Burt's Bees Case Analysis Essay - Part 2
Introduction Burt’s Bees case is a follow up for the case about Roxanne Quimby, an entrepreneur who started Burt’s Bees together with Burt Shavitz and managed to create a considerably big company almost from nothing - Burt's Bees Case Analysis Essay introduction. The objective of the first case was to make a suggestion whether the company should relocate its production from Maine to North Carolina and use its full potential, or stay in Maine and operate with limited growth potential. As the second case indicates, it is obvious that Quimby decided to expand company’s operations by moving to North Carolina while the company’s revenues were projected to be between $6 million and $8 million.
Quimby’s current intentions are to expand its operations to a level that is going to allow Burt’s Bees to have more than $25 million in sales which Quimby thinks is sufficient to sell the company to a bigger market participant. The dilemma that Quimby currently faces is how to expand company’s operations in order to make Burt’s Bees attractive for a potential buyer. This is why the objective of this case is to make a decision whether retail would be the best route to $25 million sales and to suggest how Burt’s Bees would enter the market that is already crowded.
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Moreover, the case asks to provide an alternative to retail if retail is proven not to be the best strategy available to Burt’s Bees. Analysis Burt’s Bees’ early success, while the company was still located in Guilford, Maine, was attributed to Roxanne Quimby’s entrepreneurial skills and her desire to capitalize on the opportunity that she saw in the market. However, by 1994 she noticed that the future potential of her company would be limited if she decided to stay in Maine because of high transportation costs and the lack of associates that had enough relevant experience in the industry.
Quimby’s decision to move the company to North Carolina overcame the obstacles that prevented Burt’s Bees from making more money while the company was forced to substantially change the way its products are produced and even completely eliminate a majority of its products. After moving its production to North Carolina, the company had a better access to its most important markets and was able to cut its transportation costs significantly and therefore increase its profit margins. By 1997 Burt’s Bees distributed its products to stores in every state while they were also present in European and Japanese market.
However, even though company was able to produce its products at a very low cost in its highly automated manufacturing plant, the fact that it was not selling its products directly to customers was a factor that was limiting company’s profits. The dilemma that Quimby faced after moving to North Carolina was whether Burt’s Bees should keep selling its products through others or establish its own retail store in which their products will be sold exclusively. The company therefore has the option to enter into a retail market which is a decision that has both advantages and disadvantages.
Retail Market Burt’s Bees need to increase its revenues and therefore become attractive to potential buyers may force the company to start selling its products in its own stores and not through other retailers. An obvious advantage of selling through its own stores is the fact that the only intermediary between the company and the end users is eliminated. This simply means that, through retail, Burt’s Bees would be able to substantially increase its profits as the profits earned by retailers would now belong to the company.
Another apparent advantage of this approach is that the company would be able to directly observe its customers. Quimby indicated that it is absolutely crucial for her to observe how customers make their decisions to buy and how they react to the product. By selling directly to its customers, the company would be able to provide the end users with a superior customer service and respond to every individual question they might have. Control is also an important aspect of selling through company’s own retail stores since Burt’s Bees would be able to control all processes from manufacturing to selling to its end users.
In my opinion, the overall purpose of having a retail store is that the company can connect to its customers in a better way and provide them with a service that is superior to the one they receive while shopping at a retail store that sells many different brands. Even though having its own retail stores has many advantages, there are also some shortcomings that have to be considered before entering the market. One of the most important factors that should be considered when making such decisions is whether the benefits of entering the market are going to utweigh the costs associated with the decision. This means that Quimby should perform an industry analysis before entering the retail market and decide whether the company would benefit from opening its own retail stores. Another factor that needs to be considered in addition to the cost is the risk associated with any large capital project. Currently, the company was able to minimize its risks by selling its goods through other retailers while a decision to create its own retail stores would add risk to the company.
When all costs and risks are identified Quimby should weigh them against potential benefits and decide whether it would be good for the company to invest into new retail stores. Industry analysis is a tool that is going to help Quimby assess whether the retail industry is profitable enough for the company and whether it would yield high enough profits to justify the investment. The industry within which Burt’s Bees would operate is characterized by a fierce competition that exists among the major competitors.
The industry itself is highly profitable and all industry trends indicated that it is going to grow in size in the future. The evidence for this claim is the fact that the sales of bath gels, washes, and scrubs increased by 114 percent between 1994 and 1995 while the size of the skin care and bath products segment was $1. 8 billion in 1995. However, the most important reason for a substantial increase in market size is that prices of these products are decreasing rapidly which means that industry competition is going to be even fiercer in the future.
With lower overall prices, companies are likely to be competing on cost basis which is likely to give sustainable competitive advantage to bigger companies that are able to achieve higher economies of scale and scope. In order to be successful in this industry, Burt’s Bees would have to find a way to create its own niche market and avoid direct competition with big companies like Johnson & Johnson, Colgate-Palmolive, or Amway.
The fact that Burt’s Bees is the only company that uses 100 percent natural ingredients and does not use any chemicals that could harm human health is something that Quimby should heavily exploit. Being the only firm in that particular segment gives the company a sustainable competitive advantage that could yield substantial profits. For this reason, I think it would be extremely beneficial for the company to have its own retail store which is going to focus on attracting people who are conscious about their health and who would not like to use products that are made from potentially harmful chemicals.
However, in order to be successful, the company would have to initiate an aggressive marketing campaign that is going to communicate that message to the customers. With customers that are familiar with its products, Burt’s Bees could be extremely successful as a retailer of its own products. Overall Strategy In addition to its retail stores, Burt’s Bees should still exploit revenue sources that currently yield profits to the firm. The case states that the company earns substantial profits from direct sales on channels like QVC.
Direct sales are a great way to market the products to a very large number of people while at the same time making good profits from direct sales. In my opinion, the overall strategy that Burt’s Bees should use in order to reach sales of $25 million needs to incorporate its own retail stores, selling through other retailers, and direct sales. When deciding to which extent each of these selling methods is going to be used, Quimby needs to conduct a thorough analysis of the profitability of each one of them and find a mix that is going to bring the most profits.
She needs to make sure that her strategy supports the company’s overall mission statement and always bear in mind that the company can earn highest profits by differentiating itself from the competitors and emphasizing on its environmentally friendly products. The opportunity that exists in the market is something that a skilled entrepreneur like Quimby will know how to capitalize on and I am sure that Burt’s Bees has people that are competent to achieve sales of $25 million. Conclusion
Roxanne Quimby is an executive of Burt’s Bees who needs to determine the strategy that is going to help Burt’s Bees achieve substantially greater sales than it has now. This case is important for the students who aspire to become entrepreneurs later in their lives because it makes them think about revising a corporate strategy in order to achieve higher profits. The case requires a student to research about potential advantages and disadvantages of a new strategy and to decide whether that strategy would add value to the company.
The insight to the entrepreneurship that I acquired through this case relates to its requirement to think about possible alternatives to the strategy that may be applied to benefit the company. I learned that the company who wants to do something new needs to try it and sometimes even fail. Roxanne Quimby decided to test the retail store model herself in order to decide whether it would add value to the company and she learned a lot while doing that.
The opinion that I formed while doing the case is that a company or an entrepreneur would benefit from selling its own products by themselves because nobody else would put as much effort and care into the selling process as they would. This is the reason why I would certainly suggest Burt’s Bees to incorporate its own retail stores into their strategy because it would be the best way to create a positive opinion about its products and a brand loyalty among the customers.