Case | HBS Case Collection | 2007 (Revised from original 2004 version)

Ice-Fili (Abridged)

by John R. Wells, Pai-Ling Yin and Michael G. Rukstad

Abstract

Designed as an overview of all aspects of the strategy process: industry analysis, positioning, dynamics and sustainability, and scope issues of corporate strategy, including vertical integration, horizontal diversification, and location issues. Ice-Fili is the largest ice cream producer in Russia in 2002, but is facing strong competition from Nestle despite its success over other multinational competitors. Contains detailed exhibits, allowing deeper analyses. A rewritten version of an earlier case.

Keywords: Product Positioning; Geographic Location; Competition; Vertical Integration; Corporate Strategy; Retail Industry; Food and Beverage Industry; Russia;

Format: Print

21 pages

Purchase

Citation:

Wells, John R., Pai-Ling Yin, and Michael G. Rukstad. "Ice-Fili (Abridged)." Harvard Business School Case 705-441, January 2007. (Revised from original November 2004 version.)

In 2000, Hennes & Mauritz (H&M) was the second largest and most global player in the fashion retail business. It operated 682 stores, 80% of them outside its home country of Sweden, and achieved revenues of $3.0 billion and operating profits of $375 million. ). In 1999, when H&M announced plans to enter the US, sales had grown 20% per year and operating profits, 30%, for a decade. After the August announcement of US expansion plans, its share price hit a record $35 (a P/E of over 90). But the new millennium brought challenges and uncertainty. In March 2000, the first non-family CEO, Fabian Mansson, resigned after only two years at the helm and the company issued a profits warning. In September of 2000, H&M’s share price closed at $18.68, a fall of nearly 50% from the optimism of the prior year. Meanwhile Gap, the world’s leading fashion retailer with revenues of $13.7 billion, was adding 600 stores a year and expanding into Europe from its US base. Stefan Persson, the son of H&M’s founder and the current chairman, spoke well of Masson’s replacement, Rolf Erikson, “We are entering a hectic expansion phase and our new CEO is well-prepared for that. He can tackle these challenges better than anybody else.” But Eriksen’s relatively low-profile past as the head of H&M’s Danish subsidiary impressed few analysts and questions lingered about H&M’s ability to expand as quickly as they boasted. What did new CEO Rolf Erikson need to do to avert the threat from Gap and restore the company’s fortunes?

From humble beginnings as a Levi jeans store, by 2000 Gap, Inc. had grown to become the world's leading specialist clothing retailer. Its CEO, Millard S. Drexler, the "merchant prince," was credited with transforming Gap into a global empire, leading the company through eighteen years of 21% p.a. growth to reach sales of $13.6 billion in 2000. But as Gap entered the new millennium, dark clouds were building on the horizon. While sales in 2000 were up nearly 18% over the previous year, operating profits fell by 20%, only the second profit fall since 1984. Gap found itself plagued with concerns about fashion misses, logistics failures, the departure of senior managers, and increased foreign competition. New fast-fashion competition in the form of Inditex, H&M, and Club Monaco threatened Gap's market share both domestically and abroad.

General Information

Academic Programs

Alumni

Faculty & Research

Recruit

Resources

Faculty & Research

Ice-Fili (Abridged)

Abstract

About the Author

More from the Author

Contact

Related Links

Resources