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 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.
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