ICE FILI FIVE FORCES
Ashley Springer
Ice-Fili case analysis
November 22, 2012
Through tough times in the Russian ice cream market; one company has one company has pulled their weight and maintained their position on top. Established in 1937; Ice-Fili has survived the change in government, financial hard times, and the ever growing competition from international companies. However, given these events their market share, which was once dominated by Ice-Fili, has been significantly reduced. In fact the Harvard Business School’s 2005 revision of the Ice-Fili case study states that in just a few years the market share decreased by a half billion dollars. This downfall has posed the CEO of Ice-Fili, Anatoliy Shamanov, with many questions. Included amongst Shamanov’s quest ions were the questions will we maintain our lead over Nestlé, should we find new retail avenues through cafes, how should we approach regional production without creating a price war, and how do we manage in the competitive market economy. Most if not al l of Shamanov’s questions can be answered using Porter’s five force analysis. When doing the analysis, I focused on the high threat of new entrants, low power of ingredient suppliers and high power of equipment suppliers, high buyer power, high threat of substitutes, and a high degree of rivalry.
Threat of new entrants:
In any industry the threat of new entrants is always in place, however, in the Russian ice cream industry the new entrant threat is high because the barriers to entry are low. Many companies find the market to be desirable because the profit margin is between 15% and 20%, and ingredient prices are approximately 42% of the cost incurred by manufacturers. The initial investment is low; because manufacturing equipment is easily acquired since it can be rented and can be used for other items as well. Supply side economies of scale are rather high because when producing the ice cream the unit cost decreases as the total units produced rises. Along with
Ice-Fili case analysis
November 22, 2012
Through tough times in the Russian ice cream market; one company has one company has pulled their weight and maintained their position on top. Established in 1937; Ice-Fili has survived the change in government, financial hard times, and the ever growing competition from international companies. However, given these events their market share, which was once dominated by Ice-Fili, has been significantly reduced. In fact the Harvard Business School’s 2005 revision of the Ice-Fili case study states that in just a few years the market share decreased by a half billion dollars. This downfall has posed the CEO of Ice-Fili, Anatoliy Shamanov, with many questions. Included amongst Shamanov’s quest ions were the questions will we maintain our lead over Nestlé, should we find new retail avenues through cafes, how should we approach regional production without creating a price war, and how do we manage in the competitive market economy. Most if not al l of Shamanov’s questions can be answered using Porter’s five force analysis. When doing the analysis, I focused on the high threat of new entrants, low power of ingredient suppliers and high power of equipment suppliers, high buyer power, high threat of substitutes, and a high degree of rivalry.
Threat of new entrants:
In any industry the threat of new entrants is always in place, however, in the Russian ice cream industry the new entrant threat is high because the barriers to entry are low. Many companies find the market to be desirable because the profit margin is between 15% and 20%, and ingredient prices are approximately 42% of the cost incurred by manufacturers. The initial investment is low; because manufacturing equipment is easily acquired since it can be rented and can be used for other items as well. Supply side economies of scale are rather high because when producing the ice cream the unit cost decreases as the total units produced rises. Along with