991 and most of them got nothing out of our reforms, admits Anatoly Chubais, who, as Boris Yeltsins chief man in charge of privatisation, devised and implemented them. These days Mr Chubais heads a state corporation charged with incubating

nanotechnologies, a project central to the Kremlins modernisation effort, and is going to be in charge of building the Kremlins Silicon Valley. He argues that the time has come to empower the technical intelligentsia again, recreating a social class that will in time demand liberalisation and become, as it did in the 1980s, a catalyst of change. The moment they become part of the Russian economy, they will become part of Russian political life, Mr Chubais says. Mr Zorin says this kind of social engineering is the key to understanding todays problem. An authoritarian regime creates an educated class which becomes emancipated from the state because of its intellectual superiority; it then undermines the state, and often gets buried in its wreckage. The problem, says Mr Zorin, is that this class cannot live on its own. It can be in conflict with the state, but it cannot exist without it. The second problem is that the modernisations of both Stalin and Peter the Great were driven by clear military goals. It is much harder, in an innovative economy today, to tell scientists what they should be inventing. From The Economist, March 11th 2010 1. After reading the text, try answering to the following questions: Do you think Russia needs modernizing? Modernization is impossible without adopting political and economic liberalism, a mature democracy, so as to limit briberies, corruption. Are there similarities between the Romanian and the Russian system? Medvedevs supporters argue that, on the contrary, the country needs an authoritarian government to step into the 21st century. Do you agree? State similarities with the Romanian environment. Peter the Great and Stalin are considered by the Russians to be the great modernizers of their country. Stalin suggested in 1931 that the 100 years which separated Russia from the Western civilization have to be recovered as soon as possible and by aggressive means. What are the similarities with the Romanian history in the same period? The recent economic crisis proved the limits of neoliberalism. What is your opinion concerning this topic?

1. Decide whether the following statements are true or false: Russia lacks strong property rights, competition and the ability to fight corruption. Totalitarian regimes like the ones in Singapore, South Korea or China, have progressed without a full experience of liberalism. The sort of capitalism experienced in Romania or Russia means the personal enrichment of some individuals, which consider owing the state mechanism.

Russias ruling elite consists of a corrupt bureaucracy, security services and a few oligarchs. Romania and Russia make efforts to hinder the cult of the state. Education, health care and social protection are the three sectors Russia and Romania are putting their efforts into. The economic crisis proved that the state is more needed that never in Russia. Russian capitalism is based on a savage consumption. Russia needs not only economic, but also political competition. Russia has to learn how to live as a post-imperial state, using only its natural resources and economic means.

2. Find a title for the paragraph below and use it as a provider of information to the following questions: What do you understand by perestroika and gulag, two famous words generated by the Russian history? What do you understand by technical intelligentsia? Is there any equivalent in Romania? In the 1930s leading Soviet engineers arrested by Stalin labored in special prison laboratories within the gulag. After the war, when Stalin required an atomic bomb, a special secret town was established where nuclear physicists lived in relative comfort, but still surrounded by barbed wire. Subsequently hundreds of secret construction bureaus, research institutes and scientific towns were set up across the Soviet Union to serve the military-industrial complex. They also spawned a technical intelligentsia. In the 1980s it was this class of educated peoplepermitted more freedom and better food than the rest of the country, but still poorly paid and not allowed to go abroadthat became the support base of perestroika. But it was also this class that was hit by the market reforms of the 1990s. From The Economist, March 11th 2010

3. Decide which of the two statements are true: Dmitry Medvedev was chairman of Gazprom, the state-controlled gas giant. Vladimir Putin was chairman of Gazprom, the state-controlled gas giant. Russias prosperity could continue for years: it has the world's seventh-biggest oil reserves, at 80 billion barrels, according to BP, a British oil firm.

Russias reserves of oil are quite reduced. Asia is the main oil provider. Russia has regulated the industry so poorly that production is falling despite the rising oil price. The oil price is completely deregulated in Russia. Russia refuses to international investors to explore its natural resources. In order to obtain important productions of oil and a good price, Russia needs recent technology, meaning deregulating the market and allowing international investors to achieve the best out of the Russian natural resources. Lukoil is investing $10 billion a year, but roughly 30% of that goes into gas production, which is now more lucrative than oil, given rising domestic prices for gas and lower taxation. Lukoil uses international money. Russia has high taxes on the oil industry. The Russian state does not make a high profit out of the gas industry. The today Russia is more dependent on oil and gas than it has ever been. Russia has other different resources, besides oil. Oil and gas account for 10% of Russian budget revenues and 20% of its exports Oil and gas account for 50% of Russian budget revenues and 65% of its exports. The share of oil and gas in Russias gross domestic product has more than doubled since 1999 and now stands at above 30%. The share of oil and gas in Russia's gross domestic product diminished since 1999. Over the past seven years, according to Citibank, Russia accounted for 80% of the growth in oil production outside the Organization of the Petroleum Exporting Countries. Over the past seven years, Russia accounted for 40% of the growth in oil production outside the Organization of the Petroleum Exporting Countries. Russia is always in dispute with Ukraine as concerning its oil supply. Ukraine has its own reserves of oil.

UNIT 8. MARKET STRATEGIES Coca-Cola once famously defined its market as throat share, meaning its stake in the entire liquid intake of all humanity. Not to be outdone, Indra Nooyi, the boss of Cokes archrival, PepsiCo, wants her firm to be seen as one of the defining companies of the first half of the 21st century, a model of how to conduct business in the modern world. More specifically, she argues that Pepsi, which makes crisps (potato chips) and other fatty, salty snacks as well as sugary drinks, should be part of the solution, not the cause, of one of the worlds biggest public-health challenges, a challenge fundamentally linked to our industry: obesity. To that end, on March 22nd she unveiled a series of targets to improve the healthiness of Pepsis wares. By 2015 the firm aims to reduce the salt in some of its biggest brands by 25%; by 2020, it hopes to reduce the amount of added sugar in its drinks by 25% and the amount of saturated fat in certain snacks by 15%. Pepsi also recently announced that it would be removing all its sugary drinks from schools around the world by 2012. Although Ms Nooyi talks about the need to cherish employees, and once wrote to the parents of her senior managers thanking them for bringing up such wonderful offspring, she rejects the notion that these goals are soft-headed or decorative. She argues that they are necessary to prevent food companies from going the way of tobacco firms, which are perennially held responsible by governments for the health problems associated with their products, and penalised accordingly. As it is, several countries in Europe and various localities in America have banned trans fats, a particularly unhealthy ingredient in much junk food. A bill introduced earlier this month in New Yorks state assembly proposes banning salt in restaurants. Michelle Obama, Americas first lady, has launched a campaign against obesity among children. In the 1990s virtually all of Pepsis products were bad for youor fun for you, as the firm likes to put it. Under Ms Nooyi, who became boss in 2006, it has stepped up its diversification into products it calls better for you and good for you, including fruit juices, nuts and porridge (oatmeal, to Americans). Ms Nooyi does not see this as a case of trading profits for virtue. Instead, she insists both are possiblean idea expressed in the firms syrupy motto: Performance with purpose. There is no shortage of sceptics, both about the sincerity of Pepsis social mission and, more recently, its performance, which was decidedly flat in 2009. Indeed, this week, at the firms first meeting with investment analysts since 2006, in New Yorks Yankee Stadium, Ms Nooyi admitted to a series of disappointments, before promising that lessons had been learned and that we wont make the same mistakes. As well as being hurt by the economic downturn, Pepsi suffered from a flawed financial hedging strategy that left it paying too much for commodities. And it has suffered from some recent marketing disasters, including a campaign for Tropicana fruit juice that is widely regarded as one of the worst brand makeovers since Coca-Cola launched New Coke. Yet investors seem to be taking seriously Ms Nooyis claim that Pepsis future is bright. It helps that the firm has raised its dividend and announced a big share buyback. Investors also seem to be reappraising Pepsis decision last year to acquire the two independent firms that bottle its drinks. The deal had received a tepid reception, not least because Coca-Cola had insisted that keeping syrup-making and bottling separate made sense. Now, however, Coca-Cola has decided to follow Pepsis lead by acquiring its main bottlera move Ms Nooyi describes as vindication.

The hope is that integrating the bottling company into Pepsi will bring greater control over an increasingly diverse drinks portfolio, and promote cross-marketing between the food and drink divisions (not something that Coca-Colas acquisition will help with much, as it does not own a large snack operation). Pepsi, which jointly markets several different brands, dubs the clout this gives it with retailers and customers Power of One. The bottling acquisition should boost this tactic by ending the need to negotiate a division of the spoils on every big deal. When Wal-Mart calls asking for a joint promotion of, say, Pepsi and Doritos, as it did for the Super Bowl in February, Pepsi can respond in 24 hours, instead of six weeks. From The Economist, March 25th 2010 1. After reading the text, try answering to the following questions: Do you drink Coca Cola or Pepsi? Which one do you prefer? What are the VIPs advertising for the two companies along time? Do you think that VIPs advertising for Coca Cola or Pepsi help convincing people to consume their products? Many people suffer from obesity in the USA. That is why, if a company wants to survive on the market, it has to invest in healthy brands. Do you really think that Coca Cola or Pepsi can produce healthy brands? Can you provide examples of other brands of junk food? Who has the largest market share: Coca Cola or Pepsi? Do you buy products because they are advertised? Does product design matter when you buy a product? Would you buy a new product, which was never before advertised? Do you buy products because you need them or because you heard about them (wordof mouth advertising), you saw them on TV etc.?

2. Find market challengers and market followers for the following market leaders: Gucci, Adidas, Hermes, Starbucks Coffee, Disney. Market leader = a brand that has the largest market share. It dominates in image, price, profit, promotional spending. Market challenger = a company holding a major market share and competing vigorously with the market leader for leadership Market follower = a company that maintains its existing market share behind an established market leader

3. Place the word market either before of after each of the following words listed below:

.leader. .skimming .stock .share .segment .securities. .research.. .price.. .maker.. ..bear ..free. ..commodity. ..bull. .over-the- counter secondary.

4. Complete the following sentences with the information provided by the text: Pepsi launches a campaign of healthy food consisting in. Junk food is considered to be unhealthy food because.. Pepsis social mission means. Coca Cola has decided to follow Pepsis lead by Pepsi has suffered from some recent marketing disasters.

5. There is a logical connection among two of the three words below. Which one is the odd one out? Explain your choice. Brand loyalty brand preference brand awareness Advertising campaign advertising agency commercial Advertising commercial publicity Free samples coupons discounts

6. Insert the following words in the text below: Pepsi, breakfast, healthy brand, contemporary look, black-hatted Quaker mascot, product design, Quaker, oatmeal drinks

, which makes porridge, cereal, cereal bars and rice crackers, iss leading... Pepsi hopes to use its expertise in and packaging to make these goods more enticing, especially to children at breakfast time. It is already testingand biscuits, as well as new flavours of porridge. Quaker Oats packaging will also get a more, although thewill survive. Our goal, says Ms Nooyi, in typically forthright style, is to rewrite the rules of. From The Economist, March 25th 2010 7. Decide whether the following sentences are true or false: Advertising is essential, but only when launching new products. Pepsi invests a lot in promoting a healthy life style. People buy products because the ingredients are healthy, not because of the packaging details. People choose McDonalds and KFC because is cheaper. Famous brands have to change their market strategy so as to orientate themselves to healthy products because of obesity campaigns in the USA, not because they care for peoples life. Drink and food companies have to launch themselves into producing healthier products, unless they want to be penalized by governments.

8. Is there any difference between: Trademark brand Lunch launch Market segmentation market niche Market opportunities market research Vending machine automatic teller machine Customer client Line-stretching line-filling Advertisement commercial

9. Before launching a new product, a company needs investing in market research. What market research strategies do you think a company should use when selling one of the following products: A new model of car A new Master program

A new brand of chocolate, cereals, biscuits New electronic devices A new newspaper