Dippin’ Dots Ice Cream Brian R. Callahan Alan B. Eisner McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream Icebreaker Question How many of you have tried a specialty ice cream? How many of you have heard of “Dippin’ Dots?” McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream Analyze Dippin’ Dots external environment. What are the general environmental factors that have impact on the industry? McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream What are the external forces of competition affecting the frozen dairy industry? McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream 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/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

What business level strategy does Dippin’ Dots appear to pursue? Dippin’ Dots Ice Cream 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/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Dippin’ Dots Ice Cream What opportunities for growth should Dippin’ Dots pursue? What should Jones do to manage and encourage this entrepreneurial activity? McGraw-Hill/Irwin Strategic 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 profitable McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q1. Industry Environment Limited number and variety of available distribution channels available to newcomers, particularly in large grocery store chains POTENTIAL ENTRANTS Low – commodities such as milk, sugar, etc. INDUSTRY COMPETITORS SUPPLIERS BUYERS Buyers are franchisees and the general public, 90% of whom consume ice cream and frozen desserts. Expansion to grocery chains – buyers? Competitive forces? Reason for competition is the market’s potential. Some ice cream categories show opportunity for innovation especially in the novelty area SUBSTITUTES High – many alternatives for desserts/snacks (cake, pie, fruit, candy) McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q3: Dippin’ Dots’ Value Chain 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 McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q3: Dippin’ Dots’ Value Chain (cont.) 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? McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q3. Dippin’ Dots’ Resources 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 McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q4. Business Level Strategy 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 McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q5. Growth Opportunities 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 McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.