Ben & Jerry and Iceverks : Marketing strategy in Russia

Résumé du document

The Russian systems were undeveloped and inefficient and the Russian mafia has gained enormous power. For example, the company had to pay as much as 30% of their monthly profit for mafia protection. Russians in Moscow consume 170 tons of ice-cream per year and 98% of which is vanilla. When the company decided to introduce some of the American favorite flavors (Cherry Garcia, Chunky Monkey and Chocolate Chip Cookie Dough) it was a flop. The distribution was very important and a difficult problem to solve for the company. Russians didn't have refrigerated trucks for their distribution. There was a lack of refrigeration units in Russian stores. Railroads were very expensive and prevented them for providing their products at a reasonable price. Distribution in Russia is often controlled by a monopoly, usually links o organized crime.

Extraits

[...] Ben & Jerry and Iceverks : marketing strategy in Russia The main cultural differences BUSINESS ENVIRONMENT they had to find a distribution system the Russian systems were undeveloped and inefficient the Russian mafia has gained enormous power. For example, the company had to pay as much as 30% of their monthly profit for mafia protection. PRODCTION Russians in Moscow consume 170 tons of ice-cream per year and 98% of which is vanilla. when the company decided to introduce some of the American favourite flavors (Cherry Garcia, Chunky Monkey and Chocolate Chip Cookie Dough) it was a flop. [...]

[...] Ben and Jerry's gave out 5,000 cones to elementary children in Karelia in 1994 The company has ensured the long-term viability of its own key suppliers External analysis on Russia and its Ice Cream market Goal: gain a more complete understanding of the nature of western firms entering the Russian economy Threats: Identify problems foreign firms are facing in the emerging Russian market Opportunities: describe the main opportunities of its large market this raises important issues about the level of risk involved in Russia Business Environment Opportunities Foreign Direct Investment a way to tackle Russian market Tax break, subsidies, allocation a way to avoid huge costs Threats Social and cultural challenge: capitalism versus communism Economic condition: 40% of Russian population is below poverty line Difficulties to get high ROI Huge costs of entering Russian market Political context Opportunities Russia a country in a transition period: efforts to build a democratic political system and market economy Threats Instability in law and regulation Bureaucratic problem Corruption and Mafia Distribution chain and Delivery Opportunities Concluded friendly partnership with distributor's company Organized your own equipment service and training on sanitary rules Threats Russian distribution system is undeveloped and inefficient Transport difficulties A lack of equipment in local stores Quality control problem Supplier Opportunities Use local suppliers and abundant resources: create high quality ice-cream with local ingredients Threats Difficulties to find acceptable and suitable ingredients Communication problem regarding corporate strategy Management and Employement issues Opportunities Hired local employees: lower labor costs Create a cross-cultural company: bring closer two nations by gathering your skills and competences Social mission: create jobs, exchange know-how, help local community Threats Language a hard barrier Management and employment issues: as a result of former communist work ideology, local managers and employees are not able to satisfy the western requirements Difficulties to combine local and western working-habits Ice Cream market Opportunities A large market with opportunities: the third largest market in the world and the domestic market isn't saturated Ice Cream: a mass market product for Russian Developing ice cream flavours Threats Competition Opportunities Local vendors are small business units and concentrated on one flavour vanilla Variety and novelty are a competitive advantage Threats Street vendors and restaurants linked to crime organization Local firms have strong power to pressure the entry of a new company Local companies use only natural ingredients Foreign Ice cream companies, dangerous new rivals Finance Opportunities Earning money if you don't repatriate funds and find the right niche Threats Currency fluctuations and convertibility Inability to repatriate profits because of inconvertibility of the ruble Inability to evaluate or even estimate ruble's real value Inflation a financial problem in Russia High interest rate Black market Evaluation and Conclusion Ben Cohen: a very intuitive businessman Open up business right away there, quickly without implementing a complete strategy in a long term approach Only generally speaking it seemed a right decision, considering: abundant natural resources there cheap land Cheap and highly educated workforce Huge market Evaluation and Conclusion But the big risk followed the big opportunities Ben Cohen was an idealist very concerned about his social mission and political position through ice cream diplomacy But this is business, and bankrupcy was obvious The underground: what is it? What are the mistakes done? Political instability Economy and financial risks Joint venture choice considering the lack of control Huge culture differences Strategic alternatives Fundamental issue The principal problem of the company is its philosophy. To take a part of 51% minimum to have a total control of the joint venture. To stop to focalize only on the social side and on the promotion of understanding and communication between Russia and USA. [...]

[...] To take care of the advice of their Russians partners as to local investments. Structural and marketing issue To stop the wholesale/ the new law, introduced by the Russian government in 1993, the activity won't be enough profitable to pursue it. To solve this structural problem Ben and Jerry's can install the necessary equipment to the local stores. They could import ingredients as do other foreign companies. And they can also use artificial aromas to keep down prices. The company has to reduce its flavors diversity and to produce essentially vanilla ice. [...]

[...] Russians didn't have refrigerated trucks for their distribution. There was a lack of refrigeration units in Russian stores. Railroads were very expensive and prevent them for providing their product at a reasonable price. Distribution in Russia is often controlled by a monopoly, usually links o organized crime. MANAGEMENT A conflict and a disagreement over expansion appeared between the American manager (Mr. Morse) and Mr. [...]

[...] Employees had to be trained to keep refrigerators clean and the store sanitary. FINANCE Inability to repatriate profits because of the inconvertibility of the rubles. With the inflation, the company had to adjust their prices Consumer's expectations and B&J strategy with its product Russia: the third largest market. Ice cream is a popular dessert in Russia Russians consume 170 tons of ice cream per year Ben & Jerry's strategy on American market Use of all-natural, High quality ingredients The innovative flavours Ben & Jerry's strategy on Russia market A problem: Russians were not accustomed to the chunks of ingredients in the ice cream 98% of ice cream consumed is Vanilla Create their ice cream based totally on local ingredients Produce premium products Superior consistency of ice creams How Ben&Jerry attracts Russian consumers? [...]