A Storied Market Leader Facing Competitive Pressures

1414 Words Apr 5th, 2013 6 Pages
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
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To succeed in this strategy, Ice-Fili needs to do two things. First, it needs to broadcast its commitment to follow the legacy of the traditional Russian ice cream makers and inspire consumers to cherish and value traditional Russian ice cream making method, thus creating stronger brand equity. Second, Ice-Fili needs to restructure its current distribution system. Nestle already has its products twice as available as Ice-Fili.
Summation of Key Problems
1) Competition: Baskin & Robbins and Haagen-Dazs have already become incumbents in the premium ice cream space. Regional players have a big cost advantage so a price war or a move into a low cost strategy would be difficult.
2) Distribution: Ice-Fili’s products have fairly limited availability. Distribution was also highlighted as a factor for the failure of other players in the Russian ice-cream market

Reccomendation
Possible Strategies
The main goal of our recommendation is to stop the decline of Ice-Fili’s return on equity which has fallen from 27.3% in 1996 to 14.4% in 2001 (Figure 1, Appendix). We will look to do this through a combination of sales growth and margin expansion. We outline several possible options, and choose one which looks to be the most optimal:
1) Focus on a low cost approach to grow sales
2) Focus on restaurants and café’s to improve