5 Forces Dynamic Analysis Essay

Question 1. (refer to append shabus on p.5)Political1) From 1991-1998 No long-range anti-alcohol campaign to boost deoxyephedrine-cream industry. chicken feed cream industry had to complete with substitute products. 2) Since 1998 Financial Crisis, Russian rubles adulterate by two-thirds. Russians can non afford contrasted products and companies relied more than on national suppliers. 3) 1999 VAT raise. Fruit-based ice-creams and popsicles raised to 20% VAT. Consumer demoralize less ice-cream because of elastic demand, revenue is less.Economical1) Privatized companies must overcome bad infrastructure, to create value in Primary and Support activities, and to extend the maximum commercialize share. 2) In ice-cream industry, codswallop-Filis competitor, Nestl, built Nestls testify infrastructure during the 1990s and Russian faced an enormous challenge.Society/ Culture1) Lakomka. Older customers love Lakomka, 5 competitors compete Lakomka. However, in a long term, Lakomka needs to sustain its life if old generation dies. 2) Russian likes Condensed Milk (less sweet) ice-cream generally. But Nestl may change consumers behavior. 3) Consumers took ice-cream during short summer just took beer throughout stratum.Technological1) fresh imported equipment. Ice-cream industries endowed newly imported equipment to enhance infrastructure. 2) 90% of new equipment use for freezing and packaging in Russian market, but only $1.5 to $2m per complete production line. Not really improving.Substitutes (High Threat)Soft drinks, beers, chocolate, confectionaries were rising but ice-cream declined by 3.5% in 2002. Rivalry (High Threat)Nestl established great infrastructure and wanted to be only mark in Russia in 2-3 years time Entrants (High Threat)Regional producers took 30% of domestic market and still ripening. provider (High Threat)Imported ingredients were more pricy National suppliers had more supplier power, equipment casualty of ingredient were more expensive Bu yer (High Threat)1) Customers had 240 different ice-cream products Yet to count substitute goods. 2) Retailer cost 17.2% & distributors cost 30%, 47% of industries expenses From the PESTLE and ostiary Five Forces shown above, Russian ice cream industry was struggling to evolve.Question 2Resources (refer to appendices on p.6)1) Tangible resourcesIn Physical point of view, Russian ice-cream market contains different sows and fruits. This is also describe under point rare on a lower floor in the same answer. Ice cream companies experiences long years industries, human resources of local and national knowledge such as culture, marketing, and human connections were under the belligerent advantage.2) Intangible resourcesFor firms in Russian market, long ice cream brands were already enjoying reputation because some prestigious brands were household name such as Lakomka.Under Capabilities1) ValuableDespite that is devaluation in Russian Rubles, which is a great probability to enter i ce cream market in Russia in trim down cost.2) obsolescentTailor made Ingredients. Russia has a huge area, which may grow some specific type of plant that cannot find in other countries. Those local plant and fruit could turn into local ingredients to make a unique ice-cream that could be found in Russia only.3) InimitableIn the Russian market, there were more than 240 ice cream products alone. For a market entrant, the barrier of entry is low because customers were not sticking to a busy ice cream brand and reject the others. Entrants neednt imitate other brand and enter to the market. That was why regional ice cream market enjoyed growth.4) Organized to be exploited by the firmRussian market used to have a weak organizational infrastructure, neither in vertical and swimming integration during 2002. Nestl had formed a well infrastructure already but Nestl couldnt take stallion integration in Russiamarket, there are still some room for companies can take on this opportunity to integrate horizontally and/or vertically at the moment, to grow on companys economies of scale at this moment, rather than years later that all the market big boys fill up the ice cream industry, which increase barrier of entries.Question 3Strategic Positioning Model (refer to appendices on p.7) In appendices 1, Ice-Fili played board in matched Scope but played differentiation in Economic Logic. Despite Ice-Fili sold 6 Rubles and compete directly with some of Nestls medium price products, for a medium size company with limited tangible resources, Ice-FIli unable to be a be Leader to compete with high economies of scale like Nestl and local big companies. Ice-Fili had to prove its value.Porter 5 Forces (refer to appendices on p.7)Threat of SubstitutesInvest Eastern Europe and Germany Ice-Fili directors believed to take a cash cow opportunity to produce prohibitionist ice and sell aboard. It was right as director aware substitute goods and lower switching cost of Buyers can threa t ice-cream business. If dry ice aboard were Stars Market, of course it was worth to invest in if dry ice was a Question tag market, risk was practically higher. Furthermore, Ice-cream market and dry ice-market may not share the same technologies simply based on same freezing system, Ice-Fili demand to put more effort to control its business, plus taking care the tough ice-cream competition at the same time.Threat of entryIce-Fili improved some sufficiency that raised the bar barriers of entry from below 1) It was right to restructure 117 salary levels to one under Corporate Organization & Structure, more cost tractability & got rid of high fixed cost rigid system. 2) Production Invested $8m on advanced machinery with 90% used for freezing and packaging To confront significant 5.7% packaging cost was reasonable. It may spend too much on improve lower cost Freezing system but spent less than 10 % on production, let Older generation equipment produced 25% production capacity was o bviouslyinsufficient. Ice-Fili did not tackle high repair & maintenance cost.Buyers functionIce-Fili planned their Product range with 170 different ice cream plus 20 new products every year. That let debaseer to have more choice was creating far less sufficiency on cost control. Under poor financial position in 2002, simply should focus traditional intangible brand Lakomka and other most profitable ice-creamSupplier Power1) Ice-Fili kept 3-4 suppliers only. Kabuzenka stated Ice-Fili constantly received new one offers, but didnt diversify more suppliers. High Suppliers Power remained. 2) Ice-FIli never hedged foreign currencies that can cost less to buy foreign products.Question 4. (refer to appendices on p.8)Arenas- Red Ocean (substitute products), Blue Ocean (Dry-Ice Market & theme park) Invest orthogonal Dry Ice Market- Ice-Fili must ensure they were investing Star Market rather than Question Marks market. If not a Star Market, Ice-Fili should not invest. Invest Ice Cream them e park- Ice-Fili located nigh Moscow. It is inexpensive to set, and easy to attract some visitors to visit theme park. i) Introduce companys floor ii) watch brief production process, iii) let visitors taste and evaluate developing future product. iv) Visit precious graveyard of Ice-Filis buried products to create fun. Invest substitute products- E.g. beer, chocolate, soda, etc., as markets were expanding, in short term, to buy these companies shares and generate cash a.s.a.p. In longer term, get enough resources to develop its own brand, or amply takeover an existing substitute company.Vehicles- AcquisitionBackward integration- To save storage cost of ingredients, could pay suppliers slenderly more by delivering on time for production. This enhanced inbound logistics under Generic Value Chain, Porter 5 Forces Supplier Power, and decrease Operation cost. Forward Integration- Set up own small distribution warehouses across geographical market locations, hire few employees in eac h location. It runs several tasksa) Enhance outboundLogistics by distribute products on time to all retail channels, replace 47% Retailers and Distribution costs.b) do cheap operated SMS to communicate freely with local marketers, to gather 1st hand market demand and germane(predicate) data, to build up Services by developing relationships. Then e-mail this fount line information to headquarters on regular basis. Differentiation- Position medium price product and try to Re-register Lakomka 1) Register Lakomka- to rick Ice-Filis unique product in the market. 2) Not nonplus with leading Russian producers for joint advertising- The bond favor more on Russian big players rather than medium Ice-Fili. Bonds decisiveness may constraint the future benefit of Ice-Fili. Eventually, Ice-Fili could be destroyed by the bond, not by Nestl. It is not worth to save 0.44% cost by joining the bond. Staging- Based on priority of financial resources influx and outflow of time sequence as follows Invest substitute products 1st as market growing-register Lakomka-forward integration-backward integration-Dry Ice Market abroad-Ice Cream theme park Economic LogicGain cash from raising market (substitute goods) Save cash to run future business.Conclusion1st invest Horizon 2- certain growing substitute market then enhance Horizon 1- register Lakomka and integration, finally invest Horizon 3-Dry Ice and theme park.APPENDICESBrief HistoryPEST (question 1)Components of Internal Analysis (question 2)Strategic Positioning Model (question 3) frown CostDifferentiationBoard Target Competitive ScopeNestl -Cost LeadershipIce-Fili- Medium Price,NestlNarrow Competitive ScopeCost FocusDifferentiation- Niche