Ben And Jerry's Case Analysis

Ben & Jerry's Case Study

Company History

Ben Cohen and Jerry Greenfield founded Ben & Jerry's Homemade Ice Cream in 1978. Over the years, Ben & Jerry's evolved into a socially-oriented, independent-minded industry leader in the super-premium ice cream market. The company has had a history of donating 7.5% of its pre-tax earnings to societal and community causes. Ben and Jerry further extended their generosity by offering 75,000 shares at $10.50 per share exclusively to Vermont residents, so that they may help those who first supported the company; Ben and Jerry's wanted residents to profit from their venture as well. In addition, steady growth and a widely recognized brand name helped Ben and Jerry's obtain 45 percent of the premium ice-cream market, yet the company stock price remained stagnant at $21 a share for several years.

Key Management

Ben Cohen and Jerry Greenfield, the founders of Ben and Jerry's, gave the firm a very specific spirit. While the majority of corporate managers were under constant pressure to meet their shareholders' demands, Ben and Jerry were quite the opposite, frowning upon traditional business biases based on short-term interests and large profits. Initially, their quick business growth frightened them, as they both thought about severing ties with the fast growing company. However, what was supposed to be a threat to their ideals turned out to be a way to strengthen their campaign for social change. It was through their social ideals that they introduced "caring capitalism", a philosophy which spread throughout a host of educational, environmental and social events. The founders did not place emphasis on cash, equipment and inventories; the "tangible assets" of the firm. Instead, their focus was on "intangible assets" such as reputation, quality of life, joy, social concerns; all of which they considered to be as valuable as material assets. As a result, Ben and Jerry's developed the "Statement of Mission", which was a culmination of three distinct parts: Product Mission - based on quality, innovation and the "made in Vermont" stamp ; Social Mission - (the most meaningful mission) based on quality of life; and an Economic Mission - based on growth, shareholder value and care of employees.

Ben and Jerry's voiced participation in "the greater good" and their "Statement of Mission" ideals triggered a boost in super-premium ice cream sales, which showed that a large portion of the public was ready to pay more for the Ben and Jerry's experience.

Competitive Situation

Ben and Jerry's was able to evolve in a highly competitive market; one of their strengths was their soaring growth rate at 60% a year on average. This growth surfaced from the penetration of new geographic markets by their core competencies: their social mission; the introduction of pint-sized containers; flavor differentiation (which allows the firm to dispose of the slower moving flavors and to target higher margin products); and product quality.

In addition, the ice-cream market was ready for innovation; as this market generates extremely high profits compared to the other products sold in supermarkets. Ninety-four percent of families indulge in ice-cream because it was considered an "affordable luxury". The ice cream market has also had a history of adapting quickly to market evolutions, which was witnessed when consumers began to favor non-fat ice creams as the commercialization of frozen yogurts came about. Thus, moderately because of the regular changes of consumers' habits, innovation lies at the heart of Ben & Jerry's strategy: not only new products but also inventing new flavors, a more sophisticated distribution system (based on "direct store delivery") and new promotion programs.

In order for Ben and Jerry's to subsist in this highly competitive market, they must quickly become one of the largest ice cream makers. They should be able to accomplish this by becoming more visible on the distributor's shelves, which will give consumers additional flavor choices and force outlets to carry more than one or two different flavors of this brand. Ben and Jerry's succeeded in ranking among the first ice cream makers, at the expense of other competitors such as Frusen Gladje and Steve's.

External Environment

Currently, the economy is strong, because consumers can afford the luxury of indulging in super-premium ice cream. However, the economy is not so strong that current Ben & Jerry's employees can afford to take an unwanted cut in salary. In addition, the social message behind the Ben & Jerry's band is becoming well known through a variety of advertising methods.

Problems

How can Ben Cohen and Jerry Greenfield maintain their firm's ideology and core competencies while facing dramatic changes?

There are several problems which have stemmed from the very core competency that has brought Ben & Jerry's so much success. For instance, one of the social measures that embodies the spirit given by Ben Cohen to his company is the 5-to-1 salary ratio (between the top management and the lower level employees), which pretends that all the people working at Ben & Jerry's contribute to its success. This social model raises a range of problems: difficulty hiring highly skilled management because of low salary offerings and the poor perspectives (26% of employees are not happy with their pays); the lack of top managers creates stress and disorganization; the high growth of the firm transformed it in a highly complex structure, in which the rule is very hard to control; the decision process is jeopardized by the rejection from portions of the staff of any form of hierarchy. If Ben & Jerry's is to keep their core competencies, they must consider the possibility of implementing a more efficient model; alternatives we are facing are more about the core mission of the firm than about its strategy.

Possible Options

Although it is obvious that Ben and Jerry's must transform into an organization which is "networked", it will not be enough to make their business functional because they need to brace for viable re-establishment in the long run. Therefore it is necessary that they adopt a complete strategy, and accompany the reorganization