Kelsey Martin Mgmt 4390 TR 8am Case Analysis #1 Questions Case: Ice-Fili 1. Which segments of the general external environment, if any, are relevant to the Russian ice cream industry? Why? There are many major external segments that are relevant to the Russian ice cream industry. One of the external segments demonstrated in the case is technological change. In the 1900s the Russian ice cream industry was behind in their technological advancements in production, ingredients used, and their packaging process. Starting in 2002; majority of Ice-Filis brands relied solely on new imported equipment from the US. By 1999, 90% of the equipment used by the Russians were imported that cost the company between $1.5 million and $2 million for a complete production line. I see this segment as a threat and an opportunity for the company. I can see it as a threat because if the company is not prepared for the upgrade of the new technology then it can be a struggle to operate and produce the products effectively. I can also see it as an opportunity for the company to grow and become more technically advanced. The new technology offered faster and more production as well as ways to package and freeze the products. The next segment presented in the case is specific international events. The financial crisis of 1998 resulted in a financial collapse of the Russian dollar by twothirds. This made it extremely difficult for Ice-Fili to get their imported good because they were too expensive. This was for sure a threat to the industry because many
investors felt that Russia was too risky of a market at that time. During the crisis imports decrease from 19,000 tons to 6,000 tons per year. The next segment is demographic trends. In 1998, Moscow accounted or 140,000 people diagnosed as having diabetes. In order to target to that market, Ice-Fili reintroduced their diabetic ice cream. This was for sure an opportunity for Ice-Fili to grow among their consumers. 2. How structurally attractive is the Russian ice cream industry? Why? To effectively determine how structurally attractive the Russian ice cream industry is we look at the five forces model and determine the level of threats. Each force will present either a high low or medium threat. The first force is supplier leverage. Ice- Fili used a unique butter that came from New Zealand that contributed to the taste of their distinct ice cream. Due to their supplier for butter being imported from New Zealand this was a low threat for the Russian Ice cream industry because there was not competition for the better. The next force are buyers. Ice- Fili different ingredients such as their butter, their percentage of milk used, and their non preservative products, allowed them to focus on one consumer. Ice- Fili had kiosks that allowed the customer to consume their ice cream at home as a snack. Due to the fact that Ice- Fili was different enough from their other competitors the level of threat would be low. Rivalry is the next force in the five forces model. In this industry there are multiple companies that increase competition. For example; when Ice- Fili attempted their expansion into the west it was more difficult due to the high amount of competitors
that had a much different idea of what ice cream taste like. Due to the amount of different companies in the industry there is a high level of threat. Next in the forces model is substitutes. When Ice- Fili first came out with their kiosk concept the consumer perceived the ice cream as a snack. It then became a competition between beer, soda, yogurt, chocolate, and other confectionary candy industries due to the at home consumption idea. Having easier access to the ice cream through these kiosks created a high threat between the snack companies and Ice- Fili. New entrants are the second to last of the five forces. Due to the 10% increase in the tax regulated by the government new companies would not enter into the industry. Due to no new competition, the demand for ice cream increased in which encouraged the company to come up with new innovated ideas to support the demand. The level of threat during this time was high to medium. Lastly, we have complementors. When you think about all the items that make up ice cream there are endless possibilities. There are toppings such as dried fruit, there are many different kinds of ways to present it to the consumer, and an assorted other different snacks that complement ice cream. With that said this would be a high level threat because of the multiple complements that go great with ice cream. 3. What opportunities are presented by the structure of the Russian ice cream industry? Why? The two opportunities that are present by the structure of the Russian ice cream industry are the fragmented industry structure and the mature industry structure. The reason I see the potential for the fragmented structure is because in the ice cream industry there are a large number of small firms. There were many different ice
cream producers represented in the case such as: Baskin Robbins, Nestle, Ben & Jerry’s, and Unilever, which are just a select few of competitors. Next there is no dominant technology. The technology used between each of the companies is pretty much consistent which then prevents one company from gaining too much power. Since the main differences between the companies are the ingredients used it is easy to say that there are low barriers to entry. In this case with Ice- Fili, there are also few economies of scale. This means that there was not a proportionate saving in costs gained by and increased level of production. This opportunity consists of consolidation. This company has the opportunity to buy competitors. By doing so they can increase popularity, profit, and will allow them to increase their power. With that said the next opportunity is building market power. By consolidating the company into one common alliance it will build the power to expand on the market. If Ice- Fili can join with another competitor and consolidate their production then they can proportionately gain savings cost by their increased level of production. As for the mature industry there was clearly a slow growth in demand for ice cream. The demand changes constantly in this industry based on the economies changes. There was an increase in international competition between the western companies and the Russian country. Ice-Fili tried expanding toward the western counties and there was too much of a difference between Russian ice cream and the United States ice cream. After the financial crisis of 1998 some foreign companies left the industry such as Ben & Jerry’s. This crisis began the existing of the industry. In the mature industry structure opportunity comes from refining current products. In order for this to happen Ice-Fili needs to improve their service. Ice-Fili can come up with new and improved ways of
catering to their customers through flavors, incentives, and making the ice cream more accessible for the at home consumers. Also another way to refine their current production is to process innovation. In order for Ice-Fili to keep up with the competition it will be important for their industry to expand and come up with new ways of representing their product. 4. What course of action would you recommend to Anatoliy Shamonov? Why? One recommendation I would make to Ice-Fili is to advertise more. This will allow Ice-Fili to be different and to compete against their rivalries. If every time Ice-Fili came out with a new flavor or innovation and advertised it then it would become an icon. This type of advertising would then build market power. Next I think it would be a good idea if Ice-Fili could join with another company to consolidate the competition. It would create barriers to keep other competition out of the industry. Through the consolidation of the company they will be able to share idea and incorporate the cultures of both companies to better expand.
