FLORIST BUSINESS ANALYSIS
Introduction
The term “creative economy” started to be popular after the launch of “The Creative Economy: How People Make Money from Ideas” by John Howkins. This book discuss about the new economic wave that arise in United States in 1997 and resulting in the creation of an industry call creative industry. Howkins' creative economy comprises advertising, architecture, art, crafts, design, fashion, film, music, performing arts, publishing, R&D, software, toys and games, TV and radio, and video games
This definition is also supported by the Indonesian blueprint of National Creative Economy Development 2009-2015, creative economy is defined as follows:
"The new economic era after the agricultural economy, the industrial economy, and the information economy, which intensifies information and creativity by relying on the idea and knowledge of human resources as a major factor of production in its economic activity."
In Indonesia, Bandung is one of the cities that holds a high value of creative economy. From the level of economic development of Bandung is enough to balance its regional economic movement, with the support of existing natural resources, with the support of government policies on the development of creative industries, and the potential utilization of each sector that has economic value. One example of the agricultural sector of various types of agriculture is the flower crop farming, various types of flower plants are produced from the area around the city of Bandung one of them is Lembang, West Java.
The expansion of this industry covers not only large market segments, but also to middle-class businesses. For example, it is a privately owned business. Flowers, as a commodity that is increasingly easy to get in Bandung makes him able to turn into a home-based business. The development of this business increasingly rapidly among young adults due to the small capital and the simplicity to business. This development is supported also by the culture of giving flowers on birthday, valentine, graduation, and other celebrations. Make this business grow rapidly, especially in the areas of education and in big cities.
Therefore, within this research we will try to investigate the entrepreneurship culture in Bandung, especially in floral industry. Furthermore, the research will try to define the strategies are used by florist owners in Bandung to gain business profits, and to test whether these strategies can finally be called winning strategy.
External Analysis
PESTEL Analysis
Political
The government wants to encourage floriculture to be more developed because of its potential is still very large and has not been worked out optimally. So on this day, the government launched the Indonesian Floriculture Day.
Economic
The purchasing power of lower-middle-income people drops because there is no increase in salary or insignificant increase, as well as reduced additional income from overtime, lack of commission or other sources. While the cost of living and operational.
Sociocultural
Community has not made flowers as a necessity
The floriculture market in Indonesia is still very small because the community has not made flowers as a necessity.
Internet penetration rate in Indonesia
Based on Nielsen Consumer Media View survey conducted in 11 cities in Indonesia, Television penetration is still leading with 96 percent followed by Outdoor Media (53%), Internet (44%), Radio (37%), Newspapers (7%), Tabloid and Magazines (3%).
Technological
The Ministry of Agriculture through the Agency for Agricultural Research and Development seeks to address these challenges by continuously intensifying research and technology development in agriculture, especially from Ornamental Crops Research Institute is ornamental plant technology.
Environmental
Indonesia, known as one of the centers of biodiversity, has a wealth of abundant flora and some of it is potential as an ornamental plant. With a wide range of beauty and uniqueness, Indonesian flora has an opportunity to be empowered as an important commercial commodity and can contribute to the increase in income of ornamental plant farmers and foreign exchange.
Directorate General of Horticulture Ministry of Agriculture is proposing eight new floriculture areas. A number of proposed areas such as, Gowa, Bantaeng, Solok, Bogor, Tomohon, Cianjur, Batang, and Batu, for the development of orchids, chrysanthemums, dracaena, and jasmine.
Five Forces Analysis
Suppliers
What makes bargaining power of suppliers high?
Increasing of internet penetration in Indonesia (sociocultural) opens opportunities for suppliers to be reached by wider customers.
Industry member can’t integrate backward and self-supply.
Since the VAT policy was enacted (legal), number of supplier decreasing because their average sales fall.
What makes bargaining power of suppliers low?
Since the government proposing eight new floriculture areas (environment), those are creating possibilities of increasing number of new supplier.
The government wants to encourage floriculture to be more developed because of its potential is still very large and has not been worked out optimally (political). Through Agency for Agricultural Research and Development, government is developing high quality local seeds (technological) so the farmer can supply domestic needs of flowers.
Increasing of internet penetration in Indonesia (sociocultural) are creating possibilities for industry members to reach out many new suppliers.
Buyers
What makes bargaining power of buyers high?
Buyers can reach out many firms that provide the same product easily because it is supported by internet (sociocultural)
Increasing of buying power (economic) makes buyers could easily choose wider option of florist.
Seller’s product are not differentiated.
Buyers have the ability to postpone purchases, because buying flowers is not primary needs.
In our opinion, there is no reason what could make bargaining power of buyer low, since we know buying flowers is not a primary needs, so they easily could postpone the purchases or maybe replace it with another gifts (substitute).
Substitute Products
What makes competitive pressure coming from substitute product high?
Bouquet of flowers is just one option of gift, there are other gift from another industries like dolls, jewelleries and many more.
Information technologies (sociocultural) are creating possibilities for buyers to find information about substitute product.
Increasing of buying power (economic) makes buyers could easily choose wider option of gifts.
Flowers are flowers, substitutes’ product performance features are not comparable. One thing that could make competitive pressure coming from substitute product low.
New Entrants
What makes competitive pressure coming from new entrants high?
Government support for floriculture industry (political) and increasing of buying power (economic) encourages new entrants.
Entry barriers are low because low capital requirement.
The skills is not exclusive, everyone could learn how to be a florist from internet (sociocultural).
Suppliers is not exclusive to one florist.
Value Added Tax (VAT) was imposed on the floriculture sector since 2015 (legal), making the industry that is currently in suspension, so it could make competitive pressure coming from new entrants low.
Rivalry Among Competing Sellers
What makes competitive pressure coming from industry rivals high?
Increasing of internet users in Indonesia (sociocultural) makes rivalry no longer regional, the rivals may come from another region that can reach Bandung market via internet.
Buyer cost to switch brands are low.
The product of industry member are weakly differentiated.
What makes competitive pressure coming from industry rivals low?
Increasing of internet penetration in Indonesia (sociocultural) broaden the market which no longer regional.
Government’s support (political), Increasing of buying power (economic), and the floriculture movement (sociocultural) to provide awareness of the community to develop this sector would help to develop the market.
Exit barriers are low.
Value Net
The Value Net Model was developed by Adam Brandenburger and Barry Nalebuff, and published in their 1996 book, Co-Opetition. The model helps you identify the key players in your business, so that you can predict their behavior more accurately. This helps you make more informed strategic decisions.
This is value net analysis for florist industry:
When customers want to buy a gift, there are three parties that can give the same value, these are our company, other florists (competitors) and other gifts providers (complementors). Increasing of buying power makes buyers could easily choose wider option of gifts.
When the customer wants to buy a bouquet of flower, the party that can provide the value is only our company and other florists (competitors). From the previous analysis we know that the difference between one florist and others (competitors) is not clearly differentiated so it make bargaining power of buyers high.
Flower farmers (suppliers) can only provide value to our company and other florist (competitors) because it can provide the raw materials needed. While other gifts providers (complementors) do not get value from Flower farmers (suppliers) since they are using different kind of raw materials.
Competitor Analysis
Before we begin to describe the value chain analysis, we must understand how the distribution channel in the florist industry works because it understands the process of inbound to outbound logistics.
First, the provider of fresh cut flowers is the farmers. In this case, the provider of fresh flowers is located in Lembang, West Java. After that, flowers are usually purchased by distributors who then do the sorting and packing of flowers for subsequent resold to wholesaler (eg, florist in Jalan Wastukencana), Florist, or other craft store. Then, fresh flowers are made into bouquets or other crafts until they reach the hands of consumers. Now we can see the value chain analysis for the three businesses
Current Strategy
Having a customer value approach giving customers a good quality service and going beyond their expectation to satisfy the needs. At this time, florists in Bandung, especially ones that targeting among students focused on marketing and online sales. They have done online service where they are able to view their products, select and order what they want and get it delivered.
Some of the strategies provided by this florist also is to provide flowers or disco gift to keep the consumer loyalty.
Objectives
Using technology to develop loyal, frequently-buying clients instead of traditional, walk-in retail shoppers.
Designing and selling innovative, high quality fresh flower arrangements using a variety of design styles, flowers, and containers.
Offering additional products, including snacks, vegetables, or toys bucket.
Offering complimentary events, such as free giveaways and discounts.
Resources and Capabilities
Resources
Shop/Location
Skill
Brand
Tools:
Scissor, Cutter, Knife, Twigs shears, Glue, Tape, Ribbon, Kraft paper, Plastic gift wrapper, Plant sponge, Wire, Rubber band, Duplex box, and Plastic pouch
Social Media Account:
Instagram, Line Official, Personal Line, and Email
Capabilities
Materials:
Imported natural flower, Local natural flower, Plastic flower, Textile flower, Paper flower, Snack, Vegetable, and Meat
Variant of Product:
Stalk flower, Hand bouquet, Box bouquet, Flower board, Decoration
Payment Term:
Down Payment and Full Payment
Process:
Ordering, Production, and Delivering
Assumptions
In some recent news, can be read that the interest industry is in decline. This can be seen from the lack of interest in industry player coupled with the application of taxes in this industry. However, a number of news also stated that the floriculture industry is being encouraged to change its paradigm of socialization through exhibitions, and not just exhibitions, but an addition of a more systematic development and can be utilized in the future.
One of the efforts of the government is to launch the Indonesian Floriculture Day today, July 24, 2017. It is hoped that this declaration can be a sign of national awakening and stewardship of floriculture stakeholders. The Coordinating Ministry for Economic Affairs also initiated the Indonesian Floriculture event 2017 in cooperation with the Ministry of Agriculture, Bogor Agricultural University (IPB), the Indonesian Flower Association, and the provincial and district governments.
In the information also said, that is not less important is the improvement of the practice of planting practices, maintenance of plants, to better marketing. In addition, the synergy between business groups is also considered to be a common concern.
Strategic Moves and Outcomes
Labushky
As one of the florist belonging to eprseorangan in Bandung with the most followers, Labushky focuses on not making too much product differentiation. Labushky focuses only on bouquets and bouquets. However, what Labushky did was able to penetrate the market very well because it can be seen from Instagram Labushky that the owner and florist of the business has undoubted credibility. This is also supported by the number of photo uploads that show the owner following the flower arrangement training to be the seminar speaker who likes flowers. In addition, product displays that also reflect product quality.
Flower Shop
One of the established florist in Bandung that has an offline store is Flower Shop. It is located on Trunojoyo Street and can be considered quite strategic. We can see from the capability that he can serve, Flower Shop is able to provide all the services contained in the VRIN. However, in price, Flower Shop also set a way more expensive price
LittlePuff
Similar to Labushky, Littlepuff also competes with the same strategic move but with different price ranges. Littlepuff fixes a slightly cheaper price with a bit more service.
Key Success Factors
In this sub-chapter, we will answer what the base buyers of the industry's product choose between the competing brands of sellers. That is, what product attributes and service characteristics are crucial. After combining several internal and external environmental analyzes, we have found some key success factors for the florist industry are as follows:
Ability to efficiently communicate and negotiate. An ability to work properly with suppliers, to apprehend how they work, and to have the ability to plan ahead.
Advanced economic and debt management. Cash flow management competencies.
Appealing product presentation. Desirable products presentation as a way to encourage customers to purchase.
Proximity to key markets. Place – the store requires a high level of passing visitors. It could additionally be beneficial to be located near campuses, town center, or medical institution, in which purchasing of get-well items can be concentrated.
Advertising and marketing knowledge. Advertising and marketing competencies, and a strong base of local contacts.
Good reputation. Popularity for quality, as word-of-mouth recommendations play a completely crucial role and this pertains to the quality of the product, the cost and the service provided.
Certified work force. Skilled and qualified staff.
Internal Analysis
Sarah Florist
The purpose of the establishment of Sarah Florist is to pioneering the hobby of the owner in order to be her primary work for the future. The sales target is focused on young people aged between 17 and 25 with male and female gender, because these consumers often buy flower as a gift for some events such as; birthday, graduation, and thesis defense. Their sales targets are set periodically every month.
Sarah Florist's interaction, transaction, and sales process is through LINE @ Official social media account. Provide promo directly at the time of purchasing and indirectly that is doing marketing through social media Instagram promote and promote LINE @ to the consumer is the way Sarah Florist to maintain and increase customer loyalty.
Ordering is done by the consumer at least three days before delivery. The process of making the product about two hours. The production process is done in two different places in the home of the owner, the production is assisted by two employees as admin and florist, they have been employed for months and their skills are gained from training and workshop. Sarah Florist does not provide delivery service but uses GoJek services.
With an initial capital of Rp 100,000 and place of production and sale is done at home. Sarah Florist provides product variant of fresh flower bouquet and snack bouquet; and in the form of hand bouquet and box bouquet.
100 Flower
As a form of expressing hobbies and the existence of initiative and desire for entrepreneurship then established '100 Flower Florist' by the owner. 100 Flower has a sales target to students located around Jatinangor to Bandung with approximately age range 19-30 years. Jatinangor and Bandung location is chosen because they can only reach around the production sites and consumer students because they only provide products for graduation and birthday events.
100 Florist's interaction, transaction, and selling process is through LINE social media and Instagram. Providing discounts for purchases in a certain amount to the consumer is a way to maintain and increase customer loyalty.
Ordering is done by the consumer at least three days before delivery. The production process is done by florist owner's house, the production is assisted by two employees as admin and florist, they have been employed for two years and their expertise is obtained independently / autodidact. 100 Flower does not provide delivery service but uses GoJek services.
100 Flower provides product variant of fresh flower bouquet and snack bouquet; and in the form of hand bouquet, box bouquet, and decoration. Payment is made by full payment when booking via bank transfer.
Kalea Goods
The purpose of the establishment of Kalea Goods is to facilitate students at Bandung and Jatinangor campus in obtaining services provider of fresh bouquet of flowers. The sales target is college students in Bandung and Jatinangor. This establishment is supported by its effort to cut logistic costs and flower transportation from Bandung to Jatinangor by directly sending flowers from Lembang to Jatinangor and to create offline store in Bandung and Jatinangor.
Kalea Goods's interaction, transaction, and sales process is through LINE @ Official social media account. Kalea Goods applies the values of happiness, kindness (service), warmth, wealthy, beauty, honesty in running their business. In keeping with the buyer's loyalty, some of Kalea's efforts are giving giveaway bouquet and have customer loyalty card. Kalea has one employee who works as a Florist. On average, Kalea uses time in January, June, and November as the perfect time to advertise.
With an initial capital of 20 million rupiah used to rent shop and buy equipment, Kalea has one shop in Jatinangor area, and one warehouse as well as a workplace in Bandung. Payment is made by full payment when booking via bank transfer. Kalea can book an income of IDR 18,000,000 in peak season with sales of 50-100 orders and IDR 5,000,000 in low season with 10-30 order sales.
Fit Test
Competitive Advantage Test
From the table that has been made, we can see that each business has the same competitive advantage value that is 1. Competitive disadvantage is a condition or circumstances that resulted in a business to not peform well in the industry. In this case we are able to conclude that each business has a factor that resulted in him not able to provide maximum performance, both derived from internal and external factors.
Furthermore, competitive parity is a state or strategy that can help a business to keep rband or its products in the market. From the table above, we are able to conclude that Kalea tops the competitive parity. So it can be deduced that in running his business, Kalea pay more attention to the steps he will take to keep the good name of his business and reputation in the industry.
In terms of temporary and sustainable competitive advantage, we are able to see that the three florists do not apply the temporary competitive advantage strategy. However, sustainability, Kalea and Sarah Florist topped the list. This can mean that both take on more strategies aimed at maintaining the sustainability of the company.
Then, after looking at the whole analysis, we can conclude that Kalea won the Competitive Advantage Test.
Performance Test
The performance test is measured from each company revenue per month and the number of Instagram followers, it is decided considering the limited information about financial flows and other data. So, we only compare the data that can be provided by each businesses.
Here can be seen that a business that is able to perform well is 100 Flowers with the highest revenue and Instagram followers.
