Marketing and Ice Cream Producers

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Introduction
Ice-Fili is a mid-sized and privatized joint-stock company in Russia. In 2002, it ranked as the top ice cream producer which offered 170 different ice cream products and had more than $25 million in sales. In addition, Ice-Fili’s flagship ice cream brand --“Lakomka” was responsible for 30% of the company’s sales.  However, Ice-Fili has been losing its market share and experiencing a decrease in sales volume in recent years due to the increasingly competitive Russian ice cream market. External Analysis

Life Cycle Stage
The Russian ice cream industry was in the growth stage after 1996, the ice cream consumption value had a huge increase from 222,000 tons in 1996 to around 376,000 tons in 2002. However, the industry reached the shakeout stage in 2002 since the demand for ice cream approached saturation level and the competition between companies became more intense (300 companies in 2002). PEST Analysis

The table below shows how the macro-environmental factors influence the ice cream industry in Russia. Political| - GOST: a minimum standard determining the ingredients and quality, which protected traditional Russian ice cream producers| | - The Dissolution of the Soviet Union: state-run economy transferred to an open-market economy, which lowered entry barriers and lead to higher competition| Economic| - Open Market: created an opportunity for foreign producers to expand their ice cream brands in Russia| | - Financial Crisis of 1998: hindered some potential entry candidates and adversely affected existing firms | Social| - Increased Popularity of Bulk Ice Cream: enabled ice cream producers to capture the home consumption segment| | - Increased Consumption of Substitute Products: as alcohol and soda products become popular among young people, the ice cream industry faced the challenge of decreasing sales| Technological| - Rapid Development of the Ice Cream Equipment: an opportunity for ice cream producers to efficiently produce and maintain high quality products|

Porter’s 5 Forces
Bargaining Power of Suppliers
* For suppliers of ingredients: low concentration and low switching costs * For suppliers of equipment: high concentration and high switching costs Bargaining Power of Suppliers
* For suppliers of ingredients: low concentration and low switching costs * For suppliers of equipment: high concentration and high switching costs According to Porter’s 5 Forces model, Ice Fili is facing an intense competition within Russian ice cream industry. Therefore, Ice Fili’s managers need to determine the most appropriate strategy to create competitive advantages for the company in order to compete and strengthen its market position.

Threat of Substitutes: High
* Low switching costs
* Existence of substitutes such as beer, confectionaries and snacks * High market growth of substitute products

Threat of Substitutes: High
* Low switching costs
* Existence of substitutes such as beer, confectionaries and snacks * High market growth of substitute products

Intensity of Rivalry among Established Firms: High
* Large number of competitors (300 in 2002) including regional, Moscow-based, and foreign producers    * Slow market growth
* Overcapacity
* High barriers to exit
Intensity of Rivalry among Established Firms: High
* Large number of competitors (300 in 2002) including regional, Moscow-based, and foreign producers    * Slow market growth
* Overcapacity
* High barriers to exit
Bargaining Power of Buyers: High
* Low switching costs
* Low level of product differentiation
* Low demand elasticity
Bargaining Power of Buyers: High
* Low switching costs
* Low level of product differentiation
* Low demand elasticity
Risk of entry by potential competitors: High
* Low brand loyalty
* Easy access to distribution channels
* Fragmented market
* Lack of patent rights...
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