Dippin Dots Managing Strategy - Case Study Example

Dippin’ Dots Managing Strategy Table of Contents 1.Analysis of the External Environment 2 (a) PESTEL Analysis 2 (b) Porter’s Five Forces Model 4 2.Analysis of Companies Internal Environment 8 (a) Porter’s Value chain analysis for Dippin’ Dots 8 (b) VRIO analysis 13 3.Evaluation of the Companies Performance Using Balanced Score Card 14 References 15 1. Analysis of the External Environment (a) PESTEL Analysis Political Environment Dippin’ Dots, a US based Ice cream maker, became famous for making the “ice cream of the future”. The political scenario of the US has a bearing on the activities of the Dippin’ Dots. There is less involvement of the government in the business of the Dippen’ Dots. U.S. Food and Drug Administration (FDA) regulate the quality of any food product such as ice cream. Economic Environment The US market is the world’s largest market for ice cream which was worth $21 billion in 2005. Moreover, it is the world’s fastest growing market. Consumers spend around $8.2 billion on products for at-home consumption. Social Environment In the US, there has been a trend for the consumption of the healthy treats. The people prefer to have low fat products that have the taste and the texture of the fully fat ice cream. The primary target audience for any player in the ice cream industry is children and youths of a county. The scenario is similar in the US. Technological Environment Technological development has a significant bearing on any product. The technology used for the manufacturing of the ice cream was cryogenic that was used in the process of freezing which is quite unique within the ice cream industry. Environmental Factors Low temperature is required to store the product in order to uphold the consistency and integrity of the product. Climatic condition of a country can have a bearing on the sale of the ice cream. In the US winter there is severe cold throughout the country, thus this can have a bearing on the ice cream sale. Legal Environment The United States Department of Agriculture along with the Kentucky Milk Advisory Panel has been entrusted to inspect the Dippin’ Dots plant in Paducah, Kentucky in order to ensure that the company is maintaining a high quality standard. (b) Porter’s Five Forces Model (Lima, 2006). Threat of New Entrants The threat of entry has been very high for the companies that operate in this market. Many new competitors have entered into the market producing similar kind of products. Due to less involvement of government, the threat of entry has been high. Rivalry among the Existing Competitors There have been several competitors of the Dippin’ Dots in the out-of-home ice cream market. The chief competitors are Ben & Jerry’s, Haagen-Dazs, Carvel, Baskin-Robbins and Dairy Queen; and the new entrants like Cold Stone Creamery, Magie Moo’s and Marble Slab Creamery (Prata, 2006). Bargaining Power of the Suppliers The overall suppliers in the ice cream industry encompass limited power, if there are large numbers of competitors. Bargaining power of suppliers in case of the industry in which Dippin’ Dots operate is low, as there is large number of suppliers who can provide almost similar kind of products to the buyers. Bargaining Power of the Buyers The bargaining power of the buyers is quite high as there are a variety options available to them in terms of quality, price as well as quantity. They have also an option of picking ice creams according to their tastes and preferences. Threats of Substitutes The substitutes of the ice cream are frozen yogurt, fruit juices, frozen custards, and curds. In case the price of the product increases the buyers are likely to shift their preferences towards these products. Though, none of these pose a major threat to the ice cream market of Dippin’ Dots. 2. Analysis of Companies Internal Environment (a) Porter’s Value chain analysis for Dippin’ Dots (University of Maine Fort Kent, 2009). Primary Activities Inbound Logistics The inbound logistics for the ice cream industry are milk and non-fat milk, sweeteners, flavours, various kinds of fruits, nuts and chocolate chips. In order to promote the texture and make the product delicious to customers, stabilizers and the emulsifiers are also used. The company receives supplies from various vendors. Operations Inc. magazines have ranked Dippin’ Dots as one of the 500 fastest growing companies in the year 1996-97. Curt Jones was the founder of the company and had started the company that manufactured flash- freezing ice creams. In the year 1991, a dealership network was developed in order to sell the ice creams to the authorized vendors. With the aim to prosper, Jones worked with Chad Wilson to develop franchise system. Marketing and Sales Initiatives In the year 2002, McDonald’s reportedly spent $1.2 million on advertising in order to roll out Dippin’ Dots in about 250 restaurants in the San Francisco area. The company had hired a Hollywood firm to advertise its ice cream in television and movie scenes. Nearly half of the Dippin’ Dot sales came from national account like stadiums, theme parks and the theatres. The rest of the $50 million income was acquired from the 150 franchise of multiple locations. Service It is very important for the company to comprehend whether the customers are contented with the services provided by the company or not, since the satisfied consumers may revisit the store and give repeat business. Outbound Logistics The outbound logistics for the company has been managed through transportation of the product coast-to-coast and around the world via plane, truck, train and ship. The ice creams were transported via cryogenic transport containers and pallet reefers. Support Services Procurement In order to fund the Jones’s endeavour, his parents took out a mortgage. They even had to approach other lenders who could lend him cash at exorbitant interest rates. Technological Development Technology plays a vital role in the manufacturing and the development of the product in this type of industry. At ice cream industries, special kind of freezers and equipments are needed in order to sustain the subzero temperature. Research and development has been given most priority by the company. Human Resource Management Human resource has played a significant role in establishing the company as one of the most preferred ice cream company in the US. Dippin Dots’ are also trusting on their future generation to take them ahead with their venture of expansion. Firm Infrastructure In present days, the IT plays a key role in the marketing of the products. The company has been focusing on the continuous improvement of the technology in order to provide improved and new products to its customers. (b) VRIO analysis Valuable From the above value chain analysis, the assorted significant capabilities of the company have been identified. To instigate, the company has been continuously implementing its innovative ideas in order to serve the customers and overcome the competition (Prata, 2006). Rare Reputation among the customers has taken Dippen’ Dots to a rare position in the industry and has provided them a differentiating factor from its competitors. Imitate Although there were various imitators of the product, yet Curt Jones continued investing in the R&D in order to create a conventional ice cream product comprising of super frozen dots embedded in it. Organization Support The company had adequate experience and resource in the manufacturing of the ice cream and at scoop shop retailing. Dealing with supermarket chains, distributors and packaging were a challenge for this firm. 3. Evaluation of the Companies Performance Using Balanced Score Card Financial Measures In the year 2006, half of the sales have been generated from the national accounts and rest $50 million income was acquired from 150 franchises. The company grew to a multi-million dollar company with authorized dealers internationally and also in all 50 states in the US. Innovation and Learning The company has been incessantly spending significant amount of time in R&D and producing new products for the consumers. However, it must pay more attention towards the technology in order to face the competition. Consumer Measures The company has been innovating new products in order to uphold a loyal customer base. However, it must have a thorough analysis of the tastes and preferences of the customers with the aim to shun the complaints from the customers. Internal Perspective The company needs to excel at its quality in an attempt to enjoy competitive advantage. References Lima, T., 2006. Michael Porter’s “Five Forces” Model. Barriers to Entry. [Online] Available at: http://www.cbe.csueastbay.edu/~alima/courses/3551/murdercleaners/fiveforcesporter.htm [Accessed December 16, 2010]. Prata, A., 2006. BUSA 499: Strategic Management. PEST Analysis [Online] Available at: http://web.mac.com/nick.hollingbery/iWeb/Digital%20Portfolio/Example%20Coursework/F5BACB82-5CD6-4366-A1A3-23DD63739586_files/Ben%20&%20Jerry%20Example.pdf  [Accessed December 16, 2010]. University of Maine Fort Kent, 2009. Value Chain Analysis. Marketing. [Online] Available at: http://www.google.co.in/imgres?imgurl=http://www.ukeducation.org.uk/UkeduFrames/Documents/images/Value_chain_Diagram_1.jpg&imgrefurl=http://perleybrook.umfk.maine.edu/slides/spring%25202008/BUS411/BUS_411_day_8.ppt&usg=__5hWrUurEouGDnE8jYKRrilbas-o=&h=451&w=665&sz=32&hl=en&start=0&zoom=1&tbnid=kMysZN19ZeaFMM:&tbnh=132&tbnw=195&prev=/images%3Fq%3Ddiagram%2Bvalue%2Bchain%2Banalysis%2Bsite:edu%26um%3D1%26hl%3Den%26biw%3D792%26bih%3D408%26tbs%3Disch:1&um=1&itbs=1&iact=hc&vpx=146&vpy=89&dur=563&hovh=132&hovw=195&tx=86&ty=104&ei=NeAJTfPUHMvOrQfp_7TQDg&oei=NeAJTfPUHMvOrQfp_7TQDg&esq=1&page=1&ndsp=7&ved=1t:429,r:0,s:0 [Accessed December 16, 2010]. Read More