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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
