The challenges of starting a new company in Azerbaijan illustrated by a retail toy shop : a real-world experiment in innovation

Abstract

Abstract The Azerbaijan market is a new and developing market with its own unique internal problems, characterized by a certain level of corruption in some authorities and some restriction in the main importing areas despite the last anti-corruption and anti-monopoly reforms by our president. Hence, there is some restriction for foreign investment and centralization of main financial instruments. Main types of foreign investments are in the oil and gas sector and therefore at first glance there is not much outside competition from other industries (non-oil) for in local small and medium -sized entrepreneurial ventures. On the other hand, new start-up entrepreneurs have high investment entry barriers, as there is a lot of money injected from other funds both internal and external. These injections also create high competition in the retail sector. The main interests of these funds are the large focused and developed industries with low entry barriers and high investment needs. As an example, I can cite Consumer Electronics, IT and mobile retail outlets that have merged into single format stores (>500 square meters). From this perspective we can see a growing sub-sector targeted at babies (clothes, toys, equipment), which is an emerging business opportunity and does not necessarily need a large investment. However this situation has also created a highly competitive environment, because of these low investment barriers to entry. Individuals and small groups of entrepreneurs have targeted this sector and tried to survive and grow with different specialized format approaches such as clothes and toys, clothes and equipment, only clothes and only toys. My aim is to focus only on the specialized toy-s retail niche and to create maximum demand for my targeted customers, who are children from zero month to ten years and their mothers and grandparents with yearly incomes for at least 8000 manat, who are interested in the education of their children through their childhood years. To explore the opportunity I have used a -learn by doing- methodology. Specifically, I decided to experiment in the sector and 2 months ago, started a -test- project with one small store in a rural area of Baku city. The main challenge is to strike a balance between minimum investment and maximum differentiation from my competitors. This requires the application of innovative techniques. If I invest a lot to create a very fashionable design, I would not cover my investments because demand is not high enough and I do not know this industry well enough yet. I decided to start with a small store format for understanding customer demand and exploring ways of differentiation from my competitors by appropriate product segmentation - the best mix of middle branded and no branded products-, a focus on educational toys and service oriented innovations -merchandising technologies, toy construction competitions, and product explanatory cards with educational advice alongside products on the display shelves.