Q3 Ice-Fili’s completive position relative to its regional? Porter’s five forces model will be used to assess the ice cream industry competiveness in the market. An illustration of the model specific to Ice Fili is displayed in Exhibit 1. In order to have sustained profit for Ice-Fili, we will analyze the drivers of the industry identified by strategic variable (R, C, Q). Profit can be defined: Profit=(R-C)*Q, Where R is revenue, C is cost and Q is quantity. Industry Rivalry (H)
Large number of firms from Regional and Foreign – Many firms results in Price Drop 2.
Commodity Product - commodity end of the spectrum, profits are decreasing 3.
Low rate of Growth (R)- ice cream industry production down by 3.5% in 2000 from the previous year - As firms try to grow, they cut prices Impact to (R) 4.
High Fixed cost – Impact to (c)
Ice cream industry in Russia has about 300 ice cream manufactures including regional and foreign. The ice cream market can segmented based on geographical spread, National, Regional and City. Increasing number of ice cream companies is leading to price reduction and reduced market share. Overall resulting in high industry rivalry. Ice cream is commodity product with no for few attributes of distinctiveness. Ice cream industry production down by 3.5% in 2000 from the previous year - As firms try to grow, they cut prices impacting the revenue of the company. Supplier Power (L)
No. and concentration of suppliers are low for raw materials and high concentration of suppliers in equipment. - Powerful suppliers increases C 2.
Low switching cost in terms of raw materials but high cost from equipment. 3.
Threat of vertical integration. – High
Suppler Power: - Impacts (C, Q)
Suppliers In the ice cream industry can be segmented in raw materials ingredients and equipment. There exist numerous potential suppliers of ingredients. The ingredients provided by each supplier are not unique or greatly differentiated. Furthermore, ice cream manufacturers are able to switch between suppliers quickly and cheaply. Therefore, the bargaining power of suppliers of ingredients is rather low. In terms of equipment there were 10 private ice cream equipment companies in Russia, Ukraine, and the Baltic countries, relative to 300 ice-cream manufactures. This makes difficult for ice cream manufactures to exercise their power to negotiate for lower price. Russian ice cream producers such as those converted from military facilities may present opportunities for forward integration; the bargaining power of the suppliers of equipment is relatively high compared to that of the material suppliers. Buyer Power (H)
Larger number and concentration
Availability of product alternatives – Dairy foods, Confectionaries 3.
Low cost to switch – Ice-Fili can switch to other dairy products 4.
Threat to vertical integration – (H)
Low Product differentiation
Buyer Power (H) – Impacts strategic variables (R, Q)
Buyers are presented with many choices when selecting a product in the ice cream industry while distributors have the power to decide which products will be available to customers. Ice-Fili has about 170 products in the market, compared to Nestle with 25 products. Absence of preservatives and a high proportion of milk fat differentiate the domestic Russian ice cream from the foreign producers’. Customers are able to substitute one brand of ice cream to another or from ice cream to other foods altogether at any point in time. Overall we can say that buyer power of distribution channel group and consumers is high relative to ice-cream producers.
Threat to Substitutes (L)
Existence of substitutes such as confectionaries, Beer, Soda and frozen foods 2.
Low switching cost
Consumer change in purchasing trends, Low brand loyalty or low switching cost leads attribute to Threat to Substitutes. Low customer switching costs in the Russian ice cream industry. Furthermore, some other substitutes like beer, soda, yogurts,...
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