Scenic Floral Inc Growing A Start Up Case Solution

2. Critical Issues

The most critical issue is to boost revenues in a shrinking market of perfect competition. There is not much product differentiation in the floral market although Scenic value proposition of sourcing flowers from Columbia has gain some advantages for it. The sales volume has decreased because of pandemic which has reduced the margin of revenues. Consumer buying pattern save become more inclined towards holiday sales as compare to regular sales. Moreover, cheap imports have captured the market to a larger extent.

3. Situation Analysis

The floral industry in Canada is quite competitive given that it is facing tough competition from both local and foreign players (Exhibit 1). Although overall trend is of growth for the industry the margins are shrinking because of large number of players and increase inflow of imports which are substituting the local options. The sales to end consumers have been increasing as compare to retail outlets and that captures the larger share of market. Consumer attitudes have shifted and flower sales are mostly increased in holiday season. Industry has little barriers to entry and is not very capital intensive as there are large number of small players (Exhibit 3). Consumers exercise option for selecting the best among many offerings.

The main segments of market as per product category and consumer groups indicates that people are willing to spend more on gifts and their current average spending. The trend of buying house plants is more common in millennial generation indicating potential for growth (Exhibit 4). From the percentage of buying, post millennial women are the most important segment of the market. The advertising and marketing should be done targeted to these specific segments.

The internal strengths of the company include its experience and expertise that it has developed with time. Scenic has good relationships with both its suppliers and local retailers which offers an advantage over other players in market (Exhibit 2).Company has also increased its product lines to boost its sales and has chain the supply chain strategy to increase its direct sales to mass market. However the limitations of the company are its processing capacity which needs to be increased for expansion. Currently, Scenic has reliance on two major retailers for its sales although the land scape of industry is rapidly changing towards end-user sales. Given the strengths of company it can expand in both local markets or earn foreign revenue through exports. It can also invest on e-commerce networks to increase its sales in order to thrive although it will require time and patience to get the benefits.

Scenic has expanded its product categories and sales in last few years but the pandemic has hit the industry and has affected the margins. The gross margins of the company has gone from 23% to 33 %( projected) from 2018 to 2020. The financial hit has occur for the operating profits which shrank from 3.5% (2018) to roughly 1 %( 2020). The net profits have also decline (Exhibit 4). In order to remain relevant in the competitive market company can exercise several options for its future growth. 

4. Decision Criteria

The decision criteria is to select an option that can be used to boost the revenues. Nevertheless considering the lower profit margins of company and market conditions, it should not require high investments.