Ice-Fili is a midsized Russian ice cream producing company that has been successful in the past, surviving various hard and turbulent times including a change of the Russian closed economy into an open economy, the financial crisis in 1998, and outlasting well-known international companies including Ben & Jerry’s and Unilever. Ice-Fili is Russia’s top domestic ice cream producer, and has been in a fight to maintain its market share leadership in an ever increasing competitive ice cream market in Russia. This increased competition came from foreign companies, such as Nestle (Ice-Fili’s fiercest competitor), Baskin & Robbins, and Haagen-Dazs, and along with the emergence of regional producers of ice cream, both of which have led to Ice-Fili’s decline in market share in recent years.
The attractiveness of the Russian ice cream industry for this memo was discovered by performing an industry analysis (Table 1) in which Porter’s Five Forces that shape strategy was used. Porter’s five forces suggests that bargaining power of buyers and suppliers, threat of entry, intensity of rivalry, and substitutes shape the attractiveness of a particular industry. Based on the analysis in Table 1, the Russian ice cream market is not attractive, due primarily to the high power of buyers, high intensity of rivals, and the moderately high entry barriers and substitutes found in the industry.
In the Russian ice cream market, the primary components that determine the willingness to pay for a product are the quality, how easy it is to purchase, brand, and packaging. The determinants of cost in the Russian ice cream industry are cost of ingredients, operating costs, cost of equipment, transportation and delivery costs, and advertising costs. The potential sources of competitive advantage in the industry are having a quality product that is superior to others, the production volume a company can achieve (Ice-Fili has a daily copacity of 200 tons, compared to Nestle’s 45 tons),...