Ben and Jerry

Ben & Jerry’s Meltdown in MoscowExcerpt

1 

Introduction

-

profitable alliances with franchised names and licensing in a dozen European locations and severalLatin countries.-

plant in Russia, Karelia in l992-

pull out in early 1997 due to "impossibility of managing" its assets under current conditions-

opportunities:

•

one of the largest market for ice cream (350 tonns annually)

•

weak competition-

$20 million in grants from USAID-

Entry mode: joint venture called Iceverk guided by American management techniques

Error Analysis

Error analysis:

Three viewpoints:

•

The Russians perceive Ben & Jerry's management as running out on them after failing to cope with the reality of local customs and market problems (cultural problems)

-From Ben & Jerry's viewpoint, the company made a rational business decision to get out of anunprofitable venture and cut cash-flow losses.-

-USAID describe Ben & Jerry's managers in part as

victims of the environment

itself and in part as

unprepared

for the risks of a Russian investment.>> the demise of Iceverk illustrates the demands of working in an

unfamiliar society

-Ben & Jerry's invested more than $500,000 to

renovate an existing facility and bring in equipment

.

-Management: Expatriates (manager from U.S.A.) as well as locals (combination of ethno- andpolycentric staffing)

-American-style "scoop shops" in Moscow and regional cities-

Good start

•

By 1995, sales were approximately $750,000, and the company expected substantial growth in1996.

•

Rapid spread to other outlet stores-

Areas of problem:

Intricacies of the Russian distribution system > Russia still lacks a developed wholesale-distributionsystem capable of delivering products to stores on time, consistently, and in good condition.

•

Currency problems

•

troubles with government controls

•

bureaucratic glitches

In Detail

-

Russia still...