5 Pages Posted: 2 Jun 2017
This case was awarded first place in the INFORMS 2011 case competition. A seasoned Internet retailing entrepreneur considers starting a national floral delivery service to compete with the major U.S. players. Decisions include whether to open a production facility in a single city and begin to deliver there? Which strategy should he use to decide—a premium or a discounted strategy? Ideal for MBA and undergraduate students in decision analysis modules or courses, this case offers an optional student spreadsheet useful for considering different strategies and calculating the resulting net present value of the opportunity. A B case with a spreadsheet is also available.
Rev. Aug. 11, 2015
By the time Josh Olivetti, an American of Italian descent, met his future wife, Flora—the owner of a flower shop in Miami—he was already a successful “serial” Internet entrepreneur. Josh had started and managed half a dozen small to medium-size firms offering specialty retail items over the Internet, both in the United States and outside. He had knowledge and reliable partners in Web design, online and over-the-phone customer service, online advertising, logistics, and shipment; his access to capital was also superb.
Flora ran a flower shop her parents had set up nearly four decades earlier. Like 20,000 other flower shops in the United States, the business was effectively a single-person or family-run enterprise. Such owners experienced significant pressure from online florists, which by the early part of the 21st century, had grown to about 50% of the $ 1.6 billion flower delivery market. Flora believed her future was online, but she knew next to nothing about running an Internet retailer.
The idea of building an Internet flower delivery business budded along with the couple's romance. Josh sold all his businesses and was ready to take on a new challenge: a new company named for his wife. FLORA would combine a low-cost operation with same-day delivery and superior floral designs to compete with local florists and major national companies. Josh believed he had found an innovative business design (used by several companies outside the United States) that could achieve this ambitious goal. The devil, as always, was in the details: How easy would it be to generate new and repeat orders, how big would those orders be, and how would competitors react? Each of those questions, as well as many other issues, deserved some careful analysis.
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Keywords: decision analysis, uncertainty, net present value, NPV, Monte Carlo simulation, startup, online, advertising, search engine, strategy, downstream decision, floral industry, small business venture, growing a small business, analytics
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