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CHAPTER 3 GoVERNMENT RELATIONS AND POLITICAL RISK 115 eign markets and distribution outlets will become part BIBLIOGRAPHY of Unilevers international marketing networks. Ben & Jerrys Homemade, Inc., corporate web- site <www.benjerry.com>, News Release and Finan- cial Information Summary sites [cited 12 April 2000. Banerjee, Neela. Ben & Jerrys Is Trying to 1. Describe the types of risks that Ben & Jerrys Smooth Out Distribution in Russia as It Expands. QUESTIONS faced in the Russian market. In your opinion, was Wall Street Journal, 19 September 1995, p. A18. the venture a good idea? McKay, Betsy. In Russia, West No Longer 2. What role did culture play in the difficulties en Means Best: Consumers Shift to countered by Ben & Jerrys Russian venture? Goods. Wall Street Journal,9 December 1996, p. A12 Rao, Sujata, and Jeremy Weinberg. Ben & 3. How might Ben & Jerrys managers have re- sponded differently to the commercial, social, Jerrys Bids a Bittersweet Farewell. Moscow Times, 13 and regulatory problems that they encountered? bry 1997, p. 1 Could they have succeeded eventually, or did they make the right decision in leaving? What risks might be reduced or eliminated when Ben & Jerrys products become part of Unilevers globally integrated market system? Vitullo-Martin, Julia. Managers Journal: Moscow Entrepreneurs Seize Golden Opportunity. 4. Wall Street Journal, 20 January 1997, p. A14.BEN & JERRYS MELTDOWN IN Moscow Ben & Jerrys, the upscale American ice-cream maker, huilt a plant in Russia in 1992 -only to pull out in The Russians perceive Ben & Jerrys management early 1997, citing the impossibility of managing its running out on them after failing to cope with theru assets under current conditions. The venture was not ality of local customs and market problems. Fror the first foreign expansion for the Vermont ice-cream maker. Ben & Jerryshas formed profitable allances with franchised names and licensing in a dozen Eur pean locations and several Latin countries. It also hasUSAID describe Ben & Jerrys managers in part a ade investments in rain-forest countries such Brazil, where the company has been active in conser pared for the risks of a Russian investment. The vation activities through purchasing contracts for harvested nuts and other natural ingredients used in Russian partnerships that received a total of S20 mil special-flavored frozen desserts. The company en- lion in grants under an agribusiness partnership pro countered an entirely new experience, however, with gram including several other successful ice-cream an< the Russian plant in Karelia, a developing area near frozen-dessert ventures. In 1996, for example the Finnish border northwest of Moscow. B What went wrong is stll not entirely knowi Ben & Jerrys viewpoint, the c business decision to get out of ompany made a rationa r and cut cash-flow losses. Unofficial reports fror victims of the environment itself and in part as unpre point out that Ben & Jerrys was one of 11 American as Baskin-Robbins completed a S30 million factory out ful; by others it was a side Moscow, and Mars and Nestlé have bought intc existing local ice-cream factories. However, these Ben & Jerrys rode the wave of free-market ex- pansion into Russia. Working for a company noted selling many other products in many challenging lo- for its social awareness, its managers openly preached cations throughout the world. Indeed, they may not market economics and democracy; but the plant was do any better than Ben & Jerrys in Russia, but the motivated not only by missionary zeal. To the con- demise of Iceverk illustrates the demands of working trary, Ben & Jerrys fully expected to make a substann an unfamiliar tial profit by serving an area where demand for ice cream is among the highest in the world. People more than $500,000 to renovate an existing facility and here annually consume nearly 350,000 tons of ice cream, produced through antiquated technology and sold by limited vendors. The company also received a major development grant from the U.S. Agency for and the Iceverk venture opened American-style International Development (USAID) in 1994 to ef scoop shops in Moscow and regional cities. By 1995 fect a significant transfer of American technology and to develop a distribution system for northwestern expected substantial growth in 1996. Ben & Jerrys Russia. Planners envisioned a prototype of American seemed like an overwhelming marketing success, with ingenuity. Ben & Jerrys facility was underwritten by Muscovites lining up under the familiar cow logo to company assets in partnership with a Russian firm. buy whimsical favors such as Chunky Monkey and multinationals have built up experience under fire At the projects inception, Ben & Jerrys invested bring in equipment. The company carrie of the total financial package and transferred managers run the new operation. Demand started off briskly. to sales were approximately $750,000, and the com The new venture, called Iceverk, created an excep Cherry Garcia. The catchy American-soundin tionally well appointed factory, introduced American erms for brands management techniques, and established accounting spread to other outlet stores. owr, Iceverks and control systems. Ben & Jerrys spent slightly more than S700,000 of the $850,000 USAID grant success depended on the intricacies of the Russian dis before pulling up roots, but U.S. officials said the tribution system. They were also up against cu company had successfully implemented the systems problems, troubles with government controls, andb- and project services called for in the grant. with cult-like followings rapidly managers-Americans and local Russians-knew that rrency reaucratic glitches. They had their hands full.

What role did culture play in the difficulties encountered by Ben and Jerry's Russian Venture?

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