Case Study 6

Mikhak Fresh Cut Flowers

Masoud Kavoossi
Howard University, Washington D.C., USA

with ambitions to penetrate the global markets. The company’s leadership is keen
on obtaining and maintaining real time and accurate data on consumer patterns and
behavior.
It is believed that more than half of the company’s products and services will

companies have long been offering customized merchandise, customization in the

customer preferences into account. Personalization, by contrast, allows the customer

Mikhak wants to collaborate and coordinate its marketing internationally. Mikhak is

interested in learning how it can use personalization to increase sales and margins

invest much to make its wishes a reality.

Forty percent of Mikhak’s inventory is sold prior to delivery, and 58 percent is

would like on that particular delivery. The remaining 2 percent wilts. The business
is somewhat seasonal, with quiet summers and spikes in demand around Mother’s
Day, and religious holidays in Morocco such as Prophet Muhammad’s birthday and
Eid festivals.
Having the right product mix is the key to enter the international markets and
have a chance at being successful. The company achieved annual revenues of
US$3.1 million in 2004, US$3.5 million in 2005, and US$4 million in 2006, with a

customer markets. Later, improved varieties and better transportation mechanisms

allowed growers in southern Europe, Israel, and parts of North Africa and South
America to supply northern European and North American markets. What was once
a seasonal business was transformed into a year-round industry. Roses became a
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and labor is cheaper.

US$24 billion wholesale business worldwide. The US imports more than US$400

is imported from Colombia. Roses top the list of imports, followed by carnations (or

will celebrate Valentine’s Day, while 21 percent plan to ignore it. In our globalized
economy, 90 percent of roses sold in the US come from abroad, and most of those
come from Latin America. California leads the nation in the domestic production

China has announced that becoming a major rose exporter is a national policy goal,
giving meaning to the idea of red roses! And let’s not forget the complimentary
product of candy that is produced in the US as well as abroad: Americans consume

as it relates to celebrating of Valentine’s Day, and the purchase of roses.

The Netherlands, which accounts for almost 65 percent of the world trade
volume in the industry, is by far the leading exporter. The Netherlands position as

given the famous ‘tulip mania’ in the country during the 17th century, which while
temporarily ruinous, established the country’s reputation in the eyes of consumers
worldwide as a provider of a quality product. Behind it, however, follow a number of
developing countries, including Colombia, with 19 percent of the global market, and
with Ecuador, India, Lebanon, Tanzania, Thailand, Morocco, and Israel accounting
for the remaining product. Iran is a large producer, but currently has little exports
given its current political situation. Flower centers are emerging in Dubai, in the
Persian Gulf, and elsewhere, with many of these new production centers being closer
both to producers and to promising new markets. Recently, large discount retailers

growers. Grower-retailer interaction is emerging very rapidly, as retailers have found

that bypassing the intermediaries can save costs.

coffee and bananas. The industry supports some 75,000 jobs directly, and another

earnings for the country. In value terms, 84 percent of these exports went to the US,
and 10 percent went to the EU—a share that has been declining since the mid-1990s,
when it was frequently 15 percent or more. Columbia is the number one source of

is currently primarily taking place at regional levels.

environmental and non-governmental organization groups began campaigning

against what they saw as unacceptable labor and environmental conditions in

As part of this campaign, several public relations campaigns were created in

European countries, most intended to raise environmental and social standards
 Mikhak Fresh Cut Flowers 187

effects were raised by developing countries, which complained about their loss of

for market information schemes in the context of the Technical Barriers to Trade
Agreement. This World Trade Organization agreement tries to ensure that various

unnecessary obstacles to international trade. Losing European market opportunities

were affecting the business performance of Mikhak Fresh Cut Flowers. In response
to this, foreign pressure at the national level, coupled with the work of local growers,

policies and procedures, and to implement other changes in the industry in the
region to initiate data collection at the customer level. The pressures of international

better understand their customers.

Development of the Measure

In the area of green marketing, customer sensitivity and awareness of the environment

stemming from inadequate protection of workers who handle dangerous chemicals.

In some companies, environmental concerns have also included the use of pesticides
banned for safety or health reasons in OECD countries. Mikhak is not one of those

In 1991, concerned about the plight of worker conditions in developing countries

rights and church organizations, including FIAN (Food-First Action and Information
Network), and Brot für die Welt (Bread for the World, located in Washington

In 1994, FIAN joined together with the German Flower Wholesale and Import

growing. The German Flower and Wholesale Import Trade Association subsequently

for Flower Growers and Exporters’ Association, to develop a data bank on consumer
habits and preferences including their environmental sensitivity in the EU market.
The scheme covered 12 social and environmental criteria relating to pesticide and
fertilizer use, health and safety measures, and general consumption traits. Some 35
producers in the Middle East, and around the world, signed up to participate in the
scheme, including Mikhak. It was not sure if it would lead to greater market share,

enterprise, were to be paid by the producers on a one-time basis. Given a given

188 Customer Relationship Management
country’s Euro exchange rate, it could be a large sum for something with uncertain

with a proposal to establish a separate database called ‘Mena Flowers’. The idea was

the agreement in order to be placed on a ‘market list’. In so signing, the companies

would declare that they would strictly comply with all EU laws and norms concerning
consumer protection regulations, agrochemical use, and handling. In exchange, they
would get data information on market leads, training, and promotions in the EU.
The companies would have also had to consent to having their information
checked by a commission comprised of both EU and Mena member companies that
had export markets in the EU. Despite the risk of losing access to the European
market, Mikhak decided not to subscribe to the plan, echoing the position of
some other enterprises that in so doing would be compromising too much of the

competitive advantage. The enterprises did not feel the market information access
would be of great value in terms of market personalization or even customization
efforts.
At around the same time, in the Netherlands, the EU commission began to collect

East producers, notably Morocco, Lebanon, and Iran. The idea meant to assure
consumers that the products were considerably less damaging to the environment

limited market and retail information.

The focus of the exchange was on providing detailed information and training in
the following areas:

• business environments in different EU countries: economic, regulatory, social;

• business knowledge and business skills through workshops on data
collection;
• experience of successful entrepreneurs and business in leading market
positions;
•
member enterprises.

Objectives

• To motivate and empower competent businesses in an ever-changing business

environment to enhance and develop their own businesses and market
research.
• To create a network of producers from different Mena countries as a dynamic
and sustainable forum for sharing experience, consumer trends, and new ideas.
• To enable knowledge and information to be transferred between participants.
 Mikhak Fresh Cut Flowers 189
• To work together on sustainable solutions to problems faced by small- and
medium-sized enterprises (SMEs), focusing on the export business in to the
EU.
• To transfer and exchange positive experience of working with entrepreneurs
throughout the world.
• To create international networks designed to promote export/import-oriented

• To allow for international strategic alliances with EU retail.

This case study demonstrates that private consumer producer schemes, because they
are voluntary, can be used effectively to bring about changes in production methods.
However, private schemes should not assume that all foreign producers, much
less their governments, would be willing to participate in them. By maintaining
transparency and encouraging dialogue, however, common ground can often be

remains an important element.

Questions for Discussion

1. What are the strengths and weaknesses of Mikhak’s customer data collection
strategy? Did Mikhak make the right decision by not participating in the
European market plan?

2.
for the high-income countries of the EU and the US?

3.
Colombia match the export totals referenced in the case.

4. Have their been any effective institutional arrangements enabling government

5.
Mikhak’s membership in the ‘Mena Flowers’ agreement? What do you see as
the important shortcomings of the agreement?

Resources/References

Colombia Flower Exporter’s Association website, ,

accessed on May 20, 2007.
Flora Culture International website, , accessed on
May 20, 2007.