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Native Floral Group has 13 regional facilities that span their reach from the west coast to the east coast. It provides freshly cut flowers globally with “Rainforest Alliance Certified” growing partners and enjoys a respectful image within their industry.
Native Floral Group is expanding to Canada and seeks to assess the pros and cons with regards to the current industry. Native Floral Group faces competition from Kendal Floral which also distributes the same product, freshly cut flowers, to western part of United States. Kendal Floral has three distribution facilities, located strategically in the west.
The southern California facility of Kendal Floral caters to the regions of Southern California, Arizona, Utah and Nevada, the central facility in Monterey Bay centre distributes products to Northern California, Nevada, Utah, Colorado and Idaho while the Northwest division caters to Oregon, Washington, Idaho, Montana and Canada (Kendal Floral n.d.).
Bargaining Power of Suppliers
Native Floral Group seems to have an edge over its suppliers due to its alliances with 473 farms all around the world. Barney (2007) affirms that when a company has the choice of procuring from a large number of suppliers, the power of suppliers to threaten the company’s profits is less (p. 74). This provides the company with the advantage of bulk purchasing which eventually reduces its cost, thereby giving it an edge to offer highly competitive prices to its customer.
- Bulk supply allows lower cost and competitive pricing
- Large number of suppliers
- Alliances with 473 farms worldwide
- Procured direct from growers on a global level
- Bulk purchases reduce costs
- Strategic placement across the US provides transportation advantages for procurement procedures, sourcing techniques
Buying Power of Customers
Native Floral Group appears to have good control of its pricing due to various reasons. The state of the art technological tools employed by the company including coolers maintained at 34 degrees, climate controlled production areas and a fleet of owned trucks. Barney (2007) states that if a firm has a single buyer of only few buyers, this can be threatening to the company.
Native Floral has a wide distribution network with 13 regional facilities from the west coast to the east coast all across the country. The distribution and logistics strategies by the company in its several strategically placed production capacities in several cities across the country, give it the added advantage over its customers, with its high quality products and services.
- High demand
- Strategic placement all across the US for enhanced distribution
- Excellent transportation facilities for distribution process
- Proximity to major cities and stores
- Increasingly popularity of online trading
- greater quantities and varieties of flowers for sale
- heightened competition from emerging countries
- Online Services preferred
Threat of New Entrants
Native Floral Group enjoys a strong position due to its strategically planned production and distribution channels. According to Barney (2007), when present companies have a sound distribution of channels, new entrants have to bear huge costs to create similar channels of distribution to compete with the existing players.
However, Kendal Floral, a competitor to Native Floral, has three major distribution facilities, located strategically in the southern, northern, western and central parts of the US, which give it the leverage of expansion in competition to Native Floral.
- New Entry Easy – Easy to enter the Canadian Industry. Canada with an iindex rating of 81.6% and an (IBA global average) of 64.5%, makes it easy for establishing a foreign-owned (LLC) within 6 days and only 2 procedures.
- Government subsidies of up to 50% funding to firms with revenue for farmers
- Several tax incentives to natives to set up new business in Canada to generate necessary revenue
- Low barriers to entry
- Easy to expand globally with online set up
- Economies of scale
- Distribution and logistics strategies help in reducing costs and expenses
- Legislative and government action – Constant measuring of impact measurements, especially environmental. Social impact for workers rights, pesticide use
- Limited financial capacity to grow business overseas
- Experience and technology needed to expand globally
Threat of Substitutes
When there are alternative products available at lower prices, the company is at threat of losing its market share. Substitute goods for cut flowers available in the market are a constant threat. Native Floral Group needs to understand the changing dynamics of global economic conditions in order to press toward sustained growth and development. Some factors which threaten the company are:
- Brand loyalty – changing consumer attitudes
- increasingly popularity of online trading
- Cross product substitution
- Competitive pricing with substitutes
Native Floral Group has an edge over its competition due to its strategic placement and ability to procure cut flowers worldwide, purchase in bulk and reduce its production costs. However, Native Floral Group does not have a website, unlike its competitor Kendal which has a fully functional site with complete company details.
- highly competitive pricing
- transportation facilities located in close proximity to major cities
- High quality production processes
- Highly trained staff
- Its experience of the industry knowledge, its leadership, history
- No online exposure or plans for future
- Limited resources for setting expansion in other parts of the world
Native Floral exhibits a strong potential to succeed in its expansion plans by entering the Canadian market. It has the opportunity to collaborate with the Costco wholesale group and develop new facilities, which will increase their profitability. This will create new jobs in the Canadian farming industry while allowing them to increase their purchasing power.
The legal procedures of establishing a business in Canada are easy and Native Floral could enjoy government benefits provided to companies which offer new streams of revenue for farmers in Canada. In addition, by starting operations in Canada, Native Floral will be able to increase its competition against its closest rival, Kendal Floral, which already has northwest division, supplying produce to Canada.
Native Floral should seize the opportunity by taking advantage of the grants offered by the Canadian government to the farming sector. The Canadian expansion will also provide Native Floral the prospects of employing experienced individuals to develop business and implement marketing programs to increase company volumes and profitability.
With the available incentives and grants offered by the Canadian government, Native Floral can develop facilities near the Costco locations and attain the required leadership to press ahead in the global floral industry. Expansion to Canada will thereby help Native Floral in increasing its competition with Kendal Floral, which seems to have an edge with its supply to Canada and online website.
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Barney, J. B. (2007). Gaining and sustaining competitive advantage (3rd ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Kendal Floral. (n.d.). Web.