History of the Carvel Ice Cream Shop - Research Paper Example

Number Business Report: Carvel Ice Cream Shop History of the Company and Its Products Carvel is a company that was started by Tom Carvel in 1929. It began as a small ice cream retail shop. Tom borrowed $15 and began selling ice cream from a mobile track. It became a retail company in 1934 in Hartsdale, New York. It began manufacturing equipment for the ice cream industry around 1935, formed the Tom Carvel Corporation in 1936, and patented one of its newly developed ice cream machines (no air pump ice cream machine with super-low temperature). It developed the secret soft serve ice cream formula, and introduced the concept of "Buy One Get One Free" in 1937. In 1939, the founder of the company developed a soft serve ice cream machine, becoming the first. By 1947, the corporation was already franchising retail ice cream stores in the US. In the period of 1949 all through to 2010, the company made various developments which have enabled its survival in the market. It developed a franchisee training seminar to educate its franchises, developed various ice cream products such as the flying saucer, Lo-Yo frozen yogurt, a line of all-Kosher products, Thinny-Thin frozen dietary desserts, among others developed later in the years. The company also created the idea of using ice cream vending vehicles, and introduced an ice cream supermarket. The corporation, after the death of the founder, relocated to Farmington Connecticut, where it developed branded freezers which were used to sell its ice cream products in various supermarkets. Various developments of products, sales strategies, and management accompany the progress of the company with the latest development at 2010. It introduced a new product; ‘Thick, Rich & Dreamy Low Fat Ice Cream’. The company has its headquarters in Atlanta, but has various franchises in 25 States and seven countries (The Carvel Corporation). Carvel products are categorized into three groups; take home treats, cakes, and Carvel Special Ties. The company offers take home novelty treats, freshly made hand tipped ice cream, premium ice cream cakes, and soft serve ice cream. These are meant personal desires, anniversaries, birthdays, and special holidays. The company’s ice cream cakes are said to be “perfect for any occasion” (The Carvel Corporation). Factors That Will Determine Demand for Their Products Weather is one of the factors. Ice cream is sold during the summer. A cooler weather does not support the sale of ice cream; it experiences high sales during very hot temperatures. Customer satisfaction is another factor. There are different features that customers look for in a product. In the case of ice cream, consumers will consider the flavors, melting quality, appearance, body and texture, color, and influence quality. Provision of what the different customers prefer determines the demand of different ice cream products (Bainbridge). Income is also another factor that affects demand for ice creams. This can also be related to the times when the economy is not doing well, and people tend to reduce their spending. Ice cream is not one of the needs that consumers would give priority over other necessities during economic hard times. The economy and income of individuals will affect demand. The Cost of raw materials such as milk and sugar raises the overall cost of production hence affects prices. The prices can affect demand. This could be due to increased energy and fuel bills, increased packaging cost, and increased cost of promotions (Bainbridge). The Brand: Carvel is a well known company for its ice cream products. The name Carvel and the qualities of products that come along with the name affect demand. Consumer experience with the products also affects demand. Factors that will Affect Supply Availability of raw materials: For the products to be available there should be raw materials. If they are scarce or are costly; supply of the end product will be affected. The main raw materials for ice cream are milk sugar, and sometimes eggs. Specific flavors however, need specific ingredients, which if not available, leads to no production of such products. One cannot supply what is not available. Efficiency in production: This can be explained by considering the supply chain management of ice cream for example; Carvel ensures that its products are sold through various franchises and supermarkets. The products therefore, have to reach these destinations on time, especially the supermarkets. When the production is not well managed, suppliers to various destinations may not get the product in time to various destinations. The case of franchises is an example of a well managed production system, although it also serves as a business expansion strategy, and a marketing strategy. The production of such products within the franchises ensures a constant supply in various areas of location, hence customer retention and loyalty (Bainbridge). Effective distribution: This is related to the production issue. The supply chain should be effective. If there is poor management, supply of the products to various destinations will be affected. Availability of demand for the product: A product cannot be supplied in a region with no demand. Supplies to such regions will depend on what the consumers need (Bainbridge). One Product, and Its Price and Income Elasticity of Demand Carvel has family characters such as Cookie Puss and Fudgie the Whale among its products. For this analysis, Fudgie the Whale will be the product of choice. It is a signature cake with freshly made chocolate and vanilla ice cream forming layers within it, and chocolate Crunchies. The cake is topped with vanilla Crunchies, milk fudge and icing (The Carvel Corporation). The demand for this product may not be price elastic. Price elasticity is somewhat constant. This is because of the category of the product, the type of the product, and the targeted customers. It is a product of passion. It even has its Fanpage section within the company website. The Whale character is linked to celebrations that show honor, for example it is linked to father’s day and mother’s day among other occasions. The Whale character shows some strength. This relationship, markets the product in a way that customers do not care much about the price, but much more about getting it. The same applies to the product demand in relation to income elasticity. This is a product that a passionate fan would make a sacrifice to get. One’s income may not be a determining factor in consumption. In order to improve sales, the price of this product should be set slightly high for its demand is almost constant (The Carvel Corporation; Boyes & Melvin 102). Cross-Price Elasticity The Cross-Price Elasticity of Demand is the measure of the rate of response of quantity demanded of a complement or substitute product, due to changes in the price of a product (Boyes & Melvin 102). Substitutes to this cake are; Cookie Puss, Hug Me the Bear, and the 3D Butterfly. Complements to the product area such as Fudgie branded toys, Fudgie branded T-shirts, ties and so on. For substitutes, the cross price elasticity of their demand may be slightly elastic. Even though the product has a constant demand with defined customers, some may prefer alternatives such as Cookie Puss, the 3D butterfly, and Hug Me the Bear. In the case of complements, the cross price elasticity is high. With the increased price of Hudgie the Whale, customers would prefer to have the cake, and leave the other branded products that go along with it. Maximizing sales of this product require monitoring factors that affect its production, demand and sales. Production cost affects pricing, and this affects other related products. Seasons of its increased prices may market its substitutes more to make more sales (Smith 144). Decision making will affect variable costs, explicit and implicit costs. Fixed costs and sunk costs will not be affected. Sunk costs are those incurred due to already made contracts. Implicit costs are expected to increase is a trend of price change and factors affecting demand are monitored. Explicit costs will be needed when demand for the product is expected to rise. Variable cost will also increase since more production is expected. This may reduce if production is expected to reduce (Smith 152). Type of Business The business is a competitive one. There are several ice cream companies with similar products in the world. Examples are; Cold Stone Creamery Incorporation, International Dairy Queen Incorporation, and Dunkin Brands Group Incorporation among several others. There are several supermarkets that sell different brands of ice cream, and other products from various entrepreneurs. There are also so many ice cream retail shops in various states, and bakeries that sell cakes with different flavours that can appeal to customers. There is a high risk of development of new substitutes to various products that are sold by Carvel, although the company has a well known brand, and sub brands. The risk of entry of other small ice cream vendors and bakers is also high since the initial capital for such enterprises is not high. Consumers also have a variety to choose from, and so the company has to work extra hard to please the customer, retain the customer, and gain more. More profits for the firm will only come from being innovative, and ensuring customer satisfaction. Market research will help reveal the current trends in the market, consumer tastes and preferences, and the changes that can help develop products as per the consumer requirements. It is also important to keep track of the change in prices of the substitute products. The business will then remain sustainable (McGowen & Dempsey 6). Pricing Strategy There is proof of temporary discount pricing. Carvel is currently using coupons to offer discounts to increase its sales. It is a $2 discount on any cake. There is also the use of ‘buy one get one free’ concept on various products (The Carvel Corporation; Smith 143). Effect of Government Regulations Government taxes impact quantities and prices of products. Government regulations can affect the demand for products. If for example, certain ice cream flavors are linked to cases of obesity or unhealthy eating behaviors, certain regulations can be imposed on the production and sale of such products. The products will then experience reduced sale and production. Taxes can increase or reduce prices, for they are included as part of the cost of production (Nijsen 27-28). Works Cited Bainbridge, Jane. “Sector Insight: Ice Cream”. Marketing Magazine, 2nd November 2011. Web. Retrieved on 4th November 2013 from: http://www.marketingmagazine.co.uk/article/1101375/sector-insight-ice-cream Boyes, William., J., and Melvin, Michael. Microeconomics, 9th ed. Mason, OH: Cengage Learning, 2012. Print. The Carvel Corporation. Carvel. Retrieved on 12th November from http://www.carvel.com/ McGowen, Lauren. and Dempsey, Jennifer. Carvel Ice Cream. Chicago, IL: Arcadia Publishing, 2009. Print. Nijsen, André F. M. Business Regulation and Public Policy: The Costs and Benefits of Compliance. New York: Springer, 2008. Print. Smith, Tim., J. Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price. Mason, OH: Cengage Learning, 2011. Print. Read More