We should think that the automation of the process of packaging may be reasonable if:

1. The company can provide low increase in costs resulting from the automation. In this case the corresponding increase in price will be also low. This will make orientation towards the heavy half (lowers and lower middles, and partly even the higher middles) possible. We can estimate that it will not be possible to provide high quality of packaging in this case.
   The company will position its product somewhere between automatically packed (or high quality) and manually packed (or middle quality) pastas. This may cause a positive reaction of up to 72 % of buyers depending on the price increase.

2. The other alternative is to use packaging of higher quality at higher costs. The limit here is about a one ruble rice increase per 500g package. It is also possible to make 1000g packages, this will decrease cost of packaging. The most important thing resulting from the research we should remember about is: class pricing will hardly do. We have not made a special research, but we have the reasons to think that most of domestic manufacturers of automatically packed pastas position their products too high and face significant problems. . Providing a high quality packaging and a comparatively low price (if it is possible) will position the product as an inexpensive and quality one. This should cause a positive reaction of about 20%, we may estimate (of course, this figure will depend upon marketing efforts made). This decision will mean orientation towards the higher middles and the higher class.
   Though this option will probably be less attractive than the first one, it is more attractive in prospect, since it will increase competitiveness of the company, improve its reputation and help gain loyalty.

3. The best alternative, in my opinion, is to combine the features of the first two. It is possible if the company can vary costs of packaging. This actually will mean full covering of the market.

We see, that alternative decisions depend on the costs of packaging, so the market coverage does. We have a strict limit here- we cannot afford using packaging which will cause a price increase more than 1 ruble per 500g package. This means we will have to think of production first, and only after that continue thinking about marketing (do not mix it with actually manufacturing first and than thinking about marketing). It is a specific feature of our country- everything is made vice versa.

The decision of the management of the Corporation based on this research and on the economists’ opinion was to seek means to decrease costs of packaging and make the third option possible to be performed. One of the possible decisions is sharing a packaging line with another foods (not pastas) manufacturing company. When the company has several alternative possible solutions of this problem, elaborated marketing mixes will be developed for the segments that will be selected as the target ones.

References.

1. Eaton B.C., Eaton D.F., Microeconomics, 2^nd edition.

2. Hisrich R.D., Peters M.P., Entrepreneurship. Starting, Developing, and Managing a New Enterprise. 3^rd edition. Irwin.

3. Kotler P, Marketing Management, 9^th edition, Prentice Hall International.

1 According to corporate information.

2 Subjective probability- a term from microeconomics which denotes the probability which is subjectively estimated by a person while making a choice decision.

3 High quality pasta can be made only of appropriate high quality flour. This flour must be made of limited variety of sorts of wheat. These sorts are called durum. If pasta is made of a usual flour which is generally used for baking, its quality leaves a lot to be desired. Of course, durum wheat is more expensive than usual. Pastas made of usual flour are of poor quality but cheap.

4 Digital data without reference is based upon corporate information.

5 Though I use the categories denoting social stratas in sociology, their usage here hardly corresponds with their original meaning. I have to change it according to conditions of Russia. The Lower Class will denote people whose income is not enough to provide them with necessary quantity of food and other essentials, or is lower than the subsistence level. The Middle Class will consist of people whose income is higher than the subsistence level. They have a disposable income as a consequence.

6 Since income per head in a family depends on the quantity of those members and on the income of everyone of those members, it is not surprising that the same social group will be found in different segments.

7 Of course, this may sound awkwardly, but I think we can use this category in Russian conditions due to specific traditions, stereotypes and differences in technology.

8Since people were not always willing or able to answer some questions, the total of the percentages of respondents answered in different manner this or that question is often below 100%.