Ice cream manufacturing industry

OBJECTIVES
As a person with knowledge of economic theories, the author has always brought up to his superiors the viability of strategy formation regarding the analysis of these topics and at times fails to understand the reasons or logic behind certain strategic implementations imposed on it. By delving into this project paper, the author intends to have better insights into how economic theories are thought up, formulated and then imparted down into the subsidiaries of the business. The author hopes to have an in-depth understanding as to how the economic theories enable businesses to compete effectively and profitably in this era of internationalization where competition is extremely intense. In order to reinforce the learning objectives, two key focal issues were focused upon i.e. innovation and diversity. Innovation was discussed with regard to economic theories where they were renowned for their developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation as the author considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in order to better understand the issues being discussed.

EXECUTIVE BRIEF
This essay utilized ice cream manufacturing as the model business to review its present market conditions and how it dealt with critical situations. From the analysis, key economic trends in the ice cream manufacturing were then identified, how it worked and its effectiveness in dealing with critical situations was ascertained. The paper then moved on to assess the ice cream manufacturing industry with regard to its suitability to critical situations, during which the internal capabilities of the ice cream business in relation to the strategy being followed by most manufacturers was determined also. An overall analysis of the performance and effectiveness of the ice cream manufacturing industry was also conducted to assess

and compare the capabilities of the industry with those of others. Gaps in the capabilities and environment were then identified.
Finally, several choices of strategies to improve the operations management of the ice cream business as effective means in critical situations were recommended and evaluated in terms of appropriateness to the issues reviewed, feasibility in carrying out the options and acceptability within the key stakeholders and decision makers. Several key implementation issues related to managing strategic change were also addressed as well.

The effect of a hot summer on ice cream

1)

Demand / Supply
It is a common knowledge that that when the ice cream is being sold in a free

market at a price where consumers are so demanding than what the cheap ice cream manufacturers can supply, then add the fact that it is summer then this shortage enables the cheap ice cream manufacturers to increase the prices of their ice cream products. Therefore, the heightened demand on ice cream will cause the increase of the prices of the ice cream. Those consumers that have the capability or purchasing power will bid up the market price. On the other hand, the prices of the ice cream decrease when the number supplied by the cheap ice cream manufacturers surpasses the number demanded by consumers, as well as when the weather changes from hot to colder seasons. This price/quantity balancing mechanism eventually helps the ice cream market to reach an equilibrium point, where changes are not given so much significance. A status of stability in the ice cream business is reached when the cheap ice cream manufacturers are ready to sell an accurate quantity of ice cream products as their consumers would like to purchase ( 2000).

2) Cost of production
The general rule is that when this will rise, ice cream manufacturers will cut back on product leading to decrease in supply. However, the evidence of the pricesensitive industries continuing their businesses is a primary exemption to the rule. The existence of learning curve, oligopolistic market structures and risk diversification of large international firms has the ability to absorb price shocks to the cost of inputs, technology, organizational changes and government polices (taxes). As observed, there is an eminent presence of rationality exemplified by these producers. Since they have the financial, structural and strategic depth, they enter an industry which has dynamic and unpredictable cost of production. In this way, they may have financial loss from time-to-time, but long-term gains will be pervasive due to the opportunity to dominate the market (1991).

3) State of production technology

When production technology on ice cream is high, production will become more efficient that can lead to increase in supply. However, ice cream technology is not the only factor of production existing in the ice cream manufacturers plant. There exist more complex interrelationships between these factors to be able to exploit the improved efficiency of one. The most crucial of all is governing human resources. Without proper guidance from the leaders of the ice cream firm, production efficiency will not hold because of resistance, de-motivation or just a plain technological ignorance. Technology is not 100% automated and human intervention as well as errors is inevitable. In addition, technology may also be intended for a specific segment of the industry, say, large corporations. As such, aggregate supply may not necessarily increase because small entrepreneurs who cannot afford to buy the technology cannot contribute in increasing supply ( 1994).

4) Income of consumers

As the peoples income rises, the demand for the good increases. This is also true for normal goods like ice cream but inconsistent to inferior goods. However, there are cases that this may not hold for both kinds of goods. Rich as well as working and poor people have variety of investments and savings is also their priority. In effect, even though their income or wealth may increase, their consumption for wither normal or inferior goods will not necessarily happen due to being conservative on spending. In the long-run, the deferred demand due to increase in income would now be unpredictable (1984). This is because investments and savings are pegged to risks, economic uncertainties and individual people strategy. As a result, there is a possibility that any wage increase pose by the government will not significantly affect an economy under recession.

5) Consumer tastes
This may be the psychological side of economics which gave it a very challenging position as a determinant of demand. Partially, this can only be the determinant that can directly affect economic behaviour; however, the result is also ambiguous and embedded on the brains of individuals. Consumer tastes can determine the level of demand through advertising and market research. As long as ice cream manufacturers focus their resources towards informing consumers, providing quality and protecting its reputation, desirability of its products will pull more demand. However, competitors also have their own strategies to counter any industry actions. uncertainty (1998). In effect, this makes a heavily competitive industry under

6) changes in equilibrium price and the quantity trade

The ice cream market experiences a clearance at the situation where the quantity of ice cream products demanded is equal to the quantity of ice cream products supplied. Other ice cream markets which do not experience market clearance will also undergo significant changes along the way, either through modifications in the ice cream prices, or through the number of ice cream products made, or in the quantity of ice cream products being demanded by the consumers. However, in the case of market equilibrium, all ice cream markets will experience

market clearance at the same time and their prices can all be compared in terms of tradeoffs with other goods. The market clearing price on ice cream markets does not have any maximization basis. Therefore, if the ice cream market experiences any surplus of demand or surplus in supply, then its consumers will only purchase the ice cream products when their prices are significantly low, and the ice cream manufacturers will sell when the prices are significantly high. In the event of market clearance in the ice cream market, the prices of the ice cream products simply mean that the optimal utilization values of all the stakeholders are equalized. Thus, mutual profit of exchange is emphasized (1999).

7) Market structure for the ice cream manufacturers and its relationship with the price levels for their product

Ice cream manufacturers base their pricing strategies on several key trends that continuously shape the global marketplace of ice cream. One particular trend is labeled as premium-tization (1981). This phenomenon causes the polarization of different markets. This would then trigger the consumers to demand and pay much higher prices for perceived quality. However, discounting in prices is also simultaneously taking place, therefore squeezing out the middle range. More often than not, supermarkets undergo internationalization which leads to a tighter squeeze for shelf space. This will in turn leave ice cream manufacturers as winners. It is for this reason why ice cream manufacturers value the premise sector so much because this would allow consumers can to try their brands at low risk and price. In terms of market segments, premium and specialty ice cream brands of well-known ice cream manufacturers have a disproportionate share of volume growth at an estimated 4-5% per year, as against the 2-3% overall growth rate. These rates come up as a result of both the rise in GDP among developing markets and consumer demands for higher value propositions, which is obviously dominated by international brands. Therefore, ice cream manufacturers have to increase their portfolio and operate globally to overcome the home market. Ice cream manufacturers practically operate on a relatively fragmented market, with the top four ice cream companies accounting for 22% of global ice cream volume five years ago and only about 28% today.

Top Ice Cream Industries List:

Vadilal Ice Cream India Amul Ice Cream Kwality Walls Mother Diary Ben & Jerry
MTR

Vadilal Ice Cream Ltd:

Vadilal ice cream division has always been a hot favorite with the people both
inside and outside the organization. In India, the name Vadilal is synonymous with Ice Cream. The Ice Cream industry in India today has a turnover of Rs. 15 billion [US$ 330million. A quarter of this comes from the house of Vadilal alone. But thats no surprise, considering that we have the largest range of Ice Creams in the country 120 plus flavors, in a variety of more than 250 packs and forms. The range includes cones, candies, bars, ice-lollies, small cups, big cups, family packs, and economy packs. Something for all tastes, preferences and budgets.

Amul India Ltd:

AMUL means "priceless" in Sanskrit. The brand name "Amul," from the Sanskrit "Amoolya," was suggested by a quality control expert in Anand. Variants, all meaning "priceless", are found in several Indian languages. Amul products have been in use inmillions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice

cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (Turnover: Rs. 67.11 billion in2008-09). Today Amul is a symbol of many things. Of high-quality products sold at reasonable prices. Of the genesis of a vast co-operative network. Of the triumph of indigenous technology. a farmers' organisation.

Kwality Walls Ltd:

Kwality Ice Cream is the pioneer in the Indian ice-cream manufacturing industry and in 1956 became the first company in the country to use imported technology for manufacturing ice-cream on a commercial scale. As the ice-cream industry exploded in India, in 1995 Kwality Group joined hands with Hindustan Lever Limited and then there was no looking back. The Indian consumer market was introduced to KWALITY WALLS the result of a collaboration between global brand Walls and the leading Indian ice-cream brand Kwality. Though the two giants eventually parted ways, the collaboration made Kwality a household name and created deep in roads for the brand in the consumer market.

Mother Diary Ltd:

Mother Dairy Fruit and Vegetable Pvt. Ltd. offers the following products: Mother Dairy markets dairy products like Liquid Milk, Ice Creams, Flavoured Milk, Dahi, Lassi, Mishti Doi, Ghee, White Butter, Table Butter, Cheese, UHT Milk, Dhara range of edible oils and the Safal range of fresh Fruits & Vegetables, Frozen Vegetables and Fruit Juices at a national level, through its sales and distribution networks, for marketing food items. Mother Dairy milk (Bulk Vended Milk) is fortified with vitamin A @2000 IU per litre of milk as a part of social accountability. This program was started with the Mother Dairy, Delhi, since February 1980and there after Mother Dairy is continuing this program on their own as a social responsibility without having any financial assistance from the Government as well as since it is felt that BVM is generally consumed by the middle / lower middle / poor strata of the society. It is also found that the dietary practices adopted by these classes are deficient in Vitamin A.

Ben & Jerry Ltd:

Since 2003, Ben & Jerry's have been working on a sustainable Caring Dairy initiative, which helps level out needs of the farmers and their cows, as well as the planet's needs. The company has, so far, reduced energy use on their 11 farms by 2%, and converted all their farms to green energy. Also, in 2002, Ben & Jerry's in the USA committed to reducing carbon dioxide emissions by 10% by 2007, and by investing in a variety of efficiency measures, this target was achieved with ease - the USA now produce 32% less carbon dioxide emissions (per pint of ice cream) today (in 2008) than in 2002. This initiative was brought to the exclusive provider of milk for Ben & Jerry's European ice cream production, Beemster Cheese, in 2007.

D. Show on a diagram the initial market equilibrium for ice cream

CONCLUSION
The results of the analysis carried out on the economic trends of the ice cream industry indicated very significant effects, even amidst the threats of unrest. Therefore, we could conclude that the operations of the ice cream industry could still be expected to improve faster than average. The review of the ice cream industrys operations, capabilities and resources revealed very little inconsistencies regarding the strategies of most ice cream manufacturers. This is coherent with their traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for the ice cream manufacturers. The analysis among the environment as well as the operations management and capabilities of the ice cream manufacturers revealed certain gaps, most of which are biased towards the environment. However, these gaps paved the way towards determining a number of recommended strategic options to secure their competitiveness. Also, the ice cream manufacturers have to find a balance between adherence to internal forces within the management and to the changing forces of the environment in order to implement such strategic options.