Calyx and Corolla Case Report
Introduction
Calyx & Corolla was a new entrant into the $8 billion flower industry in the United States in 1991. Through the use of overnight air freight (Fed Ex), information technology, an 800 number, and a catalog, Calyx & Corolla was able to bypass three layers of distribution and provide fresh flowers directly from growers to consumers. As a result of their efficient distribution system, Calyx and Corolla changed the way flowers were distributed to consumers.
Strengths and Weaknesses
I. Strengths
A. Good niche and mission. Calyx and Corolla filled a consumer need. Consumers wanted very fresh and long lasting flowers and the company delivered it. Efficient distribution was the key to flower industry and the company was able to shorten delivery to customers by bypassing the middle distribution layers, and provide much faster deliveries than traditional FTD deliveries. For example, Calyx and Corolla delivered roses from growers to consumers within 1-2 days of purchase order compared with one to two weeks for other FTD retailers and florists.
B. Sales growing at a faster rate than cost of goods sold. Projected FY4 and FY5 also had projected sales growing faster than cost of goods sold. See graph for details (Derived from Exhibit 1).
Growth rate 1988-1989 to 1989-1990 Growth rate 1989-1990 to 1990-1991 Growth rate FY3 to FY4 Growth rate FY4 to FY5
Sales 4.31 1.55 .49 .61
Cost of goods sold 4.14 1.52 .42 .58
C. Good creative catalogs that have appealing photographs, as well as educational information.
D. High customer satisfaction. From Exhibit 2, customers showed genuine satisfaction with Calyx and Corolla's products and services.
II. Weaknesses
A. Business depends very critically upon Fed Ex. If Fed Ex had a major disruption to their delivery system, flowers would not be delivered on time, resulting in dissatisfied customers. For example, if Fed Ex employees went on strike, there would be no alternative equivalent to Fed Ex to deliver flowers to customers. UPS, although an alternative, did not deliver perishable products in the same timely fashion as Fed Ex.
B. Business was also dependent upon information technology. If systems were down for some reason due to viruses or major electricity failure, the company would not be able to fill orders. The company should consider external power supply.
C. Suppliers mainly concentrated in Florida, California, and Hawaii. Calyx and Corolla's suppliers/growers not very diversified geographically. If another deep freeze occurs, the company may have difficulty meeting customers' demands. The company should consider other sources of growers/suppliers, such as growers in Mexico.
Calyx & Corolla (Calyx) needs to determine whether it should change its current strategy and positioning as a mail order operation to compete more directly against more traditional outlets, such as florists, and wire services, such as FTD. How could Calyx attract the largest group of potential buyers who patronized florists or other retailers and were not accustomed to buying by mail order. Calyx needs to determine what actions it should take to make a profit and grow its business.
The 3 percent decline in sales causing a 21 percent decline in profits can be attributed to the identification of the accounting concept of operating leverage. Operating leverage is what business managers apply to boost small changes in revenue into sizable changes in profitability. Fixed cost is the force managers use to attain disproportionate changes between revenue and profitability. Therefore, when all costs are fixed every sales dollar contributes one dollar toward the potential profitability of a project. Once sales dollars cover fixed costs, each additional sales dollar represents pure profit. A small change in sales volume can significantly affect profitability (Edmonds, Tsay, & Olds, 2011). So, therefore, if sales volume increases,
Online sales currently represent about 40% of Calyx revenues. Since Calyx’s main customers are upscale, professional women, it is understandable that professionals are more likely to use the Internet as a resource to buy flowers. The advantage of Internet for professionals is that the Internet requires the least amount of effort and time to purchase flowers. Calyx can use Internet advertising to target specific demographics. Calyx can position themselves towards the younger generation of customers who are more likely to use the Internet to buy goods. Calyx can also use the Internet to attract professional men, instead of its normal customer base of upscale women. Calyx should also target more heavily to companies, as it already offers flowers for corporate giving. Corporate customers and businesses are more likely to provide a higher lifetime value than a customer who only buys flowers for special holidays. In addition, Calyx could merge their two websites (calyxflowers.com and calyxandcorolla.com) together for easier navigability and increased customer convenience. By reaching out to the younger generation, corporations, and men, Calyx can increase their current yield rate. Focusing on these three groups can increase Calyx’s revenue by aligning themselves closer to the desired sniper
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