Yuriy Shumilin, the president of PetroInTrade, Ltd., became the major newsmaker of the month at the distributor market because of several events that happened in the company.

First, we learned about the transfer of the company’s shares on security of one Western venture fund. Thus, PetroInTrade became the first company among Russian distributors of electronic components that entered into partnership with Western companies to attract investments and prepare for IPO.

Second, it was announced about the company’s rebranding after which it will receive the new name – PT EIelectronics.

Third, the new development strategy was approved implying, in particular, entrance to Eastern and Western European markets with significant changes in the distribution concept. Finally, this year the company celebrated its 20^th birthday.

And, as we see, its director has something to say in the traditional for such cases conversation called “Results and Prospects”.

-          Yuriy, on the eve of the company’s anniversary, you are representing a new five year development strategy. How successfully did you manage to implement the previous one? It’s known that defining goals and targets for several upcoming years is not typical of Russian distributors. PetroInTrade was the pioneer in choosing this way. Looking at the results, was the long-term planning justified?

-          Yes, we completed the latest five year development program which was composed in 2006 and remained active since 1 January, 2007, till 31 December of the last year. At that time we set three major goals: to enter the group of five leading Russian electronic components distributors, to increase the turnover up to $100 mln. and to prepare the company for entrance to the international level. The program was implemented but with some corrections due to the 2008 crisis that, undoubtedly, had impact on us. Nevertheless, I think we reached the set goals.

-          How did you reach them?

-          The basis of our previous strategy was the work with strictly defined market segments where we could to the maximum  apply our key success factors: to study these segments thoroughly, to understand the tasks and demands of customers and to offer what is going to be demanded by customers today and tomorrow. This key account policy is oriented on final key customers. Today we don’t have a huge client base: about 1000 enterprises only. But these are the clients work with which turns into maximum effect. That fact that having only a thousand clients we occupy a leading position in Russia according to the volume of sales confirms that the chosen strategy proved its value.

Another side of this strategy is orientation on the brands for which we have a franchise. Within these five years we reduced the share of non-brand products in our sales from 30 to 8%, at this leaving them only in supplies for military industrial complex. It’s clear that this is a special market with different tasks for enterprises, and we need a complex approach. As we have a military test certification laboratory, many clients from the defense industry prefer buying and testing all necessary for them components at one supplier. And here we, of course, meet their demands.

At the same time the strategy required for our basic brands to occupy leading positions in the volume of sales in Russia. In general we solved this task. In our product line we represent leading world producers of active and passive components, electromechanics, power electronics, and for most of them we remain the leaders of sales in Russia and sometimes in all Western Europe.

Finally, was implemented the last task – to provide highly effective financial management; it will allow us to make further steps in reforming the company necessary for entrance to the international level and IPO.

-          To attract additional capital implies gaining recognition from the players of world financial market. It is an important step in development of any company if we speak about transition to a qualitatively new level. Among Russian distributors of electronic components you were the first who started implementing this task. Perhaps, you could tell in general about already undertaken and planned actions in this direction.

-          We found a foreign partner that is consulting and preparing the company, making certain structural and organizational changes, necessary to correspond to international standards and be clear to investors. Our task is to comply with all the listed demands. We estimated strong sides of our company and either closed non-core businesses or transferred them out of the principal company.  Only after this we started negotiations with the investor. This a venture fund, but it has no connection both with distribution of components and with electronics in general. Still we attract them from the point of general economic ideas, and after studying the market and our potential, they decided that we have good prospects.

A part of shares has already been transferred on security, additional financial recourses have already been opened, and in the nearest future the deal will be completed. Except creation of a financial cushion for the company’s development, the investments are sent for further investigation of the European market of electronics, the work on which is implied by our new recently approved strategy, and for optimization of international business processes.

- Before moving to the new strategy, please, clarify the issue with rebranding. Did you completely refuse from the brand “PetroInTrade”?

- The company was reregistered under its new name PT EIelectronics. Under this brand we will work from now both in Europe and in Russia. We will keep the name PetroInTrade only for a new independent branch formed on the basis of our military department. This will be an independent company included into the holding PT EIelectronics for work only with defense enterprises. It will receive, in particular, the certification test center.  It will have its own marketing policy as the military market is specific: there we have to work with constructors who are often conservative, closed, i.e. to deal with them we need a different approach.

- So, what will be the PT EIelectronics strategy?

- We started thinking of a new strategy in advance, to be more precise – two years ago. It is planned for five years, i.e. till the end of 2016. The key aspects of our new strategy became: product-oriented system of marketing and sales, project organization of work on implementation of promising and competitive products, active attraction to cooperation of EC manufacturers to satisfy the needs of the company’s customers in modern high-tech EC and unique advanced inventions, refusal from non-core activities and transnational expansion. To implement the established strategy we need to undertake a number of reorganization measures both in the sphere of internal business processes and operations management and in the organizational and legal sphere. We are planning to turn into independent business units (venture capital) all non-core activities. Not losing the competences formed within work with our key clients, we are focused on development of competences necessary for a product-oriented company aimed at forming on the market the demand at world brand products, leaders in production of electronic components. We are going to open foreign representative offices in Europe. Successful implementation of the planned changes will allow the company to enter a qualitatively new development cycle.

- Could you give an example of existing international distributor companies that serve as an orienting point for you at this new stage?

- For example, EBV Elekronik and Arrow Electronics, but, of course, not by their financial performance but by their psychology of doing business in European countries.

- But these are not just international companies: they enter the group of world leading distributors…

- Yes, and what then? It’s their experience that we are studying together with work methods of other largest companies. Business structure, stock policy – all these will be changed as we made the decision to enter European market. We don’t want to buy any of existing foreign companies for this purpose, we will create everything by ourselves under our new brand PT EIelectronics. Working on Russian market we have already become leaders in sales of certain brands in the Eastern Europe, and we are likely to receive a franchise for these brands for the whole European market. In this case, of course, methods of our work in Russia will change as the company’s policy should be single, besides, Russian customer also changed, so here we need new approaches too.

- Are your staff members psychologically ready for such radical changes? And what do these changes imply?

- It is important for us at the new development stage to preserve all that we managed to gain, including the skills and intellectual capital of our company, at the same time we need to broaden the experience, change the staff psychology, stock policy, work with brands and customers. We are doing a transition from our former key account policy implying maximum satisfaction of needs of our key clients to classic distribution, i.e. demand creation policy which means forming the demand. Last year we employed 50 new staff members and we set the task to increase the number of clients thrice by 2013. We significantly increased the number of seminars; we broaden our participation in exhibitions and advertisements, etc.

At the same time we activate work with manufacturers. The line broadens – Linear Technology, SEMIKRON, Cinterion, GE Energy (power supply units), etc., 3-4 new brands will be added soon. Contracts with new suppliers have been signed. Linear Technology is a company that occupies one on the leading positions in the world according to the volume of sales of analog microcircuits, and it is not represented widely on the Russian market. To really introduce it to the Russian market is a difficult and very interesting task.  So, we are convinced that competition between brands is important at the market and we have to work in this direction.

At the Russian market PetroInTrade obtained an image of an aggressive company, which starting to work with this or that enterprise increases its share in the purchase volume of the enterprise by introducing to it best samples of components produced by Western partners. Why does it happen this way? We come with new products, offer to a client modern components that will provide the customer with high competitive capacity at the market.  In fact, this is the demand creation. Our staff members have these skills and within this transition from the key account to the classic distribution strategy, they will be of high-demand, we just need to develop them. If earlier we were oriented at the customer, now we have to become oriented at the manufacturer, his numerous innovations and impose them on engineers. The new strategy requires not to find a product for a client, but to find a promising product, to work with it and to find clients for it.

-          Do you have any recent obvious examples of such innovations implemented by you?

-          Of course. For instance, Samsung earlier paid little attention to the light emitting diodes market, but when they were designing their TV with backlighting, for it was designed a special new LED with unique parameters that turned better than those of world leaders in the field. We were the first in Russia who paid attention to it and started working in this direction. Our customers learned from us about its existence. For example, we designed and introduced to the market NAVIA module working in the GPS/GLONASS standard.

By the way, following this concept, we changed the approach to the contract manufacturing system. The company PT Technology was established that will focus on pre-production consulting. Later it will bring additional profit to the principal company by putting into one chain the customer, our suppliers and those contract manufacturers with which the customer will work. (It is our next know-how.) Also we are establishing the company named PT AIR (automation systems).

-          Precisely 20 years after the company’s establishment you became the first Russian distributor of electronic components who managed to attract foreign capital and started development of the European market. By the 25^th birthday you are planning to come to IPO, which is a good result for any Western company.  Are you satisfied with the development rate?

-          IPO is not a goal in itself, it’s just a guide following which you immediately understand how to act. We are surely not going to reduce the pace. Following this purpose we will be able to modify our company in the way that in will stand in the same line with world leaders of distribution. Even if don’t manage with IPO, we won’t be disappointed as the major goal will be reached.

And, yes, we are celebrating our anniversary. The company PetroInTrade was founded on 12 June, 1992. We will celebrate our birthday in the private circle of our staff, and we will hold the big celebration in April during the exhibition “New Electronics” where we will be represented under our new brand name already.