The paper is about the governance, performance and market value of a brand named as Ben & Jerry. It is a multinational brand famous for its ice creams and other frozen products. The paper casts light upon the major events which leads to undervaluing its share prices and explains how the competitors planned to acquire Ben & Jerry.
From the business perspective, it is a natural phenomenon that a product has life cycle which has both boomed and depression periods. When a product is introduced, it passes through the phase of introduction, launch, popularity, high sales, innovation, and low sales. It is also possible that it may finally vanish away. The product may no longer exist in the market but brand remains there. It is loyalty with brand which attracts people to purchase products from particular seller and manufacturer. Commercial organizations go a long way to protect their brands.
For large organizations, serving across the globe, finances is a big issue and they go private limited. As they invite investment from open market, they need to give certain authority and rights to the shareholders. The shareholders earn when a brand performs well and they lose if there is any element of negativity in the market. It is important to mention that share price decrease may happen because of the factors that may not be directly related to the brand. There are uncountable factors which lead to change in share price, even rumors and psychological factors can turn the tables around.
Having established this background, it can be assumed that when share price is reduced, the giant competitors find it more favorable to acquire a small entity. The same happened in the case of Ben & Jerry. It was a profitable entity with operations in multiple countries of the world, enjoying prestige and customer loyalty. People loved to enjoy the brand of Ben & Jerry. Then the adversaries led to decrease in its share price which made it easy for giant competitors to initiate efforts of its acquisition.
Cause of Decrease in Share Price of Ben & Jerry
As mentioned previously, share price of an organization is affected by virtually any possible factor on the face of earth. Even unfavorable news can bring drastic decline in the share price. The shift in exchange rate also plays vital role in case; the company is listed at international stock exchange.
The inception of new century did not turn profitable to Ben & Jerry. Its tock price was decreased to a great extend. There were many reasons for it. Described below are few of them.
The ice cream produced by Ben & Jerry was one of the most favorite brands traded in the target market. The ice creams lovers considered it almost impossible to go to shop and refrain themselves from the ice cream. There was huge variety of ice cream flavors offered by Ben & Jerry and every time there was a big contest to distribute shelf space among the ice cream suppliers.
However, the 21st century posed new challenges for it. The quality culture was promoted and the inspection of Ben & Jerry ingredients turned highly negative for them. The inspectors accused Ben & Jerry for using the ingredients which were not natural and may not be fresh even. There were low measures of ensuring hygiene and quality. The food inspectors were concerned about the source of the ingredients as well while Ben & Jerry was susceptible about the method that were in practices at Ben & Jerry production units.
Despite its good taste and established market, this news affected the target market badly. Sales started declining. In order to meet the quality standards, Ben & Jerry had to remove a few flairs and changed ingredients of few others. It led to reduction in its product line and the favorite flavors of many ice creams lovers were vanished. It was a disappointing situation that Ben & Jerry could not defend it in the face f inspectors and made changes in its inputs. It confirmed that the previous production was not up to the mark and the huge profits were obtained from the flavors which were below quality standard.
This challenge could have faced in a better way if the management of Ben & Jerry had the same vision which they had at the time when this organization was formed. It was the story of almost 3 decades ago and the management was aging. Despite changes in its structure and function, Ben & Jerry decision making was in the hands of aging management which could not cope up with the emerging challenges of new century. They tried to convince the quality control inspectors that their definition of quality was different from the one issued by superseding body. But this justification did not go in their favor.
The customers lost their favorite flavors, hence sales were reduced. There were rumors about its selling hence investors were doubtful about its fate and losing interest in it. Consequently, share price decreased. The trend of decrease further paved way for its decline and it was expected that Ben & Jerry will not sustain as Ben & Jerry.
Potential Acquirers and Their Plans
In the corporate world, joining hands for profitable relationships is also a practice. Profitable organizations keep an eye on the market performance of their competitors so that they can offer them partnership, merger or acquisition. Depending upon the size and performance of organizations, the type of deal is offered. However, for larger organizations, it is more profitable to acquire small competitors so that an established brand can be added in their portfolio. There are other motives for acquisition, e.g. resource acquisition, finance arrangements, synergy etc.
Acquisition maybe a profitable deal for a small firm but there are many constructs which discourage the small brands from dissolutions. The first and foremost point of consideration is related to brand protection. Organizations consider it an attack on their corporate identity that an organization wants to acquire them. Still, these practices continue and get successful as well because of the certain reasons which do not fall in the controllable domain of organizations.
The governance of organization is key factor which determines the plan of action for its present challenges and future vision. In private limited companies, where management is the representation of shareholders, and shareholders are the real owners of the organizations, agency issues are common. The practicing management may have different approach to run business while the wishes of shareholders are entirely different. If these two elements are not harmonized, there is possibility of huge conflict and the ultimate loss will go the organization itself. The shareholders will fire the management and they themselves will lose because of poor organizational performance.
As mentioned earlier, decrease in stock price paves way for giant competitor to acquire the firm. The increasing rumors about Ben & Jerry attracted many other ice-cream manufacturers to acquire the brand. The most important motivation behind this initiative was to acquire the values which were engraved in the culture of Ben & Jerry.
Since its establishment in 1978 (Unilever, 2012) till the end of century, Ben & Jerry actively participated in the activities of corporate social responsibility. It was one of the reasons for its popularity and customer loyalty. When it was accused of using artificial flavors, the customers were concerned about the quality of ice cream, yet they were not in the favor of losing its identity. They considered multinational organizations as purely focusing on the motive of profit and no value addition to society. The rumors about Ben & Jerry provided them an opportunity to acquire it and utilize its values for promotion of their…