Reference no: EM132290776
After Fran graduated with an undergraduate art degree in 2008, she decided to combine her knowledge and love of art with a second love—plants and flowers—toward developing a business. Her intent was to focus on a specialty niche in the flower shop business. She decided to concentrate her efforts on make-to-order special flower arrangements, like are typically found at banquets and weddings. Due to her talent and dedication to doing a good job, she was highly successful, and her business grew to where she now has a shop located in a highly visible and successful strip mall. As with many successful businesses, her success has produced unanticipated problems, some of which are normal growth pains, but others are relatively unique to the type of business. At a recent meeting with her business advisor, she outlined some of the major issues she faces:
Business Focus. When she moved into her new shop in the mall, she continued to specialize in the make-to-order specialty arrangements, but customers frequently walked into her shop requesting “spot” purchases, including gifts for sick friends and last-minute flower purchases for occasions such as birthdays, anniversaries, Valentine’s Day, and so forth. As this business represented an attractive addition to the store revenue, she accommodated it with three large climate-controlled display cases stocked with ready-to-sell arrangements of various sizes, types and costs. Even though she did not aggressively pursue this market with advertising, the heavy mall traffic where her store is located, and word of mouth caused the walk-in business to steadily grow to where it now represents almost half of her total revenue. This business has brought her numerous headaches, however, due to several characteristics:
Even though some days have predictably high demand (e.g., just prior to Valentine’s day, Mothers’ day), most of the time she has no idea how many customers will come in for spot buys on any given day, nor does she have any idea as to the price range they will look for. Even such variables as the weather and the schedule of local sports teams appear to affect her demand. She knows she needs to manage this demand better, because not having what a customer wants could mean the permanent loss of a good potential customer. On the other side, flowers have a limited shelf life, and having too much of the wrong price range could mean a high spoilage rate. It would not take many lost sales on a daily basis to represent the difference between profit and loss for that part of the business.
Some customers have become irate that her delivery system, a major part of the make-to-order business, will not accommodate the delivery of a $20 ready-to-sell arrangement to a hospital, for example. Angry customers have even asked her how much they need to spend on an arrangement before she will deliver. She has never really thought about an answer to that question and does not know how to reply. Generally, she just states that she does not deliver pre-made flower arrangements. She knows this lack of delivery has cost her some goodwill, some business, and perhaps even some potential return customers.
Related to the point above, several customers have expressed serious dissatisfaction that she is not a member of some national delivery service, so they can have flowers delivered out of town. She is afraid such a business will pull her even further from her core business of make-to-order, as those services typically focus on catalogs of set designs. As those services are also expensive to belong to, she knows she would have to spend a lot more time and effort in that area to make it financially feasible.
Another group of customer wants her to extend her open shop hours, as they say they occasionally drop by for flowers on their way home from work and often find her closed for the day or at least not available while she is setting up a flower order in some other location.
Personnel Issues. As her business grew, Fran hired another skilled arranger, Molly, to work with her. The unpredictability of the walk-in demand has caused her to bring people issues up as a problem, however. As walk-in customers demand immediate attention, she and Molly are frequently called to the front of the shop to sell arrangement from the cases. This pulls them away from working on their orders, and while she has been late only on a couple of special orders within the last few weeks, several others were delivered before she was satisfied with their appearance, merely to avoid their being late. This worries her a great deal, as she has worked very hard to obtain a reputation for the quality of her arrangements, she thought about hiring a delivery person, but decided it was important that either she or Molly deliver the orders so that they may put last-minute touches on the arrangement in case of disturbance during the delivery process.
Instead she opted to hire some part-time unskilled help for the shop to handle the walk-in shop sales. This has proved less than satisfactory, because of two reasons: 1) The unpredictability of demand has her constantly wondering about what hours and how many hours to schedule the help. The extra help adds to overall cost and paying someone to stand around while no customers come in the shop makes the difference between profit and loss even more sensitive. 2) Customers frequently have questions about the type of flowers in an arrangement, how long they last, and so forth. The unskilled workers she hires often don’t know what to answer. They will then frequently interrupt either Fran or Molly with the question, and even when they get the answer the customer often is left with a poor impression, as they often expect more knowledge from a salesperson. The impression is even worse if both Fran and Molly are out serving orders, as the only answer the customer gets is “I’m not sure.” Since she pays only slightly above minimum wage, her turnover is high. This means she is constantly trying to hire and train people, further distracting her from her main business. She knows she could reduce the turnover and hire more knowledgeable people if she paid her help more per hour, but that issue again pushed her closer to the loss column for many of the days the shop is open, so she feels she really can’t afford to pay more.
Expansion. Several of her regular customers are encouraging her to open another operation on the other side of the city, as well as considering expansion to other cities. They claim several of their friends like arrangements a great deal, but consider her location too inconvenient from where they live or work. That is typically not a problem for large orders, as she or Molly will typically offer to visit the customer to obtain details for the arrangement. That does take a lot of time, however, so she finds herself more frequently asking the long-distance customer to come to the shop if possible. Many declined to do so, and the order is sometimes lost. While expansion is attractive to her, she worries about control, not only for order servicing, but also for delivery. How can she possibly maintain control of quality and design in two or more locations at the same time?
Supply. As her purchases of flowers from the wholesaler has grown, the wholesaler has recommended that Fran make a purchasing contract instead of making spot bulk buys as she now does. This contract will give her significant quantity price discounts, but her delivered quantity has to be above a certain amount of each type of flowers so that the wholesaler can reduce costs due to economies of scale. The quantities she needs to order are reasonable given her average demand, but the fluctuation around that average is large enough to present significant spoilage during certain periods. She wonders if she would be better off in the long run with the purchasing contract.
Questions:
1. What are the key issues in this case? In other words, analyze the case to try to determine the true problem from the symptoms of those problems. How do these issues relate to the issue of strategy?
2. What type of data would you suggest collecting to both verify the problem identifications are correct and to provide solution approaches and support? How would you organize and use that data?
3. What would you suggest she do with her business and why? Provide a comprehensive and integrated plan of action and provide support for your suggestions.
4. Develop an implementation plan for whatever changes you suggest she make. Prioritize the key steps if appropriate.
5. Has Jan’s operation grown too large for her to control well? Why or why not? What would you suggest she do? What additional information would you suggest she look for to help her situation?