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Disclaimer

Hereby, we, group 1 of International Marketing Management Group 3 (Marc-Oliver Meereis,

Nils Kirchner, Ute Klose, Sarah Lünsmann, Iva-Rebecca Schröder and Danielle Felizardo

Torchia), declare that this report is written by ourselves and we did not use any other sources

than those, which can be found in the reference

Marc-Oliver Meereis (student number) Signature

Nils Kirchner (student number) Signature

Ute Klose (student number) Signature

Sarah Lünsmann (student number) Signature

Iva-Rebecca Schröder (student number) Signature

Danielle Felizardo Torchia (student number) Signature

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Executive Summary

Florial is a medium sized Dutch flower exporter. The company buys fresh cut flower on

auctions in the Netherlands in order to export them to other countries.

Nowadays, globalization is an important matter for businesses to stay competitive. Therefore,

Florial wants to enter the market of the United States. Since the cut flower market is highly

competitive, and has many domestic and foreign competitors, Florial decided not to target

the general population, but rather luxury Hotels in the U.S.. Dutch cut flowers only account

for 7% of the entire flower market in in the United States. Especially the West Coast has

many domestic flower growers. Moreover, the competition with South American sellers is

very high. For that reason, Florial will target the East Coast of the U.S. and will enter the

market in the states of New York and Florida. Florial chose the Hotel chain “Marriott Hotels”

and will serve in total three of their Hotels when entering the market. The estimation for the

demand of the three hotels is about 214,500 stems per year.

Another important matter when entering new markets is the supply chain. Especially because

of the fact that flowers are highly sensitive and need to arrive fresh and in a good condition,

Florial had to choose the most appropriate supply chain. Flora Holland, which is located in

Aalsmeer, is the biggest and most successful flower auction worldwide. Due to their

experiences in the market, Florial will be able to work together with Flora Holland and can

therefore benefit from their well-established supply chain.

Florial is following a direct exporting strategy, which provides the company with high

independency and control over the products. Moreover, Florial will use a combination of

airfreight and truck transportation. This gives the company a timely advantage and greater

flexibility.

In order to reach awareness of customers, Florial with promote on flower exhibitions, in

catalogues and through presentations. In addition, the company will also use sales promotion

and personal selling to increase the recognition of their products.

The last point when establishing a marketing strategy to enter a new market is the financial

analysis, which will show whether the strategy will be profitable for Florial. The company

calculated the desired profit through a cost plus pricing approach and came to the conclusion

that each flower needs to be sold for €1.80 in order to make the desired profit within five

years of operation. Florial’s price is extremely high compared to those of competitors.

Consequently, the company decided to not enter the market of the United States.

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Table of Content

Disclaimer .............................................................................................................................................. 1

Executive Summary ............................................................................................................................. 2

Table of Content ................................................................................................................................... 3

Introduction ............................................................................................................................................ 6

Methodology .......................................................................................................................................... 7

1. The Dutch Flower Market ............................................................................................................ 8

1.1. Dutch Flower History ............................................................................................................ 8

1.2. Flower Production ................................................................................................................. 9

1.3. Auctions .................................................................................................................................. 9

1.4. Imports .................................................................................................................................. 10

1.5. Exports ................................................................................................................................. 10

2. Target Market Definition ............................................................................................................ 11

2.1. Local Production ................................................................................................................. 11

2.2. Imports .................................................................................................................................. 12

2.3. Dutch Exports and Competitors........................................................................................ 14

2.4. Total volume Market ........................................................................................................... 15

2.5. Supply Chain/ Market Structure........................................................................................ 16

2.6. Segmentation and Targeting ............................................................................................. 17

2.6.1. Targeting ...................................................................................................................... 18

2.6.2. Geographical Segmentation ...................................................................................... 19

2.7. Income Segmentation ........................................................................................................ 20

2.8. Consumer Behavior ............................................................................................................ 21

2.9. Consumer Behavior Target Market .................................................................................. 23

2.10. Sales Estimation ............................................................................................................. 23

3. The Product ................................................................................................................................. 24

3.1. Core component ................................................................................................................. 24

3.2. Product Mix .......................................................................................................................... 25

3.2.1. Calla Lilies .................................................................................................................... 25

3.2.2. Stargazer Lilies ........................................................................................................... 26

3.2.3. Purple Tulips ................................................................................................................ 26

3.2.4. Statice ........................................................................................................................... 27

3.3. Packaging Component ....................................................................................................... 27

3.4. Support Service Component ............................................................................................. 28

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4. Placement and the distribution strategy .................................................................................. 29

4.1. Market entry ......................................................................................................................... 29

4.2. Transportation Methods ..................................................................................................... 30

4.3. Regulations .......................................................................................................................... 32

4.4. Required Documentations ................................................................................................. 34

4.5. Marketing intermediaries ................................................................................................... 35

5. Strategy Design ........................................................................................................................... 36

5.1. Push and Pull Strategy ...................................................................................................... 37

5.2. Promotional Budget ............................................................................................................ 37

5.3. Media Channels .................................................................................................................. 38

5.3.1. Flower Exhibitions ....................................................................................................... 38

5.3.2. Catalogues ................................................................................................................... 39

5.3.3. Presentation ................................................................................................................. 39

5.3.4. Short – Term Strategies ............................................................................................. 40

5.3.5. Long – Term Marketing Strategies ........................................................................... 40

6. Pricing ........................................................................................................................................... 42

6.1. Demand estimate ................................................................................................................ 42

6.2. Estimation of costs ............................................................................................................. 43

6.3. Pricing objective .................................................................................................................. 44

6.4. Pricing Strategy ................................................................................................................... 45

7. Conclusion ................................................................................................................................... 46

8. Appendix ...................................................................................................................................... 48

8.1. Peste Analysis ..................................................................................................................... 48

8.1.1. Political ......................................................................................................................... 48

8.1.2. Economical .................................................................................................................. 49

8.1.3. Social Analysis ............................................................................................................ 52

8.1.4. Technological Analysis .............................................................................................. 55

8.1.5. Environmental Analysis.............................................................................................. 56

8.2. Legend behind calla lily ..................................................................................................... 56

8.3. The loyalty program ............................................................................................................ 57

8.4. Company facilities ............................................................................................................... 58

8.5. Placement ............................................................................................................................ 61

8.5.1. Electronic Code of Federal Regulations .................................................................. 61

8.5.2. Choice of importer......................................................................................................... 67

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8.6. Promotion ............................................................................................................................. 68

8.6.1. Short-term Strategy: ................................................................................................... 68

8.6.2. Long-term Strategies .................................................................................................. 69

8.7. Interviews ............................................................................................................................. 71

8.7.1. Marriott Hotels ............................................................................................................. 71

8.7.2. Holex Flowers BV ....................................................................................................... 78

8.7.3. Flora Holland ............................................................................................................... 81

8.8. Cost Estimation ................................................................................................................... 84

8.8.1. Email contact with KLM Air France Cargo .............................................................. 86

9. References................................................................................................................................... 87

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Introduction

“Every flower is a soul blossoming in nature!” – Gerard De Nerrval

Flowers are very different. There are not just differences in the type but also in quality and

origin.

Florial Flowers is a Dutch company that exports flowers that purchases flowers at auctions in

the Netherlands. Only high qualitative flowers are of interest for the firm. In order to expand

the business and reach more customers, the company decided to enter the U.S. market and

export cut flowers to the U.S. States of New York and Florida.

Nowadays, globalization is inevitable for a growing business. When deciding to enter new

markets, companies face many barriers, pitfalls and difficulties. However, entering foreign

market can result in great success. In order to reach that goal the difference in culture, entry

regulations, buying habits, geographical differences and foreign and domestic competitors

are only a few points a company needs to examine meticulously.

Since Florial Flowers is a luxury cut flower exporter and a medium sized company, Florial

does not target private customers but luxury, high standard hotels. In order to attract

customers to buy the product, Florial emphasizes high quality and adds value in order to

improve customer service and the recognition value of their products.

The main body of this report consists of:

Products Strategy

Place (distribution) Strategy

Promotion Strategy

Price Strategy

Financial Analysis.

The end of the report gives a final conclusion of the marketing plan and the strategies used

to enter the U.S. market successfully.

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Methodology

This report contains a marketing plan in order to examine if entering the US flower market as

a hotel supplier is profitable. To create a marketing plan that introduces the Dutch exporter

‘Florial Flowers’ to the US market, several sources were used.

Besides the 14th edition of international marketing, the internet provided a lot of useful

information, especially for the market, cultural and competitor analysis. For example,

company and governmental websites providing statistics and information were used. All of

these sources can be found in the reference section.

Even though, extensive secondary research was conducted, the most important information

was received during two interviews with experts on the target market. For primary research

the chosen interview partners were employees of Flora Holland, the company that operated

the world’s largest flower auction, and Holex, the market leader in exporting flowers from the

Netherlands to the United States.

The first interview (see appendix 7.7.2.) was conducted with Mr. van Vianen from Holex. The

interview provided the group with information concerning every single aspect of exporting

flowers to foreign countries. Especially, the modes of transportation, profitable regions within

the US, competitors in the US, governmental restrictions that have to be considered and

selling prices and much more were the main topics of the interview.

The second interviewee was Mr. van Seggelen who is a market analyst at Flora Holland. Mr.

van Seggelen enabled the group access to detailed information of the flower market,

including general information like the different types of flowers, modes of transportation,

storage requirements, turnover ratios and selling prices and how the flower auction in

Aalsmeer is working. Additionally particular information about the US market was given.

After all information was gathered, all relevant points were discussed and decisions were

made for a detailed marketing plan. When writing the report, an outline was created based

on the grading criteria and every group member focused on one part. The outcome of the

market analysis, cultural analysis and competitor analysis combined with the information

gathered from the above mentioned sources made up the following marketing plan.

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1. The Dutch Flower Market

‘Flowers that are so pathetic in their beauty, frail as the clouds, and in their coloring as

gorgeous as the heavens, had through thousands of years been the heritage of children --

honored as the jewelry of God only by them -- when suddenly the voice of Christianity,

counter-signing the voice of infancy, raised them to a grandeur transcending the Hebrew

throne, although founded by God himself, and pronounced Solomon in all his glory not to be

arrayed like one of these.’

- Quincey, Thomas De

1.1. Dutch Flower History

The Dutch flower market and Dutch flowers have a long history. If one thinks of flowers, the

first country to think about are the Netherlands. The tulip is the showpiece of the Dutch flower

industry. Even though, ‘the Tulip was originally a wild flower, growing in Central Asia. It was

first cultivated by the Turks as early as 1000 AD, The flower was introduced in Western

Europe and the Netherlands in the 17th century’ (Anon., 2008), one automatically associates

the Netherlands with this type of flower. Growers recognized the potential of the flower and

its value, that is why they were seen as thorough investment and became device for wild

speculations. (Centrum, Internationaal Bloembollen, n.d.) This Speculation led to the first

financial bubble in the history of the financial market, known as the Tulipomania. The tulip

received great recognition, leading to increasing prices and becoming an interesting

investment for speculators hoping to make profits. ‘The Semper Augustus which was

considered the rarest, most valuable and the greatest tulip ever found, was valued at 10,000

Florence at a time where an average Dutch worker survived with a family with only 300

Florence a year.’ (Anon., 2012) The value of single tulip bulbs reached its peak in the early

1937s’. In order to regain control over the mania the Dutch government released a number of

regulations on the trading of tulip bulbs, as a result several informed speculators sold their

bulbs in order to liquidate them. This led to surplus of tulip supply and in consequence to a

dramatically decrease in prices within a week. Due to this decrease in prices, many wealthy

investors, who invested all their money in tulips, went bankrupt within a couple of days. This

crash resulted in international distrust concerning speculative Dutch investments and threw

the Dutch economy in a long lasting economic depression.

The tulip is not the only flower that has been brought to the Netherlands overtime. Flowers

such as Dahlias (Mexico), Amaryllis (South Africa), and Freesias (South Africa) have been

brought to the Netherlands. Due to the climate conditions and the expertise of Dutch

growers, the floral industry is an important segment of the Dutch GDP. (Centrum,

Internationaal Bloembollen, n.d.).

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1.2. Flower Production

In order to grow flowers fast and maintain a desired quality, flowers need special care and

requirements. Primarily the ground is important, due to the fact that most nutrients are

gathered through the roots. Another important factor is sun. Conductive to the cell division,

sufficient light and clean air is vital. On the one hand this is the part where the Netherlands

struggle the most. Compared to other flower growing countries, the Netherlands has a

relatively small amount of sunny days (52). (Anon., n.d.) Through the expertise of Dutch

growers acquired over the past decades it is now possible to grow flowers outside for about

half a year and due to innovations flower can be grown in greenhouses the entire year long.

Nowadays, ‘the Netherlands has a world-leading position in greenhouse horticulture. Dutch

inventiveness under glass is well known. Nowhere else in the world are plants cultivated on

such a large scale - Dutch greenhouses cover an area of more than 60 km2, constituting a

city of glass - and with such a relatively low impact on the environment. The focus is on

concepts and technologies that facilitate energy-efficiency and adaptability to climate

change.’ (Anon., n.d.). This change has become necessary due to the lack of land that can

be used for production of cut flowers. Even though the Netherlands have a world-leading

position in greenhouse horticulture the production area of flowers decreased from 2003 to

2008 (from 3,499 ha to 2,809 ha). Besides the decrease in production area the production in

million euros also decrease until 2008 from €9,954 million to €9,743 million. Due to these

figures one can conclude that the Netherlands are performing a shift from a flower producing

country to a flower trading country. (Kargbo, et al., 2010)

1.3. Auctions

Nowadays flower auctions play an important role in the floral industry because they set the

internationally accepted prices and regulate the supply and demand. Instead of buying and

selling the flowers the auctions operate as a middle- man between the grower and the buyer.

In the early days flower auctions have been invented in order to offer small and medium-

sized growers a platform where they could sell their flowers to a larger audience and

increase their market power through the collaboration with other growers offering the same

type of flowers. (Seggelen, 2013) The Dutch flower auction Flora Holland is the most

successful and biggest auction in the entire world selling 98% of all flowers auctioned in the

Netherlands. Flora Holland opened their doors in the early 1911’s and have been growing

and becoming more successful over since. (Anon., 2008) The example of Flora Holland

clearly shows that ‘the Dutch auctions are the largest flower market in the

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World.‘ (Kargbo, et al., 2010) Currently six marketplaces in the Netherlands exist namely:

‘Aalsmeer, Naaldwijk and Rijnsburg are primarily focused on export customers. Venlo,

Bleiswijk and Eelde are geared towards the regional market’. (Wenink, kein Datum) The

success of the Dutch flower auction compared to others is mainly caused by the floral

expertise gathered through the long lasting tradition of growing flowers, the excellent

infrastructural conditions and the widely spread network of growers and buyer and their

corporation partners respectively. Another aspect that made Flora Holland as successful as

they are now is, that their members get a guaranteed payment within 48 hours after their

flowers have been sold. According to that the grower has no risks while selling his flowers via

Flora Holland. Aalsmeer is the biggest individual flower auction with a close connection to the

Schiphol Airport, which makes exporting flowers more efficient and faster. As the biggest

flower auction worldwide Flora Holland generated a turnover ‘exceeds 3.8 billion euros.

Furthermore, Flora Holland processes over 12 billion flowers and plants a year. (Wenink,

kein Datum) The Dutch Flower auctions work according to the Dutch system, meaning that

flowers are sold with a clock. The clock starts at a high price is the price decreases over

time. Buyers only have few seconds to decide whether to buy the flowers or not. (Seggelen,

2013)

1.4. Imports

Due to the fact that approximately 12.5 billion flowers are turned over by Flora Holland alone,

it is hard to determine where the flowers for the auctions are coming from. Even though the

Netherlands are a big flower growing country, more and more flowers sold at the auction are

being imported and fewer flowers are being produced in the Netherlands; as described

earlier. In 2003 the biggest flower exporting country to the Netherlands was Kenya with a

turnover of €160,553,000, followed by Israel with a turnover of €119,503,000. In total the

Netherlands imported flowers with a worth of more than €450,000,000. (Anon., n.d.) During

the coming years the percentage of imported flowers increased by 15.2% until 2008. ‘At the

same time the locally-produced stems decreased by 6.8%.’ (Kargbo, et al., 2010) These

numbers are aligned with the production volume and area size development described in the

production section. Now it can be clearly said that the Netherlands shift from a flower

growing country to a flower trading country.

1.5. Exports

The Netherlands play an important role in the world’s flower market. As Dutch flower

auctions have a world leading position it is logical that the Netherlands are the biggest

exporter of flowers world-wide, with a market share of approximately 60%. The main flower

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importing countries are located in Europe (including Germany, the United Kingdom, France,

and Italy), the USA and East European countries such as Russia. Besides flowers the

Netherlands also export planting materials, mainly to their biggest growing partners in Africa

and China. (Kargbo, et al., 2010) Taking the example of the largest retailer, the Dutch

Flower Group, is astonishing. With an annual turnover of €1 billion in 2012, the Dutch Flower

group has been able to capture 16% market share. These numbers support the hypothesis of

the Netherlands being the world-leading country ion the flower industry. (Anon., 2013)

Of course the Dutch Flower auctions sell flowers grown all over the world, but the

Netherlands are well known for the export of the following flowers: Tulips, Carnations, Roses,

Chrysanthemums, Freesia, Gerberas, Alstroemeria , Lilies, Irises, Cymbidiums. (Anon., n.d.)

2. Target Market Definition

The cut flower industry is a strong competitive market with many domestic and foreign

competitors. In order to stay competitive, Florial Flowers decided to differentiate the product

in terms of customer service. To do so, the company will sell the cut flowers only to

businesses and not to private customers. Since California already dominates the west coast

cut flower market (Aboutflowers, n.d.) and many South American importers also target this

area, it has been decided to sell the products only in the U.S. states New York and Florida.

Moreover, Florial Flowers will be able to deliver various types of tulips, different types of lilies

and other flowers upon request. These kinds of flowers are easy to transport and enable a

very low defect rate.

The target group consists of luxury hotels with four to five stars. Florial Flowers’ product

differentiates from others with a high quality, a low defect rate, a special packaging and other

add-ons and gifts for customers.

2.1. Local Production

During the last decades the production of cut flowers has been moved overseas. Domestic

production has been falling about 50% since in introduction of the subsidies for Colombian

cocaine farmers. The US flower production is struggling and fighting for survival ever since.

Most of the domestic cut flowers in the U.S. come from California, which accounts for 77% of

the domestic cut flower market. It is followed by Washington, Oregon, New Jersey, Hawaii,

North Carolina and Florida, which only accounts for a small percentage of the market. The

table below summarizes the data.

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To Fresh Flower Growing States

California 77%

Washington 6%

Oregon 4%

New Jersey 4%

Hawaii 2%

North Carolina 1%

Florida 1%

(Aboutflowers, n.d.)

As California accounts for more than 70% of the domestic flower production, it is obvious that

the California Cut Flower Commission is the most powerful association of flower growers in

the United States. The commission has been founded by cut flower growers and green

farmers in order ‘to do for all of them what none of them could do alone.’ (Cronquist, kein

Datum) The commission focusses on the following topics in order to help the growers to

survive: Transportation, Public Relations, Governmental Affairs and Grower Research and

Economic Development.

The California Cut Flower Commission has been the leading force during the Colombian FTA

negotiations, fighting for the consolidation of the US flower industry.

2.2. Imports

Most of the flowers sold in the US are imports. In 2010 nearly 70% of the flowers sold in the

US have been imports and the number is increasing. If we take a closer look at the US

market market it can be seen that the Latin Amercian countries, namely Colombia and

Equador are mainly supplxying the US market. Imports from the Netherlands only account for

7% in 2010 (see About Flowers). For the Latin American the USA are the most important

trading partner when it comes to flowers. Most of the flowers grown in Latin Amercia are sold

in the US. Importers, specialized in flower trading for flower coming from Latin Amercia are

located in main habors and airports throughout the United States.

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(Panjiva, n.d.)

This figure indicates the dominance of the Latin American countries on the US cut flower

market. The dominance of the colombian flowers is caused by an encouragement of the US

government. The USA dealt with a drug problem in the early 2000s, of which Colombia has

been a great part. Therefore the US government encouraged the Coca-farmers to grown

flowers instead of cocain with the help of subsidies. Furthermore, the US government

guarenteed a tax free access to the US market. Due to the very low labor costs and the tax

free market entries Colombian growers were able to satisfy most of the US demand at a very

low price the local suppliers could not offer.

Nowadays, the Colombian flower industry have taken over the US market and the domestic

growers are loosing even more market share. (Forero, 2010)

The cost difference of colombian exporters and domestic growers is too high , which is the

reason why domestic growers cannot offer an euqally low price. In order to increase the US

competitiveness the Free Trade Agreement (Colombian FTA) has been signed in 2012. The

aim of this agreement is to lower the cost difference and therefore increase the

competitiveness of domestic US growers. (Representative, n.d.)

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2.3. Dutch Exports and Competitors

The flower market is a highly competitive market and especially in the US Dutch competitors

have a relatively low market share with 6-7%. The figure below indicates the total number of

flowers sold in the US:

(Hbagbloemen, 2008)

This figure indicates a decrease of export volumes from €140.000.000,00 in 2001 to nearly

€60.000.000,000 in 2008. The number in 2008 is explainable through the financial

depression in 2008/2009. This figures are in connection with the overall sales volume in the

US market, which also decreased significantly. The total sales volume in the US market

decreased by about $300.000.000. (Aboutflowers, n.d.)

That is why only a few Dutch flower exporters are doing business on the US market. Holex

Flower BV is the biggest Dutch exporter doing business in the United States. Mr. van Vianen

admitted that there is hardly any domestic competition, due to the fact that the US market is

highly protected by various restrictions and standards that have to be met. Further

information on the restrictions can be found in the placement and distribution chapter.

According to Mr. van Vianen, Holex is accounting 85% of their annual revenue on the US

market. Half of the flowers Holex is selling are tulips. Holex Flower BV is selling more than

€-

€20.000.000,00

€40.000.000,00

€60.000.000,00

€80.000.000,00

€100.000.000,00

€120.000.000,00

€140.000.000,00

€160.000.000,00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Cut flower exports from NL to USA

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100 million flowers every year on the US market, which leads to an annual turnover of more

than €30 million.

Holex’s main focuses are on the wholesale and supermarket business, due to the fact that

these retailers demand huge quantities and frequent deliveries. Due to their long-lasting

expertise and presence on the US market, Holex is able to transport flowers to the John F.

Kennedy Airport New York almost 7 times a week. Furthermore,

2.4. Total volume Market

The United States of America are one of the biggest single markets in the world. With

currently 317 million citizens and potential customers the potential for profits are significant.

The following graph demonstrates the constant increasing number of citizens. This means

that the number of potential customers is further increasing.

(Statista, 2012)

According to the past years, the development if the GDP is relatively stable, excluding the

financial crisis in 2008/2009, the GDP noticed an increase of 4% on average. On the other

hand the nominal inflation is only around 3%. This means that people have relatively more

money to spend as years pass by. Another aspect that’s needs to be taken into consideration

is the development of taxes. Taking the GDP as the denominator the taxes remain the same

over the years. According to these numbers it can be assumed that the potential customers

will have the money and are willing to spend on luxury goods, such as flowers.

275

280

285

290

295

300

305

310

315

320

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nu

mb

er

of

Cit

ize

ns

in m

illio

ns

Years

Citizen Development USA

16 | P a g e

The cut flower industry is a steady growing market in the U.S. The amount of floriculture item

sales at all retail outlets rose from 2000 until 2012 from $25.3 billion to $34.3 billion. The

table below shows the market growth in more detail.

Floriculture Item Sales at All Retail Outlets

2012 $34.3 billion

2011 $32.1 billion

2010 $30.5 billion

2009 $29.6 billion

2008 $33.0 billion

2007 $34.6 billion

2006 $33.7 billion

2005 $31.1 billion

2004 $29.4 billion

2003 $28.2 billion

2002 $27.7 billion

2001 $26.7 billion

2000 $25.3 billion

(Aboutflowers, n.d.)

The total amount of retail florist shops in the U.S was in 2010 at 16,182 and the amount of

floral wholesaler at about 530. Moreover, the domestic floriculture growers in the top 15

states in U.S. account for a number of 5,763. This amount is divided in several categories

like fresh flower growers, potted flowering plant growers, foliage, fresh greens, potted

herbaceous perennials plants and garden plant which make the largest amount of the

domestic flower growers. (Aboutflowers, n.d.)

2.5. Supply Chain/ Market Structure

The Supply Chain of fresh cut flowers is one of the most impressive supply chains

throughout the world, due to the fact that all comes down to the quality of the flowers.

Therefore the entire supply chain has to function excellent or the freshness of the flowers

cannot be guaranteed. To be more precise, there are to supply chain available. One is going

through the Netherlands because the flower auction Flora Holland is involved on the other

one is based on direct trading, tied to fixed contracts between the grower and the distributer.

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(Industries, 2003)

As Florial will be a member of FloraHolland, in order to benefit from the logistics system and

the great network, the right side of the traditional supply chain to the US market will be

applicable. Florial will be the flowers early in the morning directly from the auction, in the

desired quantity and quality, will transport them to their rented office facilites and repack and

inspect them. Afterwards the flowers will leave the facilites to be exported to the US. After the

arrival in the US and the inspection of the USDA our brooker will take care of the flowers and

ensure the transport to the desired place in the right quantity.

Handling the supply chain effectively and efficiently is crucial for Florial because every

mistake made within the supply chain has significant impacts on the freshness and quality of

the flowers and it might be possible that an entire delivery needs to be destroyed.

2.6. Segmentation and Targeting

Before starting to physically export flowers to the USA, Florial Flowers needs to be aware of

the cultural differences between the USA and the Netherlands, and needs to choose their

target market with care. Customer wants will most likely differ from the once the same

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customers have in the Netherlands. In order to assure a profitable business in the US, Florial

has to adapt a market segment, of which they can serve the wants.

Moreover, consumers needs and wants differ also within the different market segments. In

order to meet the wants of our customers, the US market will be divided into various

segments. Florial Flowers is a medium size Dutch flower exporter and does not have the

capacity to target large segments of the U.S. market. Therefore, Florial divided the market

into geographical and psychographic segments, and a small amount of demographic

segmentation.

2.6.1. Targeting

As mentioned before the US flower market is dominated by the Latin American countries.

The Dutch flower industry only accounts for 6 – 7% of the market share depending on the

source. Another aspect that needs to be taken into consideration is that Florial is a medium

sized company and does not have the resources yet to operate on the supermarket business

to business market, as this requires fixed contracts of delivered amount over a certain period

of time. Besides the contract issues, “approximately 80% of U.S. flower imports come from

Colombia, with sales reaching $1.25 billion in 2011. Colombia exports flowers to 88 different

countries although the majority (76%) goes to the United States. The flower sector generates

150,000 jobs in Colombia, says Asocolflores. It is the top-ranked national non-agricultural

product. Nevertheless, the Colombian exporters mainly supply the larger wholesaler and

retailers as they demand large quantities and a frequent delivery of flowers.” (O'GORMAN,

2012) Through an interview with Bob van Vianen (Global Sales Manager at Holex Flowers

BV) Florial identified that the Dutch Flower group in general and Holex especially focus on

larger wholesalers and bigger florist chains. As the Dutch flower group is Florial’s main

competitor with an expansive expertise in the US market, Florial decided not to compete with

Holex and target a different market segment.

The final interview the Rick van Seggelen (a senior market analyst at Flora Holland) led to

the conclusion that it is a smart idea to target luxury hotels. Seggelen himself has been doing

business in the hotel segment in the US for a company that is now bankrupt. Nevertheless

Florial decided it is smarter to target a small segment of the market rather than competing

with the established exporters from Holland and Latin America; in the wholesaler segment.

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2.6.2. Geographical Segmentation

Geographical segmentation is the division of the market into different geographical units.

(Gary Armstrong, 2003, p. 203)

Due to the fact that California is the biggest domestic cut flower seller in the United States,

which makes up to 77% of the domestic cut flower sales, it would be difficult for Florial

Flowers to target the U.S. West Coast. Especially the higher prices through importing the

flowers would make the market entry in that area difficult. Therefore, Florial Flowers decided

to target the East Coast of the United States.

(Simmon, 2006)

This image indicates the density of the US population. The highest density of persons/km² is,

as shown in the figure, at the East Coast of the USA. Furthermore, the local flower

production is quite low there with 6%-1% of the domestic cut flower sales, and it gives us

therefore great entry possibilities. Since the U.S. is in terms of surface area and population

very large, and our company does not have the capability to target the whole East Cost, we

decided to focus on the States of New York and Florida. According to

www.travelchannel.com these States are popular tourist places and many hotels are located

there. Moreover, will the smaller distance to the Netherlands safe transportation costs and

gives Florial Flowers a competitive advantage to other importers from more distanced places.

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2.6.3. Psychographic Segmentation

Psychographic Segmentation is dividing a market into different segments based on social

classes, lifestyle, or personality characteristics. (Gary Armstrong, 2003) As mentioned

earlier, Florial Holland targets luxury and upper-intermediate hotels. According to the

research done these types of hotels and hotel chains pay strengthened efforts in the

decoration of their facilities. Additionally, the highest income places in the United States are

mostly found in metropolitan areas such as San Francisco, New York City, Los Angeles,

Chicago, Boston and Miami. Aligned with the geographic segmentation most of the high

standard, luxury hotels located in Los Angeles, New York, Florida and Nevada.

(Businessinsider, 2012)

Targeting New York and Florida will enable Florial Flowers great entry opportunities, a large

amount of possible customers, and the opportunity of extending the amount if customers

steadily.

Besides the hotels, it is common knowledge that upper income classes pay detailed attention

on luxury items such as flowers. Florial logically assumes that the things they don’t want to

be missing in their own houses and homes should not be missing in the hotels they are

visiting. Therefore Florial assumes a potential market in the luxury and upper-intermediate

hotels and hotel chains.

2.7. Income Segmentation

Income Segmentation is dividing the market into different income segments and is part of the

demographic segmentation. (Gary Armstrong, 2003, p. 206)

The table below shows the difference in the yearly incomes of U.S citizens in 2011.

21 | P a g e

Area Name Dollar

Alabama $34,880

California $43,647

Florida $39,636

Indiana $35,689

Kentucky $33,989

New York $51,125

United States $41,560

Average Income U.S. citizen, 2011 (Research, n.d.)

Since Florial Flowers provides a high quality product at a high price, the focus of the

company lies on the U.S. States with a higher annual income and a greater number of high

standard hostels.

The table shows that especially New York has much higher annual income than the average

of the United States.

Moreover, the number of high class hotels in Florida and New York provide Florial Flowers

with a great number of wealthy customers who appreciate luxury flowers in the hotels.

.

2.8. Consumer Behavior

Understanding the behavior of customers, meaning when they buy certain products or for

which occasions they buy products for, is of utmost importance for any product selling

company. Knowing when customers are demanding certain products, more or less, can be a

competitive advantage, due to the fact that the product portfolio or product mix can be

adjusted. Research has shown that 79% of all flower sold are sold to women and only 21%

are sold to men. For companies on the business to consumer market it crucial to know who

is buying their products in order to create specific advertisements attracting the right target

customers. Not knowing who is buying a product might result in unnecessary spending for

marketing purposes with little or no impacts.

22 | P a g e

Moreover, only 34% of the flowers sold are fresh cut flowers, the rest is supposed to be

garden plant or green house plants. Therefore one can say that, the consumer behavior and

buying trends depend on various factors. One of the main factors is the flower type. The

most popular flowers in the U.S. are Roses, followed by Chrysanthemums, Carnation,

Alstroemeria, Lily and Tulips. (Canada, n.d.)

Another aspect is that a small part of the flowers sold are sold on special calendar occasions.

Once could say the highest percentage for calendar occasion are accounted for Valentine’s

Day, which is not the case. The image below lists the percentages of the most frequent

calendar occasions.

.

(Aboutflowers, n.d.)

Besides the fact that flowers are bought for different occasions, it needs to be taken into

account that different flowers might be demanded for different occasions. For Valentine’s for

example the US customers demand a special red rose grown in Kenya only for Valentine’s

Day.

Calendar Occasions

Christmas/ Hanukkah

Mother´s Day

Easter/ Passover

Thanksgiving

Others

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2.9. Consumer Behavior Target Market

The research, which has been conducted, in order to figure out if the hotel segment is

profitable or not, has shown that hotels demand a frequent delivery of fresh flowers; on

average every 4 to 6 days. Big hotel chains such as the Hilton or Marriott indicated that they

order big and frequent deliveries for all their hotels in a certain area in order to create a

corporate identity among the hotels. This procurement behavior of hotels makes it easy for

Florial to fulfill the customer’s order, due to the fact that they order big quantities of the same

flower. Furthermore, they have indicated that the floral decoration changes over year and

special flowers might also be needed for special occasions.

Another aspect concerning transportation is that big hotel chains prefer a landed price of

flowers, which means that Florial takes care of procurement, transportation, documentation

and inspections at the particular airport. After the flowers have been approved by the USDA

the hotel arrange the transportation with our broker themselves, in order to maintain flexible

in case any changes might be necessary.

The research showed that three hotels need 16,500 flowers on average every month.

2.10. Sales Estimation

As primary research has shown a sales estimation of around 214,500 stems per every three

targeted hotels is considered to be reasonable. Florial Flowers expects to acquire nine hotels

in the first year and six additional hotels in the following years. Every year an increase of

10% compared to the previous year is expected.

1650 * 10 per bunch * 12 months + 16500 for occasional events = 214,500 stems

Year 1 Year 2 Year 3 Year 4 Year 5

707,850

1,250,535

1,958,385

3,208,920

214,500

214,500

214,500

214,500

214,500

214,500

214,500

214,500

214,500

214,500

214,500

643,500

1,136,850

1,780,350

2,917,200

4,697,550

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3. The Product

Florial plans to introduce its product to the American market and to establish itself as a luxury

cut flower brand by emphasizing the uniqueness, and high quality of its products and service.

Due to the high amount of competitors that supply retailers in the US market, Florial decided

to focus on supplying hotel chains. However, Florial will not be supplying any hotels. Instead,

it will target luxury, high standard 4 and 5 stars hotels in the states of New York and Florida.

Keeping in mind that these hotels want those flowers to prove the hotel's uniqueness and to

please their clients, Florial Flowers seeks to deliver uniqueness, beauty and long duration.

Additionally, it is planned for the future that the hotel clients will be so mesmerized by Florial

Flowers that they will choose to hire the company for weddings and other events that they

are giving and/or organizing. However, private customers are not the target group of the

company. Nevertheless, this is a step that can only be taken after Florial is established in a

top position in the market and has to be looked at carefully because it would change a lot of

things about the brand.

3.1. Core component

Flowers are gorgeous, beautiful and have a delightful smell, but this is not the only reason

why people are buying flowers. According to a local flower shop in Groningen most people

buy their flowers because they want to differentiate their home from others and give it an

individual touch. Moreover, they like to give away flowers for special occasion such as

birthdays or Valentine’s Day, because they want to make somebody’s day. People expect

the same things in a hotel room, as they have in their homes; most likely even a bit more

luxurious. Flowers cannot be missing in a hotel room. Fresh flowers provide a feeling of

being welcomed and valued.

Florial Flowers will provide exclusive flowers, such as the Stargazer Lillie or purple tulips,

which will not differ from those other exporters, are exporting to the United States. This is

caused by the fact that flowers are an undifferentiated product. The main strength of Florial

will be the nature of its flowers, the Netherlands. The Dutch flowers enjoy an excellent

repetition and are valued all over the world. Florial flowers will try to deliver not only the

product but also the history that goes along with those flowers, such as the Tulip mania.

Besides, Florial flowers will secure that the flowers are grown and transported under high

quality conditions, in order to secure the high quality Florial promises its customers. Florial

will collaborate with well-established transportation companies such as KLM and Kuehne und

Nagel, who have long lasting expertise on importing goods to the United States. This

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expertise will secure that the flowers will be transported as US restrictions specify, to reduce

the buyers risks to a minimum.

3.2. Product Mix

Florial will start in the US market by offering four different types of flowers, Calla Lilies,

Stargazer Lilies, Purple Tulips and Statice. These flowers were carefully selected their

meanings, beauty and exclusivity.

Due to the huge variety of products an additional lists of offered flowers will be worked out in

the following months. Another aspect Florial will communicate to their customers is that

nearly every flower available at the auctions can be purchased at request and will be pulled

through the regular supply chain. Adding all possible flowers to the portfolio would be too

much effort. Therefore Florial focusses on four exclusive flowers, which are appreciated by

the target segment, namely luxury hotels and hotel chains, such as Marriott.

3.2.1. Calla Lilies

Fig.1: Calla Lilies - (Callalilymeaning, n.d.)

Calla lilies give a sign of purity but also resurrection. They are very attractive and beautiful.

Therefore they are perfect for the hotels' lounges, but also for weddings that are organized

by those hotels.

This flower has been related to Hera, the Greek goddess. The word calla means beautiful

and represented Hera. (Callalilymeaning, n.d.) For more information about the Legend

behind Calla Lily, go to appendix 8.2.

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3.2.2. Stargazer Lilies

Fig. 2: Stargazer Lilies - (Proflowers, n.d.)

Stargazer lilies are beautiful, young, bold and dramatic. According to ProFlowers "the

meaning of these fragrant flowers can be one of wealth and prosperity", (Proflowers, n.d.)

which is exactly the image that Florial would like to pass on, which its exclusivity, beauty,

youngness.

3.2.3. Purple Tulips

Fig. 3: Purple Tulips - Source: sandrasflowerstudio.blogspot.com

Tulips have many different meanings according to its colors. Florial decided upon purple

Tulips because they mean perfect love and royalty (Aboutflowers, n.d.) and (Proflowers,

n.d.), besides being beautiful and giving a different aura to the environment it is being

surrounded by.

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3.2.4. Statice

Fig. 4: Statice Flowers – (Flowersmagazine, n.d.)

The Statice flower is not a common flower to be bought at a supermarket. It is commonly

used together with other flowers to make beautiful arrangements because of its strong

colors. This flower mean success and that's what our chosen hotels represent, successful

hotels in the 4 and 5 stars range who are known for their uniqueness (Aboutflowers, n.d.). In

addition, Statices are easy to dry which makes them have a longer lasting beauty.

(Flowerchoice, n.d.)

3.3. Packaging Component

The flowers will be packed in flat boxes of 350 stamps a box. This box has been proven to be

the most economic friendly variance of transporting flowers via plane. According to Mr. van

Vianen those standardized boxes are easier to handle for the Airline Company and do not

take too much space. Besides the economically friendly shape of the box, the flowers are

transported at a high quality level. “It would be possible to choose smaller boxes, but the

quality of the flowers would decrease tremendously” (van Vianen, 2013)

In the Short term, extra or special packaging will not essential. Florial will not be a recognized

brand for quite a long time, therefore the focus lies on the supporting service component in

order to increase the value of Florial. In the long-term however a specially designed transport

box is considered, in order to maintain and further increase the customers’ perception of

Florial.

Especially the transportation box for the United States requires a certain amount of

information for the authorities at the airport. This information is: the exact name of the flower,

the quantity and the color. Furthermore the Date of the shipment and the origin has to be on

28 | P a g e

the box in order to make the inspections easier. The box also needs a bar code for the

authorities to scan, so all data can be stored electronically.

3.4. Support Service Component

A very important target will be the creation of faithful and mutual relationships to the

individual hotels and hotel chains. In order to achieve this goal, Florial’s employees will

regularly visited them in order to discuss issues and talk about recent trends and new

developments on the flower market. The relationships, especially with big hotel chains, such

as Marriott, is of vital importance due to their financial potential and their well-known guests

who might keep Florial’s name in mind and remember it when they need to order big

amounts of flowers for special occasion. Furthermore, the hotels will be the first steps for

Florial on the US market and will potentially open the door to other segments.

Another aspect of Florial’s support service components are personal selling, 24 hours

customer service and consistency in prices. For detailed information please refer to the

promotion appendix.

Accompanied by the 24 hours customer service is a telephone hotline that is reachable free

of charge with a US telephone number. This telephone hotline either used as an instrument

to place orders, or to communicate problems or difficulties with orders or services provided.

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4. Placement and the distribution strategy

4.1. Market entry

When entering new markets the most essential decision made is the choice of the market

entry strategy. Depending on the country specific givens and the type of business, an

international marketer can chose between several types of entry strategies. Commonly

known market entry strategies include direct exporting, indirect export, licensing, franchising,

contracting, manufacturing abroad and joint venture.

The direct exporting approach offers the exporting business most control and independence.

Companies that follow the direct exporting strategy ship products directly and on their own

behalf to the customers in the foreign market. Indirect exporters, however, convey their

exporting operations to another exporting business or make use of resources owned by other

exporters (piggybacking). (Learnmarketing, n.d.)

Another market entry method that entails fewer risks than the aforementioned approaches is

the licensing strategy. The idea of licensing is to grant the right to produce or manufacture to

another business operating in the chosen target market which also includes the use of the

brand name. Additional similar opportunities would be franchising and contracting. When

following a franchising strategy, the entering business functions as a supporter to local

management which is making use of concepts and expertise such as marketing tools and

strategies. Contracting, on the other hand, enables organizations in the foreign market to

produce the product with the exchange of ideas.

In the manufacturing abroad approach, a company sets up a production facility in the foreign

market in order to fully avoid all exporting activities. This approach, however, is not always

possible. In the flower industry, for example, this strategies success is limited by

geographical conditions.

A strategy that follows the idea of manufacturing abroad with the cooperation with local

organizations is the joint venture approach. In this method of market entry the expanding

business seeks for a local company that is willing to supply their own expertise in the foreign

market to the benefit of both parties. (Marketingteacher, n.d.)

Florial Flowers clearly follows the direct exporting strategy in order to entry the U.S. market.

In regard to the high independency and control that this approach features, Florial Flowers

will be able to meet customer needs to the fullest by providing superior reliability.

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Indirect exporting would also be possible for Florial Flowers. However, due to the high

sensibility of the exporting goods and higher costs when assigning other companies, direct

exporting is considered to be more suitable for achieving the company’s goals.

All other previously mentioned approaches would either be not possible or require extensive

effort to be suitable for the flower industry. More specifically, it is basically impossible to grow

all flowers that Florial Flowers is exporting to the foreign market at facilities in the foreign

market. The associated costs and risks would also exceed the expected benefit of choosing

licensing or other local production methods.

4.2. Transportation Methods

When exporting flowers from Europe to the United States, there are basically only two

possible modes of transportation available – Air and Water. The following sections should

provide a comprehensive overview of the advantages and disadvantages of the different

modes.

Transporting goods by ships is a very efficient and relatively cheap opportunity to move

goods from one continent to another. Especially with the use of intermodal transportation,

distributing goods in a foreign market can be achieved very easy and without repackaging.

However, transporting fresh products with a slow mode of transportation over long distance

is crucial. In the product section of this report the needs and logistical challenges of different

flowers is briefly pointed out. Even though, there are current developments in the flower

industry that include the shipment of tulips by water, most flowers are not meant for a two

and a half weeks journey. (van Vianen, 2013) Additionally, the product’s quality is highly

affected in any case.

Therefore, Florial Flowers solely uses a combination air freight and transportation by truck in

order to move goods from and to the airport. Exporting goods by airplane offers benefits that

are of great importance for the flower industry. The most obvious is time. When dealing with

fresh cut flowers, short transit times are vital for maintaining the product’s quality. Further,

from a customer perspective, a timely and flexible delivery is fundamental for the creation of

value to the customers.

Florial Flowers buys the flowers at the flower auction in Aalsmeer and transports them to the

company’s facilities with its own truck. This truck has a cooling system in order to keep the

flowers fresh. By owning its own truck, the company is completely flexible. Once the flowers

arrive at the warehouse they are checked, repacked and labeled. At this stage packaging

31 | P a g e

requires intensive attention in order to realize an acceptable damage rate. When carefully

repacked in appropriate quantities (350 stems = most efficient), they are reloaded onto the

truck which then transports them to the air freight facilities of the airport Schiphol. This entire

procedure should not take more than 3 hours. Upon arrival at the airport a contracting freight

forwarder (e.g. Kuehne and Nagel) will prepare all necessary documents. The transportation

overseas will be done by an air freight cargo company such as KLM Air France Cargo. The

JFK airport in New York City and the airport in Newark, NJ are considered to be the most

suitable destination airports. This is due to the fact that the NYC airports offer the most

frequent flights and are located in an area with a high density of hotels.

Florial Flowers sends shipments to the upper east coast. Consequently, the two airports in

the New York City area would be suitable as a destination. Once arrived at the destinations

airport a broker helps with the inspection procedure and provides all required documents

(e.g. Kuehne and Nagel). After the successful inspections and the permission from

governmental institutions the cut flowers will be given to the importer which takes care of the

transportation to the customers. For Florial Flowers these customers are hotels.

Broker

Freight forwarder

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All shipments are processed under the incoterm DDP. Under delivery duty paid the seller of

the goods is responsible for the payment of all cost or activity related to the delivery of the

product the buyer orders. Consequently, the seller is required to be financially liable for

export packaging, export clearance, domestic transport, plane loading, main transport, cargo

insurance, customs duties and foreign transport. (Langley, 2009, p. 322) DDP is chosen by

Florial Flowers in order to create more value to our products by offering better service to their

customers.

Florial Flowers requires its cooperating importer to inform the company as soon as the

shipment arrives at the customer. More details on the importing business can be found in the

marketing intermediaries section below.

4.3. Regulations

Exporting agricultural goods to the United States is considered very complicated. An exporter

of flowers has to be aware of all regulations that exist in the foreign market. Not being

properly informed about obligations and restrictions could lead to unsatisfied customers,

higher costs and costs of lost sales. Therefore, Florial Flowers has to have distinct

knowledge of all important facts.

The following paragraph points out the most important regulations for exporting cut flowers to

the U.S.

The major goal of Homeland Security is to keep the United States safe and to fend any

threats from outside the country. (Homeland, n.d.) Consequently, Homeland Security is

highly involved in import regulations and standards. The most important obligation for

companies exporting fresh organic goods to the United States is to have an electronic key

system. This electronic key system allows Homeland Security to keep track on which person

enters the company’s warehouse space at what time. Homeland Security requires Florial

Flowers to send the stored data to the institution annually. This rule applies in all countries

worldwide and is an inevitable condition that needs to be met before first-time operations.

The USDA on the other hand is responsible for specific regulations that also distinguish

between the types of flowers and origin. Plant Protection and Quarantine (PPQ) (USDA,

n.d.), part of the Plant Protection Act, aims on guarding the home U.S. market and to protect

domestic plants from any treats of imported foreign diseases and pests such as the

Chrysanthemum White Rust (most popular plant pest in the USA). (USDA, n.d.) Therefore, it

is quite obvious that rules and regulations are taken seriously by U.S. institutions and are

executed invariably.

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The Animal and Plant Health Inspection Service, a division of the USDA is in charge of

exercising the following rules (USDA, n.d.):

Number 7 CFR 319.74 Subpart on Cut Flowers is part of the Code of Federal Regulations

that contains the requirements for and definitions of the inspection process by the rule

executing institutions. This paragraph can be found in the appendix.

Florial Flowers does not intend to export flowers to the USA that are not eligible to be

imported to the United States. However, the company needs to provide the following:

Most essential for providing the successful and smooth course of action regarding delivering

the flowers to the end consumer (hotels) is considered to be a precise preparation of all

required documents, proper labeling and rigorous inspections at the premises of Florial

Flowers before shipment.

The above shown extract (USDA, n.d.) from the preparations section of the USDA Cut

Flowers and Greenery Import Manual exhibits the documents that need to be provided to the

inspecting institutions.

The table below reflects a conditioned guideline for the inspection procedure related to the

flower type specifically created for the Netherlands.

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One very important fact that has to be mentioned at this stage is that regardless of how

meticulous an exporter works on fulfilling the requirements there is no guarantee that U.S.

institutions approve the imported goods. U.S. institutions can reject deliveries at all times.

Thus, Florial Flowers needs to be prepared to compensate unhappy customers that do not

attain delivery as a result of the aforementioned events every time the incident occurs. This

aspect is shown in the financial section of this report.

A more detailed overview of the requirements for exporting flowers to the U.S. can be found

in the appendix.

4.4. Required Documentations

Moving goods from one country to another includes exporting and importing. Therefore, it is

important to be aware of all required documents for both, the country of origin and the

destination. Clearly, these documents contain exporting and importing elements.

For Florial Flowers the following documentation has to be executed.

The Dutch customs require all exporters to deliver an export declaration. (Belastingsdienst,

n.d.) This declaration contains all relevant information of the shipment such as the owner, the

destination, the origin, the value and much more.

The commercial invoice is a signed document similar to the export declaration and has to be

attached to the shipment. (Parcelforce, n.d.)

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Another document that acts as an agreement between the shipper and the carrier is the bill

of lading. (Investopia, n.d.) This document has to be attached to the shipment.

A consular invoice states that the shipment does not contain any illegal goods that are

prohibited from being imported to the foreign country. (Wisegeek, n.d.) The consular invoice

is prepared by an official of the consulate of the country the goods are exported to.

4.5. Marketing intermediaries

For an international marketer there are several types of intermediaries available to choose

from. Marketing intermediaries such as agents, wholesalers, distributors and retailers

(Smallbusiness, n.d.) help exporters to sell their products. The exporter’s choice heavily

depends on its orientation and goals.

Agents directly represent a firm to its customers and handle products that they do not legally

own but are allowed to move. Making use of agents usually requires payment in form of

commissions or fees. In return the agent delivers its expertise in a foreign market.

Wholesalers in contrary physically own the products they merchandise and operate

independently. Further, they usually hold competitor’s products on stock as well. Distributors

act similarly to Wholesalers, but do only sell products from one brand in each product

category.

Retailers sell directly to end customers and purchase products from other intermediaries.

For selecting potential marketing intermediaries for Florial Flowers it should be recalled that

the company concentrates on B2B operations with hotel chains. Therefore, most of the

potential marketing intermediaries are not considered to be suitable in regard to the

company’s strategy and future perspectives. Florial Flowers does not need to cooperate with

wholesalers, distributors and retailers because the company can directly market its products

the end consumer. However, Florial Flowers needs to make use of a broker that acts as an

importer in the United States. Brokers have basically the same characteristics as agents and

are part of this market intermediary category.

Florial Flowers performs payment for the broker’s services and contribution to the company’s

success.

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5. Strategy Design

As the market analysis showed, Florial already has a huge amount of competitors that supply

retailers in the US market. Therefore a niche segment to focus on has been determined,

which is considered to be the supply of hotel chains. The marketing strategies used to

establish Florial in the United States of America are composed of low budget marketing

strategies. Branding as a flower exporter is very difficult due to the lack of budget and the

fact that most people are not interested in a particular company selling flowers but more in

the shop they are buying the flowers from.

At the beginning it will not be possible for Florial to spend huge amounts of money on

promotional strategies such as billboards, poster promotion or Sponsoring. As van Vianen

told during the interview, Holex Flower BV is not using any of the above mentioned marketing

platforms either, due to the fact that no budget for promotional purposes is available, and

they are not focusing on end-consumer. This interview has been convincing that traditional

marketing pools are not appropriate for Florial.

Due to the fact that almost every company, exporting flowers, is buying their products from

the auction in Aalsmeer or another place in the Netherlands, the product can be categorized

as an undifferentiated one. This fact is the reason why all marketing efforts are done on the

service and logistics level, in order to create a competitive advantage.

The unique selling point Florial is creating, relies on a superior level of customer service, the

resulting America friendly opening hours and the fast and international delivery of products.

The main objective of the marketing efforts of Florial is not to make individuals aware of the

company, due to the fact that Florial is not trying to target individuals. All promotional

channels that target individuals will therefore not be used. The focus lies on the awareness of

hotels and hotel chains towards Florial and their knowledge about the benefits Florial can

offer. Summarizing the marketing efforts, it can be said that Florial tries to implement a brand

to business partners, without excessive spending budget on additional marketing campaigns.

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5.1. Push and Pull Strategy

In order to not only supply enough hotels to generate a profit but also become the leading

flower supplier for hotel chains, both pull and push strategies are used.

“If many consumers don’t know your product or if consumers simply aren’t actively looking for

your product because of lack of need, then push marketing is your best friend.” (Garth, 2012)

As hotels and hotel chains do not know the products Florial has to offer, they have to be

approached effectively. Florial will actively get into contact with the companies and will try to

convince them of the benefits Florial has to offer. After the first approach the company will

adapt a pull strategy. A pull marketing strategy is defined as “consumers actively seeking out

a product define it and the retailer presents his ads, or products, in the path of the

consumer.” (Garth, 2012)

A push strategy is not applicable with flowers as a product due to their very low half value

period. Storing Flowers is therefore not possible and Florial has to react to the demand of its

customers and buy the flowers fresh from the auction and pull them through the logistics

pipeline as fast as possible. Due to the fact that it is expensive and inefficient to completely

push a trade marketing service into the market, the focus is on pull strategies:

5.2. Promotional Budget

A promotional budget has been developed in order to keep track of all promotional activities

and to clarify the importance of different promotional methods. In the table below a detailed

elaboration of the marketing budget that is expressed in percentages, can be found. The

entire marketing budget will approximately be 15% of Florial’s total revenue.

Promotional Method Individual % Total %

Media Channels (Advertising) 20%

Flower Exhibitions 20%

Catalogues 50%

Presentations 30%

Sales Promotion 40%

Personal Selling 40%

Total 100%

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5.3. Media Channels

Luxurious hotels and hotel chains are very busy with their daily business and are not willing

to spend a lot of time or efforts in the procurement of flowers. They are well-aware of their

financial potential and want to find business partners with the least effort possible. They are

sending out employees to locations or events, where a variety of potential business partners

and flower selling businesses can be found.

One of these events are flower exhibitions. Businesses are not only going to these events to

find collaboration partners, but also to be informed about the latest trends on the flower

market. 20% of the entire promotion and advertising budgets will be spent on the use of the

following media.

5.3.1. Flower Exhibitions

Flower exhibitions are, as its name implies, big events where growers and flower selling

companies are promoting themselves and their flowers. Furthermore, these exhibitions are

used to present the trends for the upcoming year. The biggest floral exhibition is the World

Floral Expo, which took place from March 13 -15 in New York City. According to official

numbers 101 exhibitors showed their latest trends and development, which attracted more

than 1200 professional visitors from all over the world. Another important flower exhibition is

the PHS, the Philadelphia Flower Show, which is the biggest indoor flower exhibition in the

United States. The PHS has a 184 year-old history. This exhibition mainly focusses on the

arrangements and developments of cut flowers, used for presentational purposes.

(Philadelphia, 2013)

Flower exhibitions are providing a great opportunity for Florial Flowers to present and

promote themselves to the new US market. Renting a stand at an exhibition is relatively

cheap and it offers the possibility to reach a vareity of business partners of the target

segement. As mentioned before, hotels such as Marriot, are sending their employees to

these exhibitions to keep up with the latest trends. Furthermore, Flower exhibitions are most

of the time used to get a foot into the new market as told by Mr van Vianen. 20% of the

available promotional budget, for the usage of medias, will be spend on events such as

Flower exhibitions at the East Coast of the United States. Flower exhibitions do provide the

opportunity of meeting new customers, but a relatively small amounts of contracts or

business partnerships are made on these exhibitions, due to a lack of time and authorization

of employees. That is why further efforts need to be made in order to close a contract.

39 | P a g e

5.3.2. Catalogues

“List of goods or services on sale with their description and prices published as a

printed document, or as an electronic document (e-catalog) on internet or on a diskette,

CD, DVD, etc.” (Business Dictionary)

A flower catalogue can have many different forms. The most commonly used form is a

broschure, where all flowers are presented with detailled information. Most of the time a

picture is provided in order to give the reader an image of how the flower looks like. These

catalogues provide Florial with the opportunity to hand out detailled company information,

including information on the products that are added to the portfolio and other possibilities

and services offered. These catalogues are the basis on which potential customers will be

convinced to become Florial customers. The increased efforts, decribed in the flower

exhibition section, are based on these catalogues. All information that could not be provided

during the exhibitions, can be found in this catalogue. In order to guarantee the success of

this media, the catalogues need to be well made and kept up-to-date. For these purposes a

design agency will be hired. This media channels will receive 50% of the available budget, as

it is the main tool of customer acquisition.

5.3.3. Presentation

“Formal submission or delivery of a document or negotiable instrument for the

appropriate notice or action (acceptance, negotiation, payment, etc.) of the named entity. For

example, a check is presented to a payee bank for payment, and (in documentary

credit) collection documents are presented to a buyer for acceptance or payment. Also called

presentment.” (Business Dictionary) In order to give more detailled information especially for

the target audience, Florial will make use of these formal submission of information. In order

to create sucessful presentations, various potential customers will be invited. These

presentations will be financed by Florial to increase the perceived cutomer value. General

information that have been gathered through either the exhibition or through the catalogues

can be discussed face to face and provide the opportunity to set up individual meetings

directly with a responsible sales representative. These presentation have been prooven to be

successful and a comon acquisition tool oh Holex Flower BV. Mr van Vianen indicated that

presentation are usually hold with up to 5 potential customers who share the same interests

or are competitors in a particular segment. These presentations are not more important than

flower exhibitions but are most cost intensive. Therefore this media channel will receive

approximately 30% of the available promotional budget.

40 | P a g e

5.3.4. Short – Term Strategies

The below mentioned and explained marketing methods are used to increase the recognition

and awareness of potential customers in the short-term. This includes the a period of time

after the first order has been made in order to assure a fluent connection with the long term

benefits for the customer and Florial

5.3.4.1. Sales Promotion

For many small and medium-sized companies it has become common practice to use viral

marketing as the main part of their sales promotion. Sales promotion will be used to increase

the recognition of Florial’s products.

As the research has proven, hotels will order flowers in large quantities, and Florial can make

us of the economies of scale. Rewarding customers, when ordering in large amounts, is the

most applicable sales promotional tool. Aligned with the granted discounts for large order

quantities a loyalty program will be implemented, with which companies can collect

membership points a gather further discounts.

For further short-term strategies refer to appendix 8.6

As shown in appendix 8.6 figure 1, the sales promotion, in the business to business

marketing, an important role, due to the fact that it increases the recognition on a product or

service and helps to decrease the decrease the unit costs once larger quantities are ordered;

economies of scale. “Sales promotion also increases effectiveness of personal selling,

advertisement”. (Business Facilities Operations) Based on this theory Florial allocates

approximately 40% of the entire marketing budget on sales promotion. Once contracts with

hotels and hotel chains are signed the amount of budget allocated to sales promotion will be

reduced.

5.3.5. Long – Term Marketing Strategies

The below mentioned long term strategies are used to create long lasting relationships with

customers. As long lasting relationships and mutual trust are beneficial for both parties,

Florial’s main marketing and promotional efforts will be the creation of these relationships.

41 | P a g e

5.3.5.1. Personal Selling

“Personal selling is where businesses use people (the “sales force”) to sell the product after

meeting face-to-face with the customer. The sellers promote the product through their

attitude, appearance and specialist product knowledge. They aim to inform and encourage

the customer to buy, or at least trial the product.” (Riley, 2012)

Personal selling is the unique selling point of Florial, due to the fact that there is hardly any

product differentiation possible. Providing the customer a feeling of being valued and

welcomed and providing a personal contact person within the company, who has the ability

and expertise to help the client out within a short limited of time. Due to interview research it

occurred to Florial that this type of personal contact is valued by US companies as they

prefer the informal way of communication .(van Vianen, 2013) In Florial’s beliefs personal

selling will increase the mutual trust of both parties and leads to a beneficial long-term

relationship. “Personal selling may be very effective means in selling goods or services by

giving good impression to the perspective customers.” (Business Facilities Operations).

Through this personal selling strategy Florial is trying to create a competitive advantage

towards its competitors. Due to the importance approximately 40% of the budget will be

allocated to personal selling, based on this theory on the research that proved that US

companies value personal contact with ist business partners.

42 | P a g e

6. Pricing

Price setting is crucial in basically every industry and type of business. Poor and

inappropriate pricing strategies can result in unprofitability and lost sales. Consequently,

when choosing a pricing strategy a company has to consider all important variables and

perspectives.

Before choosing a pricing strategy, every single company has to be familiar with all important

factors that influence the pricing decisions. The easiest way to come up with a suitable

pricing strategy is following a simple step by step procedure.

The very first step is considered to be the estimation of demand because demand is the

stimulating factor that highly influences every aspect of pricing. Secondly, a complete cost

estimate has to be conducted. This is due to the fact that being aware of all costs is vital for

the generation of profit. Further, having a look at the environment the business operates in is

considered to be important. Environmental factors include legal constraints, competition or

aspects of risk.

When a firm has become familiar with the aforementioned steps it can formulate a price

objective that basically states the company’s goals in regard to profit. With taking everything

into account a company can finally choose a pricing method and conduct actual and accurate

pricing.

After the implementation of a pricing strategy, a company may make use of price discount to

adjust pricing to certain current conditions.

6.1. Demand estimate

Demand estimation is crucial for the financial analysis and the decision making whether or

not to enter a foreign market. Primary research has shown that Florial Flowers could be able

to sell about 214,500 stems to three hotels. The forecasted customer base is estimated to be

30 by the end of five years of operations. Detailed key numbers are presented in the table

below.

Year 1 Year 2 Year 3 Year 4 Year 5

Stems sold 643,500 1,136,850 1,780,350 2,917,200 4,697,550

Packages* shipped

per annum

1839 3249 5087 8335 13,422

Packages* shipped

per week

36 62 97 160 258

43 | P a g e

*packages contain 350 stems each

6.2. Estimation of costs

In order to accurately determine the generated costs a company has to create a spreadsheet

that contains all cost elements the company has to face. Potential costs are ranging from

rent and salary to importer’s commission and insurance.

There are two categories that costs can be separated in – fixed and variable costs. For

Florial Flowers, costs are extremely high in the first year. This is due to the fact that the

company has to purchase equipment and has to fulfill costly requirements to take up

operations. A detailed cost overview can be found in the appendices.

Year 1 Year 2 Year 3 Year 4 Year 5

Fixed 518,689.00

€

279,600.00

€

287,682.00

€

296,056.86

€

304,735.89

€

Variable 454,361.46

€

787,371.67

€

1.221,733.13

€

1,989,112.08

€

3,190,845.21

€

Expenses 515,716.74

€

565,494.99

€

799,990.02

€

1,211,139.54

€

1,852,657.98

€

Total 1,488,767.20

€

1,632,466.66

€

2,309,405.15

€

3,496,308.48

€

5,348,239.08

€

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

5

1 2 3 4 5

mill

ion

ste

ms

Estimated Demand (stems per annum)

Demand

44 | P a g e

The most important fact that can be seen in the graph is that Florial Flowers has immense

fixed costs (blue) in year one. In the following years the percentage share of fixed costs

constantly decreases. This is due to the constant characteristics of fixed cost pools in regard

to sales volume.

6.3. Pricing objective

It is of vital importance that the pricing strategy complies with the overall goals of a company.

These goals contain aspects such as profit and quality (perception). Therefore, formulating a

price objective is needed.

Possible price objectives international marketers can choose from are current profit

maximization, current revenue maximization, maximize quantity, maximize profit margin,

meeting target rates of return (Businessdictionary, 2013), quality leadership, partial cost

recovery, survival and status quo (Learningmarketing, 2013). Further, pricing objectives for

skim pricing and penetration pricing are considered to be suitable for new products.

With focusing on satisfying hotels’ needs of cut flowers, Florial Flowers targets a customer

segment that mainly focusses on customer service, quality and reliability. For Florial Flowers,

a combination of meeting the targeted rates of return and quality leadership could be a

suitable pricing objective. This is due to the fact that the company may aim on compensating

for all costs incurred to start the business but also delivering superior quality and service to

high level customers.

€-

€1

€2

€3

€4

€5

€6

Year 1 Year 2 Year 3 Year 4 Year 5

Mill

ion

en

Estimation of cost division

Expenses

Variable Costs

Fixed Costs

45 | P a g e

A risk that is important to mention is the risk of exchange rate changes. Prices are highly

exchange rate dependent and Florial Flowers has to have a close eye on the Euro - US

Dollar exchange rate. Currently (4th April 2013), 1 Euro equals 1.28 US Dollars.

6.4. Pricing Strategy

After analyzing the main aspects and foundations of determining a pricing strategy a

company may implement the suitable pricing strategy. International marketers can choose

from the following strategies.

Florial Flowers clearly follows the cost-plus pricing approach. This fact is emphasized in the

pricing table that can be found in the appendix. Cost-plus pricing is considered to be most

suitable because it allows the company to set prices more easily in regard to the firm’s

financial goals.

The following table illustrates the prices Florial Flowers would have to charge per stem in

order to meet the company’s goals after every single year of operation.

Year 1 Year 2 Year 3 Year 4 Year 5

Price $3.26 $2.02 $1.83 $1.69 $1.60

Another calculation can be found in the appendix that states that Florial Flowers would have

to charge $1.80 consistently within the first 5 years in order to meet the company’s goals.

•Production cost + certain profit Cost-plus pricing

•Price = Target return on investment Target return pricing

•reflects the value the product delivers to customers Value-based pricing

•aims on influencing the consumers perception (e.g. high price = high quality) Psychological pricing

46 | P a g e

7. Conclusion

At first the United States seemed to be an appealing market for Florial Flowers. After

conducting the market research it can be said that the United States offer great opportunities

for flower exporter to expand their businesses. The United States market is a steadily

growing market with a strong financial potential. Even though competition in the market is

strong, profitable market segments can be found in order to successfully enter this market.

Due to the market situation the United States of America in general provide suitable basis.

The political and economic conditions are stable and highly developed. Besides, the

infrastructure and communication systems are perfectly suitable as well. Moreover, the in the

report mentioned target group, luxury hotels and hotel chains, provide great financial

potential and willingness to corporate with foreign companies.

Furthermore, a variety of wholesaler, importer and broker are available. These agents do

have the expertise to successfully distribute products. The expertise is necessary due to the

fact that the United States are a big and unclear market; therefore knowledge is of vital

importance.

Furthermore, the location of the flower Auction FloraHolland in Aalsmeer, Florials potential

offices in Aalesmeer provide the greatest of all opportunities: the close distance to the

Schiphol Airport. Due to this fact flowers can be transported easily and fast to their

destination. The air freight forwarder KLM has a long lasting expertise in handling and

transporting and provides a professional collaboration partner.

Through the elaborated promotion efforts the hotel segment can successfully be reached.

Even though the US market sounds perfectly for Florial to expand to, there are limitations

that need to be taken into account. The USDA and the US Homeland Security require a lot of

installations in the domestic premises; for example an electronic key system with a data

saving server, a special type of air conditioning system. These installations account a lot of

expenses. Due to the high standards for plant and flowers imported to the United States,

flowers need to be inspected at local premises to secure they are not destroyed at the airport

if the entrance is denied. These inspections in the Netherlands are accounting for a lot of

money.

Once all these costs are added up, a breakeven price is calculated and all necessary mark

ups have been added, Florial’s selling price would be more than double the market price.

Based on this price calculation two scenarios occur. Firstly, Florial keeps the selling price at

the high level and risks not to make a single sell, or secondly Florial asks the market price

47 | P a g e

and accounts tremendous losses during the first years of business. Through calculations it

has been proven that Florial cannot recover these losses within 4-6 years.

Therefore it is not advisable for Florials to enter the US market under these conditions,

targeting Hotel chains as the first segment. The investment would be possible once Florial

would have financial securities they could use up, or Florial has a well-functioning primary

market with a solid annual profit.

As described above the United States of America provide a solid market for flower

companies but not as a startup, due to the fact that initial costs are too high and cannot be

recovered in an economically feasible time.

Under different conditions and a different targeting the situation might change, due to the

mentioned facts. Nevertheless, based on this market analysis and the elaborated targeting it

is not advisable for Florial to enter the US market.

48 | P a g e

8. Appendix

8.1. Peste Analysis

8.1.1. Political

I. The United Kingdom consists of the following fifty states:

II. Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia

Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland

Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada

New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio

Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee

Texas Utah Vermont Virginia/DC Washington West Virginia Wisconsin Wyoming

III. Government form:

Constitution-based federal republic; strong democratic tradition

IV. President:

Barack Hussein Obama, 44th president of the United States, since 2008.

V. Secretary of State

: John Kerry

VI. Main Parties:

Republicans: The Republican Party is one of the two major contemporary political parties

in the United States of America. Since the 1880s it has been nicknamed (by the media)

the "Grand Old Party" or GOP

Democrats: The Democratic Party is one of two major political parties in the U.S. It is the

oldest political party in the world

VII. Congress consists of:

United States Senate

United States House of Representatives

49 | P a g e

VIII. Currency:

US Dollar ($; USD; 1 USD = 0,72 Euro); The Federal Reserve (FED) is the highest

issuing bank in the United States, even though it is a private bank

8.1.2. Economical

GDP Development

(Figure (Organisation, n.d.)

Household Income Development

-4,0

-3,0

-2,0

-1,0

0,0

1,0

2,0

3,0

4,0

2004 2005 2006 2007 2008 2009 2010 2011

De

velo

pm

en

t in

%

Years

Real GDP Development USA

50 | P a g e

(Figure (Organisation, n.d.)

Taxes on Goods and Services

(Figure (Organisation, n.d.)

Imports of Goods and Services

-3,0

-2,0

-1,0

0,0

1,0

2,0

3,0

4,0

5,0

2004 2005 2006 2007 2008 2009 2010

Ho

use

ho

ld In

com

e D

eve

lop

em

en

t in

%

Years

Household Income Development

4,2

4,3

4,4

4,5

4,6

4,7

4,8

4,9

2004 2005 2006 2007 2008 2009 2010

Taxe

De

velo

pm

en

t in

%

Years

Taxe Development on Goods and Services

Datenreihen1

51 | P a g e

(Organisation, n.d.)

Inflation Rate Development:

7

(Figure (Organisation, n.d.)

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

2004 2005 2006 2007 2008 2009 2010

Imp

ort

s as

% o

f G

DP

Years

Imports of Goods and Services

Datenreihen1

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

2004 2005 2006 2007 2008 2009 2010 2011Infl

atio

n R

ate

De

velo

pm

en

t in

%

Years

Inflation Rate Development

Datenreihen1

52 | P a g e

Unemployment Rate Total labor Force:

(Figure (Organisation, n.d.)

8.1.3. Social Analysis

Total Population Development

(Geography, n.d.)

0,0

2,0

4,0

6,0

8,0

10,0

12,0

2004 2005 2006 2007 2008 2009 2010 2011

Un

em

plo

yme

nt

Rat

e D

eve

lop

me

nt

in %

Years

Unemployment Rate Development

0

50.000.000

100.000.000

150.000.000

200.000.000

250.000.000

300.000.000

350.000.000

17

90

18

00

18

10

18

20

18

30

18

40

18

50

18

60

18

70

18

80

18

90

19

00

19

10

19

20

19

30

19

40

19

50

19

60

19

70

19

80

19

90

20

00

20

10

Population USA

53 | P a g e

Birth Rate Development

(Figure (Infoplease, n.d.)

0

5

10

15

20

25

30

35

Birth Rates

54 | P a g e

Flower Buying Behavior

What are consumers buying?

Outdoor bedding/garden plants 46%

Fresh flowers 34%

Flowering/Green houseplants 20%

Who's buying?

Women 79%

Men 21%

For fresh flowers only:

Women 65%

Men 35%

For whom are they buying?

Self 63%

Gift 37%

For fresh flowers only:

Self 33%

Gift 67%

Why are they buying?

Calendar Occasions 14%

Non-Calendar Occasions 86%

For what Calendar Occasions are they buying?

Christmas/Hanukkah 30%

55 | P a g e

Mother's Day 24%

Valentine's Day 20%

Easter/Passover 13%

Thanksgiving 6%

Other 7%

For what Non-Calendar Occasions are they buying?

No special occasion 50%

Home decoration 13%

Birthday 5%

Sympathy/Memorial 5%

Anniversary/Love 3%

Get Well 2%

Other 22%

8.1.4. Technological Analysis

The most important technological factors influencing Florial’s business are the infrastructure

in the US, the availability via plane and the general standard of transportation.

Due to the fact that KLM and all other air freight companies are setting high standards, in

terms of transportation and handling quality, the airports they are working with in terms of

cargo transportation do need to meet their requirements. The selected main airport JFK New

York is one of the modernist airports in the word all meets all requirements, whether it is

materials handling or cooling facilities.

The United States of America are a highly developed country and the entire infrastructure

and communication system provide superior basis for Florial

56 | P a g e

8.1.5. Environmental Analysis

One of the crucial factors for Florial is the weather at the US East Coast. Once the flowers

have been unloaded from the airplane, they are going to be transported by truck to their final

destinations. Fluctuations in weather need to be known before hand, in order to be able to

react accurately to secure the quality of the flowers.

Another important environmental issue is the Monsanto Protection Act, recently signed by

President Obama. This gene modified plants might infect our flowers during their

transportation and cause human damaged once they are presented in the hotels.

8.2. Legend behind calla lily

This legend was taken from the Calla Lily Meaning website (callalilymeaning.org/).

"Calla lily meaning has been related to Greek goddess Hera. The word calla means beautiful.

The legend goes like this. Zeus, the roman god had fathered Hercules with earthly women.

When Hercules was born, Zeus wanted Hercules to have divine powers. He drugged Hera

and let the little Hercules nurse from her. As Hera came back to her senses, she was furious

and pushed the baby aside. During this act, the milk way was formed and as the few drops of

milk fell on the earth they became lilies. Seeing the beautiful lilies, Venus felt that her beauty

is being challenged. She began cursing the flower and soon a heavy pistil came out of the

center of the beautiful cup shaped flower. Callas lilies are associated with Mother Mary, and

it symbolizes her purity and virginity. Again it is seen on Easter and it herald resurrection. It

also is related to the holy cross and Christ’s passions while on it. During the Victorian Era,

puritans imposed restrictions on the use of impure words and since then flowers are used to

transfer feelings of the heart. Different flowers have different meaning and the Calla lily

meaning is both rebirth and union."

57 | P a g e

8.3. The loyalty program

Airlines, car rental firms, supermarket chains and many other business use reward systems

to attract current and potential customers. Efforts of implementing a rewards system mainly

focus on reaching one goal – customer loyalty and creation of a beneficial advantage for

customers.

Florial Flowers follows this idea. Every customer will get a membership card which is

registered with the customer number and customer details. In order to collect points for the

rewarding system, the membership number needs to be added to the order and after

processing the order the point are being transacted to the customers loyalty points account.

After collecting a reasonable amount of points, the loyal customers can choose from a variety

of flower related products to be shipped to them without any expenses. The products offered

within the loyalty program include vases and promotional discounts. A catalogue will be sent

to the customer that entails all items that can be ordered.

Other than adding value to purchasing from Florial Flowers instead of from competitors, the

company greatly benefits from this loyalty program by gathering additional data that reveals

knowledge about the customer’s buying habits and preferences.

58 | P a g e

8.4. Company facilities

In order to meet the company’s needs to assure effective and efficient operations, a

warehouse with office space is being rented. The location of the choses property is at

Parellaan 48 in Hoofddorp. (Bedrijfsruimterondschiphol, n.d.) This location is directly next to

the Airport Schiphol and is therefore highly time and cost efficient. The airfreight area of the

Airport is 5 kilometers away while the flower auction in Aalsmeer is located 10 kilometers

away. Available warehouse space equals 216 m² at a height of 6 meters. Office space

equals 113 m². The annual rent of the premises amounts to €27,500 plus service costs.

Service costs are estimated at €5,000 annually.

Facility running costs are estimated at €4,000 per month including gas, electricity and water.

For the transshipment of flowers it is of great importance to keep the warehouse at around

14°C. In order to do so an air conditioning system specialized for warehouses is needed. The

costs for this system are expected to be €120,000. (Bochmann, 2013)

Homeland security requires all firms importing flowers to the U.S. to implement an electronic

key system to the warehouse space in order to keep track of who accessed it at what times.

The stored data is being checked annually. Therefore, Florial Flowers needs to install a

system that meets all requirements. The costs for such a system are estimated at

approximately €20,000.

A truck is being bought for transportation purposes. This truck grants the company a highly

appreciated flexibility. Certain requirements for the truck are relatively low mileage, high fuel

efficiency and an on-board cooler system in order to keep the flowers at the preferred

temperature. A truck that meets all favored requirements costs €43,090. (Truckscout24, n.d.)

Our company building has one garage door for truck access. However, it does not have a

proper loading platform. Therefore, a moveable loading platform will be bought. This loading

platform costs €4,200. (Autoline, n.d.)

For warehouse operations the following products are needed:

5 Lifting carts at a rate of €519.00 each = €2,595.00 (Hubwagen, n.d.)

40 wire carts at a rate of €137.75 each = €5,510.00 (JH-Profishop, n.d.)

100 plastic palettes at a rate of €11.95 each = €1,195.00 (Paletti-Shop, n.d.)

20 tables at a rate of €500.00 each = €10,000.00

1 labeling machine for €1,599.00 (Ammerer, n.d.)

59 | P a g e

For packaging purposes the company needs to purchase packaging cartons (printed with

graphic design) and transparencies for batching. These costs are roughly estimated at €5 per

100 flowers.

€86,994.00 Equipment fixed costs + air condition

€48,000.00 gas, water and electricity per annum

€32,500.00 Rent incl. service costs per annum

6 workers at a rate of €2,500 each = €15,000 wages per month

The map below shows the area of the company’s premises. Point A represents the flower

auction, Point B Florial Flowers’ location and point C shows the airfreight area of Schiphol.

(Googlemaps, n.d.)

60 | P a g e

61 | P a g e

8.5. Placement

8.5.1. Electronic Code of Federal Regulations

As of October 9, 2012, the e-CFR resides at a new URL. Please reset your bookmarks,

favorites, links and desktop shortcuts to: www.ecfr.gov.

e-CFR Data is current as of March 27, 2013

Browse Previous | Browse Next

Title 7: Agriculture

PART 319—FOREIGN QUARANTINE NOTICES

Subpart—Cut Flowers

Contents

§ 319.74-1 Definitions.

§ 319.74-2 Conditions governing the entry of cut flowers.

§ 319.74-3 Importations by the Department.

§ 319.74-4 Costs and charges.

Source: 64 FR 38110, July 15, 1999, unless otherwise noted.

Back to Top

§ 319.74-1 Definitions.

Administrator. The Administrator of the Animal and Plant Health Inspection Service, United

States Department of Agriculture, or any employee of the United States Department of

Agriculture delegated to act in his or her stead.

Cut flower. The highly perishable commodity known in the commercial flower-producing

industry as a cut flower, which is the severed portion of a plant, including the inflorescence

and any parts of the plant attached to it, in a fresh state. This definition does not include

dried, bleached, dyed, or chemically treated decorative plant materials; filler or greenery,

62 | P a g e

such as fern fronds and asparagus plumes, frequently packed with fresh cut flowers; or

Christmas greenery, such as holly, mistletoe, and Christmas trees.

Inspector. Any individual authorized by the Administrator to enforce this subpart.

United States. All of the States, the District of Columbia, Guam, the Northern Mariana

Islands, Puerto Rico, the Virgin Islands of the United States, and all other territories or

possessions of the United States.

Back to Top

§ 319.74-2 Conditions governing the entry of cut flowers.

(a) Inspection. All cut flowers imported into the United States must be made available to an

inspector for examination at the port of first arrival and must remain at the port of first arrival

until released, or authorized further movement, by an inspector.

(b) Actions to prevent the introduction of plant pests; notice by an inspector. If an inspector

orders any disinfection, cleaning, treatment, reexportation, or other action with regard to

imported cut flowers that are found to be infested with injurious plant pests or infected with

diseases, the inspector will provide an emergency action notification (PPQ Form 523) to the

importer, owner, or agent or representative of the importer or owner of the cut flowers. The

importer, owner, or agent or representative of the importer or owner must, within the time

specified in the PPQ Form 523 and at his or her own expense, destroy the cut flowers, ship

them to a point outside the United States, move them to an authorized site, and/or apply

treatments, clean, or apply other safeguards to the cut flowers as prescribed by the inspector

on the PPQ Form 523. Further, if the importer, owner, or agent or representative of the

importer or owner fails to follow the conditions on PPQ Form 523 by the time specified on the

form, APHIS will arrange for destruction of the cut flowers, and the importer, owner, or agent

or representative of the importer or owner will be responsible for all costs incurred. Cut

flowers that have been cleaned or treated must be made available for further inspection,

cleaning, and treatment at the option of the inspector at any time and place indicated by the

inspector before the requirements of this subpart will have been met. Neither the Department

of Agriculture nor the inspector may be held responsible for any adverse effects of treatment

on imported cut flowers.

(c) Fumigation for agromyzids. Cut flowers imported from any country or locality and found

upon inspection to be infested with agromyzids (insects of the family Agromyzidae) must be

fumigated at the time of importation with methyl bromide in accordance with part 305 of this

chapter, with the following exceptions:

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(1) Fumigation will not be required for cut flowers imported from Canada (including Labrador

and Newfoundland) or Mexico because of the finding of agromyzids.

(2) Fumigation will not be required for cut flowers of Chrysanthemum spp. imported from

Colombia or the Dominican Republic because of the finding of agromyzids, when such

agromyzids are identified by an inspector to be only agromyzids of the species Liriomyza

trifolii (Burgess).

(d) Chrysanthemum white rust hosts. (1) The following Chrysanthemum , Leucanthemella ,

and Nipponanthemum spp. are considered to be hosts of chrysanthemum white rust:

Accepted name of susceptible

species Synonyms

Common

name

Chrysanthemum arcticumL. Arctanthemum arcticum(L.) Tzvelev

andDendranthema arcticum(L.) Tzvelev

Arctic

chrysanthemu

m and arctic

daisy.

Chrysanthemum

boreale(Makino) Makino

Chrysanthemum indicumL.

var.borealeMakino andDendranthema

boreale(Makino) Ling ex Kitam

Chrysanthemum indicumL. Dendranthema indicum(L.) Des Moul

Chrysanthemum japonenseNakai

Dendranthema japonense(Nakai) Kitam.

andDendranthema occidentali-

japonenseKitam

Nojigiku.

Chrysanthemum

japonicumMakino

Chrysanthemum makinoiMatsum. &

Nakai andDendranthema

japonicum(Makino) Kitam

Ryuno-giku.

Chrysanthemum×morifoliumRam

at

Anthemis grandiflorumRamat.,Anthemis

stipulaceaMoench,Chrysanthemum

sinenseSabine ex Sweet,Chrysanthemum

stipulaceum(Moench) W.

Wight,Dendranthema×grandiflorum(Rama

t.)

Kitam.,Dendranthema×morifolium(Ramat.

Florist's

chrysanthemu

m,

chrysanthemu

m, and mum.

64 | P a g e

) Tzvelev, andMatricaria morifoliaRamat

Chrysanthemum pacificumNakai

Ajania pacifica(Nakai) K. Bremer &

Humphries andDendranthema

pacificum(Nakai) Kitam

Iso-giku.

Chrysanthemum shiwogikuKitam

Ajania shiwogiku(Kitam.) K. Bremer &

Humphries andDendranthema

shiwogiku(Kitam.) Kitam

Shio-giku.

Chrysanthemum

yoshinaganthumMakino ex Kitam

Dendranthema yoshinaganthum(Makino

ex Kitam.) Kitam

Chrysanthemum

zawadskiiHerbich

subsp.yezoense(Maek.) Y. N.

Lee

Chrysanthemum arcticumsubsp.

maekawanum Kitam,Chrysanthemum

arcticumvar.yezoenseMaek.

[basionym],Chrysanthemum

yezoenseMaek.

[basionym],Dendranthema yezoense(F.

Maek.) D. J. N. Hind, andLeucanthemum

yezoense(Maek.) á. Löve & D. Löve

Chrysanthemum

zawadskiiHerbich

subsp.zawadskii

Chrysanthemum sibiricumTurcz. ex DC.,

nom. inval.,Dendranthema

zawadskii(Herbich) Tzvelev,

andDendranthema

zawadskiivar.zawadskii

Leucanthemella serotina(L.)

Tzvelev

Chrysanthemum

serotinumL.,Chrysanthemum

uliginosum(Waldst. & Kit. ex Willd.) Pers.,

andPyrethrum uliginosum(Waldst. & Kit.

ex Willd.)

Giant daisy or

high daisy.

Nipponanthemum

nipponicum(Franch. ex Maxim.)

Kitam

Chrysanthemum nipponicum(Franch. ex

Maxim.) Matsum. andLeucanthemum

nipponicumFranch. ex Maxim

Nippon daisy or

Nippon-

chrysanthemu

m.

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(2) Chrysanthemum white rust is considered to exist in the following regions: Andorra,

Argentina, Australia, Belarus, Bosnia and Herzegovina, Brazil, Brunei, Canary Islands, Chile,

China, Colombia, Croatia, Ecuador, Iceland, Japan, Korea, Liechtenstein, Macedonia,

Malaysia, Mexico, Moldova, Monaco, New Zealand, Norway, Peru, Republic of South Africa,

Russia, San Marino, Switzerland, Taiwan, Thailand, Tunisia, Ukraine, Uruguay, Venezuela,

Yugoslavia; the European Union (Austria, Belgium, Bulgaria, Cyprus, Czech Republic,

Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,

Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia,

Spain, Sweden, and United Kingdom); and all countries, territories, and possessions of

countries located in part or entirely between 90° and 180° East longitude.

(3) Cut flowers of any species listed in paragraph (d)(1) of this section may be imported into

the United States from any region listed in paragraph (d)(2) of this section only under the

following conditions:

(i) The flowers must be grown in a production site that is registered with the national plant

protection organization (NPPO) of the country in which the production site is located or with

the NPPO's designee, and the NPPO or its designee must provide a list of registered sites to

APHIS.

(ii) Each shipment of cut flowers must be accompanied by a phytosanitary certificate or

equivalent documentation, issued by the NPPO of the country of origin or its designee, that

contains an additional declaration stating that the place of production as well as the

consignment have been inspected and found free of Puccinia horiana.

(iii) Box labels and other documents accompanying shipments of cut flowers must be marked

with the identity of the registered production site.

(iv) APHIS-authorized inspectors must also be allowed access to production sites and other

areas necessary to monitor the chrysanthemum white rust-free status of the production sites.

(4) Cut flowers not meeting these conditions will be refused entry into the United States. The

detection of chrysanthemum white rust in a shipment of cut flowers from a registered

production site upon arrival in the United States will result in the prohibition of imports

originating from the production site until such time when APHIS and the NPPO of the

exporting country, can agree that the eradication measures taken have been effective and

that the pest risk within the production site has been eliminated.

(e) Irradiation. Cut flowers and foliage that are required under this part to be treated or

subjected to inspection to control one or more of the plant pests for which irradiation is an

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approved treatment under part 305 of this chapter may instead be treated with irradiation.

Irradiation treatment must be conducted in accordance with the requirements of part 305 of

this chapter. There is a possibility that some cut flowers could be damaged by such

irradiation.

(f) Refusal of entry. If an inspector finds that imported cut flowers are so infested with a plant

pest or infected with disease that, in the judgment of the inspector, they cannot be cleaned or

treated, or if they contain soil or other prohibited contaminants, the entire lot may be refused

entry into the United States.

(Approved by the Office of Management and Budget under control number 0579-0271)

[64 FR 38110, July 15, 1999, as amended at 71 FR 4464, Jan. 27, 2006; 72 FR 15811, Apr.

3, 2007; 75 FR 4253, Jan. 26, 2010]

Back to Top

§ 319.74-3 Importations by the Department.

The U.S. Department of Agriculture may import cut flowers for experimental or scientific

purposes under such conditions and restrictions as the Administrator may prescribe to

prevent the dissemination of plant pests.

Back to Top

§ 319.74-4 Costs and charges.

The Animal and Plant Health Inspection Service, U.S. Department of Agriculture, will be

responsible only for the costs of providing the services of an inspector during regularly

assigned hours of duty and at the usual places of duty (provisions relating to costs for other

services of an inspector are contained in 7 CFR part 354). The importer, owner, or agent or

representative of the importer or owner of cut flowers is responsible for all additional costs of

inspection, treatment, movement, storage, or destruction ordered by an inspector under this

subpart, including the costs of any labor, chemicals, packing materials, or other supplies

required.

(Office, n.d.)

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8.5.2. Choice of importer

Florial Flowers can chose between several firms that take care of customs and transportation

at the destination of the cut flowers. Potential firms to cooperate with could be FedEx (Fedex,

n.d.), Kuehne and Nagel (Kuhnenagel, n.d.) or Swift. (Swifttrans, n.d.) After analyzing the

three companies, Kuehne and Nagel is considered to be the most suitable importer and

carrier for Florial Flowers.

Kuehne and Nagel supports its customers with all necessary documents, customs

regulations and also delivers high reliability. With its long lasting history and experience,

Kuehne and Nagel would be the best choice for Florial Flowers.

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8.6. Promotion

(B2Binternational, n.d.)

For consumer goods and industrial goods the importance of the various methods of

communicating with the end user differ significantly. Whilst for consumer goods advertising is

most important making up to 50% of the whole budget, is least important when advertising

for industrial goods making out only 10%. In this area personal selling uses a huge portion of

the communicating budget that equals around 40%.

8.6.1. Short-term Strategy:

8.6.1.1. Direct Mail

As most businesses ignore advertisements they receive, due to the flood of advertisements

they request the first contact with a business will be done via telephone or face-to-face

meetings. In order to support those meetings or conversations, a brochure containing all

relevant information about the offer and how to contact Florial will be sent via email to hotels

in the target group. If the addressed hotels show interest, the sales promoter can make

another appointment.

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8.6.1.2. Points of selling

As one part of Florial’s unique selling point is the superior customer service, Florial presents

multiple channels of procurement for customers. Offering different points of selling makes it

easier for every individual customer to place its order. Ordering via telephone, fax or web

shops are the most are means to place an order. Florial will offer the entire variety of selling

points in order to make it easier for clients to place orders.

Two aspects are of most importance concerning Florial’ points of selling, firstly, the

implementation of a well-organized and extensive web shop and the all-day customer

service, mentioned later. These two aspects will guarantee that customers can place orders

at a time that is most convenient for them.

8.6.2. Long-term Strategies

8.6.2.1. All-day customer service

Costumer service is one of the most important factors of customer retention. As Florial is

dependent on long lasting relationships a superior customer service is needed. The normal

working day in the European Union is from 7 o’clock till 16 o’clock, due to the shift in times,

American companies might not know how much they need to order. If the order is placed

after the office hours of Florial, it might not be possible to arrange all the necessary

documents before the flowers are bought at the auction. Therefore Florial will hire staff that

works the entire day, to assure that all orders are prepared on time and that customers can

contact Florial whenever they need to.

This all-day customer service will be a novelty in the market and helps Florial to differentiate

from its competitors.

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8.6.2.2. Consistent prices

Doing business with the United States is very much depending on the exchange rate of the

Euro and Dollar. This can cause fluctuating prices and leads to insecurities in planning. In

order to increase the security of its customers and to add value to the service provided,

Florial’s prices will be more consistent and unaffected by currency fluctuations. Even though

this might result in a slightly higher price, the gained security in planning will compensate the

higher price

8.6.2.3. Personal Selling.

The amount that has to be spent on personal selling staff depends significantly on the

demand for the flower service and therefore the budget that has to be spend in order to push

the brand. The average salary of a personal seller lies around $39,000 per year. (Indeed,

n.d.)

8.6.2.4. Catalogue Advertisement:

The prices for advertisements in specialist journals or catalogues vary from magazine to

magazine. For a half paged colored print advertisement in a hospitality journal $1,500.00 are

calculated. (Instituteofhospitality, n.d.)

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8.7. Interviews

8.7.1. Marriott Hotels

Our Customers

The states of New York and Florida are popular tourist places for people from all across the

world and many hotels can be found in this area.

The from Florial targeted hotel chain, Marriott Hotels, has 275 hotels in Florida and 113 in

New York. (Marriott, n.d.)

Since Florial is a medium sized company, it is not possible to serve all of these hotels. For

that reason, the company will deliver flowers to two hotels in New York, the Marriott Marquis

and the Marriott New York Downtown, and one hotel in Florida, the Marriott Miami Biscayne

Bay. As Florial is growing, more and more hotels of the Marriott Hotel Chain can be served.

According to the questionnaire will these hotels require an average amount of 1650 bunches

per month. The flowers will be delivered weekly direct to the hotels. Since Marriott does not

focus on special flower types, Florial can choose the cheapest offers at the auctions in the

Netherlands.

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New York Marriott Marquis

1535 Broadway · New York, New York 10036 USA

How many rooms does your hotel have?

87 rooms in total

Do you use fresh flowers in your hotel? If yes, for which events or occasions?

Yes. The rooms have fresh flowers as well as the dining area and the lobby.

Moreover, we also need fresh flowers for events like business meetings,

birthdays, weddings etc, which take place about 2 times per month.

How often do you purchase flowers?

Once /week

Where do you buy them?

Doesn’t matter

Do you always buy flowers from the same company or do you go for the

cheapest offer?

Consistent and contractual purchasing. Quality plays an important role.

How big is the volume of flowers you need per month? (estimation)

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Per week around 150 bunches = 600 per month

Is there a consistency in the types of flowers you use, and which types are you

using?

No. We buy everything that looks good and has a cheap price.

Would you appreciate a lower price but organize the transport yourself, or a

direct delivery resulting in a higher price?

We would like to pay more when everything is organized.

Our strategy is to create a well-known brand with high quality and therefore a

slightly higher price. Therefore the flowers would contain special add-ons (like

bows) with the logo of our company that would show your guests the high

quality of the flower and where they come from. Would that be an interesting

idea for your hotel in order to add value for your customers?

The idea is very interesting. This would be an interesting option to create more

value for our guests.

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New York Marriott Downtown

85 West Street at Albany Street · New York, New York 10006 USA

How many rooms does your hotel have?

112

Do you use fresh flowers in your hotel? If yes, for which events or occasions?

Yes. In our rooms, lobby, restaurant and conference rooms.

How often do you purchase flowers?

weekly

Where do you buy them?

Depends

Do you always buy flowers from the same company or do you go for the

cheapest offer?

Consistent and contractual basis. Reliability is most important, as well as quality.

How big is the volume of flowers you need per month? (estimation)

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700 bunches

Is there a consistency in the types of flowers you use, and which types are you

using?

The type does not matter for us.

Would you appreciate a lower price but organize the transport yourself, or a

direct delivery resulting in a higher price?

Direct delivery

Our strategy is to create a well-known brand with high quality and therefore a

slightly higher price. Therefore the flowers would contain special add-ons (like

bows) with the logo of our company that would show your guests the high

quality of the flower and where they come from. Would that be an interesting

idea for your hotel in order to add value for your customers?

We think it is a great idea and we would be interested in this concept.

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Miami Marriott Biscayne Bay

1633 North Bayshore Drive · Miami, Florida 33132 USA

How many rooms does your hotel have?

57

Do you use fresh flowers in your hotel? If yes, for which events or occasions?

Yes. In our rooms, dining area and lobby. Also for special events like

weddings, anniversaries etc.

How often do you purchase flowers?

weekly

Where do you buy them?

Doesn’t matter.

Do you always buy flowers from the same company or do you go for the

cheapest offer?

Our headquarter gives the order to procure on a contractual basis

How big is the volume of flowers you need per month? (estimation)

350 bunches

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Is there a consistency in the types of flowers you use, and which types are you

using?

No. We have different types. Depends on the season.

Would you appreciate a lower price but organize the transport yourself, or a

direct delivery resulting in a higher price?

Direct delivery

Our strategy is to create a well-known brand with high quality and therefore a

slightly higher price. Therefore the flowers would contain special add-ons (like

bows) with the logo of our company that would show your guests the high

quality of the flower and where they come from. Would that be an interesting

idea for your hotel in order to add value for your customers?

Yes, we would be interested.

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8.7.2. Holex Flowers BV

Interview with Mr. van Vianen from Holex

The meeting with Mr. van Vianen is seen as a significant primary source for many

information used for the creation of this report.

The interview was conducted on 6th March 2012 at 11:00am at the Holex company building in

Aalsmeer. Holex is the biggest Dutch exporter for flowers to the U.S. and approximately 85%

of all company’s exports are being shipped to the United States. The 30 years old company

now has about 65 employees and exports in many different countries but enjoys a great

competitive position in the U.S. flower market for Dutch flowers.

The interview partner holds the position of director of sales and works for Holex for 22 years.

During the interview it quickly became clear how experienced and knowledgeable Mr. van

Vianen is in the flower exporting business. The following outline was created prior to the

interview:

1. What distribution channels is Holex using?

Wholesale business, supermarket business, partial door-to-door delivery

2. How are you storing the flowers at the destination?

No storage at destination

3. What regions are you operating in?

Almost all regions, consolidations in major cities like: Boston, Chicago, Detroit,

Houston, Dallas, New York City, Washington D.C., Los Angeles

4. How many flowers are you selling in the U.S. / exporting to the U.S.?

85% of entire business is done in the U.S., 50 million tulips and over 100 million

flowers in total

5. How do you forecast the demand volume?

With experience

6. What flowers are you concentrating on?

Bulb flowers, Devides, Lilies, Tulips, Freesias

7. What is the average time between buying and selling / turnover ratio?

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1-3 days, depending on the destination location

8. Competitors?

Holex is the biggest Dutch exporter in the U.S., there is hardly any domestic

competition

9. What is your unique selling point?

Operating as a small company, 24/7 availability for customers, night shifts

10. Governmental regulations?

Restrictions on flowers, IATA governmental UDSA clearing loading, electronic key

data storage

11. Promotion, Advertising, Pricing Strategy

Flower exhibition, own farm growing near NYC, personal 24/7 customer service, web-

shop

12. Are you cooperating with other exporters?

Dutch flower group sister companies

Cooperation with growers

Business partners in the U.S., U.S. office in Miami

13. Have there ever been problems?

Yes, caused by weather. Lately, delivery problems due to the snowstorm in Detroit

14. Procurement decisions and partners?

Reliability, Quality

Other relevant information gathered:

- Customer size of around 200 customers

- Flights to NYC 6 times/week

- 70% of the flowers are bought at the auction

- Several times checked for disease (at company premises + at destination)

- Cooperation with freight forwarder needed

- Reserve 3% of revenue for claims

- Incentives: Credit cards + rewards system with collection of loyalty points

- Summertime = no profit, trying to break even

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8.7.2.1. Certification

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8.7.3. Flora Holland

Interview with Mr. van Seggelen from Flora Holland

The meeting with Mr. van Seggelen is seen as a significant primary source for many

information used for the creation of this report.

The interview was conducted on 6th March 2012 at 03:00pm at the Flora Holland company

building in Aalsmeer. Flora Holland is the biggest flower auction in the world Flora Holland

accounts a turnover of 4.2 billion Euros. The 100 years old company now has about 4000

employees and owns the second largest building in the world with 2,600,000m² (approx.. 400

football fields) and cold stores of 130,000m² (20 football fields).

The interview partner holds the position of a market analyst. During the interview it quickly

became clear how experienced and knowledgeable Mr. van Seggelen is in the flower

business. Before working as a market analyst for Flora Holland, he worked for a company

named Kontikiflor, who has also being doing business in the United States of America. The

following outline was created prior to the interview:

1. What types of flowers are sold at Flora Holland?

There are too many types of flowers sold at our auction. Overall we sell around

20,000 different types of flowers. We basically sell all types of roses, lilies, tulips.

Tulips alone have more than 500 subtypes. Therefore it is hard to determine, or to

say which types of flowers are sold in Aalsmeer.

2. Where are the flowers sold come from?

The flowers sold in Aalsmeer come from over the world. Besides some expectations a

big part of the flowers are still grown in the Netherlands. Most of our roses come from

Africa, namely Kenya. The biggest rose grower in the world is located in Kenya, he

employs more than 15000 people. We also sell flowers from Latin America or Israel.

To summarize it, we sell flowers grown all over the world.

3. How much storing capacity do you have?

Flora Holland does not really store the flowers. The flowers are delivered early in the

morning, are stored until they are sold in the morning and are transferred out

immediately after they are sold. Furthermore our logistics system is also based on a

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strict timeline. Many flowers are transferred in while others are transferred out. That’s

why we do not need so much space.

4. How many exporters are currently buying flowers from Flora Holland?

This is very hard to determine. We currently have more than 5000 members (which

means growers) and we currently account more than 2350 customers from all over

the world. This makes Flora Holland the best and most successful flower auction in

the world. Not every customer of Flora Holland is also an exporter, we have many

customers who are domestic wholesaler, or importer.

5. Can you track where the flowers go to?

We have a detailed database from where the flowers are coming from and who is

buying the flowers, but after the flowers left our buildings we cannot take track of

where they are going to. Nevertheless we are trying to convince the buyers to share

this data with us in order to improve our network and our logistics system.

6. How do you forecast the demand volume?

Flora Holland bases the forecast based on last year’s selling volume and the

expertise gathered over the previous years. Due to the fact that Flora Holland only

functions as a middle men, the risks are not as high as they are for the sellers.

7. What is the average time between buying and selling (turnover ratio)?

The average time between buying and selling is within hours. As explained earlier the

flowers are coming early in the morning, it starts around 4 o’clock they are “stored”

and prepared for the auction. After the auction the flowers are grouped according to

the quantity and quality purchased and leave around one hour after they have been

sold. In order to give you an image of how fast our turnover ratio is, I would suggest

working with 5-6 hours.

8. How does Flora Holland set prices?

Flora Holland does not set the prices; the prices are set by our customers. The more

demand for a particular type of flower the higher the price, the lower the demand the

lower the price. Flora Holland basically operates like EBay. Of course, we do

appreciate high price, because than Flora Holland makes more profit, but we do not

set prices at all. Prices are determined by the clock.

9. What makes Flora Holland more successful than other flower auctions?

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Our network and our logistical network is the main success factor. Everything is

based on reliability and commitment. Furthermore our guaranteed payment system,

even though a buyer does not pay or cannot pay anymore due to bankruptcy, Flora

Holland guarantees its members a payment within 48 hours after their flowers have

been sold.

10. As a marketing analyst, what can you say us about the US market?

From what I know and experienced, the US market is dominated by the Latin

American market. Lately the Americans noticed that this dependency will result in a

price escalation. Therefore they are seeking for new market opportunities and are

more focusing on a diversified market share. This provides great opportunities for

European flower companies.

11. Is there a reason why flowers are generally sold at auctions and not as normal

consumer goods?

The flower auction goes back in time almost 100 years. Growers decided to group

together in order to increase market power and influence. They were seeking for a

place where they can collaborate and increase market power. Aalsmeer turned out to

be a good place, due to the close distance to Amsterdam and main harbors, such as

Den Haag or Rotterdam. Furthermore the rents in Aalsmeer have not been as high as

in the rural areas. And 100 years later we are still here ;)

12. Can you suggest a particular US market segment we can focus on and where Dutch

competition is not that high?

Flora Holland has recently been contacted by a big US hotel chain. They wanted to

know, whether Flora Holland has contacts to a Dutch exporter, who could supply

them with many different kinds of flowers on a contractual basis. Our research has

shown that they cannot get the preferred flowers from their Latin American suppliers

and are therefore looking for a completely new supplier, from which they can

purchase all necessary flowers. This market segment might be interesting for your

project. From what I know the wholesale and supermarket business is very

competitive. Even though they are purchasing flowers on a contractual basis, they

want the cheapest price possible, and therefore the profit margins of exporters

supplying wholesalers and supermarket are really small.

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8.8. Cost Estimation

Year 1 Year 2 Year 3 Year 4 Year 5

Costs

Fixed Costs

Facilities

Rent 27,500.00 € 27,500.00 € 27,500.00 € 27,500.00 € 27,500.00 €

service costs 5,000.00 € 5,000.00 € 5,000.00 € 5,000.00 € 5,000.00 €

Utilities (5% increase per annum)

48,000.00 € 50,400.00 € 52,920.00 € 55,566.00 € 58,344.30 €

Flora Auction deposit 50,000.00 € - € - € - € - €

Air condition 120,000.00 € - € - € - € - €

Electr. Key sys 20,000.00 € - € - € - € - €

Truck 43,090.00 € 2,000.00 € 2,000.00 € 2,000.00 € 2,000.00 €

Loading Platform 4,200.00 € - € - € - € - €

317,790.00 € 84,900.00 € 87,420.00 € 90,066.00 € 92,844.30 €

Warehouse equipment

Lifting carts 2,595.00 € 2,595.00 € 2,595.00 € 2,595.00 € 2,595.00 €

Wire carts 5,510.00 € 5,510.00 € 5,510.00 € 5,510.00 € 5,510.00 €

Plastic palettes 1,195.00 € 1,195.00 € 1,195.00 € 1,195.00 € 1,195.00 €

Tables 10,000.00 € - € - € - € - €

Labelling machine 1,599.00 € - € - € - € - €

20,899.00 € 9,300.00 € 9,300.00 € 9,300.00 € 9,300.00 €

Salary (3% increase per annum)

180,000.00 € 185,400.00 € 190,962.00 € 196,690.86 € 202,591.59 €

Total fixed costs 518,689.00 € 279,600.00 € 287,682.00 € 296,056.86 € 304,735.89 €

Variable costs

Purchase (0,25€ per stem) 160,875.00 € 284,212.50 € 445,087.50 € 729,300.00 € 1,174,387.50 €

Fuel own truck 3% purchase

4,826.25 € 8,526.38 € 13,352.63 € 21,879.00 € 35,231.63 €

Packaging 7% purchase 11,261.25 € 19,894.88 € 31,156.13 € 51,051.00 € 82,207.13 €

Logistics 257,398.96 € 454,737.92 € 712,136.88 € 1,166,882.08 € 1,879,018.96 €

Inspection 20,000.00 € 20,000.00 € 20,000.00 € 20,000.00 € 20,000.00 €

Total variable costs 454,361.46 € 787,371.67 € 1,221,733.13 € 1,989,112.08 € 3,190,845.21 €

Total variable and fixed Costs

973,050.46 € 1,066,971.67 € 1,509,415.13 € 2,285,168.94 € 3,495,581.10 €

Mark-ups

Importer commission 25% 243,262.62 € 266,742.92 € 377,353.78 € 571,292.24 € 873,895.27 €

85 | P a g e

Claims, insurance, etc. 3% 29,191.51 € 32,009.15 € 45,282.45 € 68,555.07 € 104,867.43 €

Taxes and duties* 243,262.62 € 266,742.92 € 377,353.78 € 571,292.24 € 873,895.27 €

Total expenses 1,488,767.20 € 1,632,466.66 € 2,309,405.15 € 3,496,308.48 € 5,348,239.08 €

$ 1,905,622.02

$ 2,089,557.32

$ 2,956,038.59

$ 4,475,274.85

$ 6,845,746.02

break-even price 2.31 € 1.44 € 1.30 € 1.20 € 1.14 €

in USD (1,28) $ 2.96

$ 1.84

$ 1.66

$ 1.53

$ 1.46

Price per stem (incl. 7% mark-up)

$ 3.26

$ 2.02

$ 1.83

$ 1.69

$ 1.60

Revenue $ 2,096,184.22

$ 2,298,513.05

$ 3,251,642.45

$ 4,922,802.34

$ 7,530,320.62

Lifting carts, wire carts and plastic palettes are bought in each year in order to meet increasing

demand

Fixed costs for the truck are meant to be for maintenance after year 1

*25% (Commission, n.d.)

Please note: The logistics costs of €140 per 350 stems is only a rough estimation. Below please find

the email contact with KLM Air France Cargo. Unfortunately, no information was given.

5 Year Revenue 5 year quantity of stems sold

Price per stem

$ 20,099,462.68 11175450 $ 1.80 Unit price to meet company goals after 5 years

86 | P a g e

8.8.1. Email contact with KLM Air France Cargo

From: Nils Kirchner

To: "Customer-Service.SPL@klmcargo.com"

Subject: Cost estimation flower export NL - USA

Date: Monday, 25th March 2013 11:20:26am

Dear Sir or Madam,

I am studying International Business and Management at the Hanze University of Applied

Sciences in Groningen. Currently, I am working on a project about exporting flowers from the

Netherlands to the United States. In order to create a cost overview I would really appreciate

it if you could give me the following information.

The shipment size may consist of 350 tulips and will take place from Schiphol to JFK or

Newark. I am not really familiar with the exact characteristics of this shipment. Is it possible

to give a rough cost estimation with only this data?

Please note that the numbers do not have to be 100 percent accurate. The given number is

only used to get an impression of the cost incurred.

Further, the information given will only be used for education purposes.

Thanks in advance.

Best regards,

Nils Kirchner

____________

Student of International Business and Management

Hanze University of Applied Sciences Groningen, NL

kirchnerni@aol.com

http://www.linkedin.com/in/nilskirchner

(NL) +31623521256

(GER) +49176-53821380

(GER) +495364-9468955

87 | P a g e

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