Entering the market of pastas and the present position of the company.




In 1995 the LBS Corporation started manufacture of pastas. Since the biggest part of its capital was in the financial market, the LBS Corporation considered the foods manufacture business to be the secondary source of income, to be on the safe side. There were alternatives, such as potato chips, ketchup and others. But the fact that it was possible to buy inexpensive equipment of low capacity and use the manual process of packaging to see how it goes than to tie up much money at once was of the highest importance.

The LBS Corporation bought the necessary equipment and started pastas manufacture.

Thus, at this moment the LBS Corporation manufactures about 50 tons of pastas a month. It is a small manufacturer and we cannot talk about the market share it has in the market. The management would like, however, to increase production.

The nomenclature of pastas being manufactured by the LBS Corporation are:

· Vermicelli

· Macaroni of different shape:

Ø Horns

Ø Shells

Ø Spirals

The LBS Corporation plans to deepen the nomenclature by starting manufacture of spaghetti.

The problem of the company.

The LBS Corporation uses the manual process of packaging. The management of the LBS Corporation must decide weather it should use the automated process of packaging instead of the manual one. It also wants to know how the last crisis in Russia affected the market of pastas and what is its present state. It needs it because it knows the crisis had a strong effect on the market and the secondary data available is now out of date. It is not sure though, what particular information it needs to make the decision. It feels it is unable to predict customer’s reaction and other consequences of such a change in technology. It also has several different options of performance of this decision. These options are different in costs and quality of packaging.

Since I have already worked for the LBS Corporation and I am the only person here who has some formal education in marketing, I was offered to do this job.

Since 1995 the LBS Corporation used the manual process of packaging only, it used match-the-market or expenses plus pricing and didn’t ever think about the questions like these. The idea of having the process of packaging automated had not been discussed seriously, in the sense that it was thought to be mainly the way to increase the labor productivity, but it really was more connected with marketing. When I told them about this they looked a little surprised. Saying it another way, the decision to automate the process of packaging meant use of marketing for the LBS Corporation.

Since the secondary data was difficult to find and absolutely useless after the financial crisis, I had to make a marketing survey to collect the preliminary data to solve the problems of the company.

The first task I had to accomplish was, so to say, to formulate my task more precisely.

The marketing research.

 

The problem.

 

The research is to help to solve the problem of the company discussed above. We can formulate the problem of the research more precisely:

1) Due to inexpensive labor in Russia, the automated packaging process will increase the cost of product.

2) Since it is a mean of marketing, we should identify where it is reasonable to use it. It will require efforts of the economists and accountants of the corporation. I have to collect the necessary marketing information to make them able to answer the question:. “will offering an automatically packed product create enough incremental preference and profit to justify its cost against the other possible investments that could be made?”. This information must also be helpful for the further analysis and design of necessary marketing mixes.

3) The necessary information is information about the situation in the market, about people’s attitude towards automatically and manually packed pastas.

To do this I need to:

(I) Formulate the research objectives sharply.

(II) Analyze the history of the market of pastas of Saint Petersburg and its present state.

(III) Segment the market of pastas and develop profiles of resulting segments.

(IV) Evaluate the attractiveness of each segment.

(V) Evaluate preferences of the buyers and their attitude towards such factors as price, quality of the core product, quality of packaging, etc.

(VI) Having known the preferences and attitude towards packaging, quality and price, identify conditions upon which an automatically packed product will not fail.

(VII) Identify the necessary positioning concept for automatically packed pastas that will be offered to different segments.

Research objectives.

I had formulated the following specific research objectives:

1) Evaluate attractiveness of each segment.

a) What kind of people would be the most likely to purchase pastas in high quality packaging?

b) Which segment do the most heavy users belong to?

2) Define the preferred form of pastas (corns, shells, etc.).

3) Define the most important factors which influence the consumer’s subjective probability[2] concerning the quality of the product.

a) Does the consumer usually estimate the quality by appearance of the product?

b) Is there a stereotype that a quality product can be packed only in a high quality package?

c) Is there a stereotype that imported pastas are better than the domestic ones? How strong is it?

4) Define the importance of quality packaging for the buyer.

a) Does the quality of packaging correlate with the quality of the product in consumer’s mind?

b) What must be the quality of the product which is automatically packed?

c) How much will a buyer desire to pay for packaging?

d) What are the main factors which make packaging important (estimated quality of the product, precise weight, other)?

5) Define the desired characteristics of the package.

a) Which size of the package will be the most popular? Shall we offer packages of different size?

b) What should be the packaging be made of and what shape should it have(plastic or polyethylene packet, cardboard box)?

6) Define the loyalty status of the consumers.

7) Define the “patriot” status of the consumers.

a) Do they feel unsatisfied that most of the high quality pastas are imported?

b) Does the fact that Russia substitutes natural gas and oil for “colonial” goods?

As can be seen from the goals and objectives, the research combines the features of both exploratory and casual research.

Research plan.

Since the company:

1) has lack of information about the market in general;

2) needs some specific information;

3) does not want to spend money on purchasing the available secondary or primary data;

4) thinks that the secondary data available can be outdated due to the last crisis; primary data must be collected.

The most reasonable research approach in this situation is a survey research. It will allow to gather more information in less time, and some information needed can be acquired only directly from the purchaser’s answer. As a consequence, a questionnaire should be used as a research instrument.

I have two basic sources of information:

1. The buyers of pastas.

2. The salesmen who sell pastas.

Of course it is much easier to talk to salesmen than to the buyers, since the seller knows his market and he can give you a complete idea about what the situation in the market is like. But for this ease we have to pay:

· This information can be not so accurate because the salesman though can give you information about how much of this or that good had been sold, probably will have difficulties with determining such things as percentage of buyers of different age, sex, etc. Here a problem of selective remembering may arise.

· There are questions which can be answered only by the buyer himself and about which the salesman can have no idea at all. It regards to, for example, such things as the expected reaction for a price change, attitude towards packaging and the “reasonable” price of it in the consumer’s eyes.

As may be seen, this source of information could not satisfy our needs, but I decided not to neglect it for that reason but leave for the purposes of control. It is reasonable to expect that the results from the both sources must correlate.

 

The consumer survey was made by me and two other employees of the LBS Corporation between the 5th and the 10th of November at outdoors markets of Primorsky district of Saint-Peteersbug. About seventy customers were asked. The results of the survey are shown and discussed below in the appropriate section.



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