This report will:
1. Identify the strategy used by Ben & Jerrys
2. Analyse the method used by Ben & Jerrys to achieve this strategy
3. Critically evaluate the strategy used by Ben & Jerrys
4. Offer recommendations based on the findings to improve performance for Ben & Jerrys
The information in this report was found in academic journals and textbooks.
The report suggest that Ben & Jerrys uses a differentiation strategy from porter's Generic strategy.
Ben & Jerrys identifies these two main method to achieve this strategy:
1. Brand recognition and value
2. High level of quality service
The advantages Ben & Jerrys reaps from using a differentiation strategy are:
1. Brand loyalty, the benefits are long term and have a low sensitivity to price.
2. Increased in market share, Ben & Jerry's has achieved substantial, yet gradual, growth in revenues since 1993 through franchising by expanding market share, increasing revenue and publicizing the company's brand name.
3. They have created a perception of no substitute. Ben & Jerrys can offer consumers something they perceive is appealingly different from competitor's
However, there are also disadvantages for differentiation strategy used by Ben & Jerrys:
1. Competitors may copy or imitate Ben & Jerrys strategy.
2. Customers ultimately bear the burden of these costs by purchasing these goods at a higher cost. Ben & Jerrys must understand the changing needs and wants of their customers, despite the higher cost if served better with high quality services.
1. Ben & Jerrys need to continue using differentiation strategy in all aspects and sustain competitive advantage and customer loyalty.
2. Reduce cost in undifferentiated activities
3. Ben & Jerrys need to continue promote its strong brand image
Ben & Jerrys
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. Ben & Jerry's is a company that manufactures ice cream, frozen yogurt, and sorbet. It was founded in 1978 in Burlington Vermont, United States. Nowadays Ben & Jerry's operates globally as a subsidiary of the Anglo Dutch Unilever conglomerate (Unilever UK Limited, n.d.)
This report will:
1. Identify the strategy used by Ben & Jerry's.
2. Analyse the methods used by Ben & Jerry's to achieve this strategy.
3. Critically evaluate the strategy used by Ben & Jerry's.
4. Offer recommendations based on the findings to improve performance for Ben & Jerry's.
Business level strategy
Strategy is a set of management decisions regarding how—through choice of industry, firm configuration, resource investments, pricing tactics, and scope decisions—to balance the firm's tradeoffs between being efficient (reducing cost) and being effective (creating and capturing value) to achieve its objectives (Drnevich & Croson, 2013) it is also known as a set of actions that managers take to increase their company's performance relative to rivals (L. Hill & Jones, 2009). The likelihood of a business level strategy being successful in the long term increases when strategic leader continually evaluate the appropriateness of their ﬁrm's objectives as well as actions being taken to implement them (Michael A. Hitt, R. Duane, & Robert E. Hoskisson, 2009).
A business level strategy is defined as the plan of action strategic managers adopt to use a company's resources and distinctive competences to gain a competitive advantage (L. Hill & Jones, 2009). Business level strategies detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets. There are four generic strategies that are used to help organizations establish a competitive advantage over industry rivals (Teece, 2010). A company's relative position inside of its industry figures out if a company's profit is above or beneath the market average (Porter & Millar, 1985). There are two basic types of competitive advantage a firm can possess which is the low cost or differentiation strategies. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them. Cost leadership, differentiation, and focus are the three generic strategies to achieve above average performance in an industry explained by Porter. The focus strategy has two variants, cost focus and differentiation focus (Porter M. E., Techniques For Analysing Industries and Competition, 1980).
In recent years, a strategy of how firms compete which is unique to the field of strategic management has begun to emerge (Peteraf, 1993). Competitive advantage emerge when there is competitor that can outperform rival and earn higher average profit (Porter & Millar, 1985). Those which are distinctive or superior relative to those of rivals, may become the basis for competitive advantage if they are matched appropriately to environmental opportunities (Peteraf, 1993). Companies must offer something unique over its competitors to achieve a successful competitive advantage (Porter & Millar, 1985). Cost leadership, differentiation, nice strategy and cost reduction are the strategy suggest by Porter to attain competitive advantage (Porter, 1985).
Ben & Jerry's has used the business level strategy to differentiate itself from others within the market. (Polk, 2014) According to the Ben & Jerry's Mission Statement, the goal of the company is to integrate product quality with economic success and social responsibility. One of the key strategic factors that successfully links these three missions together is the differentiation strategy (Ericson & Shorey, 1993). Ben & Jerry's has achieved this by using Porter's differentiation strategy (Polk, 2014). One of Ben & Jerry's strategies is the practice of caring capitalism and extending Corporate Social Responsibility (CSR) to their employees (Dennis, Neck, & Goldsby, 1998). Another strategy used by Ben & Jerry's is to produce their product in environmentally and animal friendly ways (Carper, 2012). Another strategy for Ben & Jerry's is to combine marketing with their message (Neuborne, 1999) Ben & Jerry's realised the opportunity to gain competitive advantage through effective marketing of their quality, fun, innovative, honest and caring company (Polk, 2014).
Differentiation is one of the generic strategies introduced by Porter, 1980. Differentiation occurs when products of an organisation meets the needs of some customer in the market place better than others. This strategy usually target customers who are not concerned with price, so it can be profitable (Porter M. E., 1980). A differentiation strategy can reduce rivalry with competitors and fight off the threat of substitute product as customers are more likely to be loyal to the company's brand. (De chermatony, 2001) Product differentiation means that established firms have brand identification and customer loyalties, which stem from past advertising, customer services, and product differences or simply by being first into the industry. Differentiation creates a barrier to entry by forcing entrants to spend heavily to overcome existing customer loyalties. Such investments in building a brand name are particularly risky since they have no salvage value if entry fails (Porter M. E., 1980)
Ben & Jerrys Differentiation strategy
Ben & Jerry's differentiation strategy strives to implement the three integrated missions which is developing a high-quality product, achieving economic growth and profitability, and incorporating social activism (Dennis, Neck, & Goldsby, 1998)
A brand is a product, service, or concept that is publicly distinguished from other products, services, or concepts so that it can be easily communicated and usually marketed. A brand name is the name of the distinctive product, service, or concept. Branding is the process of creating and disseminating the brand name. Branding can be applied to the entire corporate identity as well as to individual product and service names (De chermatony, 2001). Despite Ben & Jerry's humble beginning, the ice cream maker has establish itself as a top ice cream maker in the industry. In 2000 the company was bought by consumer product giant Unilever (Unilever UK Limited, n.d.). The acquisition has not changed Ben & Jerry's social activist stance or its quirky names. Unilever leaders promised they will not change Ben & Jerrys business approach. Instead Unilever has rejuvenated the ice cream maker and has promoted the company three part missions. Ben & Jerrys able to maintain its corporate culture and image under Unilever (Hoovers Inc., 2010)
Brand values is considered to be the net present value of the estimated future cash flows attributable to the Brand. Brand value in the case of consumer product brands can be measured through customer loyalty. Therefore Brand value can be influenced positively and negatively (Jacoby & Chestnut, 1978). Ben & Jerry's operates on a three-part mission that aims to create linked prosperity for everyone that's connected to their business: suppliers, employees, farmers, franchisees, customers, and neighbours alike (Unilever UK Limited, n.d.). A strong image brand vision indicates the long-term, stretching intent for the brand which must excite staff thus encourage them to be committed and can contribute to success (De. Charmatony, Daniels, & Johnson, 1994). Ben & Jerry's believes that it is important to establish good environment for their workers. Ben & Jerry's began the Joy Luck Gang which is a volunteer group which aim is to be passionate and persistent in the work of joy to create a positive workplace and dedicated workers (Dennis, Neck, & Goldsby, 1998). The company also committed to help their employees with job trainings by developing the partnerShop program (Yamada K., 2000). Ben & Jerry's set themselves the long term brand objective of being the leader in the ice cream industry (Dana, 1999).
Ben & Jerry's provide a better product that buyers believe is worth the premium price (Ferguson, 2012). In order to put in a higher price, Ben & Jerrys offers high quality product since higher quality ice cream will cost more than the economy regular ice cream (Dana, 1999). Ben & Jerry's use all natural, high quality ingredients and innovative flavours to make ice cream (Dennis, Neck, & Goldsby, 1998). Ben & Jerry's also use quirky flavour names such as Chubby Hubby, Wavy Gravy, Phish Food and Chunky Monkey to set them apart from usual named ice cream product of rival companies (Unilever UK Limited, n.d.). Furthermore, the use of recycled materials and dioxin free (unbleached) paper in product packaging contributes to the uniqueness of Ben & Jerry's ice cream and helps keep its cost down (Dana, 1999).
Brand promotion is a common marketing strategy intended to increase product awareness, customer loyalty, competitiveness, sales and overall company value. Businesses use it not only to show what is different or good about themselves and what's for sale, but also to keep that image alive for consumers. It usually focuses on elements that can stand the test of time, although businesses do adjust promotions based on what is happening in the market. The efforts required to be effective with these techniques require that marketers be passionate about what they're doing (Peteraf, 1993). The company is well known for its creative advertising and public relation campaigns (Dana, 1999). They decided from the get-go that the company needed to stand for something beyond just making money. So they built their passion for social and environmental issues into the business model. That, by itself, differentiates their brand from the competition and from 90% of the corporations out there (Ferguson, 2012).
Ben & Jerry's has made substantial efforts to gain a favourable reputation and image with buyers through its frequent promotional campaigns such as the free cone day and the use of eco-friendly products. 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.
Ben & Jerry's also created “Ben & Jerry's Foundation” to engage Ben & Jerry's employees in philanthropy and social change work which indirectly create awareness and promote their product to public. Ben & Jerry's launched the Cowmobile, a modified mobile home used to distribute free scoops in a unique, cross-country "marketing drive." Furthermore, recently Ben & Jerry's created save our solar campaign as the government is cutting its support to the solar industry here in the UK. Thus this also help they promotes their product (Unilever UK Limited, n.d.). More and more people recognize Ben & Jerry's product because of the social activity they have engaged in. The use of innovative marketing and web based promotions have further emphasized this image and strengthened brand name recognition (Ericson & Shorey, 1993).
When consumers become committed to your brand and make repeat purchases over time. Brand loyalty is a result of consumer behaviour and is affected by a person's preferences (Jacoby & Chestnut, 1978) Loyal customers will consistently purchase products from their preferred brands, regardless of convenience or price. Ben & Jerry's often use different marketing strategies to cultivate loyal customers, be it is through loyalty programs.
Developing brand loyalty is another strategic move to strengthen competitive advantage. Ben & Jerry's is a global brand with a three part mission and profit is only one of the part. The other part is making a sensational delicious ice cream. From its humbled beginning to its current state as one of the most well-known ice cream product globally (Unilever UK Limited, n.d.). Ben & Jerry's has been unapologetically itself and the public appreciates Ben & Jerry's quirky awareness. Too often brands and companies attempt to lure in customers by offering freebies. While this may result in a small public relation bump, market expert knows that brand and consumer bond takes time to develop quite similar in building relationships between people (Spoolsky, 2000). To achieve brand loyalty Ben & Jerrys focuses on several agenda, nicest way, social activism and conservative media (Cohen, Greensfield, & Maran, 1997). One of the mission of Ben & Jerry's is to do business in the nicest way possible. They express this goal as linked prosperity where the idea is that everyone or everything the company touches turns into profit. Throughout the years, Ben and Jerry's has transformed its clients into frenzied fans by utilizing business as an apparatus for social and natural change (Spoolsky, 2000).
Ben Cohen is partial to stating that there are two sorts of social activism, direct activities that give transient offer to destitute some assistance with peopling and promotion that assaults the reasons for social issue (Ferguson, 2012). Ben and Jerry's stresses backing, and it supports its clients and representatives to stand up. In the mid-1990s, the establishment made a $10,000 stipend to another association called the Vermont Campaign to End Childhood Hunger, which was advancing a governmentally supported school breakfast program. The Campaign empowered Ben and Jerry's representatives to address school sheets in regions that hadn't agreed to the system yet. All the nearby authorities needed to do was ask, and the free breakfasts were theirs. Schools that joined likewise got an ice cream party (Unilever UK Limited, n.d.). The organization demonstrated that little, all around focused interests in backing have a colossal effect. People start to fall in love with the brand due to their kindness act. Thus this have a huge impact on Ben & Jerry's brand name as more customer are attracted to Ben & Jerry's and tend to choose Ben & Jerry's as their main ice cream brand.
Increased market share
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 has maximized profitability by initially starting small and slowly building an ice-cream business over time (Spoolsky, 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 the nation and Europe. As of 1999, there were approximately 164 scoop shops in North America (SEC, 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 start-up capital. Ben & Jerry's has achieved substantial, yet gradual, growth in revenues since 1993.
Perception of No Substitute
The general strategy can be characterized as a differentiation strategy based primarily on product differentiation and quality production. (Cohen, Greensfield, & Maran, 1997) Thus, this also create a perception that there is no substitute that closely match them. Although 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 flavours that taste better and consist of all natural, high quality ingredients (Dana, 1999)
Competitors may imitate Ben & Jerry's differentiation strategy. If competitors or new rivals begin to use differentiation strategy as Ben & Jerry's there is a risk that the company might lose their competitive advantage (Dennis, Neck, & Goldsby, 1998). The market that Ben & Jerry's are in allows for common interest from rivals. Other companies are curious of the strategies of Ben & Jerry's. Therefore, Ben & Jerry's is at risk of competitors imitating their business strategy and might eliminate their competitive advantage. Ben & Jerry's will no longer have their advantage over their competitors and might lose profit and market share.
Customer needs keep on changing with time, and companies can only ignore this at their own peril. Companies that keep reinventing their products attract loyalty from customers, but product differentiation requires a lot of resources for carrying out a market research to know the customer needs, product development, launch, advertisement and monitoring. Customers ultimately bear the burden of these costs by purchasing these goods at a higher cost (L. Hill & Jones, 2009). Ben & Jerry's must understand the changing needs and wants of their customers, despite the higher cost if served better with high quality services.
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