Carvel Case

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1.0 Introduction In 1934, Tom Carvel founded Carvel Corporation. It had one of the oldest and most endearing histories of all the ice cream companies in the U.S. Mr. Carvel used a combination of fresh ice cream and innovative products and manufacturing techniques to establish himself as the local, family-orientated ice cream parlor in the New York City area. In 1947, Mr. Carvel franchised his first store and proceeded to become one of the pioneers in fast food franchising. Throughout the 1960s and 70s, the gravely-voiced Mr. Carvel used his folksy and savvy style to dominate the greater New York area. By standardizing procedures and providing franchisees with exclusive product designs and marketing material, Mr. Carvel expanded all along the East Coast. By the early 1980s, there were over 800 Carvel stores in operation along the East Coast and in some Midwestern states. However, by the mid 1980s, the recession and the strain on Tom Carvel to manage his business began to take its effect on the franchise. Sales and quality control began to decline, and events forced Mr. Carvel to consider changes. In 1989, faced with diminishing sales and increasing store closures, Tom Carvel reluctantly sold his company to Investcorp, a Bahrainianbased investment-banking group. The Investcorp strategy centered on acquiring previously gainful companies whose profitability had diminished in recent years due to recession. By infusing new capital and bringing in a new management team headed by CEO Steve Fellingham, the former president of Kentucky Fried Chicken, Investcorp focused on growth and revamping Carvel’s listless image. Management was forced to walk a fine line between creating a new, vibrant image for Carvel and alienating longtime, loyal customers. Currently, Carvel Corporation’s mission statement is ‘Working together, we will make Carvel the leading choice for unique, quality frozen desserts by consistently exceeding customer expectations’. In 1994, Steve Fellingham decided to bring Carvel to China, as he has successfully completed a marketing coup by introducing KFC to China in 1978. Carvel Beijing is established through joint venture and headed by Phil Fang. The objective that Carvel U.S. attempted to meet in Carvel Beijing is to create a training and marketing base from which to expand into other areas in China. The success and Crowds of Carvel Beijing is what both Greg Demadis, director of business development and Phil Fang is concerned. Carvel Corporation offered a wide variety of ice cream products. The company’s fundamental product, though, remained its soft ice cream and fountain line. Included in this category are cups and cones; shakes; floats; sundaes; hard ice cream. New products introduced lately are novelty ice creams and ice cream cakes. It was Carvel’s cake line that distinguished it from all the other offerings in Beijing. Carvel also offered both sugar- free and fat-free frozen yogurt and a fat-free ice cream in U.S but had not been introduced to China yet. 2.0 Situation Analysis 2.1 Market Description 2.1.1 Consumers and Their Buying Processes and Relationships The recent Gallup Poll provided interesting insights into the burgeoning consumer market in China. The most striking fact to emerge was that Chinese consumers were very intelligent shoppers who valued quality and long life in their purchases. As for consumer tastes in food, the survey found that, as expected, rice, tea, and pasta were the most common foods in the Chinese household. However, 17 percent of those polled had diary products in their house, and 13 percent regularly kept frozen foods at home. The survey also indicated that Chinese were very well aware of foreign brand names. The Gallup Poll also gathered information relative to fast food and soft drinks and found that Kentucky Fried Chicken was the most widely recognized fast food chain in China. The most telling fact about these findings that the survey concluded was that urbanization...
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