A Storied Market Leader Facing Competitive Pressures: Ice-Fili Case Study
Ice-Fili
“A storied market leader facing competitive pressures”
To: Senior Management, Ice-Fili
February 12, 2012
Current Situation
Ice-Fili was able to maintain its leading position in the Russian ice cream industry during volatile times. However, it now faces even tougher challenges that threaten its future prospects: reduction in ice-cream consumption, emergence of cost-efficient regional players, and the lack of a quality distribution system. After analyzing the situation, we recommend a strategy that aims to grow sales through the earning of market share, and improving the distribution network.
Porter’s Five Forces’ Model
Industry Rivalry
Industry rivalry is high. The ice-cream industry is fragmented; 300 producers compete in the market. Ice-Fili is an industry leader with 5% market share. Regional producers threaten Ice-Fili with their significant cost advantage and flexible production system. In addition, foreign companies such as Baskin-Robbins and Nestle are expanding through relatively untouched segments such as cafes and restaurants.
Threat of Entry
Threat of entry is high. Numerous frozen imports companies have emerged as regional ice-cream producers with their cold-storage and production capabilities in pursuance of relatively high profitability in the ice cream industry. Economies of scale are not required for those small regional players. In addition, new entrants can enjoy significant cost advantages over Ice-Fili through more cost efficient equipment.
Threat of Substitute Products or Services
Threat of substitute is high. Ice-cream is not perceived as a family product that people can enjoy at home as a dessert. Impulsive purchasing consists of a large portion of ice cream sales in Russia, mainly through kiosks or street stalls. In 2000, ice cream consumption declined 3.5 % from the previous year; in contrast, its substitutes such as beer, soft drink and confectionery products experienced strong market demand growth indicating a
“A storied market leader facing competitive pressures”
To: Senior Management, Ice-Fili
February 12, 2012
Current Situation
Ice-Fili was able to maintain its leading position in the Russian ice cream industry during volatile times. However, it now faces even tougher challenges that threaten its future prospects: reduction in ice-cream consumption, emergence of cost-efficient regional players, and the lack of a quality distribution system. After analyzing the situation, we recommend a strategy that aims to grow sales through the earning of market share, and improving the distribution network.
Porter’s Five Forces’ Model
Industry Rivalry
Industry rivalry is high. The ice-cream industry is fragmented; 300 producers compete in the market. Ice-Fili is an industry leader with 5% market share. Regional producers threaten Ice-Fili with their significant cost advantage and flexible production system. In addition, foreign companies such as Baskin-Robbins and Nestle are expanding through relatively untouched segments such as cafes and restaurants.
Threat of Entry
Threat of entry is high. Numerous frozen imports companies have emerged as regional ice-cream producers with their cold-storage and production capabilities in pursuance of relatively high profitability in the ice cream industry. Economies of scale are not required for those small regional players. In addition, new entrants can enjoy significant cost advantages over Ice-Fili through more cost efficient equipment.
Threat of Substitute Products or Services
Threat of substitute is high. Ice-cream is not perceived as a family product that people can enjoy at home as a dessert. Impulsive purchasing consists of a large portion of ice cream sales in Russia, mainly through kiosks or street stalls. In 2000, ice cream consumption declined 3.5 % from the previous year; in contrast, its substitutes such as beer, soft drink and confectionery products experienced strong market demand growth indicating a