Columbo 5-2

5-2 Colombo Soft-Serve Frozen Yogurt Determining accurate costs information and real product profitability is always critical indifferent organizations; it can not only help companies understand their competitive edges butalso help them develop appropriate strategic plans to minimize weaknesses and avoid threats.Activity-based costing is one of widely used costing approaches across many business industriestoday. It is a method of identifying all activities that actually performed in a firm and assigningeach resource cost of activity to all products and services. In the case of Colombo frozen yogurt,we apply the activity-based costing analysis to illustrate how market costs allocated to twodifferent channels of distribution and analyze its marketing structures and plans.After General Mills Incorporated invested $6 billion to acquire Colombo Frozen Yogurt to helpexpand its existing product lineup and increase the current sales revenue, the company actuallyfaced challenges of intense competition in its independent shops as well as limited growth inimpulse locations. The independent shops not only faced competition from franchise operationssuch as TCBY and Freshens in the early 1990s but had to innovate in order to maintain thebusiness. In addition, the market segment had changed as independent shops tended to be widelyreplaced by impulse locations, including cafeterias, college, and buffet. However, the salesgrowth in impulse locations is actually limited due to the reason that these foodservice operators don’t want to take any risk in investing new equipment and extra labor. The GMI-Colombocontinued to put its main focus on impulse locations while ignoring shops and used sameapproach to two distinct segments. The salesforce and merchandising promotion were inefficientand ineffective as well. The company lacked of experience in operating independent shops and

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