Company Overview - Hagen-Dazs in Japan - Case Study Example

 Company Overview Häagen-Dazs in Japan Introduction The increasing intensity of competition in the domestic market has transformed into one of the major reasons for the companies to consider international expansion (Kaibin, 2013). Studies have suggested that some of the key drivers of globalization are ample opportunities in the global market place, drive to increase the size of the business and obviously to generate more revenue. International expansion is indeed a beneficial activity for a company. Opportunity to increase the market share of the products and services of the company is a key advantage of international business. In addition, product flexibility is another beneficial factor for a company. For example, if a product is failing to live up to the expectations in the domestic market, there is a possibility of the same product doing well in the overseas market. However, along with several opportunities, there are certain disadvantages as well. The biggest challenge comes in the form of managing the overseas operations (Desanctis & Fulk, 1999). The management of the operation becomes a critical issue for the firm because the firm has to comply with the legal regulations of the target market and relating to the culture of the target country also becomes a difficult issue. Hence, it is important to make sure that the companies are working efficiently towards managing their global operations. The study seeks to scrutinize the international operation of Häagen-Dazs. The study will specifically focus on the company’s operation in Japan. Company Overview Häagen-Dazs is a US based ice cream brand founded by Rose and Reuben Mattus . It came into existence in the year 1961. Häagen-Dazs is also the subsidiary of General Mills. Presently, the company is headquartered at Oakland, California, United States. Although, General Mills still owns the brand name but in the US and Canada, ‘Häagen-Dazs’, the brand name is licensed to Nestlé. Initially, the company started selling ice cream with only three variants and the first retail outlet was opened in New York (Häagen-Dazs, 2014). The company use franchised business model to expand their business to other parts of the US. The company differentiates itself from the competitors through differences in product quality and by using unique ingredients in the manufacturing process. For example, unlike any other company Häagen-Dazs does not use xanthan gum, guar gum and carageenan in the production process; rather they make use of corn syrup which is healthier. Apart from producing and selling ice creams, the company also sells ice cream cakes, ice cream bars, frozen yogurt, sorbet and gelato (Häagen-Dazs, 2014a). After strengthening their market in the home country, the company started to expand in the overseas locations. According to reports the company is presently operating in 80 countries of the world. India, South Africa, Japan, Greece, China and Canada are some of the countries where the company is presently operating. In the financial year 2012-13, Häagen-Dazs experienced a growth of 16% (General Mills, 2012). In addition, the company also succeeded in opening numerous stores across the globe. Operations Strategy of Häagen-Dazs Since its inception in the early 1960s, the company has been innovating in every field of the business. For example, the company keeps on experimenting with new flavors and at the same time seeks to offer the best experience to the consumers. Häagen-Dazs brought new flavored ice cream and attempted at providing the best dessert eating experience (Hofilena, 2014). In addition, the company has always sought to provide quality customer experience within their stores. The strategy of the company is to offer customers with quality products and a soothing in-store environment. The combination of these two factors plays a critical role in enabling the company to achieve highest customer service and ensures long term success for them. With this strategy, the company has been highly successful in Oakland, CA. In addition, along with quality product and services, the company believes in the fact that it is also important to communicate the messages of the company and the offerings of the company to the consumers. Owing to this fact, the company actively promotes their offerings through a variety of channels. The main competitor of the company is Ben&Jerry and it strictly opposes the application of brand promotion. As a result of that their visibility remains low in the market place. In addition, Carte d’or owned by Unilever and La Laitière owned by Nestle are other major competitors of the company. Häagen-Dazs’s promotional activities are more dynamic and effective. This greatly assists the company to mitigate the challenges of market competition. Sholars such as Palevich (2012) believe that a business must achieve competitive advantages which also act as a driver of growth. Echoing this concept, eminent authors such as Rusinko (2010), stated that a company can gain competitive advantage in various domains of business. For example, a company can gain competitive advantage in the field of supply chain, distribution, product quality, advertisements and can even achieve an edge over the competitors due to the presence of a set of skills and competent human resource (Robbins, 2003). In this context of Häagen-Dazs, the company has been able to achieve competitive advantage because of their product quality and diversified range of products. The distribution of products is one of the key elements of a company’s operations strategy (Stacey, Griffin & Shaw, 2000). With the help of a strong distribution channel a company gets the opportunity to reach out to a mass segment of consumers. The same holds true for every business house and it is a proven fact that despite superior quality of the products and services, a company has failed in the market or rather failed to live up to the expectation of the management due to poor distribution network. A simple example will make the scenario clear. Among the two mobile phone giants, Apple and Samsung, the later one is way ahead in terms of the global market share and revenue generation. Currently, Samsung is the market leader with a market share of 30.6% in the Smartphone segment. In the similar way, Samsung is also the market leader in mobile handset category with a share of 25.4%. Apple on the other hand, currently holds 24.1% share of market and only 9.5% in the mobile handset segment (Thomsonreuters, 2013). Despite similar qualities and features, Apple is failing to tap certain segments of the market. One of the reasons is obviously the fact that Apple only caters to the premium customer segment, even when a comparison is made between high end phones of Samsung and Apple, it showed that Samsung is still the market leader (Thomsonreuters, 2013). Hence, a question is obvious to arise that despite similar quality of products, same price and features, why one company is lagging behind the other? The answer is the network of distribution. Apple has limited distribution channel and only operates through some company owned stores and franchised stores. The company hardly retails their product and this reduces the opportunity to tap the new market segment. On the other hand, Samsung believes in robust distribution and penetrates the market through various distribution methods. Hence from the discussion it is evident that product distribution is a key element of operation and is a source of competitive advantage for the firm. In the context of Häagen-Dazs, the products of the company are sold through various selling modes such as bars, single-serve cups and cones. The company sells the products through convenience stores, super markets and Häagen-Dazs’s flagship stores. This allows the company to target customers from various segments of the society. Apart from that, the company also distributes its products to their partners such as restaurants, airports, entertainment halls and through direct vending vehicles. Hence it is evident that the operations and distribution strategy of Häagen-Dazs is quite coherent and allows them to operate with greater efficiency and scope in the marketplace. The company offers wide range of products. In order to remain consistent with their positioning strategy, the company does not distribute their products to the discount stores and only makes use of partnership strategy so as to enhance their brand image ensuring superior quality and availability of wide range of products. The analysis of the company’s operation also states that the shops of the company are located at strategic positions coupled with particular concepts. In the context of communication, the company makes use of free degustation in the company owned shops and also makes use of impactful advertisements in the form of TV commercials and printed advertisements so as to enhance their visibility rate. Segmentation is another key element of the company’s marketing efforts but at the same time the operation of the company is greatly shaped by the chosen market segment. The company basically segments the market into two halves. One is the core target and the other is the large target. The core target segments of the company are young people and middle high class people who can afford to buy the products of the company. The target age group is 20-39 years. The large target group for the company is people who fall between the age brackets of 15-59 years. Both men and women are the targets for the company. In addition, people who are looking for pleasure and have the knack of exploring new sensation and flavors of ice cream. The company positions itself as a luxury or a super premium product. This is probably the only ice cream which comes without any artificial additives and colorings. The use of naturally aromatized elements such as Madagascar’s vanilla and Belgium’s chocolate enhances the value of the product. In addition to premium quality, high differentiation and rich heritage are other vital positioning factors for the company. However, owing to the fact that being a premium company limits the size of the market, the company is actively seeking to reposition their brand from being exclusive to accessible for the middle class and from an individual ice cream brand to a sharing one. (Source: Wordpress, 2013) Hence, from an overall point of view it can be stated that with strong distribution channel, superior quality of the products and better customer service, the company is managing their operating very efficiently in the US markets. The financial figures of the company clearly reflect the stable situation of the company. SWOT Analysis On the basis of the analysis of the company’s operations and marketing strategies in the US, following is the strengths, weaknesses, opportunities and threats for the company. Strengths The company has been one of the pioneers of the industry. Strong brand recognition is another key strength of the company. Innovation is another element of the brand. Goof quality products and services is another key advantage for the firm Global presence. Weaknesses The company basically sells seasonal products and as a result of that the revenue generation is considerably low. High prices of the products are another hindrance in targeting mass segment of the customers. The products comprise of high calories and as a result of that health conscious people do not consume it. Opportunities The company has the opportunity to develop family packs or bars which will help the brand to reposition. Focusing on the emerging markets with cost leadership strategy can be effective. Increase in the demands of exotic products can be a great opportunity for the firm. Threats The market is very much competitive, brands such as Nestle and Unilever gives stiff competition to the firm. Legal restrictions are other causes of concern for the company while operating in the overseas location. In the next segment of the study, how the company manages its overseas location in Japan will be evaluated. In order to do so, the study will make use of various authentic sources from the internet and published articles. Häagen-Dazs in Japan Japan is only the fifth region outside the US, where the company started its operation. Häagen-Dazs has been operating in the Japanese market since the last 30 years (Hofilena, 2014). The company entered the Japanese market through Joint Venture mode and has successfully managed the relationship with the suppliers. The company currently has 90 stores in Japan. In the Japanese market, the company functions with five different flavors namely Strawberry, Vanilla, Rum Raisin, Coffee Chip Cookie and Swiss Almond Chocolate. However, the last two flavors are no more available. The company stopped the production because of the fact that the demand for this flavors were constantly reducing. In Japan, General Mills holds 50% stake of Häagen-Dazs, 10% stake is being owned by Takanashi Milk and the remaining 40% is being owned by Osaka-based Company, Suntory Holdings Ltd (General Mills, 2013). One of the key factors of success for the company in the Japanese market is their prime locations. The locations strategy of the company has been has been one of the key success drivers of the company. Operations Management at Japan Managing the global supply chain has always been a challenging issue for the companies involved in global operations, yet Häagen-Dazs has successfully managed its global operation. The company mainly focuses on the differences in the language of the two countries, the cross cultural differences, values and obviously the organizational behavior in managing the global operations of the firm (General Mills, 2012). Focusing in these areas has allowed the company to gain greater control over the operations. According to Stacey, Griffin & Shaw (2000), who is one of the renowned researchers of the global marketing and operations, have stated that a company needs to maintain a cordial relationship with the suppliers. In this regards, Häagen-Dazs has been very good with managing stakeholder relationship. The company has been successful in managing a strong relationship with the stakeholders and this allowed them to streamline the business operation. The analysis of the firm’s value chain model will clarify the management style of the company in Japan. Value Chain Model Value chain model is a strategic analysis tool that allows one to get deeper insights into the operations of a company. In addition, the internal environment of the company y can also be analyzed with it. The primary activities comprises of inbound logistics, operations, outbound logistics, sales and marketing and after sales service. The same will be presented below from the point of view of Häagen-Dazs operation in Japan. Inbound Logistics: - The Company prepares the products in most of the large outlets of Japan. The raw materials are procured from the local wholesalers in Japan. In addition, the company has entered into a treaty with the local suppliers in order to mitigate the risks of market volatility. Furthermore, the company also imports some of the raw materials from the overseas location. Some of the key raw materials are corn syrup, fruits, Madagascar’s vanilla and Belgium’s chocolate. This is only for the purpose of maintaining the quality and remaining consistent with the brand image. Operations: - Once the raw materials for manufacturing the ice cream are procured, the value chain moves to the operation phase. In this stage, the company manufactures the end product and tries to maintain superior quality. Recently, the company introduced two new flavors in Japan and the initial market response is positive. At the same time the company also stopped production of few flavors owing to the fact that the demand for those products was declining. Outbound Logistics: - However, for some outlets the company takes delivery from the other manufacturing units. In such cases, the company use third part logistics service providers to distribute their products at the desired places. Sales and Marketing: - The product is promoted rigorously through broadcasting media, social media and print media. In addition, in store promotion is also used to attract and drive the customers. After Sales Service: - Although, there is no requirement of having a service station for a consumable product, still the company focuses on after sales service. Häagen-Dazs operates a call centre where they take precious feedbacks of the customers and handles any grievances of the customers. Management Control In order to have greater control over the operations in Japan, the company has appointed area managers at various places of Japan. The area managers are responsible for looking after the operations and quality of services in Japan. The company has set up shops at strategic locations in Japan, mostly in the city centers. This allows the company to target more customers and remains accessible to the target audience. In addition, they also look after the functioning process of the franchised stores and ensure that none of the outlet violates the legal restriction. In addition, looking after the brand image is another vital task for the area managers. With this approach, the company has been able to achieve greater control over company’s operation in Japan. Conclusion The study tried to analyze the operations strategy of Häagen-Dazs in the US and evaluated how they manage operations in Japan. The study revealed that the company depends upon the quality of products and strong distribution channel in order to operate efficiently in the US market. The similar strategy is being followed in Japan, but they operate through franchised stores. Yet, the company has appointed area managers to look after the operations and ensure compliance with the legal regulations. Hence, from the analysis, it can be concluded that the company, so far, has successfully managed its overseas operation and it is believed that implementation of modern management techniques will allow the company to further strengthen their operations in Japan. References Desanctis, G. & Fulk, J. (1999). Shaping Organizational Form: Communication, Connection, and Community. Thousand Oaks, CA: Sage Publications. General Mills. (2012). Annual Report 2012: General Balanced Growth. Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=74271&p=irol-news&nyo=2. General Mills. (2013). Annual Report 2013: Healthy Growth. Retrieved from http://www.generalmills.com/Company/Reports_Publications.aspx. Häagen-Dazs. (2014). History. Retrieved from http://www.haagendazs.com/Learn/History/. Häagen-Dazs. (2014a). Taste. Retrieved from http://www.haagendazs.com/Products/ http://www.haagendazs.com/Products/. Hofilena, J. (2014). Häagen-Dazs celebrates 30 years in Japan with ‘cherry blossom’ and ‘rose’ flavored ice cream. Retrieved from http://japandailypress.com/haagen-dazs-celebrates-30-years-in-japan-with-cherry-blossom-and-rose-flavored-ice-cream-0743786/. Kaibin, X. (2013). Theorizing Difference in Intercultural Communication: A Critical Dialogic Perspective, Communication Monographs, 80 (3), 379-397. Palevich, R. (2012). The Lean Sustainable Supply Chain: How to Create a Green Infrastructure With Lean Technologies. New Jersey: Pearson Education Inc. Robbins, S. P. (2003). Organizational Behaviour. 10th ed. New Jersey: Prentice Hall. Rusinko, C.A. (2010). Integrating sustainability in higher education: a generic matrix. International Journal of Sustainability in Higher Education, 11 (3), 250-259. Stacey, R. D., Griffin, D. & Shaw, P. (2000). Complexity and Management – Fad or Radical Challenge to Systems Thinking. London: Routledge. Thomsonreuters. (2013). Global Smartphone Market Share – Graphic of the Day. Retrieved from http://blog.thomsonreuters.com/index.php/global-smartphone-market-share-graphic-of-the-day/. Wordpress. (2013). Competitors. Retrieved from http://justhaagendazs.wordpress.com/competitors/. Read More