Please help me summarize this article with a critique statement. Also explain wh
ID: 390899 • Letter: P
Question
Please help me summarize this article with a critique statement. Also explain why it should think about ethics and culture for running the business.
Baskin-Robbins, a global chain of ice cream parlours, is gearing up to increase its penetration in the Nepali market.
Sun International, local franchise owner of the brand, is planning to open five new outlets in the valley and seven outside. Currently, the company operates ice cream parlours at Durbar Marg, Uttar Dhoka and Thamel in Kathmandu. Besides, the brand’s products are available in 25 eateries and supermarkets across the valley.
Baskin-Robbins is one of the world’s largest ice cream franchises, with over 5,800 outlets across the world. Headquartered in Massachusetts, US, the company has its presence in over 30 countries.
The new Baskin-Robbins ice-cream parlours in Nepal, according to Sun International, will feature world class infrastructure and top-level service. Each and every detailing of the parlour will be carried out as per the Baskin-Robbins guidelines, it said.
“The market for ice cream in the Kathmandu valley is growing massively. Demand is soaring in other places as well. The new outlets are being opened to capitalise on the growing market,” said Rabi Rajkarnikar, managing director of Sun International.
According to Rajkarnikar, the new outlets will be opened in two phases. In the first phase, stores will be opened in Patan, Bhaisepati, Kalimati, Maharajgunj and Bouddha within Kathmandu. “The first phase will end within December, while the second phase will complete within March, 2013,” Rajkarnikar said.
Outside Kathmandu, Sun International planes to open outlets in Pokhara, Narayanghat, Butwal, Lumbini, Dharan, Biratnagar and Bhairawa. Each store will have an area of 150-300 sqft.
Rajkarnikar is confident about the success of the company’s expansion plans. “Quality is our major strength and we never compromise on quality. I am sure the new parlours will become a success,” he said, adding that the expansion might also help them reduce price and become more competitive. “If the new stores report good sales, this move will help us keep prices lower,” said Rajkarnikar.
Baskin-Robbins ice cream parlours in the valley sell around 100-150 litters of ice cream a day on an average during summer. All the products available in the domestic market are imported from India.
The new ice-cream parlours will have separate franchise owners, but will operate under Sun International. “We will provide all
the support to franchise owners and monitor their operation,” said Rajkarnikar. “We will also make sure that the parlors consistently maintain quality.”
Rajkarnikar added that the parlors will be built with a minimum investment of Rs 2-3.5 million. In a bid to fortify its expansion plans, Sun International is also looking for a partner.
Apart from new outlets, the company is also planning to introduce new ice cream flavors. The company is introducing ice cream cakes within the next month. Baskin-Robins offers 34 of ice-cream flavors in Nepal
Explanation / Answer
Case Facts – Baskin Robbins plans to increase its penetration in the Nepali Market. Its local franchise owner would be Sun International who would see the expansion throughout the major cities and towns of Nepal. Baskin Robbins, based out of Massachusetts, US is aggressively expanding in the Indian sub-continent and the demand for ice-cream is also steadily rising across Nepal. Sun International believes quality is their competitive advantage and the key differentiator in the Ice-cream market. The expansion would take place through local franchises which would be overseen by Sun International. All products are currently being manufactured in India and are imported to the hilly terrain of Nepal. Sun International is looking for a partner to share the cost of the growing expansion.
Inferences –
- The US Ice-cream market is pretty saturated and heavily competitive, hence major companies like Baskin Robbins would look for expansion beyond the US
- After focusing on India, BR now wants to shift attention to smaller markets like Nepal. Indian market has grown pretty competitive too.
- Since all products are currently being imported from India, consumer price for all products from Baskin Robbins would be on the premium side.
- With the price on the higher side, the basic target segment for BR would currently be from the higher strata of the society with a healthy purchasing power. This basically cuts off a major chunk of the Nepalese population who have lower disposable income and would opt for the local options instead of an imported brand. Though it would be an aspirational brand for many.
- Through rapid expansion and growing demand, BR wants to increase the consumption from 100-150 liters a day. This would help them achieve some economies of scale and lower the prices for the consumers.
Critique –
As a growth strategy, any company would like to make a first-mover advantage in a new geography and capture a major chunk of the market share. However, BR here after seeing stagnation in growth in key markets like India are targeting to push the extra production in India into smaller countries like Nepal. The intention here is not to set-up a production base in Nepal but to find an additional market for the excess production in Indian plants. This does no good to the local community as there is no job creation and improvement in lifestyle of the local population.
Instead with these foreign aspirational brands, the business of the local manufacturers would take a hit as consumers would look to have a taste of a famous, world renowned brand. This would be specifically observed in the upper and upper middle class level of the society who would consider this as a status symbol. With rapid expansion and increase in demand, BR might also achieve some economies of scale and get the costs lowered and ultimately lower the consumer price too. This would hit the local producers further as the prices would come down to the affordable range and the market share would shift gradually to BR, till another such foreign player makes an entry.
This from the ethical point of view is not correct. A company planning to enter a new market should look at it from a long term perspective and set up local production and help the community as a whole instead of looking to push the extra production of a nearby country where sales have dipped.