Ice Filli

Threat of new entrants:

In any industry the threat of new entrants is always in place, however, in the Russian icecream industry the new entrant threat is high because the barriers to entry are low. Manycompanies find the market to be desirable because the profit margin is between 15% and 20%,and ingredient prices are approximately 42% of the cost incurred by manufacturers. The initialinvestment is low; because manufacturing equipment is easily acquired since it can be rented andcan be used for other items as well. Supply side economies of scale are rather high becausewhen producing the ice cream the unit cost decreases as the total units produced rises. Alongwith high supply-side economies of scale the access to distributing is high. The access todistribution channels is high because many companies are willing to sell ice cream. Many of thedistributers carry multiple brands, therefore making an ease of access to these channels.Government is encouraging companies to enter the market even though some are foreign

ower of suppliers:

In the industry two main supply powers have bargaining power. The power of ingredientsuppliers is low because companies can easily switch brands for the lower price. The productthat is being supplied is not differentiated or unique. While ingredient suppliers have a lowpower; equipment producers have the high power. The equipment used by Ice-Fili was out datedand inefficient. The production facilities manager even agreed that nobody else could make themachinery Ice-Fili was using work as well as they did. The new equipment purchased during the1990s was comprised of 75% imported materials, and that increased to 90% by 1999. TheRussian technology was low quality and lacked flexibility in production use. The threat of forward integration is also a problem faced by the Russian ice cream industry. The militarystarted to enhance old machinery to sell in the Russian market. By 2001 ten private ownedcompanies were selling equipment in Russia, Ukraine, and the Baltic countries.

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