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MaliikJohnsonProfessorRendinoStrategicManagement January22, 2018Ben & Jerry’sExecutive Summary            On December 16,1977, Ben Cohen andJerry Greenfield created a well-known ice cream franchise called Ben & Jerry’s.This company is focused on creating and producing high quality ice cream sothey can compete with their competitors. Also, they act very highly on being sociallyinvolved the community. They want to build customer relationships and loyalty.

But,they face some issues that they need to resolve. The main issue is the 5-to-1ratio. Recommendations such as: improving the market department, more utilizationof local services, establish a better organizational structure (managementcharts), and ways of improving or eliminatinining the 5-to-1 ratio.             Following these recommendations canhelp Ben & Jerry’s increase their sales, production, decrease their costs, andimprove the company’s effectiveness in the market.  Situation and Environment AppraisalPorter’s5 Forces Threat of NewEntrants:            The ice cream business does not looklike a difficult business to enter. Look at how Ben & Jerry’s started outas a small company where they were operating out of a small ice cream, and thenended up being one of the biggest ice cream franchises today.

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Basically, Ben& Jerry’s capitalized on an opportunity that presented itself. Going backto my original thought, you really do not need much for opening an ice creamshop. Time, space, a significant amount of capital and knowledge of thebusiness should be the keys to opening and running an ice cream shop. Beingthat this is the food industry, the threat is high because other food companiesare pushing their products as well so they could make profit. Threat of Substitutes:            Ben & Jerry’s has an offering ofsuper-premium ice cream and super-premium ice milk.

Over the next couple ofyears, the ice milk market is supposed to have a drop-in value and ultimatelydisappear from production. A great substitute that Ben & Jerry’s can offerother than super-premium ice cream is super-premium frozen yogurt. The frozenyogurt market is expected to have a high demand in the next few years. Thereare companies who have already started to make frozen yogurt. With that beingsaid, the threats of substitutes are medium to high because for one, somecompanies have already started the frozen yogurt making process and two, thereare other dessert options in the market.

Bargaining Powerof Buyers:            In this scenario, buyer power ishigh. They have multiple buying options if they decide not to purchase any Ben& Jerry’s products. Every customer is different. Some may love Ben &Jerry’s and some may like their competitors’ products better. It really dependson the flavor, availability, and price.

Facing all of these factors, Ben &Jerry’s needs to have good relationships with their customers and develop a loyalcustomer base. Bargaining Powerof Suppliers:            In this scenario, supplier power ismedium to high. Farmers are the ones who supply the necessary resources such asdairy products, so Ben & Jerry’s can make their ice cream.

Farmers can opton choosing to continue with providing for Ben & Jerry’s or they can startproviding to their competitors. The reason they would start providing servicesto their competitors because of the price at which their competitors arewilling to pay them.          Rivalry:            Ben & Jerry’s is considered tobe a strong number two ice cream seller in the industry. Haagen-Dazs who istheir biggest competition, is currently number one and they control about 49%of the national market shares in major U.S. markets compared to Ben & Jerry’s27%. After Ben & Jerry’s, Frusen Gladje, Steve’s, and other small ice creambusinesses make up the rest of the percentage in the national market shares. Asfar as rating this competition, I would say it is a medium to high solely dueto the fact that Haagen-Dazs and Ben & Jerry’s are the two main giants inthis industry, but Ben & Jerry’s needs to improve if they want to be on thesame track or even above Haagen-Dazs.

CoreCompetency            Their core competency consists ofselling high quality super-premium ice cream with large amounts of flavorsavailable for consumers and they want to keep their using their ingredientsfrom Vermont at all plants. Mission            Ben & Jerry’s has a different view of their companycompared to another average company. The founders of Ben & Jerry’s are notbusinessmen, and they had no idea that their company would rise to success veryquickly. They are just two gentlemen who are dedicated in bringing change,social values, and awareness to the industry. They care more about thoseaspects than making a profit. With this, their mission consists of three parts:Product Mission            Produce, distribute and sell thebest quality of all-natural ice cream and other products with unlimited numberof flavors made from Vermont dairy products.

Social Mission            Operate the company in a way that improvesthe quality in the local, national, and international community. Economic Mission            Operate the company in a way thatmaintains good profitable growth, while increasing the value for shareholdersand making more opportunities available for our employees. BusinessStrategy            Ben & Jerry’s runs their company with adifferentiation strategy. This strategy played a major role in their flavoringand in the growth of their product line.

Some of their new flavors consisted ofChocolate Fudge Brownie, Rainforest Crunch, Wild Maine Blueberry, and FreshGeorgia Peach Light, and that increased their volume by 24%. Also, they decideto give their unique flavors uncommon names such as Cherry Garcia and ChunkyMonkey. Their increase in unique and common flavors and the quality of theirproducts is what sets them apart from the rest of the companies in theirindustry. Internal AnalysisValue Proposition            They want to product the highest quality,super-premium ice cream. Their value proposition is sort of similar to themission. They want to make and produce the highest quality of products that arebetter than their competitors and also make a pretty good profit, but they donot want to make a profit get in the way of what they really mean as a company.SWOTAnalysisStrengths             Being that Ben & Jerry’s producehigh quality products and they have a strong social image, that contributes totheir strengths as a company.

By producing these high-quality products andmaking them one of the superior brands, they claim a huge portion of the marketshare. And being that they are social oriented, it helps them in the field ofhaving and maintaining customer loyalty. Weaknesses            A weakness that Ben & Jerry’shave is the 5-to-1 ratio, which causes a divide among senior representativesand founders. The payment ratio at Ben & Jerry’s is the key contribution toa lack of senior management. Other managers can earn up to the same amount ormuch higher salary for the exact same job if they were to go work for anothercompany.

Another weakness is that they do not have organizational structure. Thereis no type of structure where you have the president and then other peopleunder them. Everyone is pretty much equal and this creates problems because thepresident may have to tend to a situation that does not need the presidents’assistance, whereas a manager can deal with it themselves.Opportunities            Ben & Jerry’s can capitalize onfrozen yogurt as its making an impact on the market very soon. If this marketmakes a positive trend, I feel that they could be key contributors. They haveto make and produce their products quickly at a rapid pace and take over muchof the market as possible before their competitors enter.

Threats            The threat that Ben & Jerry’scan face is if they do not capitalize on the frozen yogurt market. Frozenyogurt acts as a substitute to ice cream and if they do not have that, it coulddestroy their sales numbers. FinancialAnalysis 1989 1988 1987 1986 1985 1984 1983 1982 1981 Gross Margin 0.29 0.29 0.29 0.29 0.

26 0.28 0.32 0.

39 0.50 Operating Margin 0.06 0.06 0.08 0.09 0.07 0.08 0.

05 0.02 0.05 COGS as % of Sales 0.71 0.71 0.71 0.71 0.

74 0.72 0.68 0.61 0.50 SG&A as % of Sales 0.22 0.

22 0.21 0.21 0.18 0.20 0.26 0.38 0.

44              Based on Ben & Jerry’s financial analysis, itlooks like they have been operating and selling at a relatively stable rate. Therewas a three percent drop in operating margin in the year 1986, and should bepayed close attention. The gross margin has remained constant for the lastcouple of years which is not a good thing because this could be the result ofif sales are increasing, then cost of goods sold are also increasing.  Conclusion            Ben & Jerry’s are trying increase their sales sothey can be the number one ice cream provider. First in foremost, I wouldconsider them create some kind of organizational structure.

They need toestablish some kind of management system that can fully operate without havingthe president handle things that they should not have to. If that is done, thenI believe that things can be ran much more smoothly and the president can worryabout more urgent problems that the company may face.             Another improvement Ben & Jerry’scan make is in the marketing department.

If they want to sell more of theirproducts and have their products in more markets, then they should do somemarketing research. Better advertising of products and even havingrepresentatives from the company go to conventions and present their company tocustomers. Collecting the data of the market and seeing what the people wantand what they are willing to pay for the products is a good way to base your decisionsoff that.             Another improvement they can make isutilizing their local services more. Ben & Jerry’s has a plant in Indianaand there is a local dairy in the area that they can use.

Instead they ship allof their products from Vermont to Indiana, which increases costs. I understandthat Ben & Jerry’s want to uphold their reputation by having all of theirproducts from Vermont, but this can be an easy fix in lowering their costs ifthey used the dairy services in Indiana.            Then, there is the problem with the5-to-1 ratio. The founders personally feel like they do not want to be likeother businesses in America, so they come up with this 5-to-1 ratio as a way ofnot taking advantage of their employees.

Even though getting rid of it wouldmake a lot more sense, due to the fact that current or upcoming managers canturn down job offers because their salary rate is below the market value. Butbeing that is how Ben & Jerry’s chooses to run their company, they canincrease the ratio so that managers can earn a higher amount of salary and notbe completely below the market value. With that, it will attract more managersto come work for Ben & Jerry’s and regular employees as well.   

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