Edible Arrangements

A Sweet Idea...

Edible Arrangements was founded in 1999 by Tariq Farid who partnered with his brother, Kamran, in East Haven Connecticut. They specialize in creating spectacular fresh fruit bouquets - they are made to look like flowers instead of the traditional, tiresome fruit baskets. In addition to the arrangements, they also sell specialty gift items, such as chocolate dipped strawberries that are made to look like long stemmed roses (see photo) and most recently have introduced "edible to go" items which includes fruit salads & fruit smoothies. To make your occasion extra special they also offer foil helium balloons or teddy bears that can be attached to the arrangement in order to create the perfect gift for birthdays, anniversaries, you name it!

Their mission is simple - to WOW you! They insist on having the freshest produce for use in their arrangements and have spent years developing inventive and imaginative new ways to make sure that the succeed in doing just that.

In 2000, a customer by the name of Chris Dellamarggio notices a sign on the side of the road that says "Edible Arrangements". He is intrigued by this and decides to take a detour to Tariq & Kamran's store. He was "wowed" by the creative and fresh bouquet that he received and later convinced them to franchise their idea so that he would be able to own his own store. The first official franchise was opened in Massachusetts in 2001.

In 2003, the first edible arrangements was opened in Canada. This location was located in East Toronto. Obviously a Canada themed Edible Arrangement was needed for this joyous occasion (see left) so pineapples were made into maple leafs and strawberry's dipped in white chocolate to be and represent the Canadian colors. Read more about the history of Edible Arrangement's on their sweet time line.

Developing the Delectable Delights...

In April 2012, Edible Arrangement hit a significant milestone and opened up there 1000th store which are spread across 15 different countries. The Fariq brothers reportedly slept on the floors of developing franchises all across the country in order to help new shop owners get a jump start. Tariq said "You've got to make their success your priority. Lose some sleep and lose some comfort so they're successful" (Meehan, 2012)

Their first two franchises combined reached sales of $1 million according to an article written by Martin Desmarais in 2006,and  sales worldwide that in the year the article was written were approximately 50 million. Last year the company saw sales of $422 million. That's an increase of $372 million in just 5 short years. Phenomenal. Their sales goal for 2012 is $488 million. Ranging in price from $25 to $130, that's a lot of fruit - over 3.2 million arrangement if we used the highest price for each and according to USA Today they went through 5.6 million strawberries on mothers day alone!

Significant variable costs for this type of business are the fresh produce that is required and any accessories that may be used in the production of each arrangement such as balloons, skewers, baskets, mugs etc. Fixed costs would be the building in which the franchise is located, equipment that is required, and royalty fee's which amount to 5% of weekly gross sales.

Competition?

Edible Arrangements is a very unique business and I don't believe there are any direct competitors that could compete with their volume of production. The closest competitor may perhaps be a flower shop; but why would you buy flowers that die after a few days when a fruit bouquet is just as visually appealing and you can eat it too!

For economists, this wouldn't be the industry to get into in the first place and Orley Ashenfelter who is the president of the American Economic Association said quote, "it goes against all we previously held to be true about the concept of supply and demand.", "In theory, the market should have done away with Edible Arrangements long ago, that's how it's supposed to work. Yet somehow, despite offering no product of any worth whatsoever, this company not only makes payroll every week, but also generates strong profits." (The Onion, 2012).

I guess opening anything BUT an Edible Arrangements franchise would suicide, so it's safe to say that they're safe when it comes to having any sort of competition. The Farid's apparently got very lucky!

Summary....

It began as a crazy idea that was thought up by a young man who owned a flower shop, and went from 2 stores to over 1000 in 10 years. Edible Arrangements has experienced extreme growth, turned out to be a very lucrative business, and has little to no competition. The market is theirs!
 

"It is sort of like planting seeds — you have to plant them in different places — and the first stores are seeds," Farid said. "If you bloom, you learn the challenges of each market."

- Tariq Farid.

 

References

The Onion. (2011, March 31). Retrieved December 19, 2012, from Continued Existence Of Edible Arrangements Disproves Central Tenets Of Capitalism: http://www.theonion.com/articles/continued-existence-of-edible-arrangements-disprov,19856/?ref=auto

Edible Arrangements. (2012, December 4). Retrieved December 19, 2012, from Wikipedia: http://en.wikipedia.org/wiki/Edible_Arrangements

Edible Arrangements. (2012). Retrieved December 19, 2012, from http://www.ediblearrangements.ca/

Franchise Direct. (2012). Retrieved December 19, 2012, from http://www.franchisedirect.com/directory/ediblearrangements/ufoc/25/

Desmarais, M. (2006, November 30). Indus Buisness Journal Online. Retrieved December 19, 2012, from Edible Arrangements concept continues to bloom: http://www.indusbusinessjournal.com/ME2/Audiences/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=FFA5D44EB0324119AA247A1960BC6FA2&AudID=0C5ABC84F3CE4D0DB8BF8D0BF8BD2F70

Meehan, S. (2012, May 7). Edible Arrangements grew from a flower shop. Retrieved December 19, 2012, from USA Today: http://usatoday30.usatoday.com/money/industries/retail/story/2012-05-04/edible-arrangements-ceo-profile/54790086/1

Quiksilver, Inc.

        

The Journey Begins...

"MORE THAN 40 YEARS AGO QUIKSILVER AWAKENED THE SPIRIT OF

SURFING THAT LIVES IN EVERYONE BY INSPIRING FREEDOM, EXPRESSION,

JOURNEY AND INDIVIDUALITY. IT’S A CREATIVE AND CONFIDENT BRAND,

ALWAYS PROGRESSING AND RESTLESS FOR ADVENTURE."

-Quiksilver.com

Quiksilver was founded in Torquay, Australia by Alan Green and John Law and has become a family of brands over the years. It is one now of the worlds largest manufacturers of surf-wear and anything board sport related.

1970 Quiksilver Boardshorts

With a passion for surfing, and a desire for more versatile swimwear Alan began by creating prototypes of new boards shorts at the RipCurl factory in Australia, and a year later they made their way to the market under the Quiksilver name. Over the next 7 years, Quiksilver made waves with their designs, fabric and construction and began exporting their board shorts to Hawaii and Japan. With their colorful and offbeat designs, the shorts became a hit in surf communities all over the world including Brazil and South Africa.

In 1990, Quiksilver introduced it's Roxy brand which is directed at the female demographic. It was a hit and is now sold in 91 countries worldwide and caters to both grown adult women as well as teenage girls. Over the next 15 years Quiksilver began to create lines for children, everyday wear such as denim & t-shirts and also acquired many more board-sport brands including DC Shoes, LibTech & GNU Snowboards and Hawk Skateboarding.

Making it Happen...

Since Quiksilver now has such a wide array of products, there is not just one place and one production process for it all.

GNU and LibTech Snowboards are "hand crafted near Canada in the USA on Banana Way" (Lib-Tech.com) at Mervin Manufacturing and range anywhere from $300-$1000 depending mostly on whether they are endorsed by a professional snowboarder or not. All employee's are "snowboarders with jobs".

Clothing and shoe manufacturing in Canada and the US barely exists so most of the clothing the Quiksilver produces is manufactured overseas. Let me note that they in no way shape or form does Quiksilver support slave labor. They are involved QUEST / California Transparency in Supply Chains Act (SB 657), which is intended to increase the amount of information made available to consumers and retailers so that they are able to make informed decisions about which companies they support and which products to buy. The price of Quiksilver, Roxy or DC clothing is pretty standard ranging from $50-$140 for a pair of jeans, $40-$80 for shoes and $30-$80 for t-shirts. This is my approximation as I'm not stranger to these clothing lines.

The pie chart to the right represents the percentage of revenues that each different brand holds for the 2011 fiscal year under the Quiksilver group of companies. We can see that the original Quiksilver brand dominates the sales but the two subsidiary companies are fairly equal to one another and together total more than half of the total revenues. DC began with a single idea which was apparently just to build a better skate shoe; they have come along way since that day in 1993; the DC company was purchased for $87 million by Quiksilver 11 years later.

Revenues for Quiksilver Inc. have been fluctuating over the last 5 years with a difference of over 40 million between 2008 and 2010. Opperating a company with such large revenue inconsistincies is a very difficult task  - the employee overhead during 2010 was monumental as revenues barely exceeded operating costs. Quiksilver Inc. has been reporting losses for the last 5 years. Many more competitors have been entering into this type of industry since board sports and the relaxed surfer style in general continue to gain populatarity world wide.


Their Greatest Competion...

Quiksilvers biggest battles take place with companies such as Billabong & Burton. These two companies combined cover all the products that the Quiksilver group of companies has to offer and beyond. Billabong is primarily a surfwear company while Burton focus' on the snowboarding community.

Billabong has over 677 company-owned stores worldwide and saw sales grow from $225 million in 2000 to $1.7 billion in 2011. Billabong has also aquired other companies within the industry including Von Zipper, Element, Nixon, and Dakine.

Burton was responsible for building the first ever snowboard factory and markets worldwide in over 4300 stores. In 2008 the snowboard equipment industry grew to $487 million and Burton was managed to snag 40-70% of those sales.

I think that Quiksilver has a competitive edge due to them having a very well rounded line of products - they managed to catch the popularity wave before the competitors and in my opinion, their product lines are more recognized than the others.

Summary

As mentioned above, Quiksilver has a lot of different products to offer which gives them a popularity advantage because they market to many more demographics than Burton & Billabong. However, this could also prove to be a detriment. More marketing teams would be required as they must be able to reach out to all communities rather than focusing on one would be very loborious and expensive.

With losses reported over the last five years, it might be time for Quiksilver to take a look at their overall productive efficiency and perhaps revamp some of it's process' and remove product lines that are unprofitable.

References

Billabong. (2012, August 4). Retrieved December 19, 2012, from Wikipedia: http://en.wikipedia.org/wiki/Billabong

Burton Snowboards. (2012, December 8). Retrieved December 19, 2012, from Wikipedia: http://en.wikipedia.org/wiki/Burton_Snowboards

History/Investor Relations. (2012). Retrieved December 19, 2012, from Quiksilver Inc.: http://www.quiksilverinc.com

Quiksilver Inc. (2012, December 14). Retrieved December 18, 2012, from Wikipedia: http://en.wikipedia.org/wiki/Quiksilver,_Inc.

Pepsi-Cola

History in the Making...

On May 27 1867, a man by the name of Caleb Davis Bradham was born in North Carolina. He graduated from the University of North Caroline and attended the University of Maryland School of Medicine in 1890. He was forced to drop out of med school due to his fathers business experiencing financial troubles. After moving back home, he decided to become a school teacher for about a year and soon after opened up a drug store in New Bern, NC. In order to keep this drugstore afloat, druggist Bradham knew that he needed to keep customers coming back as the pharmacies with soda fountains were regular meeting places. This small drug store was the birthplace of a drink (1893) which was called "Brad's Drink" and in 1898 Bradham renamed his drink Pepsi-Cola after two main ingredients; pepsin and cola. Pepsi-cola was originally thought be a health drink because it aided in digestion like the pepsin enzyme does. In 1898 Caleb bought the trade name "Pep-Cola" from a competitor for $100. Four years later in 1902, Bradham launched the Pepsi-Cola company out of a small area in the back of his pharmacey and it was officially patented just 6 months later. Pepsi-cola experienced rapid growth over the next 17 years. In 1915, business was booming, demand was growing and Bradham was seeing revenues of over $30000. Unfortunately, due to a bad estimation about how sugar prices would fluctuate during WWI, Bradham was left with a very large and overpriced inventory of sugar, and he went bankrupt and the Pepsi-Cola company was sold to Craven Holding Corporation for $30000 in 1923. Pepsi-Cola would be considered to be in the private sector as there is no government involvement.

Making the "Healthful" Drink and it's Consumers...

Until the 1980's all soda pop and the bottles it went in were created manually right from the blowing of the glass to the mixing of ingredients to the filling of the bottle. Pharmacists experimented in their shops with new spices and syrups and manually mixed ingredients until automated machinery became available over the next few decades. Production was simplified and therefore increased.

Fixed costs would include things such as the pharmacy itself, the soda fountain, and any automated machinery that was used in the production process. Variable costs would clearly be the raw ingredients required and the glass bottles.

Here is a depiction of modern day soda pop production. Bottling of any liquid is now completely automated and happens on a series of conveyers.





Coca-Cola vs. Pepsi-Cola...

As we all know, there have been "soda wars" going on for years, and that way is happening with the soda company who produces a product that is very similar; hence the very public blindfolded taste tests, which by the way, I can always tell the difference. In 1936, Pepsi introduced a 12oz bottle which was twice the size of the rivaling Coca-Cola which came in at 6oz but was selling for the same price. Pepsi made everyone very aware of this with their clever advertising and introduced a very catchy radio slogan;  "Pepsi-Cola hits the spot / Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you" (Wikipedia). During this period, which was during the Great Depression might I had, many consumers switched from Coca-Cola to Pepsi-Cola and their profits doubled.

During this era in the Pepsi-Cola world I would have to say that their competitive advantage was the fact that you got twice as much for the same price and also their niche marketing. Walter Mack, who was then president of Pepsi-Cola noticed that their advertising ignored African Americans. To put an end to this and possibly expand to a new demographic, he made a very bold move and hired "a Negro from the newspaper field" (Wikipedia) who would lead an all-black sales team. This move resulted in a vast increase in their market share compared to Coca-Cola.


Summary...

Pepsi-Cola had it's difficulties but somehow managed to survive through monumental hardships including WW1, The Great Depression a legal battle (Guft v. Loft) that ended up in the Delaware Supreme Court and yet another World War in 1945, although there are no records of this particular war having any affect on the sugar inventories or prices. Reasons for this great success involve many factors including effective marketing, bold moves, and dedication.

Today Pepsi has lost everything it was originally created for and could no longer be even remotely considered a "health drink", but the soda wars still ensue and revenues continue to climb. If only Mr. Bradham could see it now.

References

Wikipedia. (2012, December 18). Retrieved December 18, 2012, from Pepsi: http://en.wikipedia.org/wiki/Pepsi

Kickler, T. L. (2006, August 20). North Carolina History Project. Retrieved December 18, 2012, from Caleb Bradham: http://www.northcarolinahistory.org/commentary/113/entry

Pepsi Store. (n.d.). Retrieved December 18, 2012, from http://www.pepsistore.com/history.asp

Big Rock Brewing Company

The Brewing of a Brewery...

Big Rock Brewing company was founded by a lawyer by the name of Ed McNally who was originally from Lethbridge, AB and they produce premium, all natural craft beers. This business would be considered to be in the private sector as it is run by a group of individuals whom are not involved with the government. The events leading up to the decision transpired in 1984 when apparently there was nothing more than "lager A" and "lager B" to choose from when it came to the beautiful barley beverages and Ed was just not satisfied. Now rather than complicating things and having some beer imported he decided to "take the easy way out" (Big Rock History) and instead open up his own brewery. And so it began. The original three beers were ones that Ed liked. His plan was quote "...to make the beers that I want to drink, not what will be popular.” Probably not the best of business decisions as 2/3 of those beers no longer exist. The one remaining being Traditional which is a favorite of many.

In 1985, Ed opened up shop and "imported" their first brewmaster from Switzerland who went by the name of Bernd Pieper. He was apparently internationally renowned and previously worked for Heineken. After that was a brewmaster who had worked for Molson who 4 years later took on the role as brewmaster when Pieper retired in 1998. And last but not least was apprentice brewmaster  Paul Gautreau who now leads the way for Big Rock.

After just a year of trying to make a name for themselves came the Brewery Strike of 1986 in which Molson and Labatt both ceased production. This was a huge turning point for Big Rock as they were the only beer available in Alberta that year and Albertan's sure like their beer! Demand increased on an extreme scale and the brewery had to work around the clock in order to supply that increased demand. Then, just 2 years later Big Rock received another big break when the 1988 Winter Olympics were in town. The international spectators discovered and loved the European inspired brews and soon Big Rock was receiving international media attention for their craft beers; a huge feat for this brewing industry.


Who Drinks Big Rock and How is it Made?

Beer production over the last 20 years seems to have become more of an art form. Perhaps that's why they call it "craft" beer. The founder himself encouraged creativity as even he had a particular flavor that he preferred. Currently big rock is brewing 13 different flavors of beer which appeals to a very diverse demographic. There's a beer for everyone - and in Alberta's "pub culture" it is very important to have variety. From blue collar oil riggers to upper class business man, they craft a beer that's suitable for anyone who finds themselves thirsty.

Big Rock brews are slightly higher in price due to their lower rates of production in comparison to breweries such as Molson and also, they prefer to use local products of the highest quality and as we all know, whether in Alberta is quite unpredictable, so the costs for raw materials are variable. Fixed costs would be things such as the building itself and the brewing equipment. The going rate for a 6 pack would be about $14 where you could get a 6 pack of Canadian for around $11. I'll pay the extra $3 for a local product that is far superior and locally owned.

There are 12 stages in the production process of Big Rock Beer which can be found here. It even comes with fun illustrations!

As you can see from the chart to the left which represents Big Rock's revenue over the past five years, demand drastically increased between 2008 and 2009 which was coincidentally the beginning of the global recession. According to Walters and a study done by Economic Times, "the latest economic recession has brought about increased alcohol consumption, including problem drinking such as binge drinking and driving under the influence."

Profits for the Big Rock Brewing company appear to be quite unstable over the last 8 quarters. This could be as a result of many factors, most likely due to the fluctuating costs of raw materials and even the time of year. Consumption of beer tends to rise during the hot summer months, and fall in the winter. These costs must be consumed by Big Rock as there is mutual interdependence in this oligopolistic market and they must take into consideration the repercussions they would experience from a price increase to cover the rising costs.  Loyal consumers may be lost and competitors will benefit from doing nothing at all. This is a classic example of game theory which is a method of analyzing the behaviors of competing firms, or breweries in this case. All things must be considered before making decisions that could potentially be a further detriment to the company. In this industry, they must work in terms of self-interest.

Mr. Keith vs. Mr. McNally...

I think that Alexander Keiths Brewery would be Big Rocks closest competitor because they have about the same variety of beers to choose from, they are both Canadian companies and will all have their local loyal consumers.

Big Rock would have a competitive advantage due to the luck of timing they had in the late 80's during the strike of the dominant brewing companies and their free advertising which stemmed from the Olympics in 88'.

Summary

Big Rock has become a successful brewing company for various reasons. Obtaining skilled and creative brew masters, drive and ambition and just plain dumb luck. They have loyal consumers all over Canada because they are a local company and we all try to support our own economy whenever we can. Plus, it's damn good beer.

"Three cheers for real beer!"



References:

Wikipedia. (201, November 09). Retrieved December 17, 2012, from Big Rock Brewery: http://en.wikipedia.org/wiki/Big_Rock_Brewery

Big Rock Brewery. (2012). Retrieved December 17, 2012, from http://www.bigrockbeer.com

Walters, J. (2011, October 14). Shape Magazine. Retrieved December 17, 2012, from Study Finds We Drink More — Not Less — During Bad Economic Times: http://www.shape.com/blogs/shape-your-life/study-finds-we-drink-more-%E2%80%94-not-less-%E2%80%94-during-bad-economic-times

 

WestJet

History in the making...

WestJet is a Canadian company in the private sector that was founded in 1996 by a team of people who all envisioned the same goal; creating an airline that costs less but has all the same qualities and services of a larger, well established airline. By 2016, they aspire to be one of the top 5 airlines in the world and changing the face of air travel by providing  outstanding, friendly service. Starting their journey with just three aircrafts and serving only 5 destinations and 220 "WestJetters", being a top 5 airline of the world may have seemed like a pipe dream but judging by all WestJet has accomplished in their 16 years, they seem to be well on their way to achieving that goal. They now have the youngest fleet of Boeing aircrafts; 100 strong and average age of 6.6 years, 8800 WestJetters and service more than 80 destinations across North & Central America. That's an average growth of 536 employee's per year! WestJet markets their excellent quality of service by saying "WestJetters care because they are WestJet owners." In my opinion, consumers prefer knowing that the founders care about their employee's and that one person is not the sole beneficiary of all the hard work and dedication that everyone gives on a day to day basis. This gives WestJet an advantage over other airlines. Generating such success domestically gave WestJet the opportunity to expand into other economies such as the USA and the Caribbean. I imagine we can expect even more growth over the coming years as they have established an excellent reputation in not only Canada, but their other destinations as well.

They'll get you there on time and on budget...

As previously mentioned, WestJet's goal is to provide quality service at an affordable price and remaining positive and passionate about everything they do is the key. In today's society, people are always on the go and don't have enough time in the day to accomplish all of their tasks which means that demand for airline tickets has increased since it is a much more efficient way of travelling and also the safest mode of transportation.

The chart on the left represents the average flight load for both Air Canada, which is WestJet's number one competitor (we will discuss that more in the next section) for the years 2011 and 2012. You can clearly see that planes were fuller in 2012 and that represents significant growth. "Our airline partnership strategy and growing number of business travellers are contributing to our positive momentum," said CEO Gregg Saretsky to CBC News. Although most may think that business travel is down to do online conference calling, that is clearly not true as business travel has been a large contributing factor to WestJet's growth due to it being more affordable and convenient than ever to fly out of province or even out of country. WestJet has also just added about 40 more planes to the fleet and which will serve it's regional airports beginning in early 2013 so we can expect even more growth in the coming years.

Some significant fixed costs for the short run would include the aircrafts themselves, and the hangers in which aircrafts are repaired in. These are huge costs so decisions to add or remove planes from the fleet would not be made on a whim.

Significant variable costs would include things like fuel as oil prices are constantly fluctuating. Employee's salary; people may come and go and have different levels of education thus putting them in a different pay scale or perhaps there is too much overhead in one department. With 8800 employee's this would be a very large variable factor.

As we can see by the graph to the right, WestJet has experienced significant growth over the past 5 years with a slight hiccup (slight to a multi-billion dollar corporation anyway) during the recession of 2009. The have recovered from that with flying colors and have experienced tremendous growth for the last 2 years and by the looks of things will continue to do so. Obviously owning an airline comes with huge costs, but they have still managed to maintain an enormous profit margin, hence why they were able to purchase 40 new planes for their new regional service. Profits were an unimaginable 148 million last year according to their financial report for share holders found on WestJet.com and yet prices for a flight with WestJet are clearly seen as reasonable to passengers. In my experience, most times fairs are slightly if  not significantly below the costs of their closest competitor and aircraft travel is still on the rise.

Air Canada vs. WestJet...

WestJet's closest competitor is Air Canada. Both companies were founded in Canada although Air Canada could be considered a grandparent when compared in age to WestJet. Air Canada was founded in 1936 and perhaps has lost sight of it's goals and visions through the numerous changes in ownership over the last 76 years. WestJet's competitive advantage over Air Canada is that they are a young company who still needs to prove themselves to their customers with their exceptional service and passion in order to grow successfully and achieve their goals. In recent years, Air Canada has been bailed out by the Canadian government while WestJet is still obtaining tremendous economic profits. This looks like it could be a classic case of out with the old and in with the new. WestJet's young fleet of aircrafts provide the latest in technologies, a comfortable and significantly quieter flight and always carry an upbeat flight crew.

WestJet has also received a few very prestigious awards which includes claiming the top spot in the Waterstones 10 Most Admired Corporate cultures for four years. The program annually recognizes best-in-class Canadian organizations for having a culture that has helped them enhance performance and sustain a competitive advantage. They were also inducted into the programs hall of fame. Also, in 2011 WestJet was designated as the JD Power Customer Service Champions making them the only airline in history to achieve this status.

To Summarize...

Entering into a market that would be considered to be an oligopoly generally proves to be a very difficult task in most cases. It could be compared to the automobile market which is already well established, certain companies have already made a name for themselves and have loyal customers. It seems that WestJet was able to accomplish this task with ease.

It is quite easy to see why WestJet has been such a successful company; their passionate and friendly service being one of the top reasons. I find that if a customer has a great experience, they won't care if it costs a little extra because we will pay the price for an exceptional product. It takes a team who can efficiently work together and WestJet looks to have obtained that. Managing to achieve monumental economic profits, loyal guests and dedicated employee's, I think that WestJet must be considered one of the greatest Canadian born companies of all time.

References:

CBC News. (2012, December 5). Retrieved December 16, 2012, from http://www.cbc.ca/m/rich/business/story/2012/12/05/airlines-load-factors.html

Westjet (n.d.). WestJet. Retrieved December 16, 2012, from http://www.westjet.com: http://www.westjet.com

Noack, T. (2003-2012). Plane Spotters. Retrieved December 16, 2012, from http://www.planespotters.net/Airline/Westjet