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Interview of the top manager of Electroschit TM Samara Group of Companies CJSC



Mikhail EgorovVice-President of Electroschit – TM Samara Group of Companies CJSC answered the questions of Prom-oil correspondent Mikhail Egorov
-Mr.Egorov, how could you present the goods produced by our Company? What are its advantages and shortcomings?
Electroschit Group of Companies produces the electrical products within the range of voltage from 0.4 to 220 KW. Our production is one of the most advanced on the Russian market. We use the state-of-the-art technologies, for instance, powder-coating painting of the best quality among similar products, and our production times are the shortest. Also, Electroschit offers to the Russian market the widest range of electric products equipped by components of our own manufacturing. This is one of the important advantages of our Company.  Once selecting us as the supplier, our customer solves all problems with supplies of a wide range of required goods at once.
Production equipment of all our product lines fully meets the modern requirements. 
All this is possible thanks to our well-developed technical service staffed with 500 specialists.
-Why should consumers buy tour products? What is your competitive advantage?
Our chief competitive advantage is that we produce the whole line of electric equipment, including electrical apparatuses. Due to large production volumes, our products are delivered within short time.
If to speak about intermediate and high voltage devices, it should be noted that Electroschit Group of Companies can significantly reduce engineering costs due to the work of our design institutions. Also, cost reduction is possible due to the fact that we produce standard units, so, we have not to design each product anew. In addition, modular assembly makes installation easier and cheaper, allowing easy modernization of an object by means of adding standard modules.
We have a very well-developed service division, which controls all stages of production, assembly and operation of our products. The service centers network covers the whole territory of Russia. Our service centers are located within 1000 km from any point on the Russian map.  Due to such location, in case of urgent need, we can deliver the necessary components within 24 hours by motor vehicles.
As a producer of the most part of components, we take responsibility before our clients for the equipment and works performed in their full scope.  We eliminate shortcoming by ourselves, not delegating this job to suppliers or third companies.
As the largest Russian producer, Electroschit has the huge experience of the equipment operation. Due to that, our products are maximally adopted to the conditions of their operation.
-What can you say about your competitors? How do you evaluate their potential? To what extent can the products of domestic producers be compared to their foreign analogs?  What can you say about “price wars” at the market of goods produced by your Company?
By key parameters, Electroschit Group of Companies overruns its main rival in ten times. Our Company produces the full range of items within its area. That is why such overrun is possible. There is no other Russian producer who would produce the full set of products. Someone produces distribution units, someone produces substations, but no one does all at once.  We have worthy rivals by each product line. We know our rivals, and we respect them. They are valuable for us, at least because they do not let us stop. They are our catalyst which makes us go faster. To overrun some of them, we have to make our best efforts, developing our technical and process services.  As a result, we benefit from it, as well as the market.
Today, the quality of domestic equipment is not worse than that of its foreign analogs, sometimes even better. The goods produced in Russia have higher reliability, they better fit our working conditions. Foreign producers do not feel free at all on the Russian market.
As an example of quality, I can mention a large delivery to Cuba in the last year. The cost of the delivered equipment was RUR 3 bn, but there was a “weak link” – microprocessor protection made abroad.
Concerning price wars, I may say that they have never been so intense on the market of electric goods, especially during the crisis. Because of that, producers often have no free money to invest into production development. Those who wish to win should intensify the reduction of expenditures.
-How do you evaluate your Company’s position on the market of the goods produced by it? What market share do you occupy, according to your information, in particular market segments?
We significantly overrun our closest market rival by production volumes, holding the leading market position. Market shares by each particular product vary significantly.  Sometimes they are more than 70%, sometimes – 10%.  Anyway, Electroschit is leading in every segment.
Today, Electroschit has entered the new production markets, for instance, the market of power and measurement transformers. During two or three years, we have managed to occupy up to 10% of this market.
-And what about your export activities? Do you export your products? Where? What are your customers? How do you assess the supply and demand balance? Your assessment of the market export and import situation?
Our operations on foreign markets are rather intensive. Even in 2009, the bad year for many, we delivered the equipment which cost RUR 3 bn under a direct contract - and this is to Cuba only. Also, the list of our customers includes China (switches), Libya (transformers), Iran, Iraq (switches), Afghanistan (switches, transformers), India (switches), Angola (switches, package transformer substations), Myanmar (switches, package transformer substations, transformers), Guinea (package transformer substations), Benin (package transformer substations, transformers) and the Sultanate of Oman (transformers).  We supply large volumes of production to the CIS countries, but we do not consider it export.  Historically, our plant has worked for the whole Soviet Union, and we consider operations with our neighbors as the Russian market.
Also, we have import operations, ordering a large amount of components abroad. This is due the fact that the Russian producers of analog still cannot position themselves on the market, their development is going slowly. Western companies supply mostly apparatus, not end products to the Russian market.
Also, it should be noted that the list of goods produced by Electroschit Group of Companies includes the types of equipment which have no analogs in the world. In the short-term prospective, the demand for them will be very high.
Export operations account for 20-25% of our trade turnover. These numbers are high, but, in addition to profits, the export brings us the opportunity t train our personnel, in order to further enhance the equipment’s quality and maintenance, so that it could comply with world standards.
-How have you overcome the crisis? What was its impact on your business?  What is your existing production load compared to crisis years by key products?
Our Company had no any crisis. In 2009, we intensified the activities of our commercial service, developed and implemented the anti-crisis program, So, that year was successful for us.  The economical situation of that year even had a positive effect for our business. Our market activities became stronger and more active, we took more sure positions towards our rivals. The crisis destroyed weaker enterprises; as for us, it opened new markets.  Electroschit Group of Companies initiated closer collaboration with the Russian Railroads, Gazprom. Its activities in some regions became more vivid.
For today, our facilities are working at their maximal load. In 2010, production volumes increased in 39%, compared to the year of 2009.  Now, we actively hire new employees and buy new process equipment.
We have always been a customer-oriented company. In the crisis days, we began to pay even more attention to our customers and to develop service activities.  At that period, we set new business relations which are continuously strengthening, creating a positive effect on our activities.
Also, the crisis has made us raise the requirements to our staff.
-And what about production expenditures? What do you do to reduce them? Do you procure domestic products and technologies? What do you procure form abroad, why?
We are working at reduction of expenditures and production optimization, but this activity is not currently as intense as required by the time.  Lack of activity in the area of reduction of production costs is one of our shortcomings.
As for procurement of the process equipment, 99% of the procured equipment is made abroad. This is due to the fact that the Russian machine-building industry is now in a very bad state. To assure reliable and continuous operation, high performance and quality of our products, we prefer using the foreign-made machines and technologies.  Besides, operation of this equipment requires less personnel.
-What about your staff situation? Is there any staff turnover?  What is the average age of employees? What do you do to preserve key personnel and to attract the best people?  Do you have a bonus system for key managers?
We have not any staff turnover. There are single quits, but they do not impact our business in general. Average age of employees is 37.8 years.
Of course, we are working on attraction of the best personnel and improvement of labor conditions. We reconstruct the shops, improve labor environment and safety. We build residential premises for our workers. They are not free, of course, but the prices are reasonable, there are also special conditions.  We develop the non-production infrastructure. There is a Culture Centre, a recreation base, a sporting complex, we perform sports competitions. Each employee has the right for 28 days of vacations or even more for those involved in hazardous productions.  There are incentives for rest in sanatoriums.
The Company provides educational opportunities. Those who wish may get the first or second higher education. This is possible due to our cooperation with the Samara State Technical University. Also, we have agreements with the basic chairs of the University where we educate our personnel.  Our Company sponsors education.
Electroschit Group of Companies is constantly developing, so, the road to our Company is always open for young specialists with promising potential. Every day our HR Department examines a huge number of Vs, there are queues of applicants.  To get a job in our Company is highly prestigious in Samara Region.
Working in our Company, our employees get the invaluable experience.  Even if a specialist leaves us, his experience of work in Electroschit will be respected by all employers.
And of course, we have a bonus system for key managers.
-What advanced technologies do you apply and how? Does your Company has the innovative potential? Do you plan collaborating with the Skolkovo Project?  If yes, what will be the format of collaboration?
As for technologies, Electroshit uses the most advanced of them among the electrical producers. All plants of our Group of Companies are equipped with the best equipment: metal structure welding under the Dutch technology, hot galvanizing and many other items. When we started producing generator current leads, we purchased the state-of-the art equipment of the new generation. Our rival face many problems while competing with us in this area.
Also we invest a lot of money into innovations. Now, our investments are higher that in the most successful pre-crisis years.
We have introduced some technologies by ourselves. This is, for example, line assembly of cells. No one has used this method before us. We have developed new unique single-breaking vacuum circuit breakers 100 KV, which are under testing now; closed switchgears up to 220 KV; antiresonance measurement transformers NALI, which have no analogs; and many other devices.
In general, in the last two years, we have introduced as many new goods as never before.  There are more than 20 of them, you may read about them on our web site in the section “New goods".
As for Skolkovo, we are currently considering the matter of interaction with this project. Probably, we will participate in it.
Development of information technologies is an important area of our activities. In spite of high qualification of our IT specialists, we have no software which would ensure the adequate level of processing of the information required for operations of our Company.  We have much to develop and to improve in this area.
-Are you going to enter international markets (IPO, etc.)? Do you plan to attract an international strategic investor? Are there any plans on purchasing of any enterprises?  Or are you oriented on development by your own forces?
For now, we do not plan IPO. As for attracting of investors, we often consider this question, as well as that of purchasing of new enterprises.  We have some plans in this area. Our Group of Companies is developing with good dynamics, so, the sites already available are not enough for us.  If this dynamical trend will continue, we will have to deal this question very seriously to 2010, and we already have got a set of proposals.
Also, we plan to open not less than 15 representative offices within the next 2 years.
-What do you think your customers should improve in their work, to provide you more comfortable market conditions and opportunities to produce the goods which will meet world standards of application properties?
I think that this matter should be dealt following the example of China during its energy crisis. At that time, the state, represented by the State Council and the Department for Energy Development introduced the standards for all electrical goods and developed several standard solutions. Consumers merely had no right to order anything not included in the list. Due to that, the plants managed in a very short time to develop and to supply to the market the equipment of very high quality. Also, the time of construction of power facilities reduced sharply. 
Today, we face situations where two energy specialists, working in different companies, but in the same region and operating the same oil production equipment, pose absolutely different requirements to electric products.   We, of course, meet all of them, but if standards were introduced, the equipment would be produced faster, cheaper and with higher quality.
In addition, the lack of strict requirements to the goods opens the market for unfair producer. And operation of the electric equipment may effect the economical safety of the regions, not mentioning human lives. Consumers should enhance requirements to the procured goods. In the Soviet times, there was the Main Technical Department under the Ministry of Energy. It would be a good idea to restore it. The equipment customers themselves have mentioned it at the conference “RussHydro Interview” held at our premises in October 2010.

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