Kelsey Martin

Mgmt 4390
TR 8am
Case Analysis #1 Questions Case: Ice-Fili
1. Which segments of the general external environment, if any, are relevant to the
Russian ice cream industry? Why?
There are many major external segments that are relevant to the Russian ice
cream industry.
One of the external segments demonstrated in the case is technological change. In
the 1900s the Russian ice cream industry was behind in their technological advancements
in production, ingredients used, and their packaging process. Starting in 2002; majority of
Ice-Filis brands relied solely on new imported equipment from the US. By 1999, 90% of
the equipment used by the Russians were imported that cost the company between $1.5
million and $2 million for a complete production line. I see this segment as a threat and
an opportunity for the company. I can see it as a threat because if the company is not
prepared for the upgrade of the new technology then it can be a struggle to operate and
produce the products effectively. I can also see it as an opportunity for the company to
grow and become more technically advanced. The new technology offered faster and
more production as well as ways to package and freeze the products.
The next segment presented in the case is specific international events. The
financial crisis of 1998 resulted in a financial collapse of the Russian dollar by twothirds. This made it extremely difficult for Ice-Fili to get their imported good because
they were too expensive. This was for sure a threat to the industry because many

investors felt that Russia was too risky of a market at that time. During the crisis imports
decrease from 19,000 tons to 6,000 tons per year.
The next segment is demographic trends. In 1998, Moscow accounted or 140,000
people diagnosed as having diabetes. In order to target to that market, Ice-Fili
reintroduced their diabetic ice cream. This was for sure an opportunity for Ice-Fili to
grow among their consumers.
2. How structurally attractive is the Russian ice cream industry? Why?
To effectively determine how structurally attractive the Russian ice cream
industry is we look at the five forces model and determine the level of threats. Each force
will present either a high low or medium threat.
The first force is supplier leverage. Ice- Fili used a unique butter that came from
New Zealand that contributed to the taste of their distinct ice cream. Due to their supplier
for butter being imported from New Zealand this was a low threat for the Russian Ice
cream industry because there was not competition for the better.
The next force are buyers. Ice- Fili different ingredients such as their butter, their
percentage of milk used, and their non preservative products, allowed them to focus on
one consumer. Ice- Fili had kiosks that allowed the customer to consume their ice cream
at home as a snack. Due to the fact that Ice- Fili was different enough from their other
competitors the level of threat would be low.
Rivalry is the next force in the five forces model. In this industry there are
multiple companies that increase competition. For example; when Ice- Fili attempted
their expansion into the west it was more difficult due to the high amount of competitors

that had a much different idea of what ice cream taste like. Due to the amount of different
companies in the industry there is a high level of threat.
Next in the forces model is substitutes. When Ice- Fili first came out with their
kiosk concept the consumer perceived the ice cream as a snack. It then became a
competition between beer, soda, yogurt, chocolate, and other confectionary candy
industries due to the at home consumption idea. Having easier access to the ice cream
through these kiosks created a high threat between the snack companies and Ice- Fili.
New entrants are the second to last of the five forces. Due to the 10% increase in
the tax regulated by the government new companies would not enter into the industry.
Due to no new competition, the demand for ice cream increased in which encouraged the
company to come up with new innovated ideas to support the demand. The level of threat
during this time was high to medium.
Lastly, we have complementors. When you think about all the items that make up
ice cream there are endless possibilities. There are toppings such as dried fruit, there are
many different kinds of ways to present it to the consumer, and an assorted other different
snacks that complement ice cream. With that said this would be a high level threat
because of the multiple complements that go great with ice cream.
3. What opportunities are presented by the structure of the Russian ice cream
industry? Why?
The two opportunities that are present by the structure of the Russian ice cream
industry are the fragmented industry structure and the mature industry structure.
The reason I see the potential for the fragmented structure is because in the ice
cream industry there are a large number of small firms. There were many different ice

cream producers represented in the case such as: Baskin Robbins, Nestle, Ben & Jerrys,
and Unilever, which are just a select few of competitors. Next there is no dominant
technology. The technology used between each of the companies is pretty much
consistent which then prevents one company from gaining too much power. Since the
main differences between the companies are the ingredients used it is easy to say that
there are low barriers to entry. In this case with Ice- Fili, there are also few economies of
scale. This means that there was not a proportionate saving in costs gained by and
increased level of production. This opportunity consists of consolidation. This company
has the opportunity to buy competitors. By doing so they can increase popularity, profit,
and will allow them to increase their power. With that said the next opportunity is
building market power. By consolidating the company into one common alliance it will
build the power to expand on the market. If Ice- Fili can join with another competitor and
consolidate their production then they can proportionately gain savings cost by their
increased level of production.
As for the mature industry there was clearly a slow growth in demand for ice
cream. The demand changes constantly in this industry based on the economies changes.
There was an increase in international competition between the western companies and
the Russian country. Ice-Fili tried expanding toward the western counties and there was
too much of a difference between Russian ice cream and the United States ice cream.
After the financial crisis of 1998 some foreign companies left the industry such as Ben &
Jerrys. This crisis began the existing of the industry. In the mature industry structure
opportunity comes from refining current products. In order for this to happen Ice-Fili
needs to improve their service. Ice-Fili can come up with new and improved ways of

catering to their customers through flavors, incentives, and making the ice cream more
accessible for the at home consumers. Also another way to refine their current production
is to process innovation. In order for Ice-Fili to keep up with the competition it will be
important for their industry to expand and come up with new ways of representing their
product.
4. What course of action would you recommend to Anatoliy Shamonov? Why?
One recommendation I would make to Ice-Fili is to advertise more. This will
allow Ice-Fili to be different and to compete against their rivalries. If every time Ice-Fili
came out with a new flavor or innovation and advertised it then it would become an icon.
This type of advertising would then build market power.
Next I think it would be a good idea if Ice-Fili could join with another company to
consolidate the competition. It would create barriers to keep other competition out of the
industry. Through the consolidation of the company they will be able to share idea and
incorporate the cultures of both companies to better expand.