Online Custom «Case 17 – Dippin' Dots» Essay Sample

Case 17 – Dippin' Dots

1. History of the Company

Dippin' Dots Inc. specializes in producing ice cream containing frozen beads of a unique nature. The founder of the company is Curt Jones, who has patented the process of producing ice cream with a hard texture (Funding Universe, n.d.). The company started its operations in the 1980s in Kentucky. Jones came up with a unique ice cream production process while at home. After mastering the process, Jones patented it in order to create his line of production. Jones and his wife started operating Dippin’ Dots in Illinois, with another store operating in Kentucky. The location of the business led to the proprietors struggling to make profits due to the lack of a large base of customers (Funding Universe, n.d.). The family had considered closing the operations before the operations of the business started expanding to other states such as Tulsa, Oklahoma, and Tennessee.

The company’s products became popular in the outdoor activities. In the 1990s, the sales of the company rose by more than 1,385% due to the increased shopping outlets (Funding Universe, n.d.). By the mid-1990s, there were more than 150 stores. After the successful local growth, Jones started planning to expand the business on the international level. Some of the countries under consideration were Mexico, Canada, and Japan. The operations in Japan grew drastically, with the company opening multiple outlets in the country. The operations in Japan were significant as evidenced by the operations accounting for 20% of the company’s total sales (Funding Universe, n.d.).

The main production base was the Paducah station, and due to the requirement to store the products in liquid nitrogen, it was difficult to build other production centers (Dippin' Dots, n.d.a). As the company was expanding, it built a new production facility, leading to massive expansion, both locally and internationally (Funding Universe, n.d.). The primary target market for the company was the young people, meaning that the major distribution places were those where the youth frequented (Tanner & Lacewell, 2013). The company’s current success is due to relentlessness and the desire to operate even under hard conditions such as increased costs of production.

2. Case Problem

Despite the success in the expansion of the company, there are a lot of challenges that the company faces. In essence, the unique nature of ice cream calls for an expensive preservation procedure. Ice cream requires conservation with liquid nitrogen, and it would only last for 15 days (Tanner & Lacewell, 2013). It takes five days to transport the product. For this reason, ice cream has to be consumed within ten days. Moreover, the fact that there are few production facilities means that the company incurs a lot of costs in transportation. The company also faces problems when it comes to the storage of the products in the process of international shipping. There are no available stores for the products in the offshore stores, meaning that frequent transportation is the only option available (Tanner & Lacewell, 2013).

Recently, new companies have come up replicating the production process of the company. It means that the company has lost its patent (Leslie, 2011). The copycat companies produce almost similar products at a lower cost (Tanner & Lacewell, 2013).

3. Case Analysis

a. General Environment

There are different factors that directly affect the operations of the organization. When it comes to the technological environment, the company has not yet fully adapted to the advancement in the production systems. For instance, the company has not installed storage systems in the retail locations. It means that it has to incur the cost of the frequent transportation of the products (Tanner & Lacewell, 2013).

When it comes to the economic environment, the operation costs of the company have been on an upward trend. Some of the reasons include the high costs of transporting the production to the international destinations. For example, the company has to pay the import and export duty in every transportation situation (Tanner & Lacewell, 2013).

When it comes to the social-cultural factors, there have been innovations that have threatened the Dippin’ Dots’ presentation of ice cream of the future to the public. New developments such as the slab concept and the scoop shop ideology have led to new ways of the society accessing the ice cream products. For this reason, the company’s distribution strategy is under threat.

In terms of the legal environment, the company has faced numerous challenges. For instance, after the realization of the increased number of copycats, the company launched a suit prohibiting competitors from distributing their ice cream due to the existing patent (Leslie, 2011). However, the court dismissed the allegations, thus leaving the company exposed to the threats of new competitors.

The demographic environment has mixed perception concerning the company’s products. The main fans of the company’s products are the older generation (Grunert et al., 2005). The generation has developed an attachment to the products, leading to a sense of customer loyalty.

The Industry Environment

First, there exists a threat that new companies will enter the market. The threat is rather high because of the company losing its patent (Leslie, 2011). The loss made sure that new companies could enter the market with the same production procedure (Estrada-Flores, 2010). Moreover, the former employees of the company can copy the process of producing the ice cream and establish their firms.

The suppliers also have a considerable bargaining power over the company because of the high costs of flash freezing of the ice cream. The unique process means that the company does not have multiple options when it comes to choosing the suppliers (Tanner & Lacewell, 2013). For this reason, the company my end up bowing to the demands of the suppliers.

The buyers do not have a lot of bargaining power as evidenced by their market behavior. The customers have adopted the high pricing of the company’s products despite the availability of cheaper options (Tanner & Lacewell, 2013). The dedication of the customers to purchasing the company’s products translates to more loyalty.

The company faces the challenge of the high power of the substitute products because the market is flooded. There are also numerous alternatives to ice cream currently trading in the market (Estrada-Flores, 2010). For instance, the availability of such products as frozen custard, sherbets, and gelato means that the customers have a choice. For this reason, uniqueness could be the only solution to the abovementioned challenge.

When it comes to the rivalry in the market, the industry has fierce rivals in terms of competition. Currently, the businesses owned by the families have increased numerously, leading to severe competition. The number of dairies and multinational companies offering the same products and services is also on the rise (Tanner & Lacewell, 2013). For this reason, the company needs to take adaptive measures to remain in business.

b. Competitor Environment

In the United States, there are two main players in the industry, namely Nestle and Unilever. There are more than 500 small operations offering similar products and services as well. The above facts show that the companies face the challenge of wooing customers to abandon a particular competitor (Grunert et al., 2005).

c. Internal Environment

1. Strengths

When it comes to the strengths, the company boasts of differentiated products. The unique production process includes flash freezing. Moreover, the preservation of the products in the liquid nitrogen leads to differentiation (Krishna, 2013). Another strength is that the company can distribute its products on multinational levels without the risks of ice creams melting. Moreover, the creative marketing strategy ensures that the products remain relevant to the elderly generation while attracting the new generation as well. The increased adaptation through the production of differentiated products to suit the needs of the respective customers means that the company creates a sense of customer loyalty (Krishna, 2013). The avenues availing the products to the markets (including the amusement parks, shopping malls, and festival) are the strength of the company (Grunert et al., 2005).

2. Weaknesses

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The first weakness is the inability to create business operations that are convenient for the customers. For instance, the company has not yet found a way to store its products in a conventional freezer. The unique nature means that the only conservative is liquid nitrogen, which is costly. Moreover, liquid nitrogen is not available in all outlets of the company, leading to the necessity of the distribution factor (Tanner & Lacewell, 2013). The company’s scope of operations has increased. For this reason, the company has failed to continue the production of the original product, which is a major weakness.

Another weakness is that the company failed in partnership with the fast food giant, McDonalds (Tanner & Lacewell, 2013). The failure shows that a company cannot efficiently partner with other companies. The company has also failed to expand its markets in a bid to fight the competition. The flooded nature of the market has made it difficult to attract a new customer base. Another weakness is that the company has failed to cope with the competition when it comes to the provision of health products. For instance, many competitors found out production methods that would produce healthier products (Tanner & Lacewell, 2013). Dippin' Dots has not changed its production method; it means that the competitors boast of healthier products.

3. Opportunities

The major opportunity for the company is that it can move from its current out-of-home products to emphasize the products that can be distributed to homes. The above move would be profitable, as the current competitors are trying to adopt the same distribution strategy (Krishna, 2013). However, the main disadvantage would be that it requires products that have a longer shelf life. The company’s products can only stay fresh for 15 days. Therefore, if the company is to tap to the new operation model, then it has to find new ways of producing ice cream that has a longer shelf life (Tanner & Lacewell, 2013).

4. Threats

The company faces a threat of the availability of many ice cream brands. Numerous outlets such as supermarkets and malls stock a variety of ice cream that is sold for a lower price. On the contrary, the ice cream by Dippin' Dots is only found at specific locations chosen by the company. For this reason, the customers would not find a reason to go for the company’s ice cream when they can access similar products being in other convenient places (Grunert et al., 2005). The second threat is that new entrants in the market have started producing ice cream through the flash freezing process. An example of such firms is Frosty Bites that produces ice cream by freezing it in nitrogen like Dippin' Dots does.

4. Value Chain Analysis

When it comes to franchising, the company has various policies. The company operates on event-based and store-based opportunities. The company provides a criterion for the process of acquiring the franchising rights. Some of the requirements include the right location and the right space (Tanner & Lacewell, 2013).

When it comes to financing, the company is private. It means that the financial statements of the company are not available for the public. Therefore, it would be hard to identify the financing concepts of the company.

In terms of the development of technology, the ccompany emphasizes technology heavily. The company always seeks the new ways to improve their production. As a result, the company has developed new products such as the coffee dots (Tanner & Lacewell, 2013).

In terms of marketing, the company has a policy stating that every franchise has to spare a particular percentage of their revenue and dedicate it to advertising. The marketing mainly targets the youth, and it has been successful.

When converting from traffic to buyers, the company’s sales are on the basis of a policy with the name “Fun Places”. The organization classifies various distribution avenues such as parks and sports venues to sell its products (Tanner & Lacewell, 2013). The company has also adopted the online sales model, which enhances the distribution of cooler ice.

5. Differentiation Strategy as a Competitive Advantage

The company boasts of providing unique ice cream. The ice cream undergoes the flash freezing process that guarantees a fresh feeling. Many companies have not yet adopted the above mentioned method. For this reason, the ice cream of the company comes out as unique (Tanner & Lacewell, 2013). The uniqueness is a differentiation strategy that sets the product apart from other products in the already flooded market. The uniqueness leads to the attraction of the customers that results in more sales.

6. Porters Five Forces Analysis

Rivalry

There are numerous players in the industry, thus increasing the level of competition. The company is in competition with giant firms such as Frosty Bites and Mini Melts. Apart from the two giants, the company is also in competition with other large traditional companies in addition to small firms (Tanner & Lacewell, 2013). In the United States alone, there are more than 43 operators of the frozen foods industry. High rivalry means that the companies must avail their products at lower prices.

New Entrants

The industry has a relatively low threat to new companies entering the market due to the availability of various barriers. The federal government has strict regulations that companies willing to trade in the market must follow (Reid, n.d). Moreover, the industry has high startup costs, which dissuades the willing companies from entering the market (Straus, 2012). Moreover, the industry has popular brands that are difficult to replace including Dippin' Dots and Good Humor.

Substitutes

The threat of the availability of new substitutes can be classified as medium. The industry has similar customers. Therefore, the availability of ready substitutes such as cakes and pies means that if the industry dissatisfied them, then they would easily change their consumption trend (Tanner & Lacewell, 2013). For this reason, the companies have to find ways to make its products more attractive and desired by the consumers.

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Buyer Power

The power of the buyers is not definite due to the multiple types of buyers. The buyers in the industry are the individuals and retail customers. Individual buyers study the brand before they make a purchase decision. On the other hand, the retail buyers look at the possible profits before making a purchase (Reid, n.d.). For this reason, the consumer buyers have the power to influence the demand because they dictate the decisions of the retail consumers.

Supplier Power

The industry experiences a medium type of power from the suppliers. The large manufacturers have a strong position to bargain due to the absence of agreements that have a fixed term (Tanner & Lacewell, 2013). For this reason, the companies can easily change the suppliers at low costs.

7. Potters Diamond Analysis

The analysis explains the competitive advantage of organizations on the basis of the surrounding factors. The analysis may help to improve the status of the company in the market.

When it comes to the strategy, structure and rivalry, Dippin' Dots faces various challenges. The firms’ strategy is to produce out-of-home products. It means that the target customers are limited. Moreover, the target market ages vary between 8 and 18. The strategy limits the scope of the company’s expansion. The structure of the firm entails few hierarchies, leading to easy decision-making and speeding up of the appropriate implementation strategies. The company places an emphasis on franchising, a strategy that has led to the increased market base (Reid, n.d.). The rivalry is high in the market due to the similarity in the production process. Moreover, the firms have the necessary financial resources, meaning that they can easily fight off the competition.

When it comes to the demand conditions, the company has created a sense of brand loyalty, especially to the old generation in the United States. The loyalty created enhances the company to maintain its position in the market as a major force (Reid, n.d.). The customer base is also high, meaning that the possibility of increased demand is high. However, the availability of increased competition means that demand may fluctuate due to the actions of the competitor and the company itself.

In terms of the related supporting industries, there are numerous franchising firms willing to distribute the company’s products. For this reason, the company always has a market for its products (Reid, n.d.). There are not many suppliers which means that the company does not have a lot of options at its disposal. However, the company does not engage in fixed term contracts with them, meaning that it would be easy to change the suppliers.

In terms of the factor conditions, the company can take advantage of the home based frozen foods to expand its operations overseas (Reid, n.d.). The company would be employing a diversity tactic, leading to the increased market base and a better position in the market.

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