Ben Cohen and Jerry Greenfield would have never imagined in 1978 that their small ice cream parlor would one day turn into a multi-million dollar business producing over 10 million gallons of ice cream. Through their dedication to quality and corporate citizenship, Ben & Jerry? s successfully became one of the leading ice cream producers in America. The company? s philosophy was particularly focused on social responsibility and serving the community. The Ben & Jerry? s Foundation was established in 1985, donating a portion of their profits to environmentalists and non-profit organizations. When the Soviet Union started moving towards democracy and free enterprise, Ben & Jerry? s felt a sense of global citizenship and decided they wanted to help. After the state of Vermont was declared the sister state of Russian city Karelia, plans were started for Ben & Jerry? s to conduct business in Karelia.
Ben & Jerry? s Vermont-Karelia Ice Cream, or Iceverks, was created as a joint venture partnership conducted by American and Russian businesspersons. The goal of the venture was focused on providing quality ice cream and using Ben & Jerry? s as a model for operating a business in Russia. Dave Morse, a production supervisor for Ben & Jerry? s, was appointed general director of the Russian venture. After taking trips to Russia to meet prospective business partners, Vasili Mikheev, a military factory director, was chosen as the commercial director for the project. As a result of the chaotic state of the country at the time, there were a few technical obstacles that stood in the way of establishing a business in Russia. The first obstacle was registration.
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Registration was a difficult process due of the lack of bureaucratic structure in Russia at the time. Ben & Jerry? s was offered a bribe to have the registration taken care of, but were not willing to accept an offer that was inconsistent with their philosophy. After many meetings, phone calls, and drafted documents, Iceverks was finally registered in 1991. The next obstacle was the construction of the facilities. The first and second set of architects that were hired were subsequently fired because of overly delayed work. Construction was finally completed after the Iceverks employees decided to finish it themselves.
Despite these obstacles, scoop shops were opened in the cities of Petrozavodsk and Kondo pga. During the first four months business went well, resulting in currency sales of U. S. $2, 442. Because Iceverks maintained low prices in compliance with Ben & Jerry? s philosophy of corporate capitalism, they were voted one of the top three ethical businesses in Karelia.
Souvenir goods were also made in Russia for a relatively low cost and sent to the United States to be sold at a markup price. It was very important to Ben & Jerry? s that the joint venture partnership be 50/50 between the Russians and the Americans. Even though Russian law states that the general director of a company has full authority over everyone, both partners agreed to make all decision jointly. Dave and Vasili developed a mutually agreeable relationship where each individual? s opinions mattered equally. It was planned that Dave would stay in Russia until after the grand opening of the Petrozavodsk shop, then return to Vermont to conduct communication with Ben & Jerry? s in Vermont and Iceverks in Russia.
Upon Dave? s departure, Greg Quinn, a Ben & Jerry? s employee, was chosen to take over the role of general director. The Russians had difficulty with the change in management. The directors needed an ample amount of time to become familiar with each other and each cultures styles, especially in light of the language barrier. Since all decisions were to be made equally, it was crucial that the American director make a long-term commitment to maintain long-term harmony and good relations among the directors.
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As time went on, issues in marketing, promotion, and business diplomacy began to create conflicting opinions between the Russians and Americans. The Russians had laws and customs which the Americans simply could not comprehend. Conflicting management styles were resulting in heavy debates and arguments. Greg felt that it was most important that Iceverks maintain their original goal, to focus solely on ice cream production. Vasili disagreed, believing that Iceverks should take on other projects also that would benefit them in the long run. Jeff Furman, former vice president of Ben & Jerry? s, agreed with Greg regarding the goal of Iceverks.
They felt that the business would remain profitable through ice cream sales and were discouraged from taking on other projects due to failed attempts in the past. Jeff understood that the Russian partners wanted to expand and grow, but he was uncertain of the possible success of such endeavors considering the corruption and political situation in the Russian cities. He wanted to make sure that everything was running smoothly within Iceverks before expansion was attempted. Vasili agreed with Ben & Jerry? s goal of promoting peace and creating a positive image, but he wanted to do more. He inherited the old Russian attitude of employees all being part of a family, and his vision was to create a company town that provided housing for all the employees.
He also believed that Iceverks could solve their milk supply problem by developing a farming cooperative that produced milk. Lacking the resources to fund projects on their own, Karelian cooperatives could only be accomplished through the support and funding of Ben & Jerry? s, which they were not receiving at the time. In response to these conflicts and tensions, Ben & Jerry? s had a choice to make regarding the specifications of their relationship with Iceverks. One solution would be to provide Iceverks with the funding and support that they needed to be able to successfully launch outside project endeavors. This would mean that Ben & Jerry? s would make a significant change in their policy towards Iceverks. Their focus would shift from the steady production of ice cream in Karelia, to the production of ice cream in a joined effort to further expand in production variety and grow as a corporation.
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Through existing US programs that support farming cooperatives, Ben & Jerry? s would allocate funds to allow for the development a milk production farm in Karelia. Although this was not their original goal, it has potential to be profitable. By funding projects for Iceverks, Ben & Jerry? s would be entitled to a portion of their profits. An increase in sales and production of Iceverks would directly lead to an increase in profits of Ben & Jerry? s. However, it is crucial that Ben & Jerry? s does not lose sight of their overall vision and mission statement in the process of supporting Iceverks. While maintaining increasing profits is a common goal of corporations, it would be a great disadvantage for Ben & Jerry? s to suffer as a firm by not fulfilling their own mission statement.
Another alternative for Ben & Jerry? s is to completely pull out of the Iceverks operations and focus on their own firm while allowing Iceverks to manage themselves. According to Jeff Furman, the Iceverks operation was taken on as an adventure, with no long-term intentions to continually and successfully produce ice cream in Russia. They wanted to take advantage of the opportunity in Russia while also keeping in mind that there were many opportunities in other countries also. They wanted to stay with their original focus of producing quality ice cream.
Keeping this goal in mind when the management conflicts begin to occur, it would make sense for Ben & Jerry? s to withdraw and allow Iceverks to take advantage of their own opportunities. The disadvantage of this alternative is the creation of a competitor. By not working with the Russians, Ben and Jerry? s would be allowing Iceverks and the skilled Russian partners to create their own business that could potentially be a competitor. Their original plan to expand globally would instead backfire and decrease their own sales and production. A third alternative for Ben & Jerry? s would be to continue to operate with Iceverks but to change the degree of partnership. Instead of a 50/50 American-Russian relationship, a 30/70 relationship may be more favorable.
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This would allow the Americans to remain a part of the operations, but would give them less say in the decision-making process. The Russian partners would have the freedom to explore other projects and endeavors in hopes of expanding business. If this were to occur, the Russian and American partners would need to resolve their management conflicts. Since the conflict that existed between the partners was a different vision of the future, the American partners would have to be willing to let the Russians explore their potential outside projects. Based on the analysis, our recommended strategy is for Ben & Jerry? s to withdraw from the Iceverks operations and focus on their own corporation. The reason that Ben & Jerry? s became so successful was because of their combined effort to not only increase profits but to also provide community service.
Their effort to better the community and improve the lives of the people they touched is what created their good reputation and loyal customer base. We feel that by making an increased effort to provide the Russians with the money and support that they need would be distracting from their primary concerns. It is essential that Ben & Jerry? s continue with the philosophies and goals that have provided them with the success that they have. Having their own freedom to lead their own business, Iceverks would have the opportunity to expand.
Creating a milk production farm would solve the milk supply problem that existed in Karelia. The only way to compete with the large state-owned production farms being privatized is to be able to fund a small farming enterprise. Because Iceverks lacks that kind of funding on their own, they are in no position to do this in the near future. It is possible that they gain enough growth as a company to be able to fund projects on their own further down the line. The best way for Ben & Jerry? s to prevent Iceverks from becoming their competitor is by using their authority to create a clause that says that Iceverks can not expand in the United States.