.. push the industry profits down in the process. Ben & Jerrys competitive structure seems to be consolidated. The more commodities like an industrys product the more vicious will be the price war. The nature and intensity of rivalry in their industry is much more difficult to predict. As the companies are interdependent competitive actions of one company will directly effect the profitability of others.
Companies sometimes seek to reduce this (price war) by following the price lead set by the dominant company in the industry. The demand conditions also affect the intensity of internal rivalry between companies. Growing demand tends to reduce rivalry as companies can sell more without taking market share away from other companies, resulting in high profits. Conversely declining demand results in more rivalry as companies fight to maintain revenues and market share. Therefore Ben & Jerry exist in a mature industry where there is declining demand; creating intense rivalry with Haagen Dazs.
Buyers Ben & Jerrys customers have no switching costs. Therefore Ben & Jerry have to be aware of upcoming price wars, to avoid losing customers to their rival. Hence Ben & Jerrys customers have high bargaining power. For example, during economic instability consumers are reluctant to spend their money on luxury products such as super premium ice creams. How much power can a supplier have? Ben & Jerrys Supplier of milk and cream comes from Vermont Dairy farms which charge a higher price but do not use any genetically engineered drugs (rBGH).
Their supplier of milk has increased bargaining power as a direct result of Ben & Jerrys principals, which in this case is, h Health issues. h To protect smaller farms. Most of their suppliers are scattered around the world such as, h South African rain forest, which supply Nuts. h Passamaquoddy Indians, which supply their Blueberry. h Georgia, which supply their peaches.
High costs in transportation and research are inevitable. The coffee beans used in their coffee-flavored ice cream took the company five years to find; therefore one can imagine the high costs involved. Ben & Jerry also put money pack into the suppliers. This in turn establishes strong relations between company and supplier; for example the brownies used in their Chocolate Fudge Brownie Ice Cream are purchased from bakeries, which employ underskilled workers. Doing so gives the supplier greater comfort and reassurance with better bargaining power, why? Because Ben & Jerry prefer to select their suppliers who have greater social morals.
What Social and Economic Factors affected B&J? In 1994, sales were flat, profits were down, and the companys stock prices had fallen to half its value. While Ben & Jerry had thrived in the 1980s, the coming of the baby boom in the 1990s meant a middle class society that was more health conscious {the target market which Ben & Jerry gained much success on}. The company realising its fall in sales, quickly responded to the changes in consumer demands and introduced Ben & Jerry Lite. This line failed miserably.
It seems like that Ben & Jerry failed to forecast and acknowledge the changing in consumer tastes, and was faced with increasing competition with Haagen-Dazs, which introduced its low-fat Ultra Premium ice-cream. Their social commitments to their customers community and suppliers have contributed to a successful and unique image, Ben & Jerry donated a portion of their sales from their Rainforest Crunch Ice Cream back into environmental preservation causes in South America. Ben & Jerry also established the Ben & Jerry Foundation, which donated 7.5% of its pre-tax profits helping non-profit organisation, such as, h An establishment in New York to help drug addicted pregnant women. h Individuals and families affected by the AIDS virus in Brattleboro. Such efforts had contributed to winning over like-minded consumers, however its arguable to what extent this will have on winning the hearts of international consumers. The question then arises, to what extent does their social unique image affect their consumer behaviour? Swot Analysis for Ben & Jerry Strengths h Ben & Jerry have an established and recognised brand name.
h They have a relaxed, loyal and casual workforce. h Good public and social image due to their principles in social awareness. h Wide variety of flavours in ice cream for customers. Weaknesses h Ben & Jerry have a limited target market, as their product is niche.
h The suppliers and distributors (such as Dreyers) have high bargaining power, which allows them to raise their prices when they like. h They have concentrated more on donating their money to charities therefore neglecting forthcoming changes in trends. h Declining market share. h Slow development of new products. Opportunities h Ben & Jerry should seek to globalise their product to compete effectively. h Change their current suppliers and distributors, which might enable them to be more cost effective Threats h Threat of substitutes h Economical changes such as in inflation or consumer spending h Social changes within the consumer market such as health conscience attitudes.
This report concludes that Ben & Jerry has the potential to prosper so long as they: h To be prepared for forthcoming changes in consumer needs and wants h To compromise between maintaining their company image and satisfying their investors needs. h Try to reduce their supplier and distribution costs by considering other options. Recommendations This report has identified three main areas of concern that need to be addressed; h Overcoming Inertia h Introducing an international joint venture h Maximising profits through cost efficiency (Economies of Scale) In todays global environment, change rather than stability is necessary. Rapid changes in technology, competition and customers demands have increased the rate at which companies such as Ben & Jerrys needed to alter their strategies and structures to survive in the market place.
As discussed earlier, one of the reasons why B&J has lost market share is because they failed to change themselves and adapt to a new competitive environment because of organisational inertia. To overcome this Ben & Jerry need to identify the main barrier to change such as consumer tastes. This can be overcome through the development of a marketing plan, as there seems to be no real evidence that Ben & Jerry have done this. Ben & Jerrys reliance on cause generated marketing has its benefit but it also has its pitfalls. Cause generated marketing and/or strategy has adaptability, whereas the long-term marketing plan has focus.
Therefore a good marketing plan is adaptable. Employee productivity is one of the key determinants of a companys efficiency and cost structure so this needs to be improved upon in order to make the company more competitive. The culture of the organisation is strongly influenced by the founders and changes will be hard to achieve. It is not recommended that the culture of the company be changed but that devising new ways to increase employee productivity through the Human Resource Function enhances it. After looking at many different options it is suggested that the employees be put into self-managing teams.
Each team will be responsible for an entire task and time deadlines should be given. It is also suggested that pay rewards should be given to the teams that complete their task to the highest standard. This option could lead to a more flexible work force, as employees will get to know each others roles. It can also create a flatter organisational hierarchy, which would make the decision making process a lot quicker even though all employees are still involved. Marketing should make the consumer believe that at a given time, be it on a date or after a meal, that B&J is the perfect conclusion to a perfect lunch or a perfect evening.
B&J needs to be aware of group decision especially couples. The idea of marketing B&J as the perfect accompaniment to a date could be profitable. How about the most romantic couple in USA competition?.
