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Dippin’ Dots Ice CreamBrian R. Callahan

Alan B. Eisner

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice CreamIcebreaker Question

How many of you have tried a specialty ice cream?

How many of you have heard of “Dippin’ Dots?”

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream

1. Analyze Dippin’ Dots external environment. What are the general environmental factors that have impact on the industry?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream

2. What are the external forces of competition affecting the frozen dairy industry?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream

3. Analyze Dippin’ Dots’ internal environment.

What does Dippin’ Dots’ value chain look like?

What about its resources? How would you evaluate its

performance?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream

4. What business level strategy does Dippin’ Dots appear to pursue?

What niche (cost, differentiation, focus) can Dippin’ Dots fill in the highly competitive ice cream industry? Is it sustainable and does the industry have room for such an enterprise?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream

5. What opportunities for growth should Dippin’ Dots pursue?

What should Jones do to manage and encourage this entrepreneurial activity?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q1. General Environment Demographic: Rising levels of

affluence – more discretionary dollars; shift in geographic population to South and West – hotter weather, more appeal to frozen products

Sociocultural: Greater concern for healthy diets/fitness – single serving concept has appeal; possible MTV/sports celebrity endorsements attracts growing teenage market

Technological: manufacturing/distribution

opportunities Economic/Global: Access to capital;

China as a market; consolidation in food/beverage industry; sector competitive and profitableMcGraw-Hill/Irwin

Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q1. Industry Environment

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

SUPPLIERS BUYERS

SUBSTITUTES

POTENTIAL ENTRANTS

INDUSTRY COMPETITORS

Limited number and variety of available distribution channels available to newcomers, particularly in large grocery store chains

Low – commodities such as milk, sugar, etc.

Buyers are franchisees and the general public, 90% of whom consume ice cream and frozen desserts. Expansion to grocery chains – buyers? Competitive forces?

High – many alternatives for desserts/snacks (cake, pie, fruit, candy)

Reason for competition is the market’s potential. Some ice cream categories show opportunity for innovation especially in the novelty area

Q3: Dippin’ Dots’ Value Chain

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Value Chain Activity

How does Dippin’ Dots create value for the customer?

Primary:

Inbound logistics

Acquisition/licensing of new manufacturing facilities in central U.S. and Korea – easier distribution

Operations Super-cold freezing locks in flavor/ freshness; unique form factor and state of art product line

Outbound logistics

Logistics problems; vending machines, scoop shops

Marketing and sales

Needs to be consumed at or near retail location; innovative promotion – MTV, sports celebrity

Service Opportunity for instant feedback; less control because of franchising

Q3: Dippin’ Dots’ Value Chain (cont.)

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Value Chain Activity

How does Dippin’ Dots create value for the customer?

Secondary:

Procurement High ingredient costs affect pricing/ margins

Technology development

Curt Jones’ ability to innovate in lab; new product creation

Human resource management

Initially Jones’ friends; franchising allows for growth without overhead costs

General administration

Jones is an entrepreneur – priority is growth, may be a problem. Can Jones hire the right people?

Q3. Dippin’ Dots’ Resources

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Tangible: Financial – franchise cash flow options; Physical – new production/distribution facilities in Kentucky and South Korea; Technological – innovative product, production/distribution designed specifically for product; Organizational – no obvious value-creating org. resources

Intangible: Human – franchisees can add value or damage reputation; Innovation and Creativity – Curt Jones’ scientific background and innovative ability; Reputation – current relationship with McDonald’s, MTV and sports celebrities endorsement

Capabilities: Entrepreneurial mindset, technological capability; innovative product plus energy and marketing to gain celebrity sponsorship could really add value

Q4. Business Level Strategy

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Cost Leadership – perhaps not a good strategy at this point; not enough experience yet to be able to learn what costs can be lowered without sacrificing quality

Differentiation – Dippin’ Dots must work to link its value chain processes to make sure the product retains its unique qualities. Main challenge is that product can be imitated.

Focus – Current focus is on the out-of-home market, Nestle and Unilever also doing it; if Dippin’ Dots goes to grocery stores – more competition from other brands

Q5. Growth Opportunities

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New product (that will withstand conventional freezers while preserving super frozen dots in the ice cream) – enter take-home market

Maintain/expand current market base through more support for franchising or push into grocery store business

Successfully manage the innovation process Jones needs to know when new product is worth

pursuing Need operational skills Consider implications for marketing and

distribution Need to monitor feedback from customers