4. Executive Summary
This marketing plan has been developed for Sub Zero Ice Cream & Yogurt, an ice cream and
yogurt shop beginning to establish more of an international presence.
Sub Zero Ice Cream & Yogurt is beginning to expand to grow more in the domestic market of the
United States as well as international markets.
This marketing plan is an analysis of several international markets to find the top market Sub Zero
Ice Cream & Yogurt should enter. Sub Zero Ice Cream & Yogurt has positioned themselves in the
markets they operate in as providing thousands of possibilities for their products and have grown
large in the United States because of their product differentiation.
After researching and analyzing which country would be the best fit for Sub Zero Ice Cream &
Yogurt, Germany was the country that that performed the best in the analysis. The ice cream
market in Germany is growing at a steady rate which means that there is room for Sub Zero to gain
market share in the future. The main competitors that Sub Zero Ice Cream & Yogurt will face in
Germany include Unilever Deutschland and Nestlé Schöller GmbH & Co KG. As the German
culture and environment is largely different than that of the American markets, Sub Zero Ice Cream
& Yogurt must adapt their marketing mix to better compete in the German market. The
recommended mode of entry into the German market should be through expansion of the current
franchising operation model employed in the United States.
5. 1 Company Analysis
1.1 The Company
1.1.1 History and Image
Jerry and Naomi Hancock were always drawn to the idea of customizable food. They wanted to
create a store that would sell customizable desserts. Jerry used his background in chemistry to
develop a method of freezing ice cream using liquid nitrogen. In 2004 Jerry and Naomi Hancock
opened Sub Zero in Orem, Utah. Sub Zero was featured in the fourth season of the show “Shark
Tank” where they presented their business as a new age ice cream shop where there are “trillions”
of different combinations for ice cream. Sub Zero currently has 44 U.S. owned franchise locations,
3 franchised owned international locations and 2 company owned locations in 3 separate countries:
United States, China, and the United Arab Emirates.1
Jerry and Naomi Hancock still own Sub Zero
Ice Cream and continue to franchise the company to entrepreneurs within the United States and
are beginning to expand abroad. Each location has between 5-10 employees. With 49 locations
open during 2015, the number of Sub Zero Ice Cream & Yogurt employees can therefore be
estimated to be between 245-490.2
Figure 1 – Sub Zero Ice Cream & Yogurt Logo3
1.1.2 Human Resource Management
Sub Zero Ice Cream and Yogurt’s mission is “to provide the best quality and freshest frozen
desserts, exactly as the customer desires, while entertaining and educating in the most innovative
ways.”4
Sub Zero Ice Cream trains their employees and continually retrains them to provide
optimal quality for the customers; consistently trains employees about the use and safety of
working with liquid nitrogen, ensuring their employees are well aware of the dangers thereof.
1
https://www.entrepreneur.com/franchises/subzeroicecream/333606
2
https://www.entrepreneur.com/franchises/subzeroicecream/333606
3
http://www.subzeroicecream.com/
4
https://www.subzeroicecream.com/about-us/
6. 1.1.3 Corporate Social Responsibility (CSR)
Sub Zero Ice Cream provides education to schools and the general public about the advantages of
liquid nitrogen. They create an increased interest in sciences when providing schools with
information of how they create their ice cream.5
Sub Zero Ice Cream has in the past partnered with
a local blood bank to sponsor a blood drive in the community in which they operate.6
1.2 Organizational Structure
1.2.1 Internal Analysis
Sub Zero Ice Cream and Yogurt started as a family owned company, and is still owned by the same
two people that founded the company, Jerry and Naomi Hancock.
Table 1 – SWOT Analysis
1.2.2 Product and Product Categories
Sub Zero Ice Cream and Yogurt specializes in making ice cream to the desires of the customer
through mass customization. Sub Zero Ice Cream offers 6 different types of creams (custard, low-
fat, yogurt, lactose free, vegan, and sugar free), and 18 different flavors ranging from blackberry
to vanilla. Additionally, they offer 17 mix-ins which allows for even greater variety, thus
increasing the number of combinations that can be made in the shop.7
The end creation of the
5
http://www.subzeroicecream.com/education/
6
http://www.prweb.com/releases/2014/12/prweb12409290.htm
7
http://www.subzeroicecream.com/menu/
Strengths
Product made in store
Fast reliable service
High customization
Continued expansion in
domestic market
Franchising
International Experience
Weaknesses
Lack of brand loyalty
Lack of multiple selling channels
Opportunities
Expansion to new markets
Growth rate of ice cream
industry
Threats
Retailed ice cream
Substitutes and competitors
Changes in preferences/seasons
Macroeconomic trends
7. customer is then dipped into the liquid nitrogen to freeze the ice cream. Figure 2 shows an example
of some of their creations.
Figure 2 – Ice Cream product8
1.2.3 Financial information
As Sub Zero Ice Cream and Yogurt is a private company, their revenue and profits are not disclosed
to the public. However, when they appeared on “Shark Tank” they disclosed that in 2011 Sub Zero
Ice Cream and Yogurt had $2 million in sales, with a projected $4 million in sales for 2012.9
According to Sub Zero Ice Cream & Yogurt’s franchising net worth requirements, Sub Zero
expects $150,000 – $250,000 from each location.10
Thus assuming this as the total sales from each
location, sales for Sub Zero would be between $7,350,000 and $12,250,000.
1.2.4 Industry Analysis
The ice cream industry in developed countries has reached the maturity phase, however despite
this, sales continue to increase.11
In 2013, “1.53 billion gallons of ice cream and related frozen
desserts were produced in the U.S. in 2013. Sales of ice cream and frozen desserts rose 2.1%.”
Over the past 5 years ice cream production however, has had a negative growth rate of -0.3%.12
The total revenue for ice cream production in the average of the 5 years between 2010 and 2015
was $8 billion, and the projected growth rates for ice cream production estimate that the revenue
will fall to $7.9 billion over 5 years.
Intensity of rivalry: The intensity of rivalry in the ice cream market is high because there are many
producers of ice cream, who not only have their own shops, but also retail their items to retailers.
Major competitors for Sub Zero Ice Cream & Yogurt are Unilever (21.8% market share), Nestle
SA (21.3% market share), Wells Enterprises Inc. (14.3% market share), Dean Foods Company
(10.5% market share) and HP Hood (3.5% market share).13
Thus making the HHI for this industry
8
https://twitter.com/SubZeroSA/status/701143912673488896
9
http://www.subzeroicecream.com/about-us/shark-tank/
10
https://www.entrepreneur.com/franchises/subzeroicecream/333606
11
http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=249
12
http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=249
13
http://clients1.ibisworld.com/reports/us/industry/majorcompanies.aspx?entid=249
8. equal to (21.8)2
+(21.3)2
+(14.3)2
+(10.5)2
+(3.5)2
= 1,255.92; indicating that the ice cream
production industry is a moderately concentrated competitive industry.14
Threat of new entrants: The threat of new entrants is medium because large players in the market
capture a lot of the market making it harder for new companies to join the market and succeed.
However some of the market that can be captured by smaller firms, but it may be hard for these
firms to do that.
Threat of substitutes: The threat of substitutes is medium because Sub Zero Ice Cream & Yogurt
is in the market for desserts and there are a few substitutes to their products such as chips, or other
snacks. Because the ice cream market is mature, Sub Zero Ice Cream & Yogurt may suffer from a
new market that props us to capture demand from the ice cream market; this will hurt the ice cream
producers from selling their product.
Bargaining power of suppliers: Suppliers control some costs of Sub Zero Ice Cream & Yogurt, so
a good relationship is required between suppliers and Sub Zero Ice Cream & Yogurt. The suppliers
can only have a more power in the market if they outnumber the buyers within the market.
Essentially, the suppliers would be able to have more of a say to establish their own prices if there
are few buyers in the market.
Bargaining power of buyers: The only way that buyers will be able to have more control over the
market is if buyers outnumber the suppliers. In this instance, buyers would have more of a choice
of where to buy their product from. Therefore, buyer power in this market is medium because there
are many suppliers and buyers have large influence over the market.
Figure 3 – Porter’s Five Forces
14
http://www.investopedia.com/terms/h/hhi.asp
9. 1.2.5 Competitor’s Table
The table below compares the market share and sales of leading ice cream producers to that of
Sub Zero Ice Cream:
Company Name Year
Founded
Market
Share
Sales Number of
Employees
Unilever 1929 21.8% $ 1,751,100,000 174,000
Nestle SA 1905 21.3% $ 1,724,600,000 328,000
Wells Enterprises Inc 1913 14.3% $ 1,150,800,000 1000-5000
Dean Foods Company 1925 10.5% $ 848,800,000 17,000
HP Hood 1846 3.5% $ 279,400,000 4,500
Subzero Ice Cream 2004 .12% $9,800,000 245-490 (Approx.)15
Table 2: Competitor’s Table16
2 Global Market Search
2.1 Country Selection
2.1.1 Pre-Country Selection
Sub Zero Ice Cream & Yogurt is currently in three countries with room for further international
expansion. In order to a select a proper country for my company to enter, a few exclusions must
be made in order to better determine what country to enter. Sub Zero Ice Cream & Yogurt must
enter a developed country as their product will not appeal to developing countries because it is not
considered to be a necessity and therefore demand for ice cream will be lacking.
2.1.2 Criteria Selection
Based upon a few criteria the possible countries that I recommend Sub Zero Ice Cream & Yogurt
enter will be narrowed down:
Population17
: This is a necessary measurement in order to judge the size of the consumer market
for Sub Zero Ice Cream & Yogurt. As this is an important faction in the selection process, countries
with a population under 20 million will be excluded. This data is from 2015.
GDP per Capita based on Purchasing Power Parity (PPP18
): “This measures the amount of
adjustment needed on the exchange rate between countries in order for the exchange to be
equivalent to each currency’s purchasing power.”19
This data is from 2014.
Consumer Expenditure on Food per person20
: Sub Zero Ice Cream & Yogurt’s products are
factored into food spending and therefore this measure can help indicate spending per person per
year on food in total. This data is from 2014.
15
https://www.entrepreneur.com/franchises/subzeroicecream/333606
16
http://clients1.ibisworld.com/reports/us/industry/majorcompanies.aspx?entid=249
17
https://www.cia.gov/library/publications/the-world-factbook/
18
http://www.indexmundi.com/g/r.aspx?v=67
19
http://www.investopedia.com/terms/p/ppp.asp
20
http://www.ers.usda.gov/data-products/food-expenditures.aspx#26636
10. Ease of Business21
: In order for Sub Zero Ice Cream & Yogurt to be successful in a new country
they must operate in a country free from political corruption and poor business structure.
A Likert Scale is used to classify variables between a scale of 1 to 5 in order to compare the
countries on an equivalent scale:
Factors 1 2 3 4 5 Weight
Population (in millions) 22-36 36-50 50-64 64-78 78+ 30%
GDP per capita in Purchasing Power
Parity (PPP) in USD (in thousands)22
11-18 18-25 25-32 32-39 39+ 30%
Consumer Expenditure on Food per
capita ($ of USD)
750-1200 1200-1650 1650-2100 2100-2550 2550+ 25%
Ease of Business 57-62 62-67 67-72 72-77 77+ 15%
Table 3: Likert Scale
Each of these factors is important in determining which country Sub Zero Ice Cream & Yogurt
should enter, therefore the weights are chosen according to importance to the company in choosing
a new market. Population determines the total size of the market and therefore is weighted as the
highest measurement for each country. GDP per capita and Consumer Expenditure on food per
capita are also essential factors to my company therefore their weights are high, but because Sub
Zero Ice Cream & Yogurt is more of a specialty I weighted consumer expenditure on food to be a
little less than GDP per capita (by 5%). Ease of business is weighted the least. While it is still a
very important measurement for judging countries, it is not as important as overall market size,
GDP per capita, and consumer expenditure on food per capita.
21
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB15-
Chapters/DB15-Report-Overview.pdf
22
http://www.indexmundi.com/g/r.aspx?v=67
11. Table 4: Actual Numbers for each Country
23
https://www.cia.gov/library/publications/the-world-factbook/
24
https://www.cia.gov/library/publications/the-world-factbook/
25
http://www.ers.usda.gov/data-products/food-expenditures.aspx#26636
26
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB15-
Chapters/DB15-Report-Overview.pdf
Factors Population
(millions)23
GDP per capita in
PPP (USD)24
Consumer
Expenditure on
Food per capita
(USD)25
Ease of Business
Index26
Australia 22.75 43,000 3,423 80.66
Canada 35.1 43,100 2,560 79.09
Poland 38.56 21,100 1,502 73.56
Argentina 43.43 18,600 1,701 57.48
Spain 48.15 30,100 2,688 73.17
South Africa 53.68 11,500 777 71.08
Italy 61.86 29,600 3,081 68.48
France 66.55 35,700 3,241 73.88
United
Kingdom
64.09 37,300 2,435 80.96
Germany 80.85 39,500 2,646 79.73
Russia 142.42 18,100 1,935 66.66
Brazil 204.26 12,100 1,101 58.01
12. Table 5: Likert Scale, Weighted and Base Scores
2.1.3 Country Comparison
The top three countries in my analysis are Germany, France, and the United Kingdom, the chart
below shows the results of these three countries alone:
Factors Population
(millions)
GDP per capita
in PPP (USD)
Consumer
Expenditure on
Food per capita
(USD
Ease of
Business
Index
Weighted
Score
Base
Score
Australia 1 5 5 5 3.8 4
Canada 1 5 4 5 3.55 3.75
Poland 2 2 2 4 2.3 2.5
Argentina 2 2 3 1 2.1 2
Spain 2 3 5 4 3.35 3.5
South Africa 3 1 1 3 1.9 2
Italy 3 3 5 3 3.5 3.5
France 4 4 5 4 4.25 4.25
United
Kingdom
4 4 4 5 4.15 4.25
Germany 5 5 5 5 5 5
Russia 5 2 3 2 3.15 3
Brazil 5 1 1 1 2.2 2
Weight 30% 30% 25% 15%
13. Factors France United
Kingdom
Germany Weight
Population (in millions) 4 4 5 30%
GDP per capita in Purchasing Power Parity in
USD (PPP)
4 4 5 30%
Consumer Expenditure on Food per capita ($ of
USD)
5 4 5 25%
Ease of Business 4 5 5 15%
Weighted Score 4.25 4.15 5
Base Score 4.25 4.25 5
Table 6: Final 3 Countries Ratings and Weighted/Base Score
Figure 4 – Final Three Countries with Perceptual Map of Variables GDP per capita and Consumer
Expenditure on Food per capita
France
United Kingdom
Germany
Low Consumer
Expenditure on
Food per capita
HighGDPper
CapitainPPPin
USD
Low Consumer
Expenditure on Food
per capita (USD)
High Consumer
Expenditure on
Food per capita
(USD)
LowGDPper
CapitainPPPin
USD
14. The size of the bubbles correspond to population, with the horizontal axis corresponding to GDP
per capita expressed in PPP in USD, while the vertical axis corresponds to consumer expenditure
on food per capita in USD. As seen through the perceptual map and the through the tables,
Germany scores higher in population as seen through the size of the bubble, and GDP per capita
than both France and the United Kingdom, which is shown visually as being further to the right
than either France or the United Kingdom.
3 Market Analysis
3.1 PEST Analysis
3.1.1 Germany
Political Factors: Germany’s government is a federal parliamentary republic that was reunified
back into a single country in 1990, and was one of the founding members of the European Union
in 1993. Germany is a member of the United Nations, NATO, the G8, the G20, and the OECD.
Germany ranks 14th
in the world with a 79.73 ease of business score.27
Economic Factors: The German economy is the fifth largest economy in the world in terms of
GDP PPP and the largest economy in all of Europe. The service sector is largest part of Germany’s
total economy, contributing to around 70% of Germany’s total GDP, with industry contributing
29.1% to GDP. Germany’s GDP considering PPP for 2015 was 3.842 trillion USD with a real
growth rate of 1.5%.28
Germany’s labor force amounts to 45.04 million with an unemployment
rate amongst that of 4.8%, indicating a healthy steady economy with a low unemployment rate.
Germany has a 286.3 billion USD current account balance with exports equal to 1.292 trillion USD
and imports equal to 983.9 billion USD. Germany’s main export partners include France (9.6%),
the United Kingdom (7.9%), and the United States (6.9%), while their main import partners
include the Netherlands (13.8%), France (8%), and China (6.6%). Germany currently utilizes the
standardized Euro for their currency which currently trades at 1 Euro = 1.13 USD.
Social Factors: Germany’s population size is 80,854,408 (2015) with a negative growth rate of
.17%. Germany has an urban population of 75.3%, with the major urban areas consisting of Berlin
(3.563 million), Hamburg (1.831 million), Munich (1.438 million), and Cologne (1.037 million).
While the official language is German, 56% of their population speak English. The life expectancy
for Germans is 80.57 years; and the median age is 46.5 years (2015). The culture distance between
Germany and the United States is 137.29
27
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB15-
Chapters/DB15-Report-Overview.pdf
28
https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html
29
http://geert-hofstede.com/germany.html
15. Figure 5 – Map of Germany30
Technological Factors: Germany has a very well built infrastructure making them one of the most
developed countries in the world. Germany has a total of 539 airports (2013), 43,468.3 kilometers
of railways (2014), 645,000 kilometers of roadways (2010), and 7,467 kilometers of waterway
(2012). Germany has 47.02 million fixed line telephone users (5th
in the world), 99.5 million
mobile phone users (15th
in the world), and 70.3 million Internet users (8th
in the world). Germany
has a rapidly expanding infrastructure and telecommunications sector that is allowing their overall
technology to expand to facilitate more growth and allow for easier communications.
3.1.2 France
Political Factors: France passed a constitution in October 1958 providing the basis for the Fifth
Republic. France declares itself to be an indivisible, secular, democratic, and social republic.
France belongs to the European Economic Community, NATO, the World Trade Organization,
and the OECD. France ranks 31st
in the world for ease of doing business with a score of 73.88.31
Economic Factors: The French economy is the 11th
largest economy in the world in terms of GDP
PPP with a GDP of 2.647 trillion USD, with a real growth rate of 1.2%. The leading industries are
telecommunications, aerospace and defense, ship building, and pharmaceuticals. France’s labor
force amounts to 29.84 million people, with an unemployment rate of 9.9%.32
France’s current
account balance is in the amount of -5.24 billion USD, which is a decline from 2014 by 21 billion
USD, French exports amount to 509.1 billion USD, and French imports amount to 539 billion
USD. France’s main export partners include Germany (16.9%), Belgium (7.5%), and Italy (7.4%).
30
http://www.worldatlasbook.com/germany/germany-political-map.html
31
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB15-
Chapters/DB15-Report-Overview.pdf
32
https://www.cia.gov/library/publications/the-world-factbook/geos/fr.html
16. France’s main import partners include Germany (19.9%), Belgium (11.4%), and Italy (7.8%).
France currently utilizes the standardized Euro for their currency which currently trades at 1 Euro
= 1.13 USD.
Social Factors: France’s population is currently 66,553,766 (2015) with an annual growth rate of
.43%. France’s urban population makes up 79.5% of their total population with the major urban
areas consisting of Paris (10.843 million), Lyon (1.609 million), and Marseille-Aix-en-Provence
(1.605 million). The official language is French with 100% of the population speaking French, and
39% speaking English. Life expectancy th is 81.75 years which is 19th
in the world, with the
median age at 41.1 years (2015). The culture distance between France and the United States when
calculated amounts to 164.33
Figure 6 – Map of France34
Technological Factors: France has a very well structured infrastructure with a total of 464 total
airports (2013), 29,640 kilometers of railway (2014), 1,028,446 kilometers of roadway (2010), and
8,501 kilometers of waterways (2010). France has a total of 38.81 million total subscriptions for
fixed telephone lines (8th
in the world), as well as 64.9 million mobile phones or 98 per 100 people
(24th
in the world) (2014). France has 56.8 million Internet users (11th
in the world) which is 85.8%
of their total population.
3.1.3 United Kingdom
Political Factors: The United Kingdom is a unitary democracy within the framework of a
constitutional monarchy and Commonwealth realm. The United Kingdom first joined the
European Economic Community (EEC) in 1973 and has remained a member of the EU since then.
The United Kingdom has membership in NATO, WEU (Western European Union), and the
OECD. The United Kingdom ranks 8th
in the world for ease of business with a score of 80.96.35
Economic Factors: The United Kingdom is the 10th
largest economy in the world when considered
through GDP PPP measuring at 2.66 trillion USD, with a real growth rate in 2015 of 2.5%. The
33
http://geert-hofstede.com/france.html
34
http://www.fantasytravel.ro/franta-154.html
35
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB15-
Chapters/DB15-Report-Overview.pdf
17. service sector is the main contributor to GDP in the United Kingdom, contributing 78% of GDP.
The financial services industry is very important in the United Kingdom because London is the
world’s largest financial center. The United Kingdom’s labor force amounts to 32.94 million
people with an unemployment rate of 5.4%, which decreased .8% over the past year, indicating
economic growth. The United Kingdom’s current account balance is -135.8 billion USD in 2015,
with exports totaling 442 billion USD and imports in the amount of 617.1 billion USD. The main
export partners for the United Kingdom are the United States (12.7%), Germany (10.5%), and the
Netherlands (7.6%). The main import partners for the United Kingdom are Germany (14.6%),
China (8.9%), and the Netherlands (8%). The United Kingdom utilizes the British Pound for their
currency which currently trades at 1 Pound = 1.43 USD.
Social Factors: The United Kingdom population size is 64,088,222 people (2015) with an annual
growth rate of .54%. The UK’s urban population makes up 82.6% of their total population with
the largest urban areas being London (10.313 million), Manchester (2.646 million), and
Birmingham (2.515 million). The official language is English with 100% of the population
speaking English, and regional languages of Scots and Gaelic spoken in parts of the UK. Life
expectancy is 80.54 years (33rd
in the world), with the median age being 40.4 years (2015). The
culture distance between the United States and the United Kingdom when calculated is 48.36
Figure 7 – Map of United Kingdom37
Technological Factors: The United Kingdom has a very well developed infrastructure and
telecommunications system in place that has helped facilitate growth in their economy. The United
Kingdom has 460 airports (2013), 30,858.5 kilometers of railways (2014), 394,428 kilometers of
roadways, and 3,200 kilometers of waterways (2009).38
The United Kingdom has a total of 33.24
million subscriptions to fixed line telephones (9th
in the world), and 78.5 million mobile phone
36
http://geert-hofstede.com/united-kingdom.html
37
http://allholidaytips.com/uk-map/
38
https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html
18. subscribers (20th
in the world). The United Kingdom has a total of 57.3 million Internet users in
2014 (10th
in the world), or 89.9% of their total population has access to the Internet.
3.2 Competitive Analysis
3.2.1 Main Competitors
In the United Kingdom the retail value and volume sales of ice cream have continued to fall
through 2015.39
The primary competitors for ice cream in the United Kingdom are Unilever (32%
value share)40
, whose main brands consist of Magnum, Ben & Jerry’s and Carte d’Or with all of
these brands gaining market share between 2014 and 2015. Overall the ice cream market in the
United Kingdom is growing at a rate of 2%, which has been on the decline over the past few years.
In France, the overall ice cream market has increased total revenues by 2.5% from the period
between 2009 and 2013.41
Unilever and Nestlé account for 44% of market share of the ice cream
market in France.42
In Germany, ice cream has continued on a growth rate of 3% increasing the market size to €3,212
million in 2015.43
The primary competitors of ice cream and frozen desserts in Germany are
Unilever Deutschland (22% retail value share), and Nestlé Schöller GmbH & Co KG (12% retail
value share).44
Both of these competitors are present in all segments with well-known products
and brands, they were able to accomplish this sales and marketing activities over time.
3.3 Globalization Analysis
Globalization shows how open a country is to adapting other cultures that are different from their
own. The KOF Globalization Index measures economic, social, and political globalization. The
greater the value of the index the greater the amount of globalization. Table 7 shows each of the
three remaining countries KOF scores in 2015 in order of how globalized they are.
Countries KOF
Globalization
Index
KOF Economic
Globalization
KOF Social
Globalization
KOF Political
Globalization
United
Kingdom
82.96 70.53 85.84 95.93
France 82.65 67.85 86.5 97.91
Germany 78.86 64.1 83.75 92.17
Table 7: Globalization Indexes45
39
http://store.mintel.com/ice-cream-and-desserts-uk-june-2015
40
http://www.euromonitor.com/ice-cream-and-frozen-desserts-in-the-united-kingdom/report
41
http://www.researchandmarkets.com/reports/2505311/ice_cream_in_france
42
https://weloveicecreams.wordpress.com/2013/10/29/the-profile-of-ice-cream-industry/
43
http://www.euromonitor.com/ice-cream-and-frozen-desserts-in-germany/report
44
http://www.euromonitor.com/ice-cream-and-frozen-desserts-in-germany/report
45
http://globalization.kof.ethz.ch/media/filer_public/2015/03/04/rankings_2015.pdf
19. As shown in the table, the United Kingdom is the most globalized of the remaining three countries,
while France falls slightly behind. Germany has lower overall KOF globalization index due to the
fact that they have lower scores on each measurement of the index.
3.4 Country Selection
3.4.1 Criteria Selection
To assess the top 3 countries a new Likert Scale will be constructed. The original four variables
are used as well as the introduction of new variables to better assess the three top countries. Below
are the original variables:
Population: This is a necessary measurement in order to judge the size of the consumer market for
Sub Zero Ice Cream & Yogurt. Being an important factor in selecting a country, countries with a
population less than 20 million people will be excluded. The population is as of 2015.
GDP per capita in PPP (in USD): GDP per capita is a useful measurement in judging the well-
being of an economy, and adjusting for PPP (purchasing power parity) the GDP per capita is as of
2014.
Consumer Expenditure on Food per person (in USD): Sub Zero Ice Cream & Yogurt makes ice
cream and yogurt, which means that consumption of their product falls within this measurement
and therefore the value of this measurement is essential to the success of Sub Zero Ice Cream &
Yogurt.
Ease of Business: Sub Zero Ice Cream & Yogurt needs to enter a country free of political
corruption and poor business structure therefore this is a very important factor to be successful
within a country.
The new variables are the following:
KOF Globalization Index: This variable measures three different dimensions of globalization:
economic globalization, social globalization, and political globalization. The greater the value the
more globalized the country is. This index is shown previously in table 7, the data is from 2015.
Culture Distance: Geert Hofstede’s model compares six different dimensions that make up the
culture of a country and how far apart these countries are from each other culturally. This is helpful
to judge how different two countries are from each other. The scores for each of three countries
are in appendix for the United Kingdom, France, and Germany in figures 1, 2, and 3 respectively.
The formula to calculate culture distance is as follows:
∑ |Co – Cd|
Co = Home country score
Cd = Destination country score
Investment Risk: Because Sub Zero Ice Cream & Yogurt will need to invest money to build
physical stores in the country that they will need to enter a country with low overall investment
risk.
20. Table 8 shows the new Likert Scale factoring in the 3 new variables as well as incorporating the
4 variables from the previous section:
Factors 1 2 3 4 5 Weights
Population 22-36 36-50 50-64 64-78 78+ 24%
GDP per capita PPP
(thousands of USD)
11-18 18-25 25-32 32-39 39+ 24%
Consumer Expenditure on
Food per capita (thousands)
750-1200 1200-1650 1650-2100 2100-2550 2550+ 20%
Ease of Business 57-62 62-67 67-72 72-77 77+ 12%
Investment Risk 23 21 < 20 10%
Culture Distance > 140 140-120 120-100 100-80 < 80 5%
KOF Globalization Index 78.75-79.75 79.75-80.75 80.75-81.75 81.75-82.75 82.75+ 5%
Table 8: Likert Scale
3.4.2 Country Side-by-Side Comparison
In the next two tables, the top three countries from the previous section are compared with the
variables that relate to the industry of ice cream & yogurt as well as food in general. The last three
variables are specific to each country in order to judge the preferability of each country as well as
considering the original four variables. Table 9 shows the actual numbers for each of the variables
for each of the remaining three countries, while table 10 utilizes the Likert Scales shown in Table
8 to rate the countries on a scale between 1 and 5, with weighted and base scores.
21. Factors United Kingdom France Germany Weights
Population 64.09 66.65 80.85 24%
GDP per capita PPP (thousands
of USD)
37,300 35,700 39,500 24%
Consumer Expenditure on Food
per capita (thousands)
2,435 3,241 2,646 20%
Ease of Business 80.96 73.88 79.73 12%
Investment Risk 2046
2347
2148
10%
Culture Distance 48 164 137 5%
KOF Globalization Index 82.96 82.65 78.86 5%
Table 9: Actual Numbers
Factors United
Kingdom
France Germany Weights
Population 4 4 5 24%
GDP per capita PPP (thousands of
USD)
4 4 5 24%
Consumer Expenditure on Food per
capita (thousands)
4 5 5 20%
Ease of Business 5 4 5 12%
Investment Risk 5 1 3 10%
Culture Distance 5 1 2 5%
KOF Globalization Index 5 4 1 5%
Weighted Score 4.32 3.75 4.45
Base Score 4.57 3.29 3.71
Table 10: Likert Scale, Weighted and Base Scores
Table 10 shows that the top country for Sub Zero Ice Cream & Yogurt is Germany. Germany has
the highest overall weighted score of 4.45, while not having the highest base score. Germany scores
were higher in areas that were weighted as more important, thus allowing Germany to score the
highest in the Likert scale analysis.
46
http://viewswire.eiu.com/index.asp?layout=RKCountryVW3&country_id=1460000146
47
http://viewswire.eiu.com/index.asp?layout=RKCountryVW3&country_id=1350000135
48
http://viewswire.eiu.com/index.asp?layout=RKCountryVW3&country_id=1360000136
22. 3.5 Conclusion and Recommendations
After much analysis, Sub Zero Ice Cream & Yogurt should enter Germany as the newest market.
Since a country has now been selected, we must now address the marketing mix for their stores.
In order for Sub Zero Ice Cream & Yogurt to know how to enter the market, price, product,
positioning, and promotion must be taken into account. After taking these factors into account, the
STP process will be followed allowing Sub Zero Ice Cream & Yogurt will figure what segments
they will target in Germany, and how they will position themselves in this market.
4 Market Entry
4.1 Risk of Internationalization
There are many risks of internationalization when a company decides to enter a new country,
however Sub Zero Ice Cream & Yogurt has already entered 2 separate international markets. The
risks of internationalization are essential to understand when entering a new country, because
failure in a new market could lead to major loss of investment. These risks include but are not
limited to the following: political instability, regulatory changes, failure to judge existing
regulations, misunderstandings of different cultures and business practices, lack of experience
abroad, changes in currency exchange rates, macroeconomic trends, and social instability.
Germany has very low war risk, risk of expropriation and government action and low transfer risk,
showing that the German market is a safe and stable investment.49
Due to the fact that Sub Zero
Ice Cream & Yogurt’s mode of entry is franchising, lack of international experience is not as much
of an issue due to the fact the franchisee should be from the area and they will open the store; Sub
Zero Ice Cream & Yogurt must ensure that the franchisee(s) they choose be screened and carefully
chosen in order to minimize failure risks.
4.2 German Ice Cream Market
The ice cream market in Germany has an expected market size for 2015 of €3,212 million (~$3,629
million) in 2015 with an expected growth rate of 3%.50
The largest segment of ice cream
consumption is the age segment over the age of 55, they are responsible for almost 40% of total
ice cream consumption.51
Germans under the age of 18 make up 15% of total ice cream
consumption in Germany.
4.3 Market Entry Mode
Sub Zero Ice Cream & Yogurt has a franchising operation already in place in the United Arab
Emirates, the United States, and in China. This is their primary mode of entry. Given this
information, Sub Zero Ice Cream & Yogurt should enter the German market by way of franchising
their operations. Typical Sub Zero Ice Cream & Yogurt stores are located in high traffic shopping
centers, shopping malls or storefronts.52
The company’s stores are typically between 1200 and
1900 square feet. The initial investment for opening one store for the company is between
49
http://www.delcredereducroire.be/en/country-
risks/#focusCountry=DE&focusContinent=&filter=TransferRisk&min=0&max=7&tab=1
50
http://www.euromonitor.com/ice-cream-and-frozen-desserts-in-germany/report
51
http://www.dw.com/en/ice-cream-nation-german-market-most-valuable-in-europe/a-17827040
52
http://www.subzeroicecream.com/faqs/
23. $160,000 and $381,000. The advantages of franchising their operations to German entrepreneurs
include lower financial risk, bypassing regulations and tariffs, and gaining more local knowledge
while the franchise is in operation. However, some of the major disadvantages to franchising Sub
Zero Ice Cream & Yogurt’s stores, include less control over market and revenues, some loss of
control of operations, and potential relationship issues with the franchisee. In order to start a
franchise with Sub Zero Ice Cream & Yogurt, potential franchisees must visit
http://www.subzeroicecream.com/franchising/ and email where the store will be located. Sub Zero
Ice Cream & Yogurt must consider inflationary changes within the German market and changes
in the exchange rate between Germany and the United States. In order to decrease risk of changing
inflation and exchange rates Sub Zero Ice Cream & Yogurt needs to make a contract that requests
their pay in dollars, in order to usurp the inflation and exchange rate in Germany.
4.4 Marketing Mix: Four P’s
Sub Zero Ice Cream & Yogurt need to adapt their products to be more in line with the German
tastes to attract more German customers. Most of the typical flavors that are offered in the
American stores should also be offered in the German stores, with additional flavors and mix-ins
that cater to German tastes. Prices for Sub Zero Ice Cream & Yogurt should be adapted due to
exchange rates and inflation in Germany. The promotional strategies should be adapted to be
effective towards targeting the different market in Germany, as well as the regulatory environment.
Promotional strategies will be costly, but the extra sales that they would bring in will make up for
the spending on advertising.
4.4.1 Product
Sub Zero Ice Cream & Yogurt is a unique type ice cream producer that allows consumers to choose
from multiple combinations of flavors and mix-ins that they can apply to their frozen yogurt or ice
cream. When moving into the German market, Sub Zero will need to add more flavors and mix-
ins and possibly eliminate other flavors in order to be more adaptive to the German market and
overall German tastes. In Germany, there has been a shift of demand away from dairy ice cream
24. and more toward non-dairy ice cream.53
German ice cream consumers are interested in non-dairy
alternatives, and according to a 2015 study by Mintel 63% of German ice cream consumers are
interested in non-dairy alternatives and 20% of Germans are willing to pay more for non-dairy ice
cream; of that 30% of these consumers willing to pay more for non-dairy alternatives are between
the age of 16 to 24 year olds.
4.4.2 Price
Sub Zero Ice Cream & Yogurt need to remain competitive in the ice cream and yogurt industry in
Germany. In order to do this, Sub Zero need to adjust their prices based on the exchange rate, and
have a penetration pricing strategy. In order for Sub Zero to compete with the major ice cream
sellers in Germany, it is imperative that Sub Zero price their product correctly for the company to
bring in consumers and generate profit. As of 21 April 2016, the exchange rate is .89 Euros per
USD.54
Given this information, the overall price level is set by the franchisee, therefore the
decision of pricing is merely suggestive from the standpoint of the company. When the franchisee
does price their products they must be aware of company factors such as the marketing objectives
of the company, market factors (consumer perceptions of quality, willingness to pay) and
regulatory environment (government influences on the market, constraints, taxes). The franchisee
should base their price on a value-based strategy which focuses on the consumer and competition
and will represent the quality of the product and the overall value of their ice cream. Ice cream is
not an essential good, therefore changes in prices must consider the elasticity of demand for our
products. Based on current prices in the United States, the franchisee should charge €2.21 for a
single size of ice cream, however this price should be adapted to market prices in Germany as well
as adjusted for the higher taxes in Germany. This is calculated using the formula Ee = Eb (1 + i1)/(1
+ i2). This formula shows how different inflation rates affect exchange rates, and allows us to
develop a pricing strategy for our products. The inflation rate in Germany is .02%55
, and is .02%
in the United States56
, and Eb = .89. When calculated in the formula Ee = .89, and in order to get
the final price of our product we multiply the price of our product in the United States for a single
size of ice cream ($2.49) which yields €2.21.
4.4.3 Promotion
Promoting Sub Zero Ice Cream & Yogurt to new consumers in the German market is essential in
leading to the success of the business in Germany. Due to the well-developed telecommunications
systems of Germany, Sub Zero Ice Cream & Yogurt has access to multiple forms of
communications to promote their products. Utilizing the AIDA model, Sub Zero Ice Cream &
Yogurt needs to first gain the attention of consumers in the new market of Germany, this can be
done through advertising and public relations tools. More than 90% of households in Germany
have cable or satellite TV, and 86.8% of the population of Germany have access to the Internet.57
Advertising comes at a cost to Sub Zero, whereas public relations do not have a cost, so this option
53
http://www.mintel.com/press-centre/food-and-drink/two-thirds-of-german-ice-cream-consumers-are-
interested-in-non-dairy-alternatives
54
http://www.xe.com/currencyconverter/convert/?From=USD&To=EUR
55
https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html
56
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
57
https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html
25. is useful and cost effective. Sub Zero should employ the same public relations techniques they use
in the United States to draw attention to their brand. Sub Zero should promote their product through
education. In the United States, Sub Zero brings their products to schools to get students interested
in science and this draws further attention to their brand, utilizing this type of promotion does not
come with a cost and helps promote their brand. Once Sub Zero Ice Cream & Yogurt has gained
the attention of consumers, utilizing the AIDA model, Sub Zero must generate interest in their
product. This can be done through sales promotions in order to spur demand for their products by
lowering prices of their goods for a short span in order to generate repeat customers and gain new
customers.
Sub Zero Ice Cream & Yogurt must take into account the culture distance between the United
States and Germany when utilizing promotions. Hofstede’s culture distance framework is a
necessary measure to understanding how to promote products within a different culture. Hofstede’s
framework is based on the following dimensions: power distance, individualism, masculinity,
uncertainty avoidance, long term orientation, and indulgence. Figure 8 shows Hofstede’s cultural
dimensions between Germany and the United States. In regards to power distance, German and
American culture are similar, meaning that society is highly decentralized and supported by a
strong middle class. Individualism in Germany is lower than that of the United States, but still
scores high on the framework, meaning that the members of society put emphasis on themselves
and direct family over overall society. Germany and the United States score close in regards to
masculinity, which means that performance is highly valued and promote work in order to live,
Germans generally show their wealth through the products that they own. Uncertainty avoidance
in Germany is higher than in the United States, meaning that details are important in order to make
decisions for Germans. Long term orientation is much higher in Germany than in the United States,
this shows that Germany has an ability to adapt traditions easier to changing conditions, and
Germans have a strong propensity to save and invest and preserve to attain results. Indulgence is
lower in Germany than in the United States, meaning that German culture is more restrained, and
their society is more pessimistic and generally put less emphasis on leisure time. Germans control
the gratification they receive from activities by not indulging in as many activities or products that
Americans do.58
58
https://geert-hofstede.com/germany.html
26. Figure 8 – Hofstede Framework for Germany59
4.4.4 Placement
Placement of the physical store is extremely crucial to the success of Sub Zero Ice Cream & Yogurt
in Germany. The opening of the first location should be within one of the major cities within
Germany, such as Berlin or Munich. This allows for Sub Zero Ice Cream & Yogurt to have
maximum exposure to a large market and helps build brand awareness within the new market.
Wherever the store is located is determined by the franchisee, but the first location or first few
locations should be within the major cities of Germany. Due to the typical locations that Sub Zero
Ice Cream & Yogurt has, the franchisee ideally should place the store in a large shopping center
or mall in order to follow the business model, but they are not required to follow the model and
may create a standalone store as long as the size of the store means general requirements (1200-
1900 square feet).60
4.5 STP Process
4.5.1 Segmentation
Segmentation is critical because from segmentation Sub Zero Ice Cream & Yogurt will make a
decision regarding their operations and marketing mix. The first type of segmentation is
demographic-based, the largest segment of consumption of ice cream in the Germany is people
over the age of 55 with total ice cream consumption of 40%, with people under the age of 18
contributing to 15% of total ice cream consumption.61
59
https://geert-hofstede.com/germany.html
60
http://www.subzeroicecream.com/faqs/
61
http://www.dw.com/en/ice-cream-nation-german-market-most-valuable-in-europe/a-17827040
27. 4.5.2 Targeting
When targeting the segments that we wish to engage in business with, Sub Zero Ice Cream &
Yogurt should attempt to capture the market by attempting to target all segments. Sub Zero Ice
Cream & Yogurt should aim to target multiple segments, by differentiating their products and
allowing customization of their products in order to compete with the wide variety of ice cream
and yogurt that exists currently in the German market.
4.5.3 Positioning
Sub Zero Ice Cream & Yogurt should differentiate themselves from their competition in order to
gain larger market shares in the ice cream industry. The store must be unique, fresh, and offer large
customization in order to attract more customers and encourage repeat customers.
4.6 Conclusions
The ice cream industry in Germany is a growing industry that Sub Zero Ice Cream & Yogurt can
benefit from entering into. Sub Zero Ice Cream & Yogurt must consider which segments they will
target and how they plan to target these segments before entering the market in order to better
position themselves in the market. It is necessary that Sub Zero Ice Cream & Yogurt competes on
differentiation in order to provide more products as to compete with their main competitors in
Germany. Sub Zero Ice Cream & Yogurt will greatly benefit on entering the German ice cream
and yogurt market if they follow the steps of STP and other plans laid out in this market plan.
28. References
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Web. <http://www.dw.com/en/ice-cream-nation-german-market-most-valuable-in-europe/a-
17827040>.
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risks/#focusCountry=DE&focusContinent=&filter=TransferRisk&min=0&max=7&tab=1>.
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"Ice Cream and Desserts in the UK." Mintel, June 2015. Web. <http://store.mintel.com/ice-
cream-and-desserts-uk-june-2015>.
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kingdom/report>.
"Ice Cream in France." Research and Markets. Web.
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"Shark Tank's Sub Zero Ice Cream Sponsors Blood Drive." PRWeb. 19 Dec. 2014. Web.
<http://www.prweb.com/releases/2014/12/prweb12409290.htm>.
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<https://www.entrepreneur.com/franchises/subzeroicecream/333606>.
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<http://www.xe.com/currencyconverter/convert/?From=USD&To=EUR>.
29. Appendix
Figure 1: Hofstede Framework for the United Kingdom62
Figure 2: Hofstede Framework for France63
Figure 3: Hofstede Framework for Germany64
62
https://geert-hofstede.com/united-kingdom.html
63
https://geert-hofstede.com/france.html
64
https://geert-hofstede.com/germany.html
