Ben & Jerry's
Ben & Jerry's are one of the innovative leaders in the ice cream industry. Ben & Jerry's evaluate its success by how much it gives back to the community (Flannery, 2000). It was founded by Ben Cohen and Jerry Greenfield in 1978 when they opened the first Ben & Jerry's homemade ice cream scoop shop in a renovated gas station in downtown Burlington, Vermont (Ben & Jerry's, 2013). The ice cream maker's effective work of corporate social responsibility has made them a model for the industry for engaging in socially responsible behaviour (Poltenson, 1996)
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 the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations (Johnson, Scholes, & Whittington, 2008). In order to maximize its competitive advantage, a company must find the best way to position itself against its rivals. It does this by using business-level strategy. Business-level strategy is the plan of action that strategic managers adopt to use a company's resources and distinctive competencies to gain a competitive advantage over its rivals in a market or industry (Jones & Hill, 2009).
Strategic management is all about gaining and maintaining competitive advantage. When a firm can do something that rival firms cannot do, or owns something that rival firm desire, that can represent a competitive advantage (David, 2011). According to Hill and Jones (2009) competitive advantage also can be obtained by a company when its profitability is greater than the average profitability for all firms in its industry. Therefore, it can be defined as “anything that a firm does especially well compared to rival firms.” (Hill & Jones, 2009).
When a firm combines the competitive advantage with the scope of activities for which a firm seeks to achieve them, it will lead them to three generic strategies for achieving above average performance in the industry: cost leadership, differentiation and focus (Porter M. , 2008). These strategies are called generic because all industries or business can pursue them, regardless of whether they are manufacturing, non-profit enterprises or services (Hill & 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 a result, they experience below-average performance, no consistent business-level strategy, and suffer when industry competition intensifies (Porter M. , 1985)
Ben & Jerry's has developed a lot of strategies to be competitive and different among other competitors. Ben & Jerry's achieved competitive advantage by using differentiation strategy. They differentiates its products by creating unique flavours, using high-quality ingredients, supporting the local community, and promoting diversity in the workplace (McWilliams & Siegel, 2001). The main strategy that makes them so different is the Corporate Social Responsibility (CSR). This can be seen when all of the dairy for Ben & Jerry's in the United States comes from family farms, primarily in the state of Vermont (Freese, 2007). Another thing to be looked at is how they differenced their product by offering a lot of delicious flavour with quirky names and promoting their social activity through the flavour name (Jerry's, Our Values : Ben & Jerry's, 2015). They also achieve differentiation by small growth business where they start with low capital and slowly expand their business to maintain their sustainability (Spolsky, 2004). Their social mission has made them one of the role model among successful company that is socially friendly to their customers.
The differentiation strategy is an integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them (Bercovitz & Mitchell, 2007). An organisation using this strategy will make their product different from those produced and marketed by competitors. Firms must be able to produce differentiated products at competitive costs to reduce upward pressure on the price that customers pay (Hitt, Ireland, & Hoskisson, 2009). When a product's differentiated feature is produced in non-competitive costs, the price for the product can exceed what the firm's target customers are willing to pay. When the firm has a thorough understanding of what its target customers value, the relative importance they attach to the satisfaction of different needs, and for what they are willing to pay a premium, the differentiation strategy can be successful (Hitt, Ireland, & Hoskisson, 2009).
Through the differentiation strategy, the firm made a non-standardized products for customers who value different features more than they value low cost. For example, various flavour, high quality ice cream and big chocolate chunks in the ice cream are among the differentiated features of Ben & Jerry's ice cream (Hitt, Ireland, & Hoskisson, 2009).
Ben & Jerry's Differentiation Strategy
Ben & Jerry's achieves a differentiation strategy by brand awareness, flavours and CSR (Corporate Social Responsibility) attributes (Polk, 2014).
Positive Brand image through CSR
Consumers may appreciate the charitable nature of the company (McWilliams & Siegel, 2001). Ben & Jerry's 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 (Jerry's, Our History: Ben & Jerry's, 1999). Ben & Jerry's also demonstrates how they care to its consumers. Ben & Jerry's donates 7.5 percent of pre-tax profits to charity, while the average corporation in the United States donates 1 percent (Dennis, Neck, & Goldsby, 1998). The organizations that receive the money include environmental groups, AIDS projects, a centre for immigrant rights, American Indians and the homeless (Dennis, Neck, & Goldsby, 1998).
Ben & Jerry's also help the farmers by buying the dairy from the farmers, especially in Vermont and Netherlands for European Union Ben & Jerry's products (Freese, 2007). Supporting family farms acknowledges their own founding principle that “business has a responsibility to give back to the community where we do business (Jerry's, Our Values : Ben & Jerry's, 2015).
In addition to extending CSR to the environment, another strategy Ben & Jerry's use is to combine marketing with their message (Neuborne, 1999). Their marketing formula incorporates basic level social activism and low budget, community focused tactics (Thompson, 2001). They use CSR to do most of the marketing work. One of the way is creating various flavours that contribute to charitable causes. In 1989, Ben and Jerry's created the flavour Rainforest Crunch, as of the way to help spread the word about the preservation of rainforests. The label from the product read “money from these nuts helps to show that rainforests are more profitable when cultivated for traditional harvest than when they are cut and burned for short-term gain” (Polk, 2014). By CSR they can get a positive brand image and the premium price charged for their product is no longer an issue for the customer. The support gained by Ben & Jerry's towards their CSR will then help them gain fund easily and so with the profits.
Ben and Jerry's produce their products in environmentally, animal friendly ways and supporting local farmers especially from Vermont (Dennis, Neck, & Goldsby, 1998). All farmers who provided dairy had agreed to use no bovine growth hormone (BGH) (Polk, 2014). This has made their ice cream become an all-natural and high quality in the same time. In 1998 Ben & Jerry's introduced the eco-pint, the ice cream industry's first pint container made from unbleached paperboard, avoiding the use of chlorine in the production of the packaging, a major source of dioxin and recognized as one of the earth's most toxic chemicals (Freese, 2007). They also advertised the use of recycled materials to make their cartons (Liberman, 2011).
One of their brand signature, is big chunks of added ingredients such as fruit, chocolate or cookies so people with no sense of taste can rely on the mouth feel. (Gilbert, Loxley, Tomley, & Walisiewicz, 2014). Besides providing a high quality ice cream, Ben & Jerry's also named their flavours with quirky names and some of the names were created in supporting charities or suppliers. The most notable is “Rainforest Crunch,” which used Brazil nuts grown in the rainforests by indigenous people (Jennings & Entine, 1998). In 2002 Ben & Jerry's launched One Sweet Whirled campaign, complete with its own flavour, to help stop global warming. This was a creative partnership between Ben & Jerry's, the Dave Matthews Band, and Save Our Environment. The flavour was subsequently changed to Dave Matthews Band Magic Brownies (Freese, 2007).
Ben & Jerry's also named their ice cream by referring any popular culture that is going on like a band name, politician and others. For example, there are flavours named after 30 years since Bob Marley released his song legend and several movie characters like Ron Burgundy in Anchorman movie (Jerry's, Our Favorite Pop Culture Inspired Pints: Ben & Jerry's, 2014). This variety of product uniqueness provided by Ben & Jerry's have made them differ from other competitors in the ice cream industry. The value of the high quality product plus quirky names given to their product is the most interesting factor for the customer to buy their product.
Small-Scale Growth and Franchising
The economic mission of the company was done through Ben & Jerry's strategy for small-scale business growth. Started from only three production plants in late 1980s, they have become a known ice cream company through their social strategy. By getting close to the community they get a large support after being listed in NASDAQ on 1984 (Page & Katz, 2010). Many of their business decisions were made by focusing on an environmental mission. They started to expand their scoop shop from Canada to Europe. These scoop shops serve as a major employment resource and a source of revenue for non-profit groups (McWilliams & Siegel, 2001). Unilever's acquisition of Ben and Jerry's in the year 2000 has led to a wider scope for the ice cream maker (Hoover's Inc., 2010). The company now franchising 750 Ben and Jerry's Scoop Shops worldwide. Additionally, Unilever struck a deal with Dreyer's, which has expanded the distribution of Ben and Jerry's products to 24 countries (Hoover's Inc., 2010). In addition, Ben & Jerry's gains a competitive advantage by franchising and expanding market share, increase their revenue and marketing the company's brand name using the minimal amounts of startup capital.
Brand loyalty is achieved when consumers have a preference for the products of established companies (Jones & Hill, 2009). Brand loyalty also can makes it difficult for new entrants to take market share away from established companies. Ben & Jerry's promote CSR as one of their important mission and has made them close with the society by promoting it through their flavour and social activity (Polk, 2014). Thus, this will increase their market share in the industry compared to other competitors.
By creating new product development, new flavour profiles, healthier options, new packaging concepts, and environmentally and socially conscious operation, their customer can benefit the high quality ice cream and as well to save the environment and people who have difficulty in life.
Increased Market Share
Ben & Jerry's economic mission has made them to be able to increase their market share through small scale business growth. Ben & Jerry's has maximized profitability by initially starting small and slowly building an ice-cream business over time (Spolsky, 2004). According to statista.com Ben & Jerry's is the most purchased frozen desserts brands in the United Kingdom (UK) (Statista, 2013). This shows how Ben & Jerry's can dominate the market by applying their missions, which include social, economic and product. When a company's market share increased, it may begin to serve more and more market segments and chip away at the differentiator's competitive advantage over time.
Perception of no substitute
When a company uses a differentiation strategy that focuses on the cost value of the product versus other similar products on the market, it creates a perceived value among consumers and potential customers (Freese, 2007). Ben & Jerry's has promoted how it cares much to the social and environment issues and has created a perception that there is no substitute that closely matches them especially in social and environmental issue. This action will make all the customer assume that there is no other ice cream company that related to the social activism. This will provide them with a competitive advantage (Jones & Hill, 2009).
There is a chance of imitation when a company has achieved a firm position in it industry. This may reduce their market share if competitors succeed in imitating Ben & Jerry's strategy and there is also a risk they will be losing their competitive advantage. A differentiated product becomes less valuable if imitation by rivals causes customers to perceive that competitors offer essentially the same good or service, but at a lower price (Hitt, Ireland, & Hoskisson, 2009). Therefore Ben & Jerry's are still on not in a risk free position even applying the differentiation strategy. They will lose their market share and competitive advantage if the imitation is successful.
Difficult To Sustain
Differentiation does not guarantee competitive advantage, especially if standard products sufficiently meet customer needs. The unique product of Ben & Jerry's may not be valued highly enough by customers to justify the higher price. The customer experience can narrow customers' perceptions of the value of a product's differentiated feature (Hitt, Ireland, & Hoskisson, 2009). By example, a customer that has positive experience with less expensive ice cream may lead to a conclusion that Ben & Jerry's product are not worth of extra cost. Ben & Jerry's must continue to meaningfully differentiate their product from time to time for customers at a price they are willing to pay.
Ben & Jerry's has gained competitive advantage by using differentiation strategy. By making a unique flavour and promoting social activism through ice cream sales, Ben & Jerry's are able to sell their products at a premium price with a high quality taste and ingredients competing with other super premium ice cream producer.
Ben & Jerry's achieves differentiation strategy by:
- Creating a strong positive brand image thus increasing brand loyalty. Ben & Jerry's is the most recognized frozen desserts in United Kingdom (UK).
- Providing a high quality product and being difference by other brand with it quirky names and contributing much safer environment.
- Small growth strategy that made them able to sustain their business and merge with big company such as Unilever.
The advantages Ben & Jerry's get from using a differentiation strategy are:
- Brand loyalty; the benefits are it makes other competitors hardly to enter the market
- Increased market share. Ben & Jerry's has become the top sellers of frozen dessert in United Kingdom (UK) in 2013
- They have created a positive perception where there are no company can substitute the in the ice cream industry
However, there are certain disadvantages for Ben & Jerry's in using a differentiation strategy:
- Other competitors may imitate Ben & Jerry's strategy.
- Differentiation strategy is hard to sustain as it have to follow the trend of customer demand and needs.
- Ben & Jerry's must continue to meaningfully differentiate their product for customers at a price they are willing to pay.
- Improve research and developments on ice cream product to avoid imitation from other competitors.
- Increase research or survey on customers to keep on update to their demand and needs.
- Increase their marketing to attract new consumers.
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