Firstly, the crisis in 1998 had greatly reduced the consumption ability of ice cream market and increased the imported ingredients for producers. Secondly, Centralize planning system that is used in Russia caused the Russian managers to have little knowledge and experience on channels. Therefore, they had to heavily depend on distributors to reach the end customers. Together with distributor’s strong ability to integrate upward, this endowed the distributor strong bargaining power. Thirdly, consumer had very little switching cost since the whole market’s revenue generated from spontaneous, impulsive purchases. Fourthly, there are so many substitute in the market; such as beer, soft drink and confectionary product was grabbing ice cream’s market by heavily investing on advertisement. Lastly, there were almost no entry barriers, new regional producers rushed into the industry. With strong ambition to gain market share, the regional producers leveraged their cost advantage to compete with low price. Therefore, in 2001, the producing capacity already exceeded the market demand.…