Marketing Research Project for a Russian Company
Marketing Research Project for a Russian Company
- Summary. 3
- Theory. 4
- Identifying market segments. 4
- Marketing research. 5
- Introduction. 6
- The corporation. 7
- The history of the company. 7
- The choice of the industry . 9
- Entering the market of pastas and the present position of the company. 11
- The problem of the company. 12
- The marketing research. 13
- The problem. 13
- Research objectives. 13
- Research plan. 15
- The history of the market of pastas of Saint Petersburg and its present state. 16
- Historical approach. 16
- The present situation. 16
- Products in the market. 17
- Market segmentation. 19
- The questionnaire. 21
- The results. 23
- Conclusions. 25
- General findings. 26
- Recommendations apropos automation of the process of packaging. 27
- References. 29
В данной работе анализируется проблема российской компании, производящей макаронные изделия. Компании было необходимо принять решение о целесообразности автоматизации упаковочного процесса. После последнего финансового кризиса рынок макаронных изделий значительно изменился, и компании было необходимо собрать информацию о его состоянии после кризиса. Для сбора релевантной информации было проведено маркетинговое исследование. Работа включает отчёт об этом исследовании, анализ его результатов, а также другую релевантную информацию, которая была необходима для подготовки исследования, включая описание истории рынка макаронных изделий, анализ предполагаемых последствий финансового кризиса и сегментацию рынка. Информация, собранная при помощи исследования, показала, что автоматизация упаковочного процесса целесообразна только в том случае, если компания выберет определённые сегменты рынка как целевые и помогла понять новую среду, сформировавшуюся после кризиса. Исследование продемонстрировало, что автоматизация упаковочного процесса является скорее средством маркетинга, нежели средством повышения производительности труда. Это было новым для компании.Summary.
In this paper a problem of a Russian pastas manufacturing company is analyzed. The company had to make decision weather it is reasonable to automate the process of packaging. After the last financial crisis, the market of pastas undergone very substantial changes, and the company needed to collect information about its state after the crisis. To collect the relevant information, a marketing research was prepared and performed. The paper includes a report on this research, analysis of the results of the research, and relevant information that was necessary to prepare the research, namely the description of history of the market of pastas, analysis of proposed influence of the financial crisis and segmentation of the market. The information acquired with the help of the research made it clear that automating of the packaging process is reasonable only if the company chooses certain market segments as target ones and helped to understand the new environment that has formed after the financial crisis. The research demonstrated that automating of packaging is mainly a mean of marketing, not a mean of increasing labor productivity, it was new for the company.Theory.Identifying market segments(3).
Markets consist of buyers. Since buyers differ in many ways, markets can also be segmented in a number of ways.
Market segmentation represents an effort to increase a company's targeting precision
Market segmentation can be carried out at four levels:
For the market of pastas the reasonable level of segmentation is the first one.
A market segment consists of a large identifiable group within a market.
When segmenting at this level a company tries to isolate some broad segments that make up a market. The consumers belonging to a segment are assumed to be similar in their wants and needs, though they are not identical.
Many different variables can be used for segmenting:
Purchasing power or income (though they correlate, they are not the same);
Habits and so on
Market segmenting can be made using one or more variables.
In our case we will use consumer's income per head as a variable for market segmentation.
We will use income per head because the price is the most decisive factor in making purchase decision and because the demand for pastas is elastic According to corporate information..
We will not use any other variables to make our segmenting be:
Measurable: The size, purchasing power, and characteristics of the segments can be measured.
Substantial: The segments are large and profitable enough to serve. A segment should be the largest possible homogeneous group worth going after with a tailored marketing program.
Differentiable: The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs.Marketing research(3).
Marketing research is the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company.
The marketing research process usually includes several steps:
Define the problem and research objectives.
Develop the research plan.
Collect the information.
Analyze the information.
Present the findings.
Data sources. All data sources can be divided into two large groups: primary data and secondary data.
Primary data are gathered for a specific purpose or a specific research project.The primary data are collected by the researcher and had not been collected before or is outdated, inaccurate, incomplete, or unreliable.
Primary data can be collected in four ways:
Secondary data are data that were collected for another purpose and already exists somewhere.
The sources of secondary data are:
Periodicals and books.
There are following contact methods:
1. Mail questionnaire.
2. Telephone interviewing.
3. Personal interviewing
3.1. Arranged interviews.
3.2. Intercept interview.
In our case we will have to collect primary data because secondary data on the subject is incomplete and outdated.
We will use the survey research because it will be able to give us more reliable, precise data apropos the questions that are of interest for us. They will be discussed below.
We will use personal intercept interviewing as a contact method.Introduction.
After last financial crisis in Russia the business environment had changed dramatically. Companies have to adopt to new conditions. Manufacturing companies have a chance to push their foreign competitors out of the Russian market because ruble have devolved.
In this paper I will describe how I helped a pasta manufacturing company to make an investment decision apropos reasonability of investing in a new packaging line using a marketing research.
The following tasks were to do to accomplish this goal:
1. Analyze the problem of the company.
To do this it was necessary to do the following in advance:
1.1. Study the history of the company.
1.2. Study the reasons of its choice of industry.
1.3. Study the present position in the market of pastas.
1.4. Understand and formulate the problem of the company.
2. Carry out a marketing research to give the necessary information to the management of the company.
I had to make the following steps to do it:
2.1. Formulate the problem the research is to solve and the research objectives.
2.2. Develop the research plan.
2.3. Collect data.
2.4. Analyze data.
2.5. Make conclusions apropos the state of the market and reasonability of investing.The corporation.The history of the company.
The LBS Corporation started operations in September 1992. It was started-up by three young men who had enough risk-taking propensity to make a decision to start-up in the Russia of 1992. One of them had a formal economic education, though a kind of a Soviet one but nevertheless economic, another one was a kind of a lawyer, and the third one was just a friend with no formal education useful in business administration (he had a higher education though). Their cooperation had began before they started-up the firm- they earned the capital necessary to start-up together. The idea belonged to the third man who had some connections in Germany. Some people he new there had a used car shop. So the information about prices of used cars in Germany was available for them. They borrowed some money and invested some of their own savings to drive several used cars from Germany. During their later trips they hired several people (in Russia) to help them drive cars. After they had made several trips to Germany they possessed about five - seven thousand dollars which they invested in the LBS Corporation which was started-up. They continued to import cars for a while but soon they decided to quit the used cars importing business after an unlucky trip during which an accident has happened and one of them was seriously injured and one car was completely destroyed. The matter is that the cars were often in a poor technical condition and problems with Mafia constantly appeared, so this business was really risky and in addition they saw another opportunity of making money with the help of the newly established firm. I should mention that in that time the environment they had to deal with was really unstable and they had no definite intentions, no business plan when they decided to start up, that is interesting. When I asked one of the founders how could it be and what were they thinking about, he replied that they were thinking in a way that “there will be a day, there will be food”. I think, hardly someone except Russians can refer in that way to that sort of questions. But everything happened exactly like that. First they founded their firm and then they began to look for an opportunity and found it.
In that time the depression effect had been in force and the demand for river tours in Russia dramatically decreased. As a result of it, the Volga river fleet was doing almost nothing. As a consequence of that, it was easy and inexpensive to freight a ship, if you needed one. So they did. They organized river tours for foreigners for whom Russia was extremely interesting after the Iron Curtain had just been lifted. They were in this business for one season only and then quit. It became unprofitable for some reason.
Here I have to step aside a little from the point and mention the following: it is very often difficult to get information in Russia, especially from a businessman about his business. They are used to keep silent and they are sometimes extremely jealous about the figures. Though they know you cannot harm their business and the information will not go further, they will feel uncomfortable if their confidential information is shared with someone. Sometimes you have to be glad they give you some information about their business and when once began to get into details during speaking with one of the three men he went ballistic and told in an unpleasant manner that he would not let him been questioned. So I had some lack of information about the past of the LBS Corporation, but the situation with information about its present is much better for me since I was and I am connected with that company and I have a job there, but I will return to this a little bit later when we are finished with the history of the LBS Corporation.
After they quit the river tour business they saw their next opportunity in the computer industry business. A friend of one of them was a programmer and an informal leader of a collective of programmers and technicians. It was the dawn of Russian computer market in that time. The LBS Corporation hired that collective and began to manufacture (to be more exact- to assemble) and to resell computers and develop software.
The LBS Corporation was more oriented towards corporate users. In 1993-1995 not many Russians could afford a personal computer. The buyers were mostly corporations. After the Soviet system the market environment required new methods of business administration and for many corporations it became clear that what they really need is computerization. Also a deficit of software solutions was taking place at that time. Of course, there was imported software but there was a demand for individual solutions in the market. And of course the networking business was growing.
The LBS Corporation operated in all of the three segments and offered complex solutions consisted of computers, software and networking.
This business was bringing significant income. But as the computer market developed, the competition became stronger. Some of the hired programmers separated and started their own business. On the other hand, the LBS Corporation did not want to go to the basic level computers segment which became growing faster and faster. This required investment and they did not think they should go into that segment because they though that in a year “everyone in Russia will be assembling computers”.
As the market was growing, there became more software developing companies offering their products in Russia. The LBS Corporation had do face many strong competitors among which there were not only newly established Russian companies but also some of the Western software developers which decided to start operations in Russia. Despite of this, the LBS Corporation still operates in this market but it failed to capture a significant market share. It still has many of the clients which were acquired in 1993-1995. The LBS Corporation does not want to make expensive marketing efforts to increase its market share. In my opinion, if the LBS Corporation had decided to manufacture and market computers for personal use when it had that opportunity, it would have succeed much more than it had, though it would have faced significant difficulties connected with the last financial crisis in Russia.
But the LBS Corporation decided to invest the biggest part of its profit in bonds. It was extremely profitable until 1997 to have your money invested in the government bonds. Later the market of shares began to grow, and the LBS Corporation reinvested in shares. But then, approximately in may, 1998 the economic situation in the country began to dramatically and rapidly deteriorate. For the LBS Corporation it meant a partial loss of the money invested in bonds and shares.
But the management of the LBS Corporation did not want to hold all eggs in one basket. In 1995 they decided to go into the food industry.The choice of the industry .The basic motives which made the LBS Corporation chose this industry were the following:The food industry in Russia and especially in big cities was growing fast. After the Perestroika it survived a significant decline which was actually a crisis caused by old methods of business administration, antiqueness of technology, poor quality of products and packaging and availability of imported foods. Then the process reversed: more and more of consumers realized that the imported foods they used to buy were of poor quality though packaging was good-looking. In addition to this Russian manufacturers began to use more progressive methods of business administration and more modern technology of manufacturing and packaging. This made the consumer's preferences to change in favor of the Russian manufacturers and Russian foods. Market size.The fact that most of foods are necessities. As a consequence of this, people will not reduce their consumption of foods or will reduce it less than consumption of other products.Absence or low competition with Russian manufacturers due to small quantity of them, the tendency of pushing the foreign manufacturers out of the market, and as a consequence- an opportunity to capture a significant market share and relatively low entering barriers.The demand for many foods is not seasonal, neither the prices are.Short operation and production cycle. After the industry had been chosen it was necessary to choose the concrete product to be manufactured. The management of the LBS Corporation decided that the most acceptable product according to the resources possessed was pastas. The basic advantages of this decision were:1) Easy to start:a) The technology of pasta production is not sophisticatedb) The equipment is relatively inexpensive and availablec) Short list of ingredients requiredd) On the first stage automated packaging process is though desirable but not necessary. This significantly decreases the capital necessary to start-up because in the food industry the cost of a packaging line very often is similar to or even exceeds the cost of the production line.2) Market size:a) Pastas are necessities. Because of this people with low disposable income are among the potential buyers. This is extremely important in Russian environment.b) The technology makes it possible to vary the quality of the product by using wheat of different quality and different technology of packaging. Using the wheat of lower quality allows to decrease costs and, as a consequence, the price of the product. This allows to cover more segments of the market of pastas if we make an income segmentation of it. This is important because income of people of different stratas in Russia differs dramatically.c) Market stability. The biggest indirect competitor of pastas is potato. Of course, the price of potato does vary during the year, but:i) The period when the price of potato is significantly below average is short,ii) The seasonal variation of the price of potato does not usually exceed 40%. iii) Since potato and pasta have a lot of different features, the decision to purchase this or that is greatly influenced by consumer's preferences. As a result of it we should not expect the cross-price elasticity to be high. We certainly can estimate it to be less than one.
As a result of what was said, we can estimate the market of pastas to be stable and to be a subject for seasonal changes in a low degree.