978-1259278211 Case 8 Solution Manual Part 2

Unlock access to all the studying documents.

View Full Document

According to the current information, the 2013 initial franchise fee is $15,000. See

http://www.dippindots.com/business/franchising.html

Dippin’ Dots direct competitor Mini Melts does not franchise shops, but instead supports

dealers’ vending machines that dispense the pelleted ice cream dessert worldwide. Here’s

a story of Mini Melts’ distribution strategy, announcing the 2013 partnership with

WalMart, which will place Mini Melts vending machines in 5,000 WalMart stores around

And here’s the Mini Melts’ website list of international (worldwide) vendors – compare

the 23 countries where Mini Melts are available with the 9 countries where Dippin’ Dots

Dippin’ Dots announced a new push into Asia in 2013 by signing a joint master licensing

agreement with Wellness Hanshin, Inc. in Osaka, Japan for “the exclusive marketing and

News from April 2015 that Dippin’ Dots’ total business was on track to grow 61% based

this growth on the re-launch of the franchise program. According to this report, Dippin’

Do you think Dippin’ Dots’ change in the way it handles its franchise operations will

make a difference?

1. SECONDARY QUESTIONS: What elements in the external environment might

affect Dippin’ Dots’ strategy?

NOTE: there are no PowerPoint slides to accompany the following.

Referencing Chapter 2: Analyzing the External Environment of the Firm

This case presents an opportunity to drive home the point that stronger industry-wide

forces may drive down industry profitability. Strategy is all about the ideas, decisions,

Organizational leaders must become aware of factors in the overall environment that

might affect their ability to create a competitive advantage. So how do managers become

Environmental scanning involves surveillance of a firm’s external environment to predict

environmental changes and detect changes already under way. It is a BIG PICTURE

viewpoint of the industry/competition, looking for key indicators of emerging trends –

what catches your eye? Alerts the firm to critical trends before changes have developed a

To assess how the external environment might affect Dippin’ Dots’ strategy, it’s necessary

to take a look at the factors in the general external environment. Dippin’ Dots must

Political/Legal – Entrepreneurial businesses that produce innovative products must

Economic and Global – The economic emergence of China, as well as all of Asia Pacific,

creates a currently untapped potential market for frozen desserts, as witnessed by Dippin’

Dots’ licensing of capacity in a manufacturing plant in South Korea. Consolidation in the

Sociocultural – A greater concern for healthy diets and physical fitness may reduce the

interest in dessert, but a single serving concept may override this concern. Also, the

Demographic – Rising levels of affluence may give the frozen dessert industry a boost

(once the economic situation calms down) because families may choose to spend

Technological – Developments in technology and new uses for existing technologies can

It’s necessary to assess the segments of the external competitive environment that include

One important question is “what business is Dippin’ Dots in?” Until students are sure

about the boundaries of the business, it is impossible to do an industry analysis – what is

the “industry” to be analyzed? Some students might say Dippin’ Dots is in the ice cream

Help students apply Porter’s Five Forces of competition by drawing a diagram on the

board similar to the following, and having students fill in the details:

Based on the external environmental industry analysis, the novelty ice cream business

may require attention to growth strategies – acquisition, diversification, or internal

2. What internal resources does Dippin’ Dots have that might help it support its

competitive strategy? What challenges remain?

Referencing Chapter 3: Analyzing the Internal Environment

From Chapter 3, a firm’s value chain helps support its basis of competitive advantage.

Dippin’ Dots’ value chain can be examined to ascertain the various activities that the firm

carries out to try to establish and maintain a competitive advantage.

Suggested: The reason for

competition in the frozen dairy

industry is the market’s potential. A

Suggested: there are many

Substitutes’

Buyers’

Rivalry

Very High

Power

Low

Suggested: Buyers are the

supermarket chains,

Suggested: Low – Supplier

Threat of

variety of available distribution

Dippin’ Dots’ value chain is captured visually in the following diagram:

Value chain activity How does Dippin’ Dots create value for the customer?

Primary:

Inbound logistics

warehouse layouts)

Acquisition and licensing of custom manufacturing and

Operations (efficient work

flow design, quality control

The super-cold freezing (-325º) of Dippin’ Dots ice cream

done by liquid nitrogen cryogenically locks in both flavor and

Outbound logistics

(consolidation of goods,

efficient scheduling,

Dippin’ Dots has problematic logistics issues with shipping

(the requirement of extreme subzero temperature storage

during transport – currently supported by specially designed

Marketing and Sales

(motivated sales people,

innovative advertising &

The general inability to easily purchase Dippin’ Dots from a

local grocery store or consume Dippin’ Dots at home, because

the product must be stored and served at such low

Service (ability to solicit

customer feedback &

Since the product is consumed at point of purchase, there is

opportunity for immediate feedback from the customer, and

Secondary:

Procurement (win-win

relationships with

suppliers, reduced

dependence on single

supplier)

Higher ingredient costs may affect product pricing and profit

margins.

Technology development.

(state of the art hardware &

Because of the science and technology background that

resides in existing employees, there’s the ability to be

Human resource

management (effective

Initially, Dippin’ Dots corporate positions were filled with

Jones’ friends, and authorized dealers handled sales. The

General Administration

(effective planning systems

to establish goals &

Jones was an entrepreneur, seemingly with all the attributes

of that personality type. Growth is a priority now, and that

may be a problem. New President Scott Fischer seems to

In terms of primary activities, it appears Dippin’ Dots only ability to differentiate itself

comes from the super-cold freezing operation that creates the unique form factor of the

product. This need for super-cold temperatures is a real challenge – even though the

Regarding secondary activities, Dippin’ Dots may need to make sure the human resource

skills are strong – there’s a need to recruit, train and retain both the franchisees and the

To further answer the question of how to support a competitive strategy, it’s important to

consider the concept of the resource-based view of the firm, and the three key types of

Tangible Resources:

Financial – franchises provide cash flow options

Physical – Production and distribution facilities in Kentucky and South Korea

Technological – An innovative product, with production and distribution facilities

Intangible Resources:

Organizational – Other than Jones’ initial energy and drive required to start and grow the

Human – Franchisees can add value or damage reputation, depending on how they are

Innovation – Curt Jones’ scientific background provided initial innovative ability.

Reputation – Initial relationship with McDonald’s, endorsement by MTV and sports

Organizational Capabilities: Entrepreneurial mindset, technological capability

Capacity to combine resources: Innovative product plus energy and marketing to gain

Determining whether the internal resources are valuable, rare, difficult to imitate, or

difficult to substitute (VRIN) can help a firm sustain a competitive advantage. See

Chapter 3, Exhibit 3.6. Applying the VRIN analysis to the above shows that only Dippin’

Evaluating Firm Performance:

The balanced scorecard looks at the interaction of various performance measures to help

managers get a more comprehensive look at firm performance than they would get from

looking at financial measures alone. Encourage the students to interpret Kaplan and

Norton’s approach in this case. See also Chapter 3, Exhibit 3.11:

Customers: (How do our customers see us relative to time, quality, performance &

quality and cost?) Of interest to the Dippin’ Dots case is the relationship it has with its

Internal Processes: (What must we excel at internally to meet stakeholder expectations

relative to cycle time, unit cost, quality, productivity?) As Dippin’ Dots had already done,

It’s also possible that internal processes managing the franchise operation might need

attention. Dippin’ Dots had problems in the administration of this area in its early years.

Although the business model appeared to have been the problem then, might not some

Innovation and Learning: (How can we continue to improve and create value by

developing new products, creating greater value for customers, increasing operating

efficiencies to penetrate new markets, increase revenues and margins and enhance

Financial Measures: (How do we look to our financial partners relative to improved

sales, increased market share, reduced operating expenses and higher asset turnover?)

Financial data on Dippin’ Dots is currently unavailable, but the franchise system seemed

to be a good model for cash flow in the past. The case doesn’t explain the drop in number

of franchises in recent years, and we don’t know if Dippin’ Dots has been actively trying

Dippin’ Dots’ value chain, along with the tangible and intangible resources that were

Referencing Chapter 6: Corporate-Level Strategy

Corporate strategy focuses discussion on the questions of what businesses a corporation

should compete in, and how the businesses should be managed so they can create

Diversification is the process of firms expanding their operations by entering new

businesses. In related diversification, a firm enters a different business in which it can

benefit from leveraging core competencies, sharing activities, or building market power.

Some possibilities include:

●Mergers and acquisitions

●Strategic alliances

Whatever the choice, it should create value for all stakeholders – employees, suppliers,

Companies can achieve synergy through diversification in two ways:

Through related businesses (horizontal relationships)

●Sharing tangible resources

Or through unrelated businesses (hierarchical relationships)

●Value creation derives from corporate office

Core competencies reflect the collective learning in organizations—how to coordinate

diverse production skills, integrate multiple streams of technologies, and market diverse

Sharing activities means that value chain elements are shared across business units, so

that two or more activities are done by one of the businesses. This allows for cost

Acquisition is the incorporation of one firm into another through purchase. It can be a

means of obtaining valuable resources that can help an organization expand its product

Originally, Curt Jones had pursued internal development, trying to create new products

using the firm’s existing resources. At the end of the case, Dippin’ Dots was trying to re-

invent itself, but it was questionable if the new owner had fully appreciated all his

options. Firms can create additional value for stakeholders through entering new markets

Referencing Chapter 9: Strategic Control and Corporate Governance

Strategic control involves the process of monitoring and correcting a firm’s strategy and

performance. In a traditional control system, top management formulates strategies and

sets goals. These strategies are implemented, and then performance is measured against

This approach utilizes two different types of strategic control: informational control and

behavioral control. These two types of control play a role in the formulation and

implementation of strategies. Informational control is a method of organizational control

Informational control is concerned with whether or not the organization is “doing the

right things”, while behavioral control is concerned with whether or not the organization

is “doing things right” in the implementation of its strategy. Organizations need to make

Dippin’ Dots didn’t appear to have either type of control mechanism. Not only did the

organization appear to lack sufficient information from the external environment to

decide if it was “doing the right things”, the historical lack of appropriate behavioral