Evaluation of Entry into Ice cream Business - BRAC University ...

Igloo is confident about its unbeatable first position, but there is competition among other companies
such as Polar and Kwality for the 2 nd position. However, in current market, no operator is showing
much aggressive and visible activity towards growth. It is expected that recent announcement
regarding introduction of ISIS diabetic ice cream by Polar in partnership with DANONE would again
create some hype in the market.
Reasons behind existing level of rivalry among competitors can be attributed to following reasons:
� The ice cream industry has few sellers because there is economy of scale through large-scale
production. The larger firms have a cost advantage over smaller firms; they can produce more
cheaply- making it hard for small firms to survive.
� Market is bigger than capability of current players and can accommodate them without much
trouble. This is because PCC of ice cream in the country is still pretty low.
� This market has substantial amount of “barriers to entry”, making it difficult for a large number of
competitors to enter the market. The cost of setting up a new plant in this industry is quite high.
The cost of entry works as an entry barrier.
� To get people to try new product, the potential entrant will have to run a big competitive
advertising or massive promotional campaign, which is expensive. The prevailing companies
created barriers in entry for potential rivals by using extensive advertising and product
differentiation earlier which has its effects till now. Another fact is that product awareness and
brand loyalty to the existing firms make it expensive for potential rivals to enter.
� To further elaborate present competitive reality of the industry the five competitive forces are
discussed below:
� The rivalry among the competing sellers is weak as market is yet to develop more.
� With various entry barriers not many new companies are attempting to enter this industry.
� As there are no direct substitute products to ice-cream, the companies don’t face any
competition from other industries.
� As the number of suppliers is very low and, the companies especially Igloo as the best
product enjoys high bargaining power or leverage over rivals. But some of the companies
such as Savoy are concentrating on increasing profit margin of the retailers for securing a
more prominent position in the market.
� Mainly consumers or buyers decide the pricing. Keeping in mind the various buying power
of people, the companies decide the price of each items. Price of the Items that have the
most market demand is kept low so that they are in the reach of the general customers.
By lowering the price some companies such as Savoy are trying to maintain a competitive
edge.
Evaluation of Entry into Ice cream Business for Bangladesh Limited 21