Kalashnikov Concern Unveils Development Strategy Through 2020

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Russia’s premier small arms manufacturer Kalashnikov Concern, part of State Corporation Rostec, unveiled today its new development strategy through year 2020.

The strategy will enable the company to improve its productivity, widen the global sales footprint and increase revenue fourfold. Kalashnikov plans to invest over 4.5 billion rubles to implement the strategy. As part of this implementation, the company already started its production facilities’ upgrade.The development strategy provides for sales increase in the near future where profitability will increase on the account of production facilities and management effectiveness upgrade. As early as 2014 Kalashnikov’s growth will lift it right into the black with 140,000 small arms units shipped to customers, twice the 2013 volume.

“Solidification of local market positioning and active sales of military and civil products abroad will become Concern’s top priorities. Thanks to measures put in place, by 2020 the upper plank of Kalashnikov’s maximum production capacity will be lifted two fold (100 percent), and productivity will increase four fold,” said Alexey Krivoruchko, Kalashnikov Concern CEO. “Moreover, Concern’s revenue from specifically small arms sales should grow four fold as well. Kalashnikov will supply for the entire life cycle of its products, from the drawing board to recycling, as well as conduct scientific research and experimental design to create innovative weapon platforms and systems.”

Kalashnikov Concern manufactures about 95 percent of small arms made in Russia. Eighty percent of all of Kalashnikov output is exported. One of Concern’s priorities is finding new and increasing its share of existing markets. This approach was used to pick 50 countries that have the most potential acquiring Kalashnikov military products. Concern already started new market penetration, mainly in the Asia-Pacific and African regions. The most promising markets for Kalashnikov are India and Egypt. Contracts with Thailand and Indonesia were signed recently, and Concern is in negotiations with South American countries. Kalashnikov plans to pay special attention to Commonwealth of Independent States countries, which traditionally displayed high demand for Concern’s products.

One important activity in implementing its 2020 strategy is Kalashnikov harmonizing its product line. After conducting marketing studies, Kalashnikov discontinued weapons that have lost their appeal and freed up resources to manufacture new types of weapons. Today this approach freed up 200 engineers from the design studio who are working on 30 large scale projects encompassing the entire range of modern armaments: from new sniper rifles to handguns. A closed doors presentation showcasing first achievements for Ministry of Defense has been scheduled for early next year. One of the directions of Kalashnikov work would be activities on wholesale rearmament of Russian army, which will include work under “Ratnik” (Warrior) high-tech soldier system program.

To give its products a competitive and quality edge, Concern launched a large scale technical upgrade program. Activities including major overhaul and new construction in 2014-2017 are funded with over 4.5 billion rubles. This investment will provide for longer lifespan of Concern’s buildings and facilities and lower operation expenses. These funds will also be used to upgrade 90 percent of the machine tools Concern uses. An individual new Kalashnikov machine tool will pay for itself in 2-3 years, which is a better than average ROI. Following the upgrade a single new machine tool will replace three old ones, which will help save on production space, thus cutting costs and decreasing environmental impact while constantly growing production volume.

Aiding business development and product marketing is Concern’s new global brand, which is an important part of new markets expansion and sales growth in the civilian products niche. The new brand will become the basis of advertising campaigns, dealers’ retail designs for Kalashnikov products, as well as the foundation of an apparel and accessories line.

Kalashnikov Concern – The company is Russia’s largest designer and manufacturer of combat automatic and sniper weapons, guided projectiles and a wide range of precision weapons. A large segment of civilian products includes shotguns, sporting rifles, machine tools and tools. 51 % of the Concern’s shares belong to Rostec State Corporation, while 49% are purchased by private investors. The Concern’s products are sold to more than 27 countries. Kalashnikov Concern unities three product brands: Kalashnikov firearms brand, Baikal hunting and civilian rifles brand and Izhmash sporting rifles brand.

Rostec State Corporation is the Russian corporation established in 2007 to promote the development, production and export of high-technology industrial civil and military goods. It comprises about 700 enterprises which currently form 9 holdings in the defense industrial complex, 5 holdings in civil industries and 22 companies of direct management. Rostec’s portfolio includes such famous brands as AVTOVAZ, KAMAZ, Russian Helicopters, VSMPO-AVISMA, etc. Rostec’s enterprises are located in 60 regions of Russia and serve the markets of over 70 countries. In 2013, its revenue was 1.04 trillion rubles and tax payments to the budgets of all levels exceeded 138 billion rubles.

Apostol Center For Strategic Communications – is a holding which unites several companies involved in media work, Russian and international PR, digital communications, analytics, branding and design, graphics, audio and video production, IT R&D, and consulting. Among its clients are Rostec State Corporation, LTE-operator Yota, Yota Devices – Russian smartphone manufacturer, КRET, Russia’s largest airline Aeroflot, beauty giant Oriflame and many others. The company revenue in 2013 was 1.03 billion rubles.

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Ekaterina Boni

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