Introduction The RRC group of companies is an international holding with a 15-year long history. Established at the time when Russia was undergoing radical economic reforms, the company strove to look far ahead and invest in business development and pursuit of new markets. A clear strategic vision of prospects and growth opportunities enabled the company to open its first office in Eastern Europe in 1998 — only six years into existence. When the company hit the European market it had a range of advanced and efficient tools to enhance profitability of its client businesses. Today, RRC Group consists of three independent companies — RRC EN, DiFo, and RRC Education. Although their business operations are different, they are united by their ambition to be at the cutting edge of the technical progress and supply consumers with advanced solutions for work and leisure.
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RRC Group / Annual Report 2006-2007
2006 results In 2006, RRC Group accomplished the objectives it had envisioned, strengthened its positions within familiar market segments, and acquired new opportunities to pursue promising markets and business areas. RRC Group executed a number of new agreements with world’s leading manufacturers of high quality equipment, adjusted the strategy of one of the group’s companies, and began to pursue export markets which enabled the company to expand its international operations onto new European territories. A great deal of work was implemented in control automation and planning of business processes. In 2006, these ambitious objectives were accomplished through introduction of a modern ERP information system which enables the company to manage business processes at all levels of its organizational structure. This system helps RRC Group to create a common information space for all of its geographically distributed subsidiaries and to standardize internal procedures, reporting, planning, and control over business activities in all of its operation areas. This automation concept has enabled RRC Group to significantly reduce its costs, improve the corporate resources management quality, ensure more effective strategic planning, and more adequately forecast further development of the holding. Additionally, in 2006 the company launched a number of projects designed to automate its external operations. The projects will integrate CRM and e-Commerce applications into the RRC Group common information space to help the company to improve the quality of its customer service and more adequately plan its relations with clients. Today, results of these innovations are already visible. Using IT technologies RRC Group accomplishes concrete strategic objectives. For example, advanced e-Commerce applications enable RRC Group to actively develop its relations with partners operating within the SMB segment because they require a flexible and operative solution to work with suppliers that meets modern standards and market realities. In addition to information systems, in 2006 RRC Group began to deploy a management by objectives (MBO) system. This system is introduced to improve manageability of the company. It implies planning of each employee’s tactical objectives on the basis of the company’s strategy and plans. It also enables the company to synchronize efforts of its various structural units to ensure they all work towards common goals. This innovation results in improved communications between unit leaders and their subordinates in setting objectives, evaluating their accomplishment, and identifying criteria required to appraise employees’ performance.
+30%
Turnover growth
+33%
+38%
+44%
+44%
+33%
RRC Group / Annual Report 2006-2007
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Companies
RRC Education 5% DiFo 41%
The RRC Group includes three companies operating in Russia, the CIS, and Eastern European countries:
RRC Education
RRC EN
niche VAD distribution of high-tech equipment
Education — training and consulting
EN 54%
DiFo
distribution ofices end user dev
DiFO growth of sales +18% +24%
These segments have been growing most dynamically over the past several years. They set the tone in the development of the most important sectors of economy, business, and people’s lives. They have long become an integral part of processes that enable the mankind to develop rapidly, communicate on a qualitatively new level, and learn faster and more effectively.
+33%
RRC Group guides high technologies into the world of people. We are responsible for bringing new solutions to the market. It is not important what it is — a technologically complex project or a small pocket computer. What is important is to make sure that a product travels from manufacturer to consumer within the shortest time possible and has a chance to accomplish its mission within its own period in history.
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This is why our partners succeed in their business. They acquire the newest products and technologies alongside value-added services and the RRC Group multiyear experience within the shortest time possible.
RRC EN growth of sales
RRC mission
+57%
We are an efficient international company marketing innovative high technologies and services for the benefit of society. Our success is based upOn: HigH prOfessiOnalism Of Our emplOyees prOfOund understanding Of Our partners’ needs Optimal cOmbinatiOn Of equipment and services HigH respOnsibility witH respect tO emplOyees and partners
• • • •
We want to be a financially successful international distribution company leading on every market that we pursue. We also want to be a socially responsible company. We strive to create a unique business model that will ensure our advance and ongoing development. We strive to be aggressively competitive, technological, to fully meet our clients’ needs, and operate a solid and professional team.
+41%
+71%
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RRC Group / Annual Report 2006-2007
Geography The RRC Group operation territory extends from the shores of the Pacific Ocean in the Russian Far East through Siberia and Urals to eastern outskirts of Europe. This is the best characteristic of the RRC Group business — the company operates in twelve sovereign states and works for the benefit of people from different cultures and with different mentalities. At the same time, the group of companies adheres to uniform strategic principles — niche distribution, individual approach to building relations with partners, and flexibility of the organizational structure. But in each country the RRC office is unique — it develops according to local market laws and adapts to local market peculiarities while preserving the basic principles of the group. This means that RRC Group does not need clichés — it needs partners’ trust and leadership in strategic niches.
St.- Petersburg
Estonia
Moscow
Latvia
Russian Federation
Lithuania
Belarus Poland Ukraine
Czech Republic Slovakia
Moldova
Hungary Slovenia Croatia
Romania
Alma - Ata
Bosnia and Herzegovina Montenegro
Bulgaria
Georgia
Macedonia Albania Greece
Turkey
Azerbaijan Armenia
Kazakhstan
RRC Group / Annual Report 2006-2007
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Establishment of an Export Markets Department in 2006 was also a significant initiative of the RRC group of companies. This had to do with the group’s ambition to develop its European business on new territories without establishing permanent offices and was an adequate response to the growing demand and market changes.
RRC offices
Azerbaijan Czech Republic Hungary Kazakhstan Poland Russia Serbia and Montenegro Slovenia Ukraine
Export markets
Bosnia and Herzegovina Bulgaria Croatia Cyprus Greece Israel Latvia Lithuania Macedonia
Malta Romania Slovenia Turkey Estonia Lithuania Albania Moldova Belarus
2005
Shares by territory: EE — 36% CIS — 64%
2006
Shares by territory: EE — 43% CIS — 57%
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RRC Group / Annual Report 2006-2007
RRC EN — is an international niche VAD distributor promoting highly technological telecommunication and network equipment, automatic identification devices, and security and data protection systems for multi-level networks of various degrees of complexity. Adjustment of the company’s strategy was an important 2006 event for RRC EN. Many of the company’s operation aspects underwent changes the most important of which has to do with the fact that from now on RRC EN will focus on four niches — telecommuni-
Technical Support Project documentation development ● System specification & definition ● System design ● Implementation support ● Pre-sales and post-sales support ● Demo and testing facilities ● Maintenance support ● Consulting
Financial Support Diversified contract terms and conditions ● Assistance in trade financing ● Leasing programs ● Consulting
cations and networks, infrastructure, information security, and automatic identification of data (auto ID). In 2006, the company continued developing one of its most important business components - the Value Added Distribution model — by providing a broad spectrum of valueadded services that secure competitive advantages for its partners.
Real VAD
The value of the VAD-model is that the company offers a variety of services and expertise in addition to
Logistic Service Diversified logistic partner base ● Transportation strategy optimization ● Cost optimization ● Integrated delivery ● Order cycle management ● Flexible billing management
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●
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Partner Care
Marketing Support
Education Service
Detailed partner base E-helper Regular targeted support programs ● Integrated offers ● ● ●
Communication campaigns ● Specialized channel programs ● Print and Internet media campaigns ● Partner e-care ● Sales support programs ● Road shows ● Trade shows and events ●
Certified courses Regular sales and technical training courses ● Individual education ● Web-based education ● Specialized conferences ● Co-programs with vendors ● ●
RRC Group / Annual Report 2006-2007
RRC EN — a niche VAD distributor operating within four product segments: ● Telecommunications and networks ● Infrastructure ● Security ● Auto ID
RRC EN sales by product niche
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Auto ID 12% ● ● ● ●
Security 6% ● ●
Barcode Scanners Terminals RFID Barcode Printers
Network Security Application Security Telecommunications and networks 48% Routing and switching ● Wireless solutions ● IPT, IPVC, MSG center ● Telephony ● Call center ● Optical ●
Infrastructure 34% ● ● ● ●
Servers Storage Systems UPS Cooling Systems
RRC EN sales by countries Kazakhstan Azerbaydgan 5%
Czech Republic 4% Ukraine 7% Hungary 6%
47%
Slovenia 2% Russia 36%
Poland 35%
S&M 5%
commodities it supplies. This model is especially important for mediumsized integrators which in most cases do not have enough experience in dealing with complex product lineups. It is not always possible for them to have highly paid certified specialists on their staff therefore outsourcing such specialists is the most effective method for them to implement their projects. Product portfolio includes: 3Com Corp., APC, Avaya, Cisco Systems, Check Point Software Technologies, EMC, Emerson, Fujitsu Siemens Computers, IBM, LinkSys, Netgear, Nortel, McAfee, Motorola (Symbol), Sonicwal , Zebra, ZyXEL Communications Corp., TrendMicro, Allied Telesis, F-Secure, FunkwerkEC, mks_vir, Liebert (Emerson Network Power), and TUT Systems.
53% +57%
Overall RRC EN sales growth
+71%
+41%
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RRC Group / Annual Report 2006-2007
Today, DiFo is a pan-European niche distributor with offices in Moscow, St. Petersburg, Kiev, Almaty, Warsaw, Prague, Budapest, Belgrade, and Ljubljana. The company also operates an Export markets division that represents its interests in 12 countries, including Romania, Bulgaria, Croatia, Greece, Turkey, and Israel. The DiFo philosophy is to focus on marketing of advanced digital technologies designed to change people’s lives and expand their understanding of the boundaries within which highly technological devices can be used at office and home. The company’s
strategic success is accounted for by the mobile role it plays in relations between manufacturers and clients. DiFo uses this business approach in all countries in which it operates, ranging from Russia to Eastern Europe. What made us successful in the past is likely to be what will make us successful in the future: flexibility, focus and a personalized approach to our business development. We will keep on strengthening our positioning, our business results and our market approach in order to drive our success as well as the success of the brands we work with.
The company’s product areas include:
Mobility ● ● ●
Connectivity
Navigation devices PDA and smartphones Notebooks
● ● ●
Communication devices Wireless solutions Solutions for businesses
Visual and Display Solutions ● ● ●
Monitors LCD TV Projectors
DiFo — VAD distributor
Technical services Pre-sale and postsale support ● Demonstration and testing of products ● Design of project documentation ● System design ● Certification and localization of equipment ● Consulting ●
Partner services Detailed partner database ● E-commerce system ● Development and support programs ● Marketing pro● Complex solutions ●
Education Certification courses Regular courses for technical and commercial specialists ● Individual training ● Distant learning ● Special seminars ● Partner programs with vendors ● ●
Media/PR Presentations of new products and solutions ● Organization of events facilitating networking among partners and vendors ● Press releases and news ●
RRC Group / Annual Report 2006-2007
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Countries’ shares in the DiFo business
Serbia 2%
In 2006, DiFo Russia radically changed its product portfolio to optimize the company’s business in the region. It gave up on auxiliary brands that had stagnated on the market and focused on segments that are potentially promising in terms of profitability. One of the notable events in the DiFo business development was the launch of an E-shop system in seven countries of operation. The success of this system is confirmed by the fact that the company sells 27% of equipment through the E-shop. In 2006, DiFo achieved impressive results in Eastern European countries — its business grew by 139% by the year’s end. An impressive business growth rate was observed in Ukraine. The company tripled its business in this country and plans to double it in 2007. DiFo took advantage of the Export markets division established by RRC Group to expand its operations onto twenty-five countries. The Export markets division sells equipment in territories in which the company does not have permanent offices. Today, the division actively sells Palm equipment in Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Greece, Israel, Latvia, Lithuania, Macedonia, Malta, Romania, Slovenia, and Turkey. By the end of 2007 DiFo will be supplying Palm equipment to Estonia, Latvia, Lithuania, Albania, Moldova, and Belarus thus expanding its operations onto a total of twenty-five countries. DiFo is the exclusive distributor of this manufacturer’s equipment and its sales in the aforementioned countries amounts to 61% of the total amount of Palm equipment sold by DiFo in Eastern Europe. In 2006, DiFo accomplished a great deal of work to develop the channel. The company segmented its partner base having carefully examined its preferences and recommendations, which enabled DiFo to design and introduce an optimal operation strategy for each segment of the channel.
Hungary 12%
E-Markets 2%
Czech Republic 6%
Poland 6%
Russia 55%
Ukraine 17%
EE and CIS shares 27%
73%
Overall DiFo sales growth
+18% +24%
+33%
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RRC Group / Annual Report 2006-2007
RRC Education RRC Education was based in October 2003 and is an RRC Group member company. From the very inception the center has been growing successfully and expanding its scope of services on a regular basis. To better meet clients’ needs RRC Education strives to expand the geography of its training courses by offering training sessions on the basis of: • RRC Group subsidiaries (in Moscow, St. Petersburg, Kiev, Almaty), • Premises of partners and resellers in various RF and CIS regions, • Clients’ premises. Alongside traditional training courses the company offers distant learning services and remote laboratory access required for practical sessions (virtual classroom) which helps improve education efficiency and reduce training costs. In 2006, the RRC training center achieved impressive results having doubled its turnover as compared to 2005. In addition to that, the company launched two fully functional offices in St. Petersburg and Almaty, tripled the number of courses offered, and trained almost 1,600 students. These and other initiatives enabled the RRC training center to reach a qualitatively new business level and triple its client base. advantages: multiyear experience acquired by tHe cOmpany in applicatiOn Of advanced infOrmatiOn tecHnOlOgies tHat benefit training prOcesses, utilizatiOn Of tHe metHOdOlOgical base Of equipment manufacturers, including tHe largest players On tHe glObal it market, qualified staff witH a sOlid teacHing backgrOund in infOrmatiOn tecHnOlOgies, access tO a brOad spectrum Of tHe mOst advanced equipment frOm tHe rrc wareHOuse makes it pOssible tO use tHe latest generatiOn equipment fOr classes, a brOad spectrum Of training prOgrams fOr specialists witH any level Of training.
• • • • •
Target audience endusers
integrator resellers
38%
endusers
62%
RRC Group / Annual Report 2006-2007
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Awards Working as an international distributor implies active operations in multiple national markets that draw attention of partners and the public. In 2006, the group’s companies received numerous awards and were included in a variety of ratings.
THE RRC EN OFFICE IN HUNGARy DESERVES A SPECIAL MENTION AS IN 2006 IT RECEIVED AN AWARD FROM LENOVO FOR OUTSTANDING ACHIEVEMENTS IN PROMOTING ITS BUSINESS IN HUNGARy. THIS INDICATOR HAD GROWN By 65% AS COMPARED TO 2005 AND THE COMPANy’S MARKET SHARE IN THE LAPTOP SEGMENT HAD GROWN FROM 6% TO 15%. THESE ACHIEVEMENTS ENABLED RRC EN HUNGARy TO BECOME THE SECOND LARGEST LENOVO DISTRIBUTOR IN THE COUNTRy AND MOVE UP FROM ONE OF THE BOTTOM POSITIONS TO THE TOP THREE WITHIN A MATTER OF ONLy ONE yEAR.
ACCORDING TO AUTHORITATIVE RUSSIAN BUSINESS “PERIODICAL CNEWS”, RRC GROUP IS ONE OF THE FIFTEEN LARGEST IT COMPANIES IN RUSSIA. ACCORDING TO ANOTHER, NOT LESS RESPECTABLE ONLINE PERIODICAL, “ASTERA”, RRC GROUP ENDED UP IN THE TOP TEN OF AN ESSENTIALLy ANALOGOUS RATING.
THE COMPANy’S ACHIEVEMENTS DID NOT GO UNNOTICED By MASS MEDIA AND WORLD-RENOWNED VENDORS IN EASTERN EUROPE. THE RRC EN OFFICE IN POLAND RECEIVED A SPECIAL AWARD FROM IBM FOR THE BEST GROWTH INDICATORS AND WAS ONCE AGAIN INCLUDED IN THE “GAzELLE OF BUSINESS” RATING PUBLISHED By THE LEADING POLISH MAGAzINE “PULS BIzNESU”.
THE GROUP HAS ALSO ACHIEVED GREAT RESULTS IN PROMOTING MOTOROLA (EARLIER — SyMBOL) PRODUCTS. IN 2006, RRC EN RUSSIA RECEIVED AN AWARD FROM THIS VENDOR FOR ACTIVE DEVELOPMENT OF ITS BUSINESS IN THE RF REGIONS. RRC EN RUSSIA HAS BEEN THE ExCLUSIVE MOTOROLA DISTRIBUTOR IN RUSSIA SINCE 2004 By ACTIVELy DEVELOPING THE AUTO ID BUSINESS IN RUSSIA AND THE CIS COUNTRIES. IN 2006, THE SyMBOL PRODUCTS TURNOVER GREW By 83% AS COMPARED TO 2005.
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RRC Group / Annual Report 2006-2007
Contact information Russia 119331 Moscow, Vernadsky pr., 29, office 903 Tel.: +7 495 956 1717 Fax: +7 495 133 5230 http://www.rrcgroup.com http://www.rrc.ru http://www.digital-focus.ru http:// www.digital-focus.com 195112 St.-Peterburg, Malookhtinsky pr., 68, office 310 Tel.: +7 812 333 1510 Fax: +7 812 528 0250 http://www.rrc.spb.ru Ukraine 04073 Kiev, Moskovskiy pr., 16B, 2 floor Tel.: +38 044 581 1118 Fax: +38 044 581 1118 http://www.rrc.com.ua Poland RRC Poland Sp.z.o.o. 02-862 Warszawa Farbiarska, 69 Tel.: +48 22 644 0133 Fax: +48 22 644 0132 http://www.rrc.com.pl 53-611 Wroclaw, Strzegomska, 46B Tel.: +48 71 354 8400 Fax: +48 71 354 8409 Kazakhstan 050010, Almaty Dostyk ave., 85a, #405 Tel.: +7 3272 506 196 Fax: +7 3272 910 318 http://www.rrc.ru
Hungary RRC Hungary Kft. 1135 Budapest, Frangepan u. 28-32 Tel.: +36 1 236 9000 Fax: +36 1 320 0390 http://www.rrc.hu Czech Republic RRC-Cz, s.r.o. 180 00 Praha 8, Czech Republic U Pekarky 1 Tel.: +420 283 84 0400 Fax: +420 283 84 0166 http://www.rrc.cz 763002 Dlouhe dily, 393 Zlin-Louky Tel.: +420 283 84 0400 Fax: +420 283 84 0166 http://www.rrc.cz Serbia RRC Beograd, d.o.o. Mazuraniceva, 3 11000 Beograd Serbia and Montenegro Slovakia RRC Slovakia Kutikova str., 17 852 50 Bratislava Tel.: +421 2 6828 6707 Fax.: +421 2 6828 6708 Slovenia Poslovne telecomunikacije podruznice Ljubliana Motnica, 11, 1236 Trzin, Tel.: +386 1 530 5590 Fax: +386 1 530 5592 http://rrc-bt.com Azerbaijan Republic AZ1004 Baku, Icheri Sheher, Boyuk Gala Str., 41 , 2 floor Tel.: +994 12 437 2351 Fax: +994 12 437 2351 http://www.rrc.ru www.rrc.ru | www.rrcgroup.com