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Introduction From 1996 to 1998 Ice-Fili suffered from huge increases in costs that gradually ate at their margin at alarming rates. Even worse, from 1999 to 2001 they had a huge decrease in sales and got into liquidity problems. The economic situation for Fili seems to be doomed even more when you add growing and strong competitors to the mix. But what caused all this? In the following problem analyisis, we will discuss basically 4 categories of issues that Ice-Fili is undergoing: Manufacturing, Distribution, Marketing, and Price. An insight of manufacturing problems seems to date back to the soviet era, which is basically when Ice-Fili got stuck in. The fact that their manufacturing assets are now nearly obsolete is their main issue. We will then discuss distribution, and why the fact that Fili doesn’t own or control their distribution networks makes their product unavailable and unreliable to vendors. Finally we will explore Marketing and Pricing, which have a connected negative impact on Ice-Fili’s sales. Needless to say, Fili is not at the top or the bottom of the low value-premium pyramid, but rather swimming blindly in the middle. These 4 basic categories present a very difficult situation for Ice-Fili and their economic struggles. We will now discuss them in more depth. Manufacturing Ice-Fili has fallen behind. In terms of their physical manufacturing capabilities they are battling large international competitors who have vast capital to invest in ensuring their plants are cutting edge. Ice-Fili does not have the same amount of capital, and thus their manufacturing plants are visibly inferior to the extent that they are still using soviet era machinery to produce some of their varieties. The majority of manufacturing equipment is imported from western countries, increasing the cost to IceFili to invest in updating their infrastructure. In addition, Ice-Fili’s dedication to keeping their product “all natural” makes the storing of their easily perishable finished inventory extremely expensive. Distribution It is a simple fact that if a product is not available to purchase, then it will not be purchased. There are many factors that lead to a lack of availability for a product, one of the most important however is distribution. Ice-Fili is facing a serious issue with the reality that they do not have a proper distribution system for their product and it is evident that very little resources have been invested to solve this problem. Currently IceFili uses several contractors to distribute their ice cream products to kiosks and other points of sale. The problem with this, however, is that not only are these contractors also transporting competitors products, but that they are unreliable. Often retailers will not have Ice-Fili products in stock due solely to issues along the distribution channels.
Loyalty among customers for ice cream is not very strong, those wishing to indulge in these treats will likely choose equally among what is available as long as they are of similar price. It is this notion that makes the decision to contract out distribution of IceFili’s product to companies who will be also supplying retailers with their direct competitors a key strategic mistake. To make even clearer why this strategy is a failing maneuver we can take a look at Nestle’s distribution system. Nestle owns their entire supply network, and because of this they can not only promote their product whilst delivering, but they can also battle for retail outlets and ensure a constant supply to these outlets. In doing so they have the ability to block out competition from serving certain retailers. At the end of the day, the retailers only want to sell as much product as...
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