Sergey Savitsky: "Changes in store for us"

In March, 2014 the top managers of the Holding held a strategy session during which the main strategic directions of the company development for the next 5 years were created. The CEO of "Atlant-M" Sergey Nikolaevich Savitsky agreed to comment on results of the strategy session and to give comments and explanations.

Sergey Savitsky

― Sergey Nikolaevich, first of all, is it really necessary to hold a strategy session, as the last time the strategy of the Holding was changed in 2011?

― Yes, in the spring of this year it became obvious that the strategy formulated in 2011 doesn't work and we need to correct it. So, for example, in recent years the markets where "Atlant-M" is represented have behaved very unstably. In all the regions the fast changes happened and are happening at the moment. In Ukraine we observe a deep political and economic crisis, market prospects can not be predicted. In Russia the automobile market is saturated, it starts being reduced, and the prospects for future growth are also weak. The market is growing in Belarus, but its size is insignificant and it greatly depends on the automobile market and economy of Russia as a whole.

The situation also becomes complicated because the pressure upon business profitability is gradually strengthening and the value of an existing business model decreases in all three markets.

One of the most important tasks for us still remains debt load reduction as the existing level of debt doesn't give the opportunity to grow by means of mergers and acquisitions.

As a result the strategy formulated in 2011: "We accumulate profit to buy our competitors at the right time"doesn't work now, the opportunities for growth of "Atlant-M" are limited, and it means that we should develop a new strategy.

― What are the results of last session? Can you indicate the main points of it?

― Firstly, we defined for ourselves that the potential growth in the existing markets is running low and if we want to grow in the future, we need to develop a new portfolio strategy, that is to look at the markets with a potential growth.

Secondly, it is necessary for every region to develop its own basic strategy and business model considering the peculiarities of the market and brand.

Thirdly, we modified our investment strategy.

And fourthly, we defined the key strategic initiatives of 2014 directed on the improvement of the existing business model of "Atlant-M".

― I am looking forward to get to know details. Can you comment on each of the decisions?

― The portfolio strategy of Atlant-M Holding is aimed at a future growth and consists of the three points:

The main markets for "Atlant-M” remain Russia, Belarus, Ukraine. And here we have to realize the first phase, a strengthening phase in order to be prepared for future growth.

If there is positive profit dynamics and improvement of the financial condition "Atlant-M" considers an opportunity to enter new markets (1-2 countries).

"Atlant-M" carefully approaches to the possibility to enter poorly saturated regions of the Russian Federation with a high potential of sales growth (we are preparing for a merger, but we have not taken any active actions).

― Will you comment on the second and third points? Does it mean that young and impudent managers have to pack suitcases and prepare for moving to Tajikistan, Uzbekistan or Kyrgyzstan? And why do you use a careful approach?

― Yes, we are exploring foreign markets, first of all, in CIS countries and we are estimating their potential, preparing for negotiations with suppliers, that is we are aimed and preparing for the following growth phase.

And the careful approach of "Atlant-M" to merges and acquisitions in the existing markets means that we are not searching for objects for merges and acquisitions in 2014, but ready and will consider all offers not to miss a suitable one for us.

― It is clear with the portfolio strategy. What will each of regions and the head office do?

― During the session we defined basic strategies for a further development this year in the current markets:

  • The Russian Federation: a strengthening strategy with elements of strategy of innovations;
  • Ukraine: strengthening strategy;
  • Belarus: strengthening strategy with elements of strategy of expansion;
  • The head office: strengthening strategy.

Let us define the notions.

Expansion is a use of the existing business model in adjacent segments, that is the answer to a question "where and by what means can we expand an existing business? " (location, products, clients, chain, sales channels, technologies).

Strengthening is improvement of one or several components of a business model in additional segments, that is the answer to a question "how can we increase competitiveness of an existing business? " (synergy search, optimization of operations and structure, efficiency increase, brand strengthening, scale effect strengthening).

Innovation is a creation of a new business model, that is the answer to a question "how radically can we change a business model to enter new markets?"

The main objective of the regions and the head office during the first phase, a strengthening phase, is to find a new, profitable business model in the existing markets, to increase management efficiency, to reduce debt load in order to be prepared for a new growth phase.

― What will be with investments? Where is the Holding going to make investments in the next 3 years?

― We are going to make pinpoint investments into the car centers, the main profit generators, for strengthening their facilities, position in the market and capacity growth. We are not making any large-scale investments into the new car centers. We are only planning to finish the construction of the third and fourth car center in Minsk around Uruchye (these are the elements of expansion to the Republic of Belarus).

Also we are to get rid of non-performing assets and those that are not corresponding to our strategy that is unfinished buildings and the land plots on Dmitrovskoye Highway (Moscow), sites in Kudrovo (St. Petersburg), Tyumen and Kiev.

― Now will you tell about key initiatives of 2014 which as you told will have a great influence over company strategy later on?

― Atlant-M Holding has always been eager to work with the leading world experts to develop the separate directions of strategy and policy of the company. This year we have also decided to involve the best experts, in our opinion, with whom we have already been familiar and cooperated in the fields of training or strategy development for the partner companies. This year we are developing three major projects. The first is "The product conveyor" in which we are cooperating with Michael Rekman, the consultant from the USA. The second project is " Auto Dealership Income Management ", the consultant is Yury Levin from University Toronto, Canada. And the third project is "The Holding Structure", the consultant is Henry Moon, CIEBS, the USA.

― It is possible to describe these projects in details?

― I will speak about "The product conveyor" in details, and I will name the main objectives of the other two projects . So, what do we mean by "The product conveyor"? It is a corresponding department in a car center which will generate and offer to introduce new products and services for clients on a regular basis. The main objective is to increase profitability of the enterprise through introducing original products and services for clients. For this purpose it is necessary to develop and start a continuous process of creation and "packing" of the new products or services that will interest the clients despite their price. For each segment of clients we will have to learn how to create a particular " dish" which consists of existing “ingridients”: new cars, used cars, financial service, additional equipment, vehicle maintenance and repair, spare parts, body repair. The introduction of this project will demand reorganization of the existing structure of our commercial offices: a creation of a strong middle-office where there will be a production of new products and their "packing", and a strong front-office (sales), introduction of the personal manager service.

In 2014 we are planning to start up a pilot project in the Russian Federation, and in 2015 the product conveyor is to start working in other car centers of "Atlant-M".

Now let’s talk about two other projects. The Income Management Project will quickly allow to find out a ratio "Price vs Items" in car sales, standard hours and spare parts for receiving the maximum possible profit for a particular center in a particular place and at a particular time. The Structure of the Holding Project will give the chance to determine highly effective organizational structure and management model for "Atlant-M", and to adapt corporate culture and HR policy of the Holding according to the require modifications and new strategy as well.

― That means “Atlant-M” has changes in store?

― Yes, “Atlant-M” has changes in store. In the course of the evolution not the largest and strongest one survived but the most flexible, that one who adapted for environmental changes the best. Therefore we also have to react to external changes quickly.

However I want to assure all those changes will be according to our brand and the values of "Atlant-M". We are still positioned as the most customer-oriented dealer and the most attractive employer. And all the memebers of management structure should work quickly and unhesitatingly, that is the rule for each employee of "Atlant-M" "I want - I can - I do - I achieve a result" is still relevant !

― Thanks!

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