As a recent trend, the traditional family meal time has now been challenged. It is largely due to people’s busy working lives. Therefore, it becomes common to find different family members eating different foods at different times. As an easy-to-prepare and ready-to-eat dessert, ice cream has obviously attracted a large number of consumers. Ice cream can be taken back to home and served in flexible portions (take home) or rather consumed immediately (impulse).
Deseasonalisation has considered being a tendency in recent years. It implies the less dependency on the hot weather, which, in some European countries, last for quite a short time. Mars’s Ice Cream has been sold all over the Europe, thus producing deseasonalised items is of more importance on company’s agenda.
The production of the ice cream is subject to the use of advanced technology in areas like prevention of fat accumulation and coarse texture, sweetness, or drawing temperatures. It, in some ways, raises the threshold of entering ice cream industry, thereby protecting the existing companies, including Mars, from a too fierce rivalry competition. Continued innovation is also a key issue here. Unlike a stapler or cigarette, ice cream is the kind of product which needs continued ‘refreshment’ and constant innovation in its taste, flavour, texture or ingredients in order to maintain consumer interest and encourage sales and repurchasing. The ability to conduct it relates to the technology as well, which re-invigorate the product portfolio. This kind of requirement has put Mars onto an advantage position since the company has been well-known for its ability of innovation.
Threat
The biggest threat refers to the counter-offensive defence strategy (Kotler & Singh, 1981) employed by Unilever against Mars, since Unilver has effectively prevented Mars from accessing its freezer cabinets. It is done by supplying smaller outlets with free freezer cabinets, which are exclusive to other brands, thus increasing and enhancing its retail outlets.
Since macro actors are more difficult to manage and control, a proactive action is required in order to survive in the market. Overall, the European ice cream market is a stable, growing, but highly competitive environment. ‘Stale’ always indicates that the low level of changeability, higher level of predictability and visibility. Therefore, a prescriptive strategy can take place.
Micro-Environmental Analysis
Micro-environment is the internal factors that impinge directly on Mars.
Mars Ice Cream
Mars is highly profitable in confectionery and prepared petfood areas, acting like the market leader in these two categories. However, since the growth rates of these two industries are not high enough, its confectionery and petfood can be regarded as cash cows. The profit generated by its cash cows is actually used to support its question mark, namely Mars Ice Cream (see Figure 1).
According to Mars, the ice cream has not generated significant profit since its launch in late 1980s. Mars Ice Cream, enjoying only 5% to 10% market share in Europe, demonstrates an ambiguous future in this growing ice cream market. In this scenario, the company should decide whether to continuously fund it in order to increase market share, or withdraw it from the marketplace as it erodes the company’s profit. Therefore, It is said that Mars Ice Cream is a question mark.
However, in its product portfolio, no star or dog has been observed. It might imply the unbalance of its current product offering.
Strength
Probably the major strength Mars has demonstrated for years is its innovation ability. It refers to what Lynch (1998) calls as distinctive strategic element relevant to competing in the marketplace. However, during the early 1990s, this strategy was borrowed by Nestle, a major competitor of Mars. For that reason, the advantage of being able to innovate is a competitive advantage of Mars instead of a core competence.
By adopting Porter’s (1985) model for generic strategies, Mars’ concentration on a segment of the market is categorised as differentiation (see Figure 2). One of Mars’s strategies was to price the ice cream at a premium level, which proves to be highly successful. By doing so, Mars has implemented a flanking attack by concentrating distinct market segments that are not adequately served by Unilever and Nestle (Kotler, 1997).
Figure 1 Mars Product Portfolio in BCG Matrix
Figure 2 Generic Strategies in
European Ice Cream Market
Mars is a highly-aware brand name in the European market. Strong brand implies the use satisfaction, efficiency of marketing programs, and, more importantly, customer loyalty, thus increasing the competitive advantage as well as the invisible asset of the business.
Moreover, Mars has maintained very good relationships with grocery trades, largely because of Mars’s successful performance in confectionery market. It enables Mars to have their multi-pack ice cream items distributed on large grocery outlets.
Weakness
The biggest weakness of Mars relates to its distribution problem in small retailers. Unilever and Nestle, Mars’s major competitors, have supplied these retailers with free but exclusive freezer cabinets. Mars, therefore, has major difficulty in accessing them.
While having been denied access to its competitors’ freezer cabinets, Mars actually opens the door for its competitors to enter its outlets. Mars has employed the differentiation generic strategy, thus solely producing one kind of ice creams. Retailers, in order to stock a completed range of product, are, therefore, forced to seek alternative suppliers of the items in which Mars does not offer.
Moreover, Mars has not been able to generate significant profits from its ice cream over years yet. Once again, it erodes the profits earned by its cash cows.
By looking at the value chain (see Appendix 3) proposed by Porter (1985), Mars has competitive advantages in its inbound logistics (confectionery supply), operations transform (manufacturing, freezing and other related operation process), and marketing and sales (strong brand). But problem occurs in outbound logistics, which refers to the distribution.
Alternatives and Recommended Solution
After analysing the environment on both macro and micro level, the threats and weaknesses have been identified. In order to minimise their harmful impacts, two alternatives are formulated based on two frameworks: Market Options Matrix and Expansion Method Matrix.
Alternative 1: Market & product development & diversification
Considering its weaknesses and threats, coupled with its strengths and opportunities, Ansoff’s Market Options Matrix (see Appendix 4) can be employed here. However, in order to tailor it to suit Mars’s case, it is interpreted as in Figure 3.
Market development using existing products
According to Haagen Dazs, it has 174 shops and cafés in 15 countries in Europe. France, Spain and the UK are three major markets (28%, 26%, and 17% respectively). Within the cafés, customer has the opportunity to sit down and order its premium ice creams, such as Cookie Crunch or Belgian Waffle, at its premium price.
By analysing its current status, Mars only sell its ice cream bars through small retailers and big grocery stores. In order to attract more customers and increase its market share, Mars can copy the strategy from Haagen Dazs by opening small franchise stores around Europe.
Figure 3 Market Option Available to Mars
French people tend to regard ice cream as something luxurious, thus taking it more seriously rather than rushing into a newsagent to buy one. In Italy, ice cream has also been taken as an expensive item with luxury ingredients. Taking these socio-cultural factors into account, Mars can consider opening several cafés in these two countries first. UK is in a peculiar position. British customers have long considered ice creams as cheap and economy items manufactured with lower quality ingredients. However, on the other hand, UK, from whatever any perspective, is a large market that no company can afford to ignore it. Therefore, launching a limited number of cafés in high streets in big cities, such as London, Manchester, and Birmingham, depending on the budget number, can also be considered here.
Not only ice cream, but coffee, cappuccino, shake, even ice cream tea should also available in the Cafés to increase customer’s choice. At this point, it largely depends on product development, which will be dealt with in the next part.
By launching this unprecedented scheme, Mars will be able to sort its two weaknesses out which were identified in the micro-environmental analysis earlier. First, by opening its independent cafés, Mars alleviates the distribution problem occurred in small outlets. The café will be franchising, which means Mars provides the franchisee with the brand name, necessary technical service expertise and some advertising assistance. Franchisee, in turn, has to pay part of its profits back to Mars. It increases Mars’s profit margin, which is Mars’s drawback. Franchise is also a low investment, which is an odds-on to persuade the stubborn Mars family to implement the scheme.
Moreover, according to Lynch (2000), franchise lowers the risk of testing of business proposition undertaken by franchisees. Mars, the franchiser, can also launch their new-flavour or new-taste ice creams in their cafés in the first place, which lowers the risk of testing them in the more uncontrollable general public, too.
Product development in existing market
Ice cream market can be segmented in a number of ways. The most commonly used one is based on the product type and positioning, which divide this market into five categories: multipacks, standard, premium (in packs of 1 litre or over), super premium, and complete ice cream desserts (made primarily of ice cream but with some added ingredients such as nuts, chocolate, flavoured syrup and/or biscuit, and presented in a shaped block with decoration) (Mintel, 2000).
As identified earlier, the incomplete range of Mars’s ice cream products actually allows the competitors to enter the outlets. In order to sort this problem out, Mars has to consider broadening product range into the existing and new markets (Mars Café). It is also an approach to increase the market share in short time.
Since Mars has only the presence in multipacks and premium categories, according to the segmentation, producing new ice creams like standard tubs and super premium is a solution here. Because these two markets are less competitive, usually with one company takes the most market shares in (according to 2000 Mintel report, the standard tubs are now dominated by Unilever and the super premium ice cream market by Haagen Dazs). It switches Mars’s battleground to avoid fierce competition. Complete ice cream desserts is another alternative for Mars to consider.
In addition, low fat ingredients can be added to the product line as well, as there are more health-conscious customers in the marketplace. The deseasonlised ice cream is also of importance regarding deseasonalisation is a market trend, as identified in macro-environment analysis.
By doing so, Mars takes advantage of what is called market synergy (Naylor, 1999) by applying the same brand name to all across its products, which is one of Mars’s strengths.
Diversification to related market
Diversification relates to the strategy which puts new ice cream products identified earlier to the new market, which is done through the opening of franchise cafés around Europe. According to Lynch (2000), the risk may be very low if a company moves into related market. Thus Mars’s business will be more secure in applying this strategy.
These three strategies have to be used at the same time in order to be successful. And each of them actually is complementary to others.
Alternative 2: Expansion
According to Appendix 5, coupled with Mars’s own strengths and weaknesses, an expansion method is, therefore, developed for Mars (see Figure 4).
Acquisition is relatively a fast way to gain market share, and it may reduce competition from a rival to some extents (Lynch, 2000). Compared with merger, which arises because neither company has the scale to acquire the other on its own (Lynch, 2000), acquisition is usually easy and fast to complete.
Mars can choose a small local ice cream company, then evaluate its assets and current market status to decide whether to acquire or not. More importantly, this local company should have a good relationship with local small retailer outlets, which means it has no big problem in having its ice creams displayed in the freezer cabinets.
The local company is allowed to produce ice creams in its brand name, but Mars will have the rights to enter its distribution channel. By doing so, Mars will be able to solve its distribution problem in the quickest time
Mars can still stick at its concentration strategy, which has been favoured by the Mars family for years. Compared with the first one, this is a relatively conservative strategy, which leads to a slight change. Again, it might be advocated by the Mars family, who is reluctant to see any changes. However, this strategy can be costly and risky sometimes, if the wrong company has been taken. Even if the right one is targeted, there is usually a substantial premium to pay over the asset value of the company (Lynch, 2000). From Mars viewpoint, the company was acquired mainly because of its distribution channel. As for other parts of the local company, such as brands, marketing, operation, it might be against Mars’s principle in some ways, but they are not easy to get rid of.
.
Figure 4 Expansion Method Available to Mars
Company
When it comes to compare these two alternatives, a fact has to be acknowledged fully that the owner of Mars company, the Mars family, is quite stubborn in choosing marketing strategies. Any alternatives proposed above are most likely to be rejected in the first place. However, the effort must be made in order to persuade them to adapt to the external and internal environment where the company has currently been exposed to. Debate will be focuses on the consequence of not applying any of these alternatives. If Mars does not make any changes, the profit of its cash cow will be serious eroded. It might rise dispute between ice cream department and confectionery and petfood departments. Secondly, its market share will be adversely affected if Mars still stick to the current strategy, since the necessary capital to conduct innovation or modification will not be sufficient in the future. As the ice cream market, as pointed out in the macro-environmental analysis, is highly attractive to any existing and potential market players, Mars should, however, still endeavour to stay in this market. Therefore, although it is painful in short-term, the strategy that is going to use will benefit Mars far more in long-term than the family might expect.
Thorough careful evaluation, the first alternative should deserve more attention. Although this one demands a more radical change, it will restructure Mars’s product portfolio and market in order to make profits and survive in the marketplace. The second one is fine, but it does not diminish Mars’s weaknesses, and other problems will still arise if the root problems were not sorted out.
Conclusion
Mars is an innovative but unprofitable company. Its macro- and micro-environment bestow Mars great opportunities and strengths, although substantial threats and weaknesses exist as well.
The European ice cream market is a relatively stable environment with less changeability, more predictability and visibility. Therefore, a prescriptive strategy is going to be used at this point, which means it is appropriate to develop a new strategy for Mars to implement in the future.
Currently, the biggest problem relates to its distribution and incomplete range of products. In order to remain and further increase its market share in the highly-profitable ice cream market, it is time for Mars to consider some changes in its marketing strategy, although it is fully acknowledged that everything proposed above is likely to face big pressures from the stubborn Mars family.
After evaluating the pros and cons of each alternative listed above, the first one which emphases market and product development, and diversification in related market is strongly recommended. It opens a new world from marketing perspective and gives a brighter future to Mars ice cream products, as well as Mars company itself.
(Word Count: 3434)
References
-
Brooks, I. And Weatherston, J. (2000), The Business Environment: Challenges and Changes, 2nd edition, Prentice Hall
-
Finlay, P. (2000) Strategic Management: An Introduction to Business and Corporate Strategy, Prentice Hall
-
Johnson, G. and Scholes, K. (1997), Exploring Corporate Strategy, 4th edition, Prentice Hall
-
Kotler, P. (1997), Marketing Management: Analysis, Planning, Implementation and Control, 9th edition, Prentice Hall
- Kotler, P. and Singh, R. (1981), Marketing Warfare in the 1980s, Winter, pp. 30-41
-
Kotler, P. (1984), Marketing Essentials, Prentice Hall
-
Lynch, R. (2000), Corporate Strategy, 2nd section, Pitman Publishing
-
Mintel (2000), Ice Cream Report, Mintel
-
Naylor, J. (1999), Management, Pitman Publishing
-
Porter, M.E. (1980), Competitive Strategy, Free Press
-
Porter, M.E. (1985), Competitive Advantage, Free Press
-
Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press