Strategic Management – BUS3110-0910
THE ICE CREAM INDUSTRY
Tutor: Tom Murtagh
1) The threat of new entrants 5
2) Bargaining power of customer 7
3) Bargaining power of supplier 9
4) The threat of substitute 12
5) The threat of rivalry 13
6) Summary 14Porter’s model limitations 15
This paper deals with the global ice cream industry.
Ice cream is a frozen dessert made of mainly milk products, sugar, egg, butter and water.
The first sort of ice cream was invented in China in 200BC when a milk and rice mixture was frozen by packing it into snow.
In the 13th century, theexplorer Marco Polo learned from the Chinese method how to create ice and milk mixtures and brought it back to Europe. It became a fashionable treat in Italy and France.
Although there are a lot of stores related to the history of ice cream, historical research has found little evidence to support any of the stories. In actual sense, the history of ice cream is associated with the development ofrefrigeration techniques, which can be traced in a number of traces which backs up this fact.
(Clarke, 2004 p.4)
It is interesting to analyse the ice cream industry because this market has shown an important growth these few years. It has reached total revenue of $44.9 billion in 2008. So, this is an attractive sector.
The global ice cream market includes the sale of the frozen yogurt,take-home ice cream, and impulse ice cream, artisanal ice cream in Americas, Asia Pacific and Europe (datamonitor, 2009 p.7)
In order to analyse this industry, it would be appropriate to use the Porter’s five forces model. The study of forces that impact on an organisation is a continuing interest to researchers, especially those that can be applied to provide competitive advantage.
Porter hasproposed these five forces:
1) Threat of new entrants – New businesses entering the market.
2) Bargaining power of suppliers – How much control suppliers have over manufacturers.
3) Threat of substitutes – Threat of similar products taking market share.
4) Bargaining power of customers - Power customer has over business.
5) Threat of rivalry – Competition of companies in the samemarket.
Each of these forces will be looked at in detail to determine whether the Ice cream industry has a profitable market.
1) The threat of new entrants
“New entrants come into a market place when the profit margins are attractive and the barriers to entry are low” (corporate strategy, Lynch, 2003).
The ice cream industry has been around for a few decades now but is still agrowing market. It is quite easy to position the well known companies in the global ice cream market. The most well known companies, being Mars and Nestle, take important positions in the market. Although Nestle has developed global scale, it is still considerably smaller than the low-cost leader, Unilever. Nestle on the other hand have a large range of products which will allow premium prices. (Lynch,2009 p.308)
As the ice cream market is still growing, a global demand is still on a rise; Ice cream volume has also advanced swiftly by 18%, with the majority of additional sales coming from Asia/Australasia and the Middle East.” Although the global scale for ice cream has increased, the North America volume consumption per person has decreased – the market keeps growing in the rest of theworld.
When looking a product distribution in the ice cream industry, the products have to be kept up to date between the major competitors. They do this by regularly updating their brand image. To hold on or increase their market share, companies have to be prepared to push out old flavours and replace them with flavours. Experienced consumers will want to experience new flavours which they are...