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Executive Summary

This report will:

1. Identify the competitive strategy used by Ben & Jerry's

2. Critically evaluate the strategy used by Ben & Jerry's

3. Offer recommendations based on the findings to improve performance for Ben &  Jerry's

The information in this report was found in academic journals and textbooks.

The report identifies that Ben & Jerry's adopts differentiation strategy.

Ben & Jerry's employed four methods to achieve this strategy:

1. Variety of product

2. Fostering a company image of social activism

3. Franchising the company to aid economic growth

4. Developing creative advertising campaigns

The advantage Ben & Jerry's reaps from using differentiation strategies are:

1. Brand loyalty; the benefits are long term and have a low sensitivity to price. Company is protected from new business's entering marketplace as they are forced to create new ways to compete which is extremely expensive

2. From social activism they can get a good perception brand image to attract the customer to buy their products (strong brand identity)

3. Franchising Ben & Jerry's trough scoop shop, and export, a lot of country can recognized the Ben & Jerry's brand

However, there are significant disadvantage for Ben & Jerry's in using differentiation strategy:

1. Competitor may imitate Ben & Jerry's strategy

2. Higher cost that comes using a differentiation strategy can create a big gap from its competitors that the customers no longer find it valuable to use the service

3. Difficult to sustain – Ben & Jerry's must understand the changing needs and wants of their customers despite the higher costs if served better

Recommendations are made to improve Ben & Jerry's performance in the future:

1. Frequent product innovation to address threats of substitute and imitation products and meet changing consumer preferences

2. Continue franchising scoop shops to increase its market reach and withstand growing competition, both nationally and internationally

3. Increase the development of cleaner manufacturing, disposal, and distribution technologies to ensure that the company continues to stay in compliance

4. Develop additional manufacturing plants and distribution centers outside of Vermont to reduce distribution costs

Ben & Jerry's – A commitment to quality

Introduction

Ben & Jerry's

Ben & Jerry's is an innovative leader in the super premium ice cream industry. The company blends a commitment to provide all natural, high quality ice cream with a commitment towards social activism and environmental responsibility (Tuttle & Krikelas, 2000). This report will analyze both the competitive strategy used by Ben & Jerry's and evaluates the strategy that Ben & Jerry's have used. We will also discuss the advantage and the disadvantage of the strategy.

Objectives

This report will:

1. Identify the competitive strategy used by Ben & Jerry's

2. Critically evaluate the strategy used by Ben & Jerry's

3. Offer recommendations based on the findings to improve performance for Ben & Jerry's

Strategy

Strategy is the discipline that seeks to explain why organizations do what they do, and how they can be changed to achieve a purpose (such as make profits or survive). Although strategy concepts are typically concerned with firms, they can also be applied to individuals undertaking small scale businesses, and groups of firms that are linked to each other (Thomson & Fuller, 2010)

Business Level Strategies

Business level strategies defines an organization`s approach to growth and competition in its chosen business segments (S.Harrison & John, 2012), and also integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets (A.Hitt, Ireland, & Hoskisson, 2011).

Porter Generic Strategy

Michael Porter (Porter, 1980) has  described  a category  scheme  consisting  of  three  general  types  of strategies that  are commonly used by businesses to achieve and maintain competitive advantage. This is the three types of Porter generic strategies:

A. Cost leadership

This strategy emphasizes efficiency. By producing high  volumes  of  standardized products, the  firm hopes  to  take  advantage  of economies  of  scale and experience curve  effects. The  product  is  often produced  at  a  relatively  low  cost  and  made  available  to  a  very  large  customer  base. (Tanwar, 2013).

B. Differentiation – The strategy that Ben & Jerry use

Differentiation  is aimed  at  the  broad  market that  involves  the  creation  of  a  product  or  services  that  is perceived  throughout  its  industry  as  unique.  The company or business unit may then charge a premium for its product (Tanwar, 2013).  

C. Focus

In this strategy the firm concentrates on a select few target markets. It is also called a focus strategy or niche strategy.  It is hoped  that  by  focusing  your  marketing efforts  on  one  or  two  narrow  market  segments and tailoring your marketing mix to these specialized markets, you can better meet the needs of that target market (Tanwar, 2013).

Stuck In the middle

(Hills & Jones, 2009) Such companies are said to be stuck in the middle because they have made product/market choices in such a way that they have been unable to obtain or sustain a competitive advantage. As result, they have no consistent business-level strategy, experience below-average performance, and suffer when industry competition intensifies.

Critics on the Generic Strategies

(Mekić & Mekić, 2014) After  he  wrote  his  books  Competitive  Advantage  and  Competitive  Strategy  during  the  1980s, Michael Porter deserved a name of “management guru”. Since then his theories were commented a lot, refined, reappraised and criticized as being hardly applicable in its complete sense.

In  his  book  Porter  is  arguing  that  in  order  to  be  successful  a  business  should compete on the basis of one strategy; cost leadership, differentiation or focus. However  this  statement  does  not  have  to  be  accurate  according  to  some  scholars.  What Wright argues  is  that  small  firms  have  a  choice  of  successfully  competing  only  through  focus  strategy whereas  bigger  firm  choice  of  either  cost  leadership  or  differentiation  will  not  suffice  and  be attractive enough (Wright, 1987). Secondly Dawes and Sharp argues that Porter's generic strategy  schema  does  not  fit  the  empirical  reality,  and  there  is  no  support  that  these  generic strategies are route to superior profit (John Dawes, 1996).

Differentiation Strategy

Differentiation  is aimed  at  the  broad  market that  involves  the  creation  of  a  product  or  services  that  is perceived  throughout  its  industry  as  unique (Tanwar, 2013). Such differentiation can be based upon design or brand image, distribution, and so forth (Frambach & Verhallen, 2003). Differentiation is a viable strategy for earning above average returns in a specific business because the resulting brand loyalty lowers customers' sensitivity to price. Increased costs can usually be passed on to the buyers. Buyer's loyalty can also serve as entry barrier new firms must develop their own distinctive competence to differentiate their products in some way in order to compete successfully (Tanwar, 2013).

The generic strategy of differentiation involves creating a market position that is perceived as being unique industry-wide and that is sustainable over the long run (Porter, 1980), and also that are widely valued by buyers, and its aim is to create brand loyalty and price inelasticity, which can increase margins, create entry barriers, and mitigate the power of buyers who lack comparable substitutes. In particular, differentiator firms create customer value by offering high-quality products supported by good service at premium prices based on (Walker & Ruckert, 1987).

Competitive advantage

Competitive advantage is an advantage gained over competitors by offering customers greater value, either through lower prices or by providing additional benefits and service that justify similar, or possibly higher, prices (Cole Ehmke, 2008). Many researchers has defined the concept of competitive advantage, such as: Porter

(Porter M. , 1985) Porter says “competitive advantage is at the heart of a firm's performance in competitive markets” and goes on to say that purpose of his book on the subject is to show “how a firm can actually create and sustain a competitive advantage in an industry—how it can implement the broad generic strategies.” Thus, competitive advantage means having low costs, differentiation advantage, or a successful focus strategy (Rumelt, 2003).

Main Finding

Firm description

Ben & Jerry's Homemade, Inc., the Vermont-based manufacturer of super-premium ice cream, frozen yogurt and sorbet, was founded in 1978 in a renovated gas station in Burlington, Vermont, by childhood friends Ben Cohen and Jerry Greenfield with a modest $12,000 investment (About us: Ben and Jerry).

Ben & Jerry's is one of the nation's leading producers of super-premium ice cream and frozen yogurt. The company prides itself on using high-quality ingredients, including fresh cream from dairies located in its home state of Vermont. The company is a subsidiary of consumer products giant Unilever (Ben & Jerry's Homemade Inc, 2012).

General Strategy

Ben & Jerry's strategy strives to implement the three integrated missions: developing a high-quality product, achieving economic growth and profitability, and incorporating social activism (Tuttle & Krikelas, 2000). The general strategy can be characterized primarily on product differentiation and quality production. Although focused differentiation strategies target a narrow buyer segment, this strategy helps Ben & Jerry's gain a strong competitive advantage as it can offer consumers something they perceive is appealingly different from rival competitors innovative super premium ice cream flavors that taste better and consist of all natural, high quality ingredients.

In addition to differentiating its product from other ice cream competitors, Ben & Jerry's general strategy combines several other key components, including variety of product, fostering a company image of social activism, creating brand loyalty, franchising the company to aid economic growth, and developing creative advertising campaigns (Tuttle & Krikelas, 2000).

Ben & Jerry's Differentiation strategy

For Ben & Jerry's, one means of gaining a competitive advantage is through the use of a differentiation strategy to provide a better product that buyers believe is worth the premium price (Alonzo & Arthur, 1999). Since higher quality ice cream generally costs more than the economy and regular types of ice cream, Ben & Jerry's has incorporated product differentiation in its general corporate strategy in order to command a higher price. The use of all-natural, high quality ingredients and the innovative flavors of Ben & Jerry's ice cream illustrates the strategic use of product differentiation to gain a competitive advantage in the ice cream market.

Quirky flavor names such as Chubby Hubby, Wavy Gravy, Phish Food, and Chunky Monkey also set Ben & Jerry's apart from the traditionally-named ice cream products of rival companies to attract the customer. Furthermore, the use of recycled materials and dioxin-free paper in product packaging contributes to the uniqueness of Ben & Jerry's ice cream and helps keep its costs down (Tuttle & Krikelas, 2000). Several differentiation strategies that Ben & Jerry's used: Socially Activism/ Showing customer appreciation, variety of products, creative advertising campaign, franchising the company to aid economic growth.

Socially Activism/ Showing customer appreciation

Being social is a core component of Ben and Jerry's marketing strategy (Mike, 2015). It is the integrating ingredient of their online and online to traditional marketing/media. They support local issues and do weekly online promotions to increase customer engagement, gain new customers and convert good customers to advocates. Ben & Jerry's strive to be an independent, socially-conscious company that supports local dairy farmers. The company also sells ice cream during public events and community celebrations in the Vermont area, and contributes a percentage of the profits earned from ice cream sold in Vermont retail stores to fund local charities (Securities and Exchange, 1999).

Creating a positive, identifiable image for target audience    Through social activism, the company also can market they product by charity, charitable, and any kind of activity that make the consumer happy. Consumers may appreciate the charitable nature of the company, which has set up a charitable foundation to help support a variety of projects based in the markets in which it operates. For example, the company set up a charitable foundation in the UK when it moved into that market. The bus pictured below tours the UK festivals and county shows in the summer selling ice cream and the money raised goes to good causes around the UK (Datamonitor, 2004).

Figure 1 : Ben & Jerry's bus tours

Variety of Products

Not only is Ben & Jerry's known for its social stance, they are well known for their variety of ice cream product and flavor offerings. The company sells creatively named ice cream and ice cream novelties like Chubby Hubby, Wavy Gravy, Phish Food, and Chunky Monkey (Hoover's Inc., 2010). Additionally, in response to health conscious needs, Ben & Jerry's have launched a line of frozen yogurt products. In April 2004, the company introduced a line of low-carb, low/no-sugar ice creams, and four low-fat frozen yogurts, including a reformulation of its popular Cherry Garcia frozen yogurt (Young, 2005) and also recently Ben & Jerry's just release low calories yoghurt, Ben & Jerry's Greek yoghurt (Xashunta.L, 2014). Ben & Jerry's carries over 100 product flavors which allow them to meet the meet needs of wants of many consumers (Xashunta.L, 2014).

Creative advertising campaign

Ben & Jerry's have clearly embraced the social realm. With a strong presence on multiple social networks, the brand has set a high bar when it comes to being social and engaging its customers. They are at or near the top of nearly every major brand ranking in social commerce (Mike, 2015). Ben & Jerry's ability to wear so many hats on corporate success, “local” favorite, and Internet sensation warrants close examination (Mike, 2015). One of the earliest adopters of the use of social media for marketing and social commerce, Ben & Jerry's has certainly taken a leadership position in social engagement (Mike, 2015). Their social media strategy is built around their company web site and 6 additional social platforms, including Twitter, Facebook, Pinterest, G+, Instagram, and YouTube (Mike, 2015).

(Tempesta, 2015) Other examples of creative advertising that Ben & Jerry's use is using the names of famous celebrity to named their ice cream product. One of the examples is recently Ben & Jerry's named their product based on Jimmy's Fallon Tonight Show.

To celebrate Jimmy Fallon first full season as the host of The Tonight Show, the brand has debuted The Tonight Dough, a decadent ice cream that 'combines chocolate and caramel ice creams with chocolate chip cookie dough, peanut butter cookie dough and a crunchy chocolate cookie swirl (Tempesta, 2015). A lot of people believe that this strategy will made a lot of people buy this Ben & Jerry's product, regarding the ice cream named after Jimmy Fallon due to his fame.

Figure 2: Ben & Jerry's Jimmy Fallon ice cream: The Tonight Dough

Franchising the company to aid economic growth

Franchising is a business level strategy that allows companies to enjoy the competitive advantages result from differentiation (Hills & Jones, 2009). The economic mission of the company (to achieve profitability, increase value to shareholders and create career opportunities) is implemented through Ben & Jerry's strategy for small-scale business growth. Ben & Jerry's have maximized profitability by initially starting small and slowly building an ice-cream business over time (Spolsky, 2000). Ultimately, the success at the small-scale required the company to shift its corporate strategy toward the establishment of several franchised “scoop shops” throughout USA and Europe.

As of 1999, there were approximately 164 scoop shops in North America (Securities and Exchange, 1999). These scoop shops serve as a major employment resource and a source of revenue for non-profit groups. In addition, Ben & Jerry's gains a competitive advantage through franchising by expanding market share, increasing revenue and publicizing the company's brand name using minimal amounts of startup capital (Cara, 2013). Ben & Jerry's revenue keep on increasing since they applied the franchising strategy. Through franchising Ben & Jerry's can get the benefit from the royalty that the franchisor pays, so that they can get more revenue from it. Ben & Jerry's revenue keep on increasing since 1993 (Tuttle & Krikelas, 2000).

    Figure 3 Ben & Jerry's Annual Revenue 1993-1998

Advantage & Disadvantage

Advantage:

• Brand Loyalty: Brand loyalty plays an important role in developing and maintaining the goal of marketing (F.Reichheld & W. Earl Sasser, 1990). Brand loyalty is considered as an asset and consumers are ready to pay more than usual for a brand (Wernerfelt, 1991). Customer loyalty determines how much of the product is bought and how often the repeat purchase is made based on its features (Singh & Pattanaya, 2014).

The use of higher quality ingredients and eco-friendly packaging has created a unique brand image for Ben & Jerry's that helps develop brand loyalty and beat rival competitors to the market. The company's social activism toward the community and use of innovative flavors also help insulate the firm from the strong bargaining power of buyers since rival firms and/or products are relatively less attractive (Tuttle & Krikelas, 2000).

Social activity makes a good impact on the brand. Because of social activism that Ben & Jerry does, a lot of people recognize what the good thing that Ben & Jerry's does, respect the brand, and eventually become preference brand on the ice cream industry. Based on (Statista, 2015) shows the sales of the leading 10 ice cream brands of the United States in 2015, Ben & Jerry's was the fifth ranked ice cream brand preference USA.

• Strong Brand Identity: Ben & Jerry's has made substantial strategy efforts to gain a favorable reputation and image with buyers through its social activism, and also frequent promotional campaigns (i.e., Free Cone Day), donations to social causes (i.e, Ben & Jerry Foundation), and the use of eco-friendly products (Tuttle & Krikelas, 2000). This strategy has proven successful; the 1999 Harris Interactive Poll regarding buyer perception of corporate reputability ranked Ben & Jerry's first in the “social responsibility” category and fifth overall (Securities and Exchange, 1999) make Ben & Jerry's one of the top customer preference of the ice cream industry.

• Increased Market Share: Through small-scale growth and franchising Ben & Jerry's has maximized profitability by initially starting small and slowly building an ice-cream business over time (Spolsky, 2000). Ultimately, the success at the small-scale required the company to shift its strategy toward the establishment of several franchised “scoop shops” throughout the nation and Europe. As of 1999, there were approximately 164 scoop shops in North America (Securities and Exchange, 1999). These scoop shops serve as a major employment resource and a source of revenue for non-profit groups. In addition, Ben & Jerry's gains a competitive advantage through franchising by expanding market share, increasing revenue and publicizing the company's brand name using minimal amounts of startup capital (Cara, 2013).

Disadvantage:

• Higher Cost: According (Hitt, Ireland, & Hoskisson, 2007) there are several key risks or limitations when using differentiation strategy, the higher cost of the price that customer must to pay that comes using a differentiation strategy can create a big gap from its competitors that the customers no longer find it valuable to use the service. If customers become aware that the bulk of the products offered by a business are higher than the market rate, they will be more likely to shift their spending loyalties elsewhere (Accounting, 2015), and it might be dangerous for Ben & Jerry's to loosed the customer royalty.

• Imitation: Competitors may imitate Ben & Jerry's differentiation strategy. If rival begin to use the same strategy as Ben & Jerry's, there is a risk that their competitive advantage will be lost (Barney, 1995). The market that Ben & Jerry's operate in allows for constant interest from competitors because of Ben & Jerry's status is in the top ladder for ice cream market.

• Difficult to sustain: Organizations sustain a competitive advantage for long as the services they deliver and the manner in which they deliver them have attributes that correspond the key buying criteria of substantial number of customers (Ginter, Duncan, & Swayne, 1995). Ben & Jerry's must understand the changing needs and wants of their customers despite the higher costs if served better.

Conclusion

In conclusion, my analysis has illustrated through differentiation, Ben & Jerry's has established itself as both a leader in product quality and environmental responsibility. By creating a unique service alongside the promotion of the brand, Ben & Jerry's is able to sell their service at the maximum level, resulted in increase in their revenue. However, the challenge will be for Ben & Jerry's are, is it possible to maintain its uniqueness and sustain the competitive advantages in the future (Tuttle & Krikelas, 2000). If Ben & Jerry's was able to leading the competition in term of innovation, quality services, and continuing to emit the same brand message, Ben & Jerry's will able to continue to be a dominate figure in the ice cream industry for the foreseeable future.

Ben & Jerry's achieves a differentiation strategy by:

1. Focusing on their strong brand identity

2. Increasing brand loyalty

3. Providing high quality of product by creating a lot of variety

The advantage Ben & Jerry's reaps from using differentiation strategies are:

1. Brand loyalty; the benefits are long term and have a low sensitivity to price. Company is protected from new business's entering marketplace as they are forced to create new ways to compete which is extremely expensive

2. From social activism they can get a good perception brand image to attract the customer to buy their products (strong brand identity)

3. Franchising Ben & Jerry's trough scoop shop, and export, a lot of country can recognized the Ben and Jerry's brand

However, there are significant disadvantage for Ben & Jerry's in using differentiation strategy:

1. Competitor may imitate Ben & Jerry's strategy

2. Higher cost that comes using a differentiation strategy can create a big gap from its competitors that the customers no longer find it valuable to use the service

3. Difficult to sustain – Ben & Jerry's must understand the changing needs and wants of their customers despite the higher costs if served better

Recommendations

1. Frequent product innovation to address threats of substitute and imitation products and meet changing consumer preferences

2. Continue franchising scoop shops to increase its market reach and withstand growing competition, both nationally and internationally

3. Increase the development of cleaner manufacturing, disposal, and distribution technologies to ensure that the company continues to stay in compliance

4. Develop additional manufacturing plants and distribution centers outside of Vermont to reduce distribution costs

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