Ben & Jerry’s Case Analysis Give the history of the company in the case. In this history you should discuss how the company came into the situation presented in the case.? In 1977, two friends, Ben Cohen and Jerry Greenfield, decided they were tired of working for someone else and wanted to start their own business. They took a five dollar correspondence course on ice-cream making, rented an abandoned gas in Burlington, Vermont, and started their business with an investment of $12,000 dollars.
They began making home-made ice-cream in a four-gallon mixer, and used higher fat, all natural and pure ingredients to produce a richer and smoother product. Soon, the business became successful in the local community. Ben and Jerry’s advertisement consisted of community based projects, carnival shows, and movie nights for customers in the parking lot (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). The business continued to expand, and by 1980 Ben and Jerry began to package pint-size ice-cream to sale in the local grocery stores. This would be the beginning of the large expansion of the business.
Within a year, manufacturing outgrew their current building, and operations had to be moved to a second site. Sales were approaching $500,000 dollars. The company continued to grow at an average of 60 percent per year. In 1984, the Ben and Jerry offered a Vermont-only stock which raised $750,000 for construction of a new operations site in Waterbury. The new site allowed for a greater production and Ben and Jerry began distributing nationally. By 1990, the company was selling in all major markets (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). In 1982, Jerry Greenfield decided to leave the company to move to Arizona.
Jerry felt the company was getting to large and impersonal. Ben Cohen became the dominant force in the company, but in 1985, Jerry returned. Ben established The Ben & Jerry’s Foundation in 1985 that was operated by employees. The Foundation donated grants to charitable organizations. The company contributed 7. 5 percent of pre-tax profits to the Foundation in an effort to balance profits with community enrichment. Ben believed in “caring capitalism” and wanted to keep a concept of linked prosperity for the company (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par The company’s growth continued to expand, and Ben became less interested in the aspects of running the business. Fred “Chico” Lager was hired in 1982 as general manager, and by 1986 Chico was doing all the management of the company. Ben began to notice that the original social mission of the company was beginning to be lost due to the growth. Chico established a mission statement and helped to create a better understanding of the mission throughout the company. When Chico began to wear from the stress of running the business, he decided to leave for a six-month trip.
Chuck Lacy then took over management of the company (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par The company’s salary policy was on a 5-to-1 ratio, meaning that the top level pay can only be five times the lowest level pay. This policy began to become a problem in recruitment and retention of quality level management. As the company expanded, many of the management and staff believed this policy to be a hindrance in continued growth and hurt the company in competition (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par “Ben & Jerry’s is dedicated to the creation and demonstration of a new corporate concept of linked prosperity. Our mission consists of three interrelated parts. par Product Missionpar To make, distribute and sell the finest-quality all-natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products. par Social Missionpar To operate the company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community: local, national and international.
Economic Missionpar To operate the company on a sound financial basis of profitable growth, increasing value for our shareholders and creating career opportunities and financial rewards for our employees. par Underlying the mission of Ben & Jerry’s is the determination to seek new and creative ways of addressing all three parts, while holding a deep respect for individuals, inside and outside the company, and for the communities of which they are a part (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). “par
Provide a short discussion of the key management of the company. In this section you should talk about any beliefs or values or philosophies of these individuals, which are important in understanding how the company operates or why the company is facing a decision or a problem in the case. Also discuss the training, experience or background of the key management individuals that are significant to the case. par Ben Cohenpar Ben Cohen was one of the founders of Ben & Jerry’s. He began, in 1968, to work as an ice-cream distributor for Pied Piper Distributors, Inc in New York.
He was promoted and worked in several position including warehousing, driver testing, and inventory control. In 1974, he began working as a crafts teacher in Paradox, New York until he moved to Vermont in 1977 to start the ice-cream business with his friend, Jerry Greenfield. Ben served as the president and chief executive officer for Ben & Jerry’s until 1989. Cohen was the dominant personality in the business and set the social mission. Ben believed strongly in social activism, equality with pay, and high quality products.
In 1997, Ben made a public statement that expressed his ideals of a “fun” and “values’ culture, “When you’re values led … people want to buy from you. They want to be associated with you. They feel invested in your success (McKell). “par Jerry Greenfieldpar Jerry Greenfield graduated from Oberlin College in 1973 with a Bachelor’s in Biology. He then worked in biochemical research at the Public Health Research Institute in New York City. He left that job and began work at the University of North Carolina until he moved to Vermont in 1977 to start the ice-cream business with Ben Cohen.
He acted as president of the company until 1983, when he withdrew from operations and moved to Arizona. He then moved back to Vermont in 1985 and once again became active in the company. He became a full-time employee again in 1987 as the director of promotions (McKell). par Jerry’s personality was more of creativity and non-conformity. His leadership behaviors helped to contribute to “fun” image of the company. Greenfield displayed diplomacy, tact, and cooperativeness, which counteracted Cohen’s stubborn character.
He focused more on interpersonal relationships of the work environment. His image was displayed on the product’s containers (McKell). par Fred “Chico” Lagerpar Fred “Chico” Lager was owner/operator of a nightclub and restaurant from 1977 to 1982, when he sold the business and went to work as the treasurer and general manager of Ben & Jerry’s. Chico was promoted to president and chief executive officer in 1989 because Ben Cohen decided the company was getting too big and did not want to handle the “business” aspects.
Chico worked with the Chuck Lacy in daily operations (McKell). par Chuck Lacypar Charles Lacy worked as an executive in business and finance from 1984 until 1988, when he was employed by Ben & Jerry’s as the director of special projects. In 1989, Chuck was promoted to general manager and then took the position of president when Chico Lager stepped down. Chuck and Chico shared the responsibility of running the business (McKell). par Discuss the competitive situation in which the company finds itself in the case.
Develop the competitive issues that impact on the case and the decision that the management must make. par In 1990, Ben & Jerry’s held the second position of strength in market penetration in major markets. Net sales forecast was for the year was $75,000, which is an increase of approximately $17 thousand dollars, or 28 percent (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par Most of the competitors sold lower grades of ice cream. In the late 1980s the market for super-premium ice-cream experienced saturation, and some competitors were not able to hold a position.
Ben & Jerry’s had captured the number two spot in the super-premium segment, but competition for shelf space was extremely intense; which allowed retailers to set the demand price for slotting fees (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par The super-premium market separated into two sub-segments by 1990. There were traditional flavor segments and mix-in flavor segments. Ben & Jerry’s used mix-in flavors, which was more expensive, but did not increase prices. Even so, in 1980, research did show that consumers valued quality over price. par The company competed on the basis of quality, flavors, distribution, and Vermont-based farms. Market research was typically not performed and advertisement was done for new products and by word-of-mouth and community events. par Discuss the external environment in which the company is operating. Consider the economic, political and other important external conditions with which the company is faced. par Ben & Jerry’s environment consisted of the raw materials sector, socio-cultural sector, and market sector. The distribution of its products was mainly through one firm.
Dreyer’s plant, in Indiana, was temporarily contracted to help product some of Ben & Jerry’s products due to the high demand. To assure the products were still made from Vermont dairy ingredients, the company shipped these ingredients to Indiana to be included in products made there (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par Changing prices in the dairy industry made price planning difficult. Because of the highly competitive super-premium market, close attention must be a constant to ensure that consumers retention.
The company’s efforts in social activism required that it remain knowledgeable in the political and social environment, and react to any community concerns and sensitivities (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par Identify the problem or problems facing the company in the case. Identify every major problem or opportunity that the case discusses and try to isolate the cause or causes of reach problem identified. par 1. Management style focused on social mission instead of financial profit and growth. The business plan contained no numbers and few economic characteristics.
As growth continues in both the product line and quantity, challenges will be faced in controlling price, meeting quality, and managing values-based purchases (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par 2. The withdrawal of Ben from the management picture will pose a dilemma for keeping the original culture and mission strong. Continued recruitment and growth will lead to a dissection of views in the way the company should be managed. The value-based strategy that helped the company to flourish may be lost due to the sheer size of the organization. par 3.
The 5 to 1 compensation ratio has created a problem in morale of managers, retention, and recruitment. This creates an atmosphere where employees are not paid or promoted by merit. Managers cannot be promoted, or salaries increased, without the entire company getting an increase. This also holds a problem for the bottom line. The policy resulted in rates that were above market for lower paid employees and below market for higher paid employees (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par 4. The lack of hierarchy made decision-making and communication complicated.
Employees went to Chico for guidance, and this put a huge pressure on him since he did not have the authority to make all decisions. The lack of organizational structure, training, reporting structures will continue to be an increasing problem as the company continues to grow. par 5. Because of the strong competition from Haagen Dazs, the company needs to grow its sales to maintain market share and increase shareholder value. The culture of the market continues to change, and Ben & Jerry’s brands are focused on products that are rich and fatty.
Also, as the company expands globally, products named after icons or places in the United States will have no value in global markets. par Respond to the specific case questions regarding the company being reviewed. Questions for each case study are identified in the weekly assignments. par Case Questions:par 1. Evaluate Ben and Jerry’s Ice Cream Company in light of core competencies and genetic coding. Are these strategic issues problems for this company? par The company’s growth has been due in large part to the counter-culture and socially responsible image, and values.
Because the company plays a major role in the community, its social activism was a leading core competence. The values the company upholds has created a lot of morale for some employees and has created a good image in the public eye. Ironically, the success of the company’s values and policies has also caused problems in the later years. For example, the 5 to 1 ratio caused retention and recruitment issues for the upper management because they were not getting paid competitive to market rates (“Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,”). par Ingredients of products were also a strong competence.
The company product was centered on ingredients that were all natural versus artificial, high-fat versus low-fat, taste, flavor selection, price, and brand image. par 2. How strong is the company that Ben built? par By 1990, stock prices were similar to the S&P average, and the company held 441,987 shares of Class A stock and 243,938 Class B stock. The company was second in the market of super premium ice cream nationwide. Two plants were in full operation, employing 330 people, and a third plant was planned for development. Sales growth was consistent at approximately 60 percent and the company’s future looked bright (Annual Report, 10-K). par 3. Has Ben and Jerry’s social mission been an advantage or a constraint considering the company’s commercial success? par The company mission statement has been an advantage from the public’s viewpoint. The commitment to social activism and dedication to the community helped keep Ben & Jerry’s in the public eye. It was an advantage for marketing and public relations, but on the other hand, it was a disadvantage from a profit viewpoint. The shareholders want to make a profit and shareholder value was placed last among the three mission statements. par Ben & Jerry’s is a company that has an ethical strategy to help the community.
In choosing suppliers, the company only did business with other companies Ben & Jerry’s thoughts were ethical; even if it meant spending more money. par Identify the possible options available to the case company to resolve each of the problems that were identified in number 5. Discuss the strength and weaknesses of each proposed option. par Ben & Jerry’s can work to mitigate problems and challenges by making some changes in the organizational structure, adopting stronger alliances, employee training, creating stronger financial reports, and reformatting the compensation policy. par Ben & Jerry’s must take advantage of customer feedback and demands as they develop new products. In the past, a more casual environment and informal teams have been successful, but a more structured organization may be necessary. With continued growth a structured framework will allow for better communication, ease of work flow, and a system to follow in case problems arise. By combining marketing, sales, research, and purchasing this will allow for a better organizational growth and development.
The company will be able to design and market new product lines and consult with research and finance on the cost and supply of new ingredients. If the company decided to keep its current structure, it could choose to downsize and focus on a smaller market niche. This would help with the problems of having to create a more formal structure and allow the company to stay focused on its social mission. Also, it would be a disadvantage in that the company would not be able to continue to grow without a more structured organization. par To compete in the market successfully, the company may need to establish a demand in both regional and global markets. By targeting tastes in both areas, it can build a demand and brand equity to match the social environment of each market. By creating a global sales department the company can have dedicated personnel that will research each market and develop products that will be in demand. This framework should consist of marketing, research, sales, and purchasing, similar to the local team. By then dividing into foreign regions, the company can assure that all foreign markets are being covered.
The goal is to develop new products that will meet the company’s social mission. The advantages of these teams are that the company can dedicate time to meet specific needs of each market. The divisions could become experts in foreign affairs and know when changes need to occur. At the same time, a disadvantage is the financial impact. The company will need to expand personnel, spend additional funds for marketing and research, which affects the bottom line. Ben & Jerry’s could also simply worry about the local market and focus totally on gaining the competitive advantage at home.
This would free up finances for more social activism and create a stronger loyalty for the one market, but the company would lose market share and hold in foreign markets. par The lack of management skills and leadership training results in lead positions that are filled with external candidates who are not focused on the mission. Alignment with the mission was the integral force that helped company growth. Ben & Jerry should develop advancement structures for management and training that would allow employees the opportunity for a career path.
Management training would allow long-time employees to understand the culture and work processes to move into roles of leadership. By creating a plan of action for current employee growth, the company can assure that the next generation of leadership will be aligned with the original mission and values. By mentoring current management and training them to be leaders, the company could also gain control of the structural problems. Duties could be delegated and a “relaxed” hierarchy system could be created in order to structure communications and problem resolutions.
To mitigate compensation issues a system that has a broader ratio based on performance and longevity would be a good incentive for retention and recruitment of management. A ratio of 8 to 1 would be a better option and could align management more closely to market averages. Other ideas could be a bonus system where the current 5 to 1 ratio would still be in place. Management would have the opportunity to gain bonuses based on sales, cost reduction, and etcetera. Advantages would be a structured, controlled system that will build morale, to incent and retain managers, and allow for a structure to follow for leadership command.
The disadvantages would be the possibility of creating an environment that is more “stiff” and formalized. The goals of Ben and Jerry were to keep a casual atmosphere. par The withdrawal of Ben and Jerry from management should not pose a problem as long as the management training and reorganization occurs. The advantages of them leaving the leadership would be more of a focus on financial strength. At that same time, caution needs to be used to keep the mission and values intact. Another option would be for Ben and Jerry to sit on a board of directors and still be able to have some decision-making authority. par From the identified list of options, recommend the solution that the company should adopt in this situation. Explain and justify this choice. par par Ben & Jerry’s can work to mitigate problems and challenges by making some changes in the organizational structure, adopting stronger alliances, employee training, creating stronger financial reports, and reformatting the compensation policy. By reevaluating the compensation policy to allow for continued growth of management the company could build a strong team and reduce retention.
Employee morale would renew and the organization could continue to grow. In creating a “casual” hierarchy the company could resolve leadership and chain of command issues and create a stronger communication system. With continued growth Ben & Jerry’s will have to implement changes in order to stay in business. The mission and values can still be a core competence, and the company can maintain its social mission while being financially and structurally sound. This will ensure Ben & Jerry’s presence into the future. par par Works Citedpar “Annual Report, 10-K”. Ben & Jerry’s Homemade, Inc. 996. Retrieved on November 4, 2004 from http://www. benjerry. com/our_company/research_library/fin/0000768384-97-000005. html. par “Ben and Jerry’s Homemade Ice Cream: Keeping the Mission Alive,” Harvard Business School Case 392-025par “Core Competence of the Corporation”. by C. K. Prahalad and Gary Hamel. The Harvard Business Review May-June 1990. (Available as a Reprint. )par McKell, Lynn. Ed. “Ben & Jerry’s Homemade, Inc. ” December 3, 2002. Retrieved on November 4, 2004 from http://marriottschool. byu. edu/teacher/ISYS201/Packet/ben&jerrys. doc. par par }}