1.Problem / Issue Identification: The Russian ice-cream market is not structurally attractivePorters 5 ForcesBargaining Power of Suppliers:-Not an issue-Commodities but big seasonal variations-Limited local sources of high quality butter-High availability of imported raw materials-Specialist equipment must be imported (but may be easy to copy?)Bargaining Power of Buyers:-consumers have low disposable income-distributors have power – they have many suppliers-Growth in supermarket sectors – may wield more power in the future-cafes and restaurants can dictate which ice-cream consumers will choose-accessibility is the issue here – consumers don’t have access to all products
Competitive Rivalry:-low growth-undifferentiated products – no strong brands-high seasonality-overcapacity-ice cream margins decreased from 30-40% to 15-20% between 1998 and 2000 (confectionery 6-8%)-Dollar price per kilo has dropped from 2.66 to 1.35 (1997 Ex9/Ex7A)-high competition – 300 players a large increase from only 87 in the mid 1990’s Barriers to Entry-very low-low capital requirements as meat packers convert existing refrigeration-No strong brands to compete with or major players – fragmented market-No government policy restricting the number of ice-cream manufacturers-No strong distribution links to break-into: distributors willing to take on another brand at the right priceThreat of Substitutes-ice-cream is in direct competition with chocolate and beer (substitutes)
... ice cream market both local brand and internationally brand for example in Singapore Udder’s ice cream which has grown rapidly fast and high ... the country as it could affect buying power. If there is a crisis, the company ... called Unveils Liz Lemon Greek Yogurt Flavor low fat and made by yogurt.. They do ... Jerry’s are high. 4.4 Supplier Supplier to Ben & Jerry’s is low as to make ice cream there are ...
THESE CAN BE ADDRESSED:Increase Barriers to Entry-economies of scale – rationalise products and longer runs, become cheaper to manufacture, create more value and capture it-create a brand identity and invest in marketing-vertically integrate with kiosks and distributors – control-push for regulation of ingredients labelling on packaged ice-creamReduce Rivalry-Grow the category – use advertising (increase the size of the pie)-Buy up smaller players or use branding to drive out smaller playersDecrease Buyer Power-by increasing brand identity-vertical integrationDifferentiate ice-fili from substitutes-increase consumers WTP, make ice-cream better value for moneyDecrease supplier power-Local equipment supplies-Local high quality butter suppliers-By improving the brand consumers will demand the product-Stronger relationships with distributors.
External Environment & Industry AnalysisCore competency:•Company is convinced that higher quality ingredients meet demand – But – will customers pay?•Nestle sells an inferior product for 33% more – regionals sell an inferior product for 50% less•Is higher quality a sustainable source of advantage (easily imitated!)?Their main core competency is producing superior tasting ice cream – using high quality natural ingredients, without any artificial preservatives or colorants. Ice-Fili can leverage this competency, butTheir strategy of producing preservative-free ice cream should link with other strategic initiatives. For example, they entered western markets, where consumers were health, low-fat conscious, which did not align with their core competency. In these markets they need to position their product as premiumThe other core competency is their strategic alliances with distributors. And again they failed to realize the potential of this core competency.
Position:Their current positioning is “stuck in the middle” – that is they haven’t taken a cost leadership approach nor a differentiation approach. They have an unclear value proposition with high costs and low prices. In terms of their market breadth they are not a niche and yet do not reach the mass market. They are somewhere in between whereby serving a few regions, with a large variety of products and some market specialisation e.g diabetic ice-cream.
The Ansoff product-market matrix helps to understand and assess marketing or business development strategy. Any business, or part of a business can choose which strategy to employ, or which mix of strategic options to use. This is one simple way of looking at strategic development options: Each of these strategic options holds different opportunities and downsides for different organizations, so ...
Strategy:They tried to regain market share by creating lots of new products. However, they did it without any market research and analysis; they still operated under old slogan: “We produce, they will buy.” Considering the current kiosk distribution system, where each kiosk carried very narrow range of products and only handful products generate most of the revenues, it did not made sense to carry so many product lines. By reducing number of products carried, the firm will be able to differentiate them better, allocate marketing budget to most profitable products, and, therefore, increase brand recognition. Additionally by focusing on fewer products, they will be able to gain economies of scale and spread their high fixed costs.
Structure:Operations:Performance:Financial Analysis:3.identify alternatives to increase market share:Offensive Strategies1.attack nestle head-onmove to a broad cost-leadership approach (session 3, page 4 & 6)cut costs structure to compete2.Invest to improve competitive position:Focusing on their core competencies – differentiation strategy.
clear focus on optimising the process – activities to increase WTPmove to a broad differentiation – needs based positioning (week 4, page 4)improve customer loyalty and retentionbuild a marketing advantagerequires a strong leaderco-operative corporate cultureCreate more value (increase the size of the pie) and then capture the value!Cost drivers – identify ways to extend shelf-life of the product without compromising the value to the customer (i.e. all natural ingredients, super taste)3.change the rulesintroduce a new technology – innovatepush for a shift in regulatory requirements (ingredients labelling)4.Invest to enter new marketsfocus on non-impulse channelsoverseasDefensive Strategies1.Protect position•Protect market share•Build customer retention2.
PROJECT ON “ARVIND MILL (THE PRODUCT MIX AND ITS STRATEGY)” Master of Commerce Semester-I (2013-2014) Submitted In Partial Fulfillment of the requirements For the award of degree of M.Com-I By Suraj Shridhar Tripathi Seat No: _______ Tolani College of Commerce Sher-e-Punjab society, Andheri (East), Mumbai-400 093 PROJECT ON “ARVIND MILL (THE PRODUCT MIX AND ITS STRATEGY)” Master of Commerce ...
Monetize, Harvest, Divest•Manage for cash flow•Harvest/divest for cash flow2.assess alternatives (criteria for assessing a strategy)•Creating ValueoAligns with what customers want?oWTP exceeds the cost of creating it?•Competitive AdvantageoSuperior value compared to competitors’?oSustainable (ie. hard to copy or circumvent)?oInimitability – how hard is it to imitate?oDurability – how long it will last before being taken over by an innovation or other?oAppropriability – the extent to which other firms can can capture the value that the resource createsoSubstitutability – the ability of others to provide a similar functionality at the same or lower cost•Industry AttractivenessoAttractiveness of chosen industry & segment (s)?oImpact of the strategy & tactics on the attractiveness?•Internal Consistency & Effective ExecutionoConsistency among operating policies, actions, etc?oAccess to required skills, assets and raw materials?oAre they being employed in the most efficient manner?3.make a decision•Do not diversify until domestic market is secure•Increase their marketing budget to effectively compete with substitute products.
•They should focus on fastest growing segments – supermarkets. By rebalancing their distribution to capture these growing segments, the ice cream producers will be able to attract more customers and make them less season dependent.
•Product Rationalization-Too much variety – expensive – higher manufacturing costs with shorter run lengths & higher distribution costs since stock slow moving lines-Too little variety -> lower volume as fail to meet all needs cannot spread manufacturing, branding and distribution costs. Creates a gateway for competitors.
•Alter-West, one of the major distributors, has 40% ownership in Ice-Fili. Even more importantly, they specialize in distributing ice cream to the growing supermarkets and restaurant chains. By building upon this relationship, they can limit the access to distribution channels for other competitors. They should strengthen relationship with their distributors, instead of venturing into very capital extensive and 50% lower margin distribution business.
Case Analysis For the past two months our sales on copper fitting has almost doubled due to the increasing demand from the market and the competitors! | unsuccessful selling promotion. However, the problem rises from the overwhelming demand. Many back orders are just piled up on the warehouse manager! |s desk, and some of the customers lost their patience with us. What we really need right now is ...
-Visit outlets frequently-Variety is a way to increase % of shelf space-If small outlets want to have frequent deliveries-Note that Nestle controls its own distribution and achieves twice the breadth of distribution with 24 lines (Ice Fili has 170 lines)Justifying Advertising Spend:-Category is worth 500 million -> hard to justify the 90 million spent in beer sector-BUT if increase willingness to pay by 18% or expand category by 270 million, it would pay off-Adverts are a fixed cost -> if have high share, can drive out smaller competitors-Importance of umbrella brands-Ice Fili spends 1% of sales (500K), does not bother to communicate superiority of product to customer and doesn’t mention company brand or products in advertisingBibliography:Ice-Fili Case Study write-up on CheathouseSmurfit School Of Business, UCD