The Definition of Success
Since Scenic Floral Inc. (Scenic) is a start-up, Ben Van Weelden primarily targets developing and running the business with a steadily increasing profit and firm position in the floral market despite fierce competition. Besides, considering the current strained context stipulated by the Covid-19 pandemic, the manager desire to transcend various challenges and problems caused by the government’s strict restricting measures and adapt to a new situation. To attain genuine success, the company also aims at diversifying its propositions to meet the needs and preferences of its continuously expanding customer base.
Critical Issues
- The first critical issue stems from the COVID-19 pandemic and its far-reaching aftermath that has transformed customers’ daily life of customers and made businesses adjust their market strategies. The interruptions caused by the pandemic forced Scenic to modify its projection concerning income, from $2.7 million to $1.9 million before and after the emergence of COVID-19, respectively (Weelden et al., 2021). This calamity hinders access to warehouse space and interaction with purchasers and induces problems with collections and the workforce.
- The second significant issue is a severe rivalry in the floral market. In particular, over 400 companies are involved in flower and nursery wholesale, while 1600 deal in growing and treating plants before resale (Weelden et al., 2021).
- The third concern is related to storing the flowers mostly delivered from foreign countries, which requires buying special equipment and ultimately increases plants’ costs price.
Situation Analysis
Concerning the first critical issue, it is worth noting that before the COVID-19 pandemic, Scenic demonstrated a skyrocketing, impressive growth in sales and revenue. According to the income statement, compared to $73.365 in 2018, the company’s gross profit reached $543.879 in 2019, an increase of almost eight times (Weelden et al., 2021). Such achievements are primarily due to Scenic’s exceptional value proposition, appealing mini-arrangements and bouquets, live samples, and excellent relationship with Columbia’s suppliers. Nevertheless, lockdowns and decreased consumers’ activity and even purchasing capacity diminish the previous effectiveness of these strategies. Hence, the most appropriate opportunities, in this case, can be entering e-commerce via Amazon marketplace, 1-800-FLOWERS, or Bouqs Company and export market, especially the United States.
Scenic can respond to the existing stiff competition by adding new types of flowers, a new product, namely, potted plants, and novel services such as processing flowers for other companies. For instance, it is worth considering that in Canada, the sales of potted plants raised from $700 million to over $850 million between 2010 and 2019 (Weelden et al., 2021). Besides, Scenic can widen its order base through cooperation with other retailers, including Sobeys/Foodland or Longo’s.
Finally, these initiatives can be relevant while addressing the third issue, namely, imports from foreign countries and a need for buying special equipment. The decision such as introducing potted plants would foster the company’s competitive capacity and reduce plants’ cost prices because of lower processing costs. In particular, potted plants do not require refrigerators or other complicated devices and can be preserved much longer. In addition, alternative decisions can be the import from the United States, the core import source, or investing in the construction of modern greenhouses that would make the company more independent.
Summary
Considering weaknesses and opportunities, Scenic should pursue expanding its product and service lines, including adding potted plants that acquire increasing popularity, which will promote its competitiveness overall. Additionally, there are vast opportunities in export markets, primarily in the US, and e-commerce can be an effective response to upcoming lockdowns and their aftermath. Finally, it is relevant to broaden order size and include Sobeys/Foodland or Longo’s in the list of regular customers.
Decision Criteria
The potential decisions should be easier in terms of practical execution and generate significant profits that differ from those brought by previous strategies. These decisions should allow for saving on transportation, freight-in and out, and processing costs. Moreover, the approach should be innovative and fit modern trends and contexts, particularly considering the COVID-19 pandemic. Lastly, the overall strategy should also contain long-term perspectives spanning five years on average.
Option Analysis
The strategy that includes potted plants can capitalize on time, energy, and cost since these products require more simple processing than cutting flowers and economizing on transportation. In particular, the discounted average price per case of gerberas and orchids can amount to $45 and $135 in the case of a full truckload. In the case of export, the net margin of selling potted plants is estimated to comprise 20-25 percent, and the overall revenue can reach $1 million in sales volume over the next five years (Weelden et al., 2021). Nevertheless, Van Weelden may be forced to spend some time building robust relationships with local growers and allocate resources to expand the company’s facilities.
Growing its business with existing customers, namely, Metro and Food Basics may also provide an additional $3-5 million in revenue per year over five years. Besides, net margin can achieve 15 or 20 percent due to lower processing, freight-in, and freight-out costs and other factors (Weelden et al., 2021). However, it is worth considering an increasing need for full-time staff for sales or procurement. In addition, every additional retailer, apart from Metro and Food Basics, can generate $1-3 million in revenue per year. The work with Petals can also be profitable, especially within three years when sales can leap to over $5 million, but the following growth will be slow (Weelden et al., 2021). Finally, the net margin of e-commerce can account for 30-50 percent, and sales may comprise $200.000 for the first two years with a further noticeable increase over five years.
Recommendations
Based on the careful examination of potential decisions and critical issues, Van Weelden should focus primarily on the four branches of Scenic’s future development. First, the company should introduce sales of potted plants that are cost-saving, especially regarding processing, live much longer than cut flowers, and gain incremental popularity among customers. The second beneficial objective is e-commerce which is likely to turn into a prevailing trend because of shifts in purchasing habits caused by the COVID-19 pandemic. The third strategy is export, primarily to the United States possessing extensive opportunities for boosting sales that can include a vast assortment of products and services. The fourth direction is the cooperation with new retailers, including Sobeys/Foodland or Longo’s. It is also worth noting that considering the future expansion of customer base and orders, it is useful to enlarge production capacity and expand their working facilities to meet customers’ needs.
References
Van Weelden, S. J., Busuttil, L. G., & Ploeg, E. M. (2021). Scenic Floral Inc.: Growing a start-up. Ivey Publishing. Web.