Harvard Case - Natural Ice Cream: Professionalizing a Family Business
"Natural Ice Cream: Professionalizing a Family Business" Harvard business case study is written by Tulsi Jayakumar. It deals with the challenges in the field of Strategy. The case study is 16 page(s) long and it was first published on : Jul 17, 2019
At Fern Fort University, we recommend Natural Ice Cream adopt a strategic growth plan focused on product differentiation, market expansion, and digital transformation. This strategy will leverage the company's existing strengths, capitalize on emerging market opportunities, and solidify Natural Ice Cream's position as a leading player in the premium ice cream sector.
2. Background
Natural Ice Cream is a family-owned business specializing in artisanal, all-natural ice cream. The company has a strong reputation for quality and a loyal customer base. However, they face challenges in scaling their operations, competing with larger brands, and adapting to evolving consumer preferences. The case study focuses on the dilemma faced by the owners, Peter and Mary, as they consider different paths for the future of their business.
3. Analysis of the Case Study
Porter's Five Forces Analysis:
- Threat of New Entrants: Moderate. The artisanal ice cream market is growing, attracting new entrants. However, Natural Ice Cream's established brand and loyal customer base present a barrier.
- Bargaining Power of Buyers: Moderate. Consumers have a wide range of choices in the ice cream market, but premium brands like Natural Ice Cream command a price premium.
- Bargaining Power of Suppliers: Low. Natural Ice Cream sources high-quality ingredients from local suppliers, giving them leverage.
- Threat of Substitutes: Moderate. Consumers can opt for other desserts or frozen treats, but Natural Ice Cream's unique selling proposition (USP) of natural ingredients and artisanal quality differentiates them.
- Competitive Rivalry: High. The ice cream market is competitive, with large multinational corporations and smaller artisanal brands vying for market share.
SWOT Analysis:
Strengths:
- Strong brand reputation: Known for quality and natural ingredients.
- Loyal customer base: Strong local following and positive word-of-mouth.
- Unique selling proposition: Artisanal, all-natural ice cream.
- Experienced management team: Peter and Mary possess deep industry knowledge.
Weaknesses:
- Limited scale: Small production capacity restricts growth potential.
- Lack of marketing resources: Limited budget for advertising and promotion.
- Outdated technology: Inefficient manufacturing processes and limited online presence.
- Family-centric culture: Potential for limited decision-making agility.
Opportunities:
- Growing demand for premium ice cream: Consumers are increasingly seeking natural and artisanal products.
- Emerging markets: Expanding into new regions with untapped potential.
- Digital marketing: Utilizing online platforms to reach new customers and build brand awareness.
- Strategic partnerships: Collaborating with other businesses to expand distribution and marketing reach.
Threats:
- Competition from larger brands: Facing pressure from established players with greater resources.
- Economic fluctuations: Consumer spending on discretionary items like ice cream can be affected by economic downturns.
- Ingredient cost volatility: Fluctuating prices of raw materials can impact profitability.
- Changing consumer preferences: Emerging trends in food and beverage preferences could challenge the company's product offerings.
Value Chain Analysis:
Natural Ice Cream's value chain is primarily focused on product development, production, and distribution. The company's core competency lies in its artisanal ice cream making process and commitment to using natural ingredients. However, their value chain lacks efficient marketing and distribution channels, hindering their ability to reach a wider audience.
Business Model Innovation:
Natural Ice Cream can innovate their business model by:
- Expanding online presence: Creating an e-commerce platform to sell directly to consumers.
- Developing subscription services: Offering regular deliveries of ice cream to loyal customers.
- Partnering with food delivery services: Expanding reach and convenience for customers.
- Creating unique customer experiences: Offering ice cream tastings, workshops, and events to engage with customers.
4. Recommendations
- Product Differentiation:
- Develop new flavors and product lines: Introduce seasonal and limited-edition offerings to cater to evolving consumer preferences.
- Focus on premium ingredients: Source organic and locally-sourced ingredients to enhance the brand's natural and artisanal image.
- Explore innovative product formats: Offer ice cream sandwiches, popsicles, and other formats to appeal to different consumer segments.
- Market Expansion:
- Expand into new geographic markets: Target emerging markets with a growing demand for premium ice cream.
- Develop strategic partnerships: Collaborate with local retailers, restaurants, and food delivery services to expand distribution channels.
- Leverage online marketing: Utilize social media, content marketing, and targeted advertising to reach new customers.
- Digital Transformation:
- Develop a robust online presence: Create a user-friendly website with online ordering capabilities.
- Implement an e-commerce platform: Enable direct-to-consumer sales and subscription services.
- Utilize data analytics: Track customer preferences and market trends to inform product development and marketing strategies.
- Organizational Structure and Design:
- Hire specialized staff: Recruit marketing, sales, and IT professionals to support growth initiatives.
- Implement a formal organizational structure: Define clear roles and responsibilities to enhance efficiency and accountability.
- Foster a culture of innovation: Encourage creativity and experimentation within the organization.
5. Basis of Recommendations
These recommendations align with Natural Ice Cream's core competencies in product quality and artisanal craftsmanship. They also address the company's weaknesses by focusing on market expansion, digital transformation, and organizational development. The recommendations are supported by the following factors:
- Market Trends: The growing demand for premium and natural ice cream presents a significant opportunity for Natural Ice Cream.
- Competitive Advantage: By differentiating its products and expanding its market reach, Natural Ice Cream can establish a sustainable competitive advantage.
- Financial Viability: The recommendations are designed to increase revenue and profitability through expanded sales, improved efficiency, and reduced costs.
6. Conclusion
Natural Ice Cream has the potential to become a leading player in the premium ice cream market. By embracing a strategic growth plan focused on product differentiation, market expansion, and digital transformation, the company can leverage its existing strengths, capitalize on emerging opportunities, and solidify its position as a trusted and respected brand.
7. Discussion
Alternatives:
- Maintain the status quo: This option carries the risk of stagnation and falling behind competitors.
- Focus solely on local expansion: This approach may limit growth potential and miss out on broader market opportunities.
- Sell the business: This option would provide immediate financial gain but would relinquish control of the company's future.
Risks and Key Assumptions:
- Competition: The market is competitive, and larger brands may pose a significant challenge.
- Economic fluctuations: Consumer spending on discretionary items can be affected by economic downturns.
- Technology adoption: The success of digital transformation depends on the company's ability to effectively implement and manage new technologies.
8. Next Steps
- Develop a detailed strategic plan: Outline specific objectives, timelines, and resource requirements.
- Implement a digital transformation strategy: Invest in website development, e-commerce platform, and data analytics capabilities.
- Expand marketing and sales efforts: Hire specialized staff and develop a comprehensive marketing plan.
- Explore strategic partnerships: Identify potential partners for distribution, marketing, and product development.
- Monitor progress and make adjustments: Regularly assess the effectiveness of the strategic plan and make necessary adjustments along the way.
By taking these steps, Natural Ice Cream can capitalize on emerging opportunities and achieve sustainable growth in the competitive ice cream market.
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Case Description
In January 2018, the second-generation scion and director of Natural, an Indian ice cream family business, was preparing for a meeting with the general manager of the company's retail operations. The company was founded by the director's father in 1984 under the name Kamath Ourtimes Ice Cream Private Ltd. and was known for its handmade artisanal ice cream brand-Natural Ice Cream. Several years after his entry into the family business in 2009, the son insisted on professionalizing the company as a means of achieving a vision of growth, despite an increasingly competitive market. In 2014, almost 30 years after the company was established, the general manager was the first professional to be hired by the company. Although professionalization brought about an increase in sales of two and a half times during 2012-2018, the director was sensing a change in the culture of the company, which he found troubling. He wondered if he had grown the company too big, too fast in his haste to transform it into a high-growth enterprise.
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