Full Bloom

Full Bloom

1. In early stages of here business Karen had to find opportunities to grow her business. By 1989 she had a dozen of small coffee shops and a handful of corporate food service companies, so she obviously needed to get more new customers. In 1992 Karen realized that Starbucks was moving to California, so she made everything possible to get this big customer.

While Karen’s business was growing she needed to expand the capacity of production. So Karen changed it production site several times. First, she moved to Fremont in 1989. Then she expanded into 8000 square feet facility in Redwood City by 1993 and into 20000 square feet facility in Menlo Park by 1995. Finally, Karen wanted to move her factory to an even bigger facility in Menlo Park by 2007. Most importantly, Karen tried to reallocate not to far every time, so that she could keep her old employees.

2. Starbucks was a major customer for FullBloom with 67% of total annual revenue by 1999 and 90% by 2002. This concentration provided upsides as well as downsides.

UPSIDES

1) Large marketing and sales team is not required.

2) Ability focus on one big and fast growing customer, which provided healthy.

3) Better integration of the supply chain and better predictability of demand.

4) Better logistics, since products can be delivered to few customer’s distribution centers.

DOWNSIDES

1) Risk of losing a large share of revenues in case if the largest customer decides to switch.

2) Weaker negotiation position, and hence risk of margin squeezing.

Karen was able to build strong relationship with Starbucks, so that it helped her to manage the largest customer of the company. From the very beginning Karen was creative in acquiring the biggest coffeehouse coming from Seattle. To achieve this goal Karen imitated a large enough operation by asking her six friends to play a role of FullBloom’s employees.

Karen could loose Starbucks as a customer at least twice during its long term...