Introduction - International Business Ben & Jerry’s Case Study
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Executive Summary
An international business is a trading operation between a company of a certain country and the individuals and/or businesses of another country. Organizational management for long-term financial development is one of the organization’s business objectives (Cavusgil et al, 2014). To accomplish this goal, an organisation must increase shareholder value and employment opportunities for professional progress. Hence, the following report has focused on the international expansion of the global business of Ben & Jerry’s in the ice cream market of India. The report has established the justification of the internationalisation of the company, as well as the significance of the market due to its potential growth in the business world. In this process, a detailed macro-environmental analysis has been conducted to showcase the prospect of the Indian market for the company. Suitable entry modes have been detailed, followed by critical risk factors for the company in the chosen market.
Company Background: Ben & Jerry’s
Vermont-based Ben & Jerry’s Homemade Holdings Inc., doing business as Ben & Jerry’s, is ice cream, frozen yoghurt, and sorbet manufacturing company. Founded in 1971, the company now has its main office in Vermont. Burlington, Vermont-based firm Ben & Jerry’s Homemade was started in 1978 and sold to Unilever in 2000. Today, it is a completely owned subsidiary of Unilever that operates globally. There are offices in South Burlington, Vermont and a key production site in Waterbury, Vermont where the company is now headquartered. The following study explains how it plans to enter the Indian market. Customers may find Ben & Jerry’s ice cream at grocery stores, gas stations, and in “scoop shop” franchise locations. There were two individuals and a euphoric corporation in 1978 (Ben & Jerry’s Homemade, 2021).
Presence in Global Ice Cream Market
By the year 2020, Ben & Jerry’s will have generated sales of around $863.1 million. There were total ice cream sales of $6.97 billion (Wunsch, 2021). Their main strengths are their ability to provide customers with a wide variety of high-quality ice cream options that can satisfy their needs and desires. When it comes to international business, the company has concentrated on its key competencies to get an advantage in the sector. Between 2015 and 2020, the Indian ice cream market increased at a rapid pace (PRNewswire, 2021). The sector employs the world’s top six businesses, accounting for 68% of 2017’s value (Blendhub, 2020). Since the market is fairly concentrated and competitive, it is ideal for Ben & Jerry’s to grow.
PESTLE of Target Country: India
Political
Over the next five years, over three-quarters of the nations, spanning from much of the industrialised world to prominent emerging economies including India, Brazil, and Saudi Arabia, are expected to see increased volatility (Lockhart-Smith and Wille, 2021). Taxes and tariffs, which apply to both exporting and importing, are other important considerations. In addition to manufacturing and transportation regulations, the company’s overall strategy and marketing plan may be significantly influenced. As per Vora (2019), it has been brought to the attention of the “Indian Ice Cream Manufacturers’ Association” (IICMA), which has called for the imposition of restrictive restrictions on imports.
Economic
India ranked 26th out of 40 nations in the Asia-Pacific region in the 2021 Index, with a score of 56.5 points (ANI, 2021). India’s economy is ranked 121st in the world by the Foundation for Economic Education. Despite this, the total score has remained the same. The IMD “World Competitiveness Index” places India at number 43 (Press Trust of India, 2021). Ice cream manufacturers from across the world have been expanding their operations in India because of a rise in disposable incomes that allow customers to acquire high-quality ice creams. This, in turn, is a crucial component in the company’s development. Known as the mixed economy, the private and state sectors coexist in India; the country relies heavily on foreign commerce (Sharma, 2020). Economic considerations, such as rising pricing for raw materials, increased demand, taxes and tariffs, and supply shifts, all have an impact on corporate strategy and the business model. A decline in the demand for and expenditure on Ben & Jerry’s products might have a negative impact on the company’s business in India (Soulard, McGehee and Stern, 2019).
Social
Understanding the similarities and differences in each country’s conception of ethical behaviour may be aided by a code of conduct, based on the Hofstede cultural analysis (Silintowe, and Susanto, 2018). India lays more focus on relationships and less emphasis on explicit language, while the US places more importance on plain terminology in professional norms of behaviour. As a result, personal and professional lives regularly collide in India, where corporate leaders rely more on gut instincts to make ethical judgments. Social considerations play a key part in this process. Gao et al. (2018) have stated that lifestyle, work, education, status, culture, and the local community all have an impact on consumer preferences and decision-making. In 2020, India’s corruption perception index (CPI) rating has dropped six places to 86th out of 180 nations (Bennett, Coleman & Co. Ltd, 2021). As people’s awareness of health issues and intolerance to lactose grows, manufacturers are responding by creating products free of preservatives, genetically modified organisms (GMOs), dairy, fat, and organic ingredients, all of which are contributing to the growth of the market in the United States. People under the age of 30 are more likely to consume high-quality meals at colleges, coffee shops, cafés, and other establishments. Ben & Jerry’s may focus on its competitive strategy by capitalising on the growth in eating habits and urbanisation.
Technological
As per Paul and Mas (2020), when it comes to the food processing business, new technologies are always being created to enhance product creation as well as transportation and marketing methods. Infrastructure connected to commerce and transportation in India was rated at 2.91 out of a possible 5 between poor and high quality in 2018 (TRADING ECONOMICS, 2021). Modern cold chain infrastructure, such as temperature-controlled storage facilities and well-trained operations and maintenance staff, is boosting the market’s expansion. Ben & Jerry’s is also on the lookout for new legislation and technological advancements in this industry, such as cloud services like speech recognition and the “Internet of Things”.
Legal
The World Justice Project’s (WJP) Rule of Law Index 2021 places India at number 79 out of 139 nations and regions (worldjusticeproject.org, 2021). Plastic packaging and other “non-biodegradable raw materials” utilised in food processing activities influence the industry’s operational functions (Soulard, McGehee and Stern, 2019). Environmental standards are a top priority for the Ben & Jerry’s team. the “Food Safety and Standards Authority of India” (FSSAI) has revised many criteria to make it simpler for companies such as Ben & Jerry’s in the food processing business to operate (Paul and Mas, 2020).
Environmental
Environmental effects and emissions need to be reduced by Ben & Jerry’s. Additionally, the FSSAI is responsible for a broad variety of other elements of food safety, such as licensing, packaging, and labelling. Worker and consumer safety, as well as environmental stewardship, must be considered in the planning process (Gao et al., 2018). Environmental Protection Act was signed into law in 1986 to create a comprehensive system of environmental protection (Galea, 2010). As a result of this law, the central government now has the authority to control all types of garbage and address local issues that may arise across the country. If Ben & Jerry’s goods are corrupted, customers’ loyalty and confidence in the firm would be eroded.
Target Market Industry: Indian Ice Cream Market
Ice cream and frozen desserts have been inconsistent with demand as the world’s population expands, urbanisation rates rise, and global economies improve. According to industry research, the worldwide ice cream market will grow at a CAGR of 4.7% and reach $73.2 billion in sales by 2022 (Blendhub, 2020). Because of rising disposable incomes and a growing appetite for decadent sweets, global demand for ice cream is surging at breakneck speed. The Asia-Pacific area, on the other hand, is predicted to have the largest rise in growth. In India, ice cream is one of the fastest-growing food categories. Asia-Pacific is expected to grow at a CAGR of 4.1% by 2022, driven by India and Thailand, which have a growing middle-class and a huge young population that enjoys and seeks out novelties, particularly Western-like ones (Blendhub, 2020). Between 2019 and 2022, the Indian market is projected to rise by more than half its current value. Between 2015 and 2020, the market grew at a rapid pace.
Several factors contribute to the market’s healthy expansion. People’s increasing wealth and urbanisation are only a few of the variables that are expanding the market’s development horizons. Increasing deep freezer penetration is also contributing to the market’s expansion. Today, ice cream is widely accepted as one of the most popular sweets in India. There is a growing demand for desserts in the area because of the region’s hot weather and shifting consumer preferences. The ice cream market in Maharashtra is one of the biggest in India, accounting for over 15% of the entire market share (EMR Inc, 2021). Uttar Pradesh and Gujarat are the next main areas to follow. In 2020, the ice cream market in India will be worth INR 141.2 billion.
Reasons for Internationalisation for Ben & Jerry’s into India
Most businesses are dependent on foreign commerce for their economic existence during this period It is common for nations to have a bigger foreign marketplace than a local one. It is not necessarily the case that the wider the market, the less likely it is to generate substantial sales. It is possible to infer that the American and Indian marketplaces have quite different cultural standards based on these disparities. As a result, women are losing their sense of self-identity and autonomy, particularly in the workplace. While women’s rights and liberty of choosing are acknowledged in both countries, they have differing degrees of recognition. There has been an increase in women’s empowerment in the United States, as well as more freedom for them to make choices about their lives and lifestyles (Goryushkina et al., 2019). A woman’s daily decisions are impacted by her family and the significance of family values in the Indian culture. Considering Ben & Jerry’s business, this product is aimed at pregnant ladies who are searching for high-quality and flavourful ice creams.
To that end, Ben and Jerry’s new product, which is targeted largely at young adults between the ages of 18 to 29, and pregnant mothers residing in urban areas, has been developed. In metropolitan areas, there are ice creams specifically for women. Ben & Jerry’s may take advantage of the company’s extensive market penetration by promoting in urban and metropolitan areas. To appeal to the younger age, the company will provide high-quality ice creams and a large choice of ice cream flavours (Lin et al., 2019). Because of the very excellent quality of these ice creams, the Indian market has several potentials for the company to gain a competitive advantage. As a result, the company has chosen India as a target market for its operations.
Entry Mode for Ben & Jerry’s into India
Franchise
Franchising is the practice of joining up with another successful business and using part or all of their established procedures to run their own business. Distributorships were utilised in the past to enable companies to market their products in certain regions. In recent years, franchises have grown in popularity when a company gives another company licence to use the same brand and harness the company’s capabilities to build a successful business of its own. According to established rules and regulations, franchisees are also permitted to use the brand and other distinctive marks of the franchisor. Considering the long-term connection the company would have with the franchisor is crucial before they decide to start their own business as a franchise. There are two types of franchising relations. The most well-known kind of entry mode of foreign companies is franchising. An operator provides a complete framework for operating a business to the franchisees under a management contracts franchising model. In general, as Lin and Ho (2019) opined, franchisors help their franchisees with everything from site selection and construction to operational guidance and training, trademark requirements and quality assurance, advertising tactics, and general business advice and guidance, to name a few.
Joint Venture
Joint ventures are contracts between two or more parties to start a new business and invest in new assets. Profits, losses and resources are shared among the shareholders, who have complete control over all aspects of the company’s operations. A joint venture is a partnership between two or more persons created to accomplish a goal. Both parties invested equally in the project to improve on the original notion. Joint ventures are used by large corporations to extend their operations. To ensure the long-term viability of small-scale projects, a joint venture may be a useful tool in the early phases of business. Achieving short-term and long term goals are equally important. This objective can only be achieved if there is fairness, openness, and meaningful dialogue. In this regard, Ben & Jerry’s has chosen to enter the Indian market via a joint venture. It has been determined based on the opinion of Löhde and Calabr (2019) that Starbucks and Krispy Kreme would operate Ben & Jerry’s business in India, and this arrangement has been reached. There has been an increase in disposable income in India, which means that Ben & Jerry’s will follow Starbucks Coffee Co and Krispy Kreme Doughnuts in entering the country’s marketplace. “Dunkin’ Donuts” has opened four stores in the country under a licensing agreement with “Jubilant Foodworks Ltd”.
Critical Risk Factors for Ben & Jerry’s in India
Even though India is one of the world’s top suppliers of dairy products, the ice cream industry in the country is still in its infancy (Jana, Pinto and Moorthy, 2016). Companies such as GCMMF, Kwality Walls, Vadilal, Mother Dairy (India), Hatsun, and Cream Bell are among the key companies functioning in the sector. Competition in such a developing market can be a critical risk factor for Ben & Jerry’s.
It may be more difficult to establish universal corporate ethical standards in India and the United States due to cultural variations, organisational variances, and individualism vs. collectivist notions in both countries. In light of these cultural variations, it is essential for business managers in other nations to be well-versed in the ethical standards of their counterparts in other countries, as well as an understanding of how to maintain these values in a mixed workplace.
Political systems throughout the globe were severely damaged in 2020. After all, what comes next in the Covid-19 case might have serious repercussions for stability in a broad variety of countries. Using the Political Risk (Dynamic) Index, experts look at risks that are likely to fluctuate and worsen quickly (Marsh Inc, 2013). Political violence, business and macroeconomic risk, and societal-driven regime change risk make up the other two-thirds of the 30 political risk indices in their model. Though the country is at a comparatively higher rank of political stabilisation, it still poses some threats of corruption and terrorism from this viewpoint.
Conclusion
The entire report has focused on the aim to evaluate the prospect of the Indian ice cream industry as a potential market for the effective internationalisation approach of Ben & Jerry’s. The company overview has showcased the strong presence of the company in the global ice cream market, while the PESTLE analysis has evaluated the macro-environment to display the suitability of India as a prospective market for international businesses. Political issues, competitiveness, developing market and cultural difference between India and US have been identified to be four critical risks for Ben & Jerry’s to consider. The report has also identified franchising and joint venture to be effective market entry modes for the ice cream giant into the Indian market.
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