Introduction
A medium-sized Russian ice-cream producer, Ice-Fili, is still a middle store. The company is dominating the Russian top ice-cream production. However, according to Bernard Koopmans’s market share targets, the company does not have a stable dominating market share. The company only boasts of 4.3% market share which is very low considering the huge market Russia presents. This also shows how competitive the Russian ice-cream market is.
Regarding the case, there are increased numbers of competitors approximated to be growing at a higher rate ranging from 100 to 3000 within a span of six years (Rukstad et al 2005). For Ice-Fili to continuously dominate the market, the company should adopt various strategies that will provide it with an additional competitive advantage. Ice-Fili’s CEO, Anatolive Shamanov should not only choose the two proposed strategies, differentiation, and overall-cost-leadership strategy but also other marketing strategies in order to survive in this volatile market.
Industry and market analysis
The Russian ice cream industry is characterized by high economies of scale coupled with increased competition (Rukstad et al., 2005). There is also high product differentiation as well as established brand loyalty among the competing firms. However, the market provides increased opportunities for a company like Ice-Fili. The company must come up with strategies that will enhance its competitive advantage in order to survive in this highly volatile market.
The company is facing fierce competition from well-established competitors in the industry. These include the international firms that have a technological advantage over the Russian firms. One of the companies is Nestle which enjoys the second largest market share. The strength of this company comes from its well well-known distribution channels and marketing sets of connections (Rukstad et al., 2005). Besides, the company is now considering the Russian taste in its products in addition to offering reduced prices. The other big threats to the growth of Ice-Fili come from the new regional entrants into the market.
Proposed strategies
For the company to remain competitive and continue dominating the market, it must adopt new strategies that enhance its competitive advantage and position the company above potential threats (Rukstad et al., 2005). To properly position itself, the company should adopt the cost leadership and product differentiation strategies that focus on strong promotion and advertising to make its products well known to the buyers.
The overall-cost-leadership strategy
The company is capable of selling at low prices while keeping high quality and profit margins. For the company to sell at low prices, it must reduce production costs. This should begin by sourcing for cheaper raw materials. The company should engage and negotiate with its supply chains, make it effective and efficient in order to have raw materials supplied at reduced costs. Derived from Porter’s five forces analysis, Ice-Fili will continue to enjoy its control of supplier power to reduce the cost of production. Choosing the suppliers enables the company to have increased raw materials at an advantageous cost.
Secondly, the company should decrease the number of product lines and put more emphasis on superior ice cream brands. The company is currently producing a wide range of ice cream brands in contrast to its market competitors. The varied product lines result in inefficiencies within the manufacturing process. Therefore, this company should focus on building strong brand products. The company should finally use economies of scale to reduce its prices. This implies producing a high amount of output at minimal costs. This will ensure that the company benefits through expanding its retail outlets.
Differentiation strategy
One of the competencies that the company has utilized to increase its competitive advantage is quality. The company focused on quality ice-cream that has enabled it to effectively compete with the fiercest market rivals. There are several ways through which the company can differentiate its products from those of the competitors. The company should make its brand known to a majority of the consumers. According to Porters five forces, entering into the Russian ice cream market is easier.
The ice cream industry is attractive as the average profits gained by firms are high. In addition, the new entrants do not need a huge capital. The reason is that the production process does not need heavy and complex equipment that is costly to install.
Companies that are well established have poorly promoted their products and this has made them create brand loyalty vacuums. New entrants into the Russian market take advantage of these vacuums to increase their market share. Building a strong brand loyalty assists companies in taking advantage of their market rivals and equally increases barriers to entry. In order to build strong brand loyalty, the company should focus on the strong promotion of its products while prioritizing consumer recognition of the company brand. Ice-Fili should focus on those activities that increase its brand representation and ensure that the consumers continuously buy its products.
Conclusion
The company is operating in a highly competitive Russian market. In particular, the company should adopt strategies that will enhance its competitive advantage. The adopted strategies include cost leadership and product differentiation. Both of these strategies should aim at building a quality brand image for the company. Therefore, the company should take advantage of the market share as quickly as possible.
Reference
Rukstad, M., Mattu, S., & Petinova, A. (2005). Ice-Fili. Harvard Business School, 703(516), 1-30.