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CHURCHILL ICE CREAM

Table of Contents
Premium Ice Cream Industry Analysis ...................................................................................... 3 Critical Success Factors of Premium Ice Cream Industry............................................. 3 Porter Five forces Model: .................................................................................................. 3 1. 2. 3. 4. 5. Supplier Power: ................................................................................................................ 4 Buyer Power: .................................................................................................................... 4 Competitive Rivalry: ........................................................................................................ 4 Threat of substitutes: ........................................................................................................ 4 Threat of new entry: ......................................................................................................... 4

Churchill Ice Cream ..................................................................................................................... 5 Company Analysis ..................................................................................................................... 5 Case Details: ........................................................................................................................... 5 Critical Analysis Of The Case ........................................................................................... 6 Strategic Goals ................................................................................................................. 6 Market segmentation ........................................................................................................ 6 Target Market ................................................................................................................... 6 Brand Positioning ............................................................................................................. 6 Off Season(During this season sales decreases) .............................................................. 7 Competitors Analysis ....................................................................................................... 7 Suppliers Analysis ............................................................................................................ 7 Organization Culture ........................................................................................................ 7 SWOT Analysis ......................................................................................................................... 8 Strengths of Churchill ...................................................................................................... 9 Weaknesses of Churchill: ................................................................................................. 9 Opportunities for Churchill: ........................................................................................... 10 Threats to Churchill:....................................................................................................... 10 How Churchill Ice Cream can exploit Opportunities and overcome Threats ...................... 11 Porters Generic Value Chain ................................................................................................. 11

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Primary Activities .................................................................................................................. 12 Support Activities .................................................................................................................. 13 Proposed Strategies..................................................................................................................... 14 Growth Strategies ( Organization-Level Strategies) .................................................... 14 Ansoffs Matrix ..................................................................................................................... 14 Business-Level Strategies ................................................................................................ 16 Differentiation Strategy: ................................................................................................. 16 Focus Strategy: .............................................................................................................. 16 Functional Level Strategies ............................................................................................. 17 Marketing Strategies ...................................................................................................... 17 Human Resources Strategies .......................................................................................... 18 Information Systems Strategies ...................................................................................... 18 R&D Strategies .............................................................................................................. 18 New Products development ............................................................................................ 18 Strategies related to technology ..................................................................................... 19 Other Strategies ....................................................................................................................... 19 Supplier and Customer Relationships ............................................................................ 19

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Premium Ice Cream Industry Analysis

Critical Success Factors of Premium Ice Cream Industry


Product quality Manufacturing Technology Availability Freshness of products Production innovation

Porter Five forces Model:

This model analyzes the industry. Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are:

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1. Supplier Power: This analyzes the power of supplier to intimidate your business. The less the suppliers, the more power they have to have an impact on your business. Churchill procures its raw materials from local suppliers which are many. The local farmers have lesser control over the established Churchill brand in the vertical line of integration. 2. Buyer Power: This analyzes the power of the buyers to have an impact on the business. A few powerful buyers will have a great impact on your business and they have the greater power. Churchill only has a hold in London which makes its position weak. Competition can quickly grasp over the small market Churchill has. 3. Competitive Rivalry: If you have many competitors, and they offer equally attractive products and services, then you'll most likely have little power in the situation, because suppliers and buyers will go elsewhere if they don't get a good deal from you. On the other hand, if no-one else can do what you do, then you can often have tremendous strength. Churchill faces severe competition in the take home market from the global manufacturers with significant global brands dominating the industry. Four major supermarkets also dominate the take home market. These supermarkets have enough power to dictate their own terms and sell products under their own brand name. 4. Threat of substitutes: If substitution is easy and substitution is viable, then this weakens your power. Churchill ice cream also has few ice cream substitutes E.g. Frozen Yogurt ,Sorbet, Popsicles etc and if demand of such substitutes is increased among customers then it can be a real threat for Churchill Ice cream. 5. Threat of new entry: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. The initial cost of entering the premium ice cream industry is a purpose built factory with non-current assets. The value to enter this

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market is quite high and even those who can afford it should know that it is already a saturated market.

Churchill Ice Cream


Company Analysis

Case Details: Churchill Ice Cream is a UK based medium sized family owned business making and selling premium ice cream products. In year 2002 John Churchill left his position of chairman and chief executive after recognizing the need of bringing outside management. The new chief executive Richard Smith was formerly the senior executive of major super market. Smith main focus was to make the company more market oriented to meet the challenges of 21st century. Churchill Ice Cream sells its premium ice cream products through its own stores. Through its unique store format of specialist ice cream store it develop Churchill brand. Churchill develops competitive advantage through sourcing its ingredients from local farmers and suppliers. It produces dairy ice cream as opposed to cheap ice cream. It has also developed a range of products with no artificial additives which help Churchill to develop competitive advantage. Churchill manufactures its own products and delivers them directly to their stores but because of lack of any management information system they suffered a lack of detailed and timely information about product and store performance. In year 2004, it became the sponsor of major summer supporting events in London. Churchill is now an established brand and it enjoys 90% customer recognition in London area. In UK ice cream is brought about in two main ways from super markets for take home purpose and from outlets like Churchill for immediate consumption. In year 2004 the purchase from super stores was almost equal to purchase from outlets and the total sales revenue is $ 1.3 billion. The share of premium ice cream is 19% of UK take home market which is 15% in 2003.

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Churchill does not use advertisement. Churchill has a low share in take home ice cream market this is because of two main barriers. 1) Global brands dominate the industry. 2) Four major UK super markets dominate the Take home market. The main barrier to get into super store is that there is the availability of two American brands and the super store own label. The Churchill achieved a little success in getting its premium ice cream to two small super store chains but margins are very slim. To increase the sales revenue Churchill tried to enter international market twice but it fails. It tried to enter US market through organic growth and through acquisition both in Germany and Italy.

Critical Analysis Of The Case


Strategic Goals To become the leading Premium Ice-Cream brand in the UK To increase sales to 25million To penetrate the Supermarket sector with the Churchill product range. Market segmentation Middle and Upper class Target Market Health conscious people with high income levels. Brand Positioning Brand positioning belong to the most important and difficult decisions in marketing. Positioning often implies a segmentation commitment unless you can dominate the core category benefit an overt decision to ignore large parts of the market and concentrate only on certain segments, namely those interested in the benefits and associations selected for the brand. Such an approach requires commitment and discipline, because it is not easy to turn your back on potential buyers. Yet the effect of generating a distinct, meaningful position is to focus on the target segments and not be constrained by the reaction of other segments.

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Currently Churchill ice cream is positioning its premium ice cream as a hygienic product with no artificial additives and low price as compared to competitors for indulgence seeking consumers who have better life style. Which a better positioning strategy as compared to competitors. Off Season(During this season sales decreases) Winter season November, December, January and February.

Competitors Analysis
Major competitors

Global manufacturers with significant global brands.

Suppliers Analysis
Major suppliers Local farmers and Suppliers.

Organization Culture Organization culture is weak as contradiction exists between the approaches of owners and management E.g. owners of the company are risk aversive and they are happy with a modest rate of growth and modest return in terms of profits on the other hand management is much more growth orientated and may be happier with the risks that the growth strategy entails. Although the strategic objectives of Churchill ice cream are achievable but this contradiction makes them only ambitious.

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SWOT Analysis
SWOT analysis is a method for analyzing a business, its resources, and its environment. SWOT is commonly used as part of strategic planning and looks at:

Internal strengths Internal weaknesses Opportunities in the external environment Threats in the external environment

SWOT can help management in a business discover:


What the business does better than the competition What competitors do better than the business Whether the business is making the most of the opportunities available How a business should respond to changes in its external environment

The result of the analysis is a matrix of positive and negative factors for management to address:

Positive factors Internal factors External factors Strengths Opportunities

Negative factors Weaknesses Threats

The key point to remember about SWOT is that: Strengths and weaknesses

Are internal to the business Relate to the present situation

Opportunities and threats

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Are external to the business Relate to changes in the environment which will impact the business

Strengths of Churchill: Sourcing ingredients from local farmers Control over the ingredients A strong brand image Throughout its history it has followed a strategy of in-house manufacture, retailing largely through the companys own shops and, to a lesser extent, through franchising. This vertically integrated strategy gives more control, which is particularly important given its use of fresh ingredients and emphasis on premium product quality Different products for different segments Uses real dairy products instead of artificial additives 90% customer recognition in London area

Weaknesses of Churchill: Delay in intrdoucing Management Information System resulted in shortages during peak summer months Churchill is exposed to the twin problem of both manufacturingand retailing a product which is highly seasonal in demand and equally vulnerable to the vagaries of the British summer. In fact, there is a close correlation between the average summer temperature and the volume of ice cream consumed. The case, therefore, provides us with an opportunity to develop an understanding of the implications of a companys pattern of vertical integration for competitive advantage and the strategic development of the company. Clearly, if key activities and capabilitiesare kept inside the company, this makes imitation far more costly and complex One of the problems of being both a manufacturer and retailer is where you decide to place the emphasis commitment of resources to one area almost inevitably leads to resources being constrained in the other. There is evidence in the case to suggest that Churchill Ice Cream with its newly-built factory is tending to favour the manufacturing side of the

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business. But with ice cream stores costing 100K to fit out and needing constant refurbishment this places a heavy investment load on the company Low demand during seasons other than summer and cold summers (Weather has a direct effect on the sales of ice cream) Only 10% sales out of London International failure in America, Germany and Italy Churchill Ice Cream seems to have a quality product and a good reputation, albeit only a regional one Their sponsorship of major sporting events is a high profile achievement, but there is little point achieving such exposure if customers can only buy the product once a year! There is some growth of sales, unfortunately at a declining rate, but the return on sales is consistently poor. The progress with opening new stores is modest to say the least and not moving them into becoming a national brand In terms of the efficiency of business processes there is the comment that they have a new purpose built factory and that their products are supplied quickly and directly. This performance is not currently having any significant impact on costs and profits Opportunities for Churchill: Churchill has opportunities in UK outside london with which it can hope to gain customers with English quality and style. Churchill can target high profile resturants Churchill can also establish alliance with the Airplanes (only first class can be targeted) Ready to go vans with full leisure facilities can be established to reduce costs and increase efficiency. Capture the home market by providing home deliveries through the multi purpose vans used

Threats to Churchill: Take home market is dominated by global manufacturers with global brands Four major supermarkets give a high competition to Churchill. 41% of the sales of ince cream in UK are through supermarkets

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How Churchill Ice Cream can exploit Opportunities and overcome Threats
Target new and emerging market opportunities Predict future growth areas in premium ice cream industry Benchmark leading executives opinions on the future of premium ice cream industry. Assess the key trends in premium ice cream for example you don't have any idea that what types of flavors are going to be in vogue next month or next season unless you keep your eyes wide open and investigate where the flavor trends are heading overall. By taking full advantage of peak season and converting special occasions (e.g. Christmas Day, Valentine's day, Mother's Day, Father's Day etc) into extraordinary events that clients will remember forever. Market research is a useful tool for assessing the attitudes and behavior of potential consumers so Churchill Ice Cream should focus on it in order to exploit Opportunities and overcome Threats.

Porters Generic Value Chain

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We can analyze the specific activities of Churchill to identify the competitive advantage by modeling the firm as a set of interrelated activities. Michael porter identified a set of interrelated activities common to a wide range of firms as depicted above. Primary Activities The goal of the primary activities is to create value which exceeds the cost of the product or service, thus creating profit margins.
Inbound Logistics:

This includes the receiving, warehousing and inventory control of input materials. Churchill Ice cream sources its ingredients from local farmers and suppliers to gain a competitive advantage. They have full control over the recipes used in their ice creams product range. Churchill uses real chocolate and dairy products as they mention in their policy saying. The highest cost they incur is for the ingredients and packaging. According to the Table 2 of the case study, ingredients are almost 45% of the total cost. Churchill uses fresh cream, butter and milk instead of vegetables oil to mix the flavorings and has also developed a product range without any artificial additives to differentiate itself from the competition.
Operations:

These are the processes that transform inputs into the final product. After the raw materials are delivered to the new purpose built factory, Churchill produces the different product ranges it offers. All the operations including packaging are carried out at this purpose built factory.
Outbound Logistics:

These are the activities that required getting the finished product to the customer, including warehousing, ordering fulfillment, etc. After the production of the Churchill product ranges at the purpose built factory, the final products are supplied quickly and directly to the ice cream stores and other retail outlets including the Franchises.
Marketing & Sales:

These are the activities associated with getting buyers to purchase the product including advertising. Churchill ice cream stores have a unique store format which has established the Churchill brand. Churchill also became the sponsor and a sole supplier to a number of high profile summer sporting events held in London. Churchill is also a supplier of eight million

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tubs of ice cream each year to cinemas and theaters in London. Churchill doesnt use advertising as a tool to appeal to the masses since Churchill is a premium brand for the niche.
Service:

The activities support and enhance the products value through customer support. There is no information regarding the after sales service or the feedback from customers. Churchill can identify the most preferred flavor and the complaints regarding the brand and its services. This will help them better understand and adapt according to the market. Support Activities The Primary activities are facilitated by the Support activities as follows:
Procurement:

Procurement includes purchasing the raw materials and other inputs used in the value creation. The procurement process is different from the competitors since the Unique Selling Proposition of Churchill is to have full control over the ingredients by purchasing them through local farmers. This vertical integration helps Churchill build a different image for its premium ice creams.
Technology development:

These include research, process automation and other technology development. Due to the delay in introduction of a Management Information System, detailed and timely information regarding the product and Churchill stores have suffered. This delay in introduction leaded to stores facing product shortages during peak summer months.
Human Resource development:

Activities associated with recruiting, development and compensation of employees. Labor costs are almost 28% of the total costs, according to Table 2 in the case study. Other than this there is not much detail about the human resource in this case.
Firm Infrastructure:

These include the activities such as finance, legal, quality management, etc.

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Proposed Strategies
Growth Strategies ( Organization-Level Strategies)
Ansoffs Matrix It is used by marketers who have objectives for growth. As all strategic objectives of Churchill Ica Cream are related to growth so in Ansoff's matrix we'll discuss different strategic choices to achieve the objectives. There are four main categories for selection.
Market Penetration

Here we market our existing products to our existing customers. However, the product is not altered and we do not seek any new customers. This is a low risk strategy because there is already a lot of knowledge in the area which you can work with. Churchill Ice Cream can use following strategies for penetrating the market 4 Ps :Use pricing strategies, advertising, sales promotion and increasing outlets to maintain or grow share Drive out competitors: This requires an aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors. Increase sales to existing customers: Through loyalty schemes Repositioning the brand

Market Development

Here we market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. This is much more risky than Market Penetration because you wont be as familiar with the market and may require market research before embarking on this strategy. In case of Churchill Ice Cream there can be many possible ways of approaching this strategy, including:

New geographical markets; for example exporting the product to a new country

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Ensuring compliance with local standards while marketing a product in a new region New distribution channels (e.g. moving from selling via retail to selling using e-commerce and mail order)

Different pricing policies :to attract different customers or create new market segments

Product Development

This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers. A strategy of product development is particularly suitable for a business where the product needs to be differentiated in order to remain competitive E.g. Premium Ice Cream Business. In case of Churchill Ice Cream product development strategy can be achieved through

Research & development and innovation Detailed insights into customer needs (and how they change) Being first to market

How to achieve it?


Customer Research can uncover unmet demand from an existing customer base and this can be an opportunity to develop new products or services or to extend your current product/service with a greater variety of choice.

Thing to remember
Growing product range can be a problem E.g. modifying/ introducing entirely new product can cannibalize the sale of existing products, so manage the product range
Diversification

This is by far the riskiest marketing strategy in which we market completely new products to new customers. . In order to achieve the 3 strategic goals Churchill Ice Cream need to focus on

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only related diversification . Related diversification means that we remain in a market or industry with which we are familiar. In case of Churchill Ice Cream Diversification can be achieved through Attracting new segments with new product line Joint ventures Strategic Alliances

Business-Level Strategies
Differentiation Strategy: Differentiation does not allow a firm to ignore costs; it makes a firm's products less susceptible to cost pressures from competitors because customers see the product as unique and are willing to pay extra to have the product with the desirable features. Churchill Ice Cream differentiates its product from those of competitors as its products are of high quality with no artificial additives but advertising is required to promote such unique differences so that customers could perceive its products different and unique as compared to competitors.

Focus Strategy: Through this strategy (also called niche or segmentation strategy) Churchill Ice Cream can concentrate on only meeting the specialized needs of its customers within London area which will help Churchill Ice Cream in designing products to meet the needs of those customers. Moreover this strategy will make Churchill Ice Cream better able to tailor advertising and promotional efforts to that particular market niche.

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Functional Level Strategies
Marketing Strategies The basic principle of marketing strategies is to sell the right product, at the right price and promote it in the right place to the right people(target Market). Churchill Ice Cream can utilize following marketing strategies. Product Strategy In this Strategy Churchill Ice Cream should Specify the exact product or service to be offered and should link product features with market needs/wants. For Example Churchill Ice Cream should evaluate New or existing product? for new or existing customers? Pricing Strategy Although Churchill Ice Cream is selling premium ice cream for which it can charge a premium price however Churchill Ice Cream should keep in mind the following factors while determining the price of its products: Positioning of the product Cost of developing and manufacturing the product. Cost of competitive products. Condition of the economy.

Promotion Strategy Churchill Ice Cream can select following Promotion strategies to increase its sales Pull - Spending to build brand awareness via so consumers will ask for it by name especially during peak season e.g. There should be regular and sustained marketing through fliers distribution, FM Radio and TV for making strong brand equity. It is very effective strategy for Churchill Ice Cream to enter in supermarkets with its own brand. Push - Spending on promotions and discounts to push products especially during off season.

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Channel or Place Strategy Currently Churchill Ice Cream is Selling directly to consumers through own stores However Several strategies will need to be implemented to establish a credible presence in the market. These may include: Selling premium ice cream to private distributors at wholesale prices. Selling premium ice cream to supermarket outlets and to shops at wholesale prices. Human Resources Strategies Churchill Ice Cream should focus on Extrinsic or Intrinsic Reward Systems to motivate employees because motivated employees can provide best services. Information Systems Strategies As mentioned earlier that due to delay in intrdoucing Management Information System resulted in shortages during peak summer months. Through information systems strategies
Churchill Ice Cream can manage sales & inventory in an efficient way.

For example Internet sales and development of customer databases Using softwares just like Electronic data interchange (EDI)

R&D Strategies
New Products development Churchill Ice Cream should develop new products to maintain and improve its market position.

New products can include: New varieties and flavors - these are called line extensions where different varieties or flavors of the same product are produced. Quality improvement of an existing product, either functional or nutritional. Developing a new, innovative product resulting from new ingredients

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Strategies related to technology Technology can help Churchill Ice Cream to create or extend a competitive advantage by generating hard-to-imitate products. Having competitive advantages through technology will help in decreasing costs and increasing profits. The real goal here is to find some way to make these advantages sustainable, and technology can help Churchill Ice Cream in finding ways to do that. For Example Improving processing methods involving low temperature freezing and product blending.

Other Strategies
Supplier and Customer Relationships
Customer Relationship Management

On average, it costs over 10 TIMES more to acquire a new customer versus retain an existing one A 5% gain in customer retention can result in an 80% gain in profits.
Churchill Ice Cream should consolidate its customers into a single database and record all their

holdings and history there, so that sales partners always have this information to hand. Moreover Keeping Good Records about its e.g. what they bought, when they bought, and if they bought through a sale or special promotion. Through this database Churchill Ice Cream can segment its customers and send them customized offers via E-mail. Moreover customers will appreciate knowing that company is thinking about them "after the sale." They will be more likely to purchase again because of your customized offers and communications.

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Some Strategies Regarding sustaining Customers

Traditional loyal customers have made repeat purchases from you at regular prices. Instead of offering them a sale price, you need to treat them special. Brand customers may have only purchased from you once, but demonstrate potential to become loyal customers. You should pursue them with promotions that further develop their positive perception of your brand.

Suppliers Relationship Management


Churchill Ice Cream should plan sufficiently in order to request orders from suppliers with

acceptable lead time and without multiple changes. If every order requires emergency handling, the relationship will never work. To overcome such problems and to maintain a good suppliers relationship Churchill Ice Cream should use Electronic data interchange (EDI) ,a software that helps manufacturers, suppliers and retailers improve production planning, reduce inventory, improve inventory turnover and improve stock availability. Moreover using this software will also help Churchill Ice Cream sharing quicker and more effectual Information and to reduce cost.
Churchill Ice Cream can further improve Suppliers Relationships via making partnership

agreements with key suppliers and reducing number of suppliers as a specific cost is associated with making good relationship with each supplier.

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