I am taking the viewpoint of the management of Ben & Jerry’s Homemade Inc.
II. Statement of the Problem
How should Ben & Jerry’s management improve its management control processes in order for it to be more competitive in the superpremium ice cream industry?
We will analyze the pertinent facts of the case and help the management of Ben & Jerry’s develop a strategy to improve its management control processes.
IV. Areas of Consideration
Few small businesses have more appeal to the American public than the Vermont-based superpremium ice cream company, Ben & Jerry’s Homemade Inc. There is broad appeal in Ben & Jerry’s superpremium ice cream. “Ben & Jerry’s is a household name in America.” Their approach to business was uninformed at best; once they even closed for a day to figure out the books. B & J’s commitment to the welfare of their employees is evidenced by free health-club memberships (affordable day care, etc.) Today the company has more than 350 employees and about 90 franchised shops and enjoys sales revenues in the neighbourhood of 60 million annually. In 1990, it was ranked as the number two producer of superpremium ice cream in the country. Although well known for the excellence of their product and their willingness to compete with the likes of Pillsbury-owned Haagenn-Dazs, they also derive much of their notoriety from their approach in doing business.
Ben and Jerry are widely perceived as “The Bad Boys of American Business”, whose ice cream company is not the normal kind of growth company, but rather a company founded on “funk and adventure” plus a strong interest in social change. It has become successful due to the dedication of the work force, many excitingly bold marketing manoeuvres, and some good luck. The company has used its image of being unusual and dedicated to social change to woo the press into giving it lots of free publicity. While B & J insist their motives are well meant and they keep on producing quality products, their corporate financial approach appears to be quite unique.
For example, no employee (including Ben & Jerry) can earn more than five times the salary of the lowest-paid employee, according to company policy. Additionally, B & J commits a full 7.5 percent of pretax profits to a non-profit foundation that aids various causes and charities. Part of B & J’s distinctiveness is that they continue to focus on projects and causes outside of business. They mad the effort to help save the Amazon rain forest by producing the Rain Forest Crunch. They brought out the Peace Pop in 1989, an ice cream bar on a stick, which was to provide funds for their “1% for Peace” project.
The bar had problems from the time of its introduction, including a lack of quality control, an ineffective, low-budget, low-key marketing strategy, and heavy marketing blitzes from the competition, which offered less expensive treats. “We learned that a product doesn’t sell just because you’re trying to do good in the world. You still have to have a healthy distribution strategy, a good marketing strategy, and price the product properly.” Some key people, including the marketing director, have apparently become disgruntled with the salary cap, the 60-hour weeks, and other B & J policies. The search for a female chief financial officer was unsuccessful, partly because female CFO’s can write their own tickets.
V. Alternative Courses of Action
1. B & J’s management does nothing. Maintain the status quo. 2. The first thing that B & J’s management should do is hire the best CFO that is currently available in the labor market. To do this, they have to amend their salary cap policy and make an exception for critical top management positions in the company (e.g. CEO, COO, CFO, etc.). I think that some of their problems can be traced to improper management and planning of their finances. They also need to hire a good marketing team that can address their problems on their distribution, marketing strategies and product pricing.
Secondly, the management has to minimize their expenses on their corporate & social responsibility (CSR) projects. It is good to use their money to promote social change and awareness but it may have a detrimental effect on the company’s resources (i.e. profits). Lastly, the management should continue with their good policies and best practices like commitment to the welfare of their employees, amended salary cap (with exceptions for critical positions), producing quality products, and their commitment to CSR projects (though at a lesser extent).
VI. Conclusions & Recommendation
I recommend that B & J’s management follow option no. 2 and hire top notch professionals with a passion for social change to run the company. I have no problems about their commitment to social change and contributing to non-profit organizations. They just need to balance their focus and still be a profitable business at the end of the day. With the help of a professional management team, they may become the no. 1 premium ice cream company in the world.