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... stores, and restaurants nationwide and globally. Since retailers purchase ice cream products in large quantities, this gives buyers substantial leverage over price. In addition, there are many ice cream products to choose from, so the buyers cost of switching to competing brands is relatively low.
In order to defend against this competitive force, a companys strategy must include strong product differentiation so that buyers are less able to switch over without incurring large costs. Suppliers The suppliers to the ice cream industry include dairy farmers, paper container manufacturers, and suppliers of various flavorings. Such suppliers are a moderate competitive force, given that the ice cream industry they are supplying is a major customer, there are multiple suppliers throughout the nation to choose from, and many of the suppliers viability is tied to the well-being of large, established companies such as Dreyers and Happen-Dazs. Therefore, the ice cream suppliers have moderate leverage to bargain over price. Substitute Products Many substitutes products are available within the dessert and frozen food industry (cookies, pies, Popsicles, cake). The ease with which buyers can switch to substitute products is an indicator of the strength of this competitive force.
Since substitute products are readily available and attractively priced compared to the relatively higher priced super-premium ice cream products, the competitive pressures posed by substitute products are intense. Companies that enter the super-premium market, therefore, must adopt defensive strategies that convince buyers their higher priced product has better features (i. e. , quality, taste, innovative flavors) that more than make up for the difference in price. Potential New Entrants The barriers to entry within the ice cream industry are moderate due to the brand preferences and customer loyalty toward the larger and more established rival companies. Other obstacles to new entrants include strong brand loyalty to established firms and economic factors, such as the requirement for large sources of capital, specialized mixing facilities and manufacturing plants. In addition, the accessibility of distribution channels can be difficult for an unknown firm with little or no brand recognition.
Although Ben Cohen and Jerry Greenfield successfully launched their ice cream business from a gas station with modest funding and staff, they had to initially rely on a rival companys distribution channels (and later on independent distributors) in order to gain a stronger foothold in the market. As discussed above, several competitive forces on the ice cream industry are relatively strong, suggesting that it is a difficult industry to be competitive in. However, Ben & Jerry's implementation of a differentiation strategy has helped the company effectively defend against these forces and gain a competitive advantage. The use of higher quality ingredients and eco-friendly packaging has created a unique brand image that helps develop brand loyalty and beat rival competitors to the market. The companys social activism toward the community and use of innovative flavors also help insulate the firm from the strong bargaining power of buyers since rival firms and / or products are relatively less attractive. Similarly, Ben & Jerry's product differentiation strategy also allows the company to fend off threats of substitute products that dont have comparable features.
The companys differentiation strategy also mitigates the threat of potential entrants due to high buyer loyalty for a superior product. The moderate threat posed by suppliers is tackled by two other facets of the companys strategy: ensuring the viability of suppliers by paying premium prices for raw materials, and redesigning the distribution network to gain more control and reduce reliance on rival distribution channels. The Sixth Force (Non-Market Forces) Industry Regulations Ben & Jerry's is subject to regulation by the United States Food and Drug Administration (FDA) and the Vermont Department of Agriculture. In response to stringent labeling criteria for health-oriented foods, the company made changes in its labeling regarding its low fat / low cholesterol products (SEC Report, 1999). FDA regulations may potentially affect the ability of the company, as well as rival firms in the ice cream industry, to develop and market new frozen dessert products.
However, given that Ben & Jerry's is already in compliance with the FDA, it is unlikely that such regulations will have a significant impact on the companys operations. Other regulatory forces include potential RCRA liability due to the companys generation of hazardous materials during the manufacturing process. However, Ben & Jerry's is currently exempt from these hazardous materials regulations since the level of hazardous materials generated is below the threshold for requiring a permit; indeed, by staying small and maintaining regulatory compliance, the company gains a competitive advantage over larger companies that may have to meet stricter regulations or be more susceptible to non-compliance. Public and Stakeholders Public and stakeholder concerns over health and nutrition and environmental pollution exert a strong force on the ice cream industry. The heightened consumer awareness and demand for low-cholesterol or low-fat foods can force companies to respond with ingredient substitutions and differentiated product lines to stay in business.
Similarly, the increasing consumer trend toward supporting eco-friendly product packaging and all-natural, organic ingredients can cause ice cream companies to revise their strategies. Ben & Jerry's, with its commitment to providing all natural ingredients, a low-fat ice cream line, and chlorine-free paper for example, is in a better position to attract those consumers who are willing to pay more to get more. Given Ben & Jerry's proactive strategic approach, the company can effectively insulate itself from these public pressures and enjoys a significant competitive advantage over those companies that resist incorporating socially progressive or eco-friendly values into their strategies. SWOT Analysis Another means of analyzing the strategies of the company is by examining the strengths and weaknesses of its internal resources, and then exploring the external threats and opportunities facing the company. By developing a clear understanding of these factors, we can evaluate where the company should go from here. Figure 4 identifies these forces for both the general corporate and environmental strategies of Ben & Jerry's.
Based on our analysis, we feel that much of the companys internal strengths and external opportunities lie within its environmental strategy. This gives further evidence to suggest that the environmental and corporate strategies are well integrated, and that this integration is crucial to the future success of the company. Key Success Factors A successful strategy incorporates the companys efforts to be competent on all of the industry's key success factors and to excel on at least one factor (Thompson and Strickland, 1998). In the highly competitive super-premium ice cream industry, the key factors of success include product differentiation, a strong distribution network, brand loyalty and clever advertising. As shown in Figure 5, Ben & Jerry's excels in these (and other) key factors, and has a particular expertise on product differentiation to gain a competitive advantage. STRATEGIC CONSISTENCIES According to the Ben & Jerry's Mission Statement, the goal of the company is to integrate product quality with economic success and social responsibility.
One of the key strategic factors that successfully links these three missions together is the differentiation strategy. In this respect, the environmental and general corporate strategies are very much in tune with each other. Differentiation not only increases the competitive advantage of Ben & Jerry's, but it also leads to environmental excellence in the operation of the company. By focusing its attention and energy on recycling, energy efficiency, and product innovation, Ben & Jerry's can reduce its impact on the environment while at the same time reducing product cost.
This is being achieved through the work of the Packaging Information Group that focuses on reducing the incoming packaging which adds to the waste stream, and the production of the comfortable Eco-Pint. These and other actions help build a competitive advantage within the market. By using all-natural, right-free ingredients and dioxin-free containers, Ben & Jerry's can also attract environmentally minded consumers to its products, thus increasing market share. At the same time, this practice helps protect the environment and support family-farming and sustainable agriculture. Therefore, this differentiation strategy has the versatility of providing a better product that can attract customers, command a higher price, and protect the environment, thus satisfying the three integral parts of the companys mission and both the corporate and environmental strategies.
In order for this environmental differentiation strategy to be sustainable there needs to be a willingness among customers to pay for environmental quality, credible information about the companys environmental attributes, and insulation against imitation. The companys steady growth in revenue over the last few years shows that the customer base is there and that they are more than willing to pay a premium price for a superior quality product. Ben & Jerry's addresses the latter two issues through its informative website, external audits, and constant innovation creating unique, hard to imitate flavors and products. Another way in which the environmental strategy and corporate strategy are consistent with each other is in the area of regulatory compliance. As a result of the attention Ben & Jerry's pays to the environmental risks associated with its production process, and the efforts made by the company to ensure that negative impacts to the environment from its business operations are minimized, Ben & Jerry's has had very few compliance issues and has never been issued any penalties by Federal regulators (1998 CERES Report). In addition to the environmental benefit from such compliance, there is a beneficial impact on the business as well.
By minimizing operational costs, the company gains a potential competitive advantage ove...
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