Question

As an executive at diversified mail order retailer Avian Group, Ruth Owades saw opportunity. Choosy gardeners...

As an executive at diversified mail order retailer Avian Group, Ruth Owades saw opportunity. Choosy gardeners did not have easy access to premium specialty gardening equipment.

But these amateur horticulturalists could be profitable, easily reached, and extremely loyal if well served. She proposed the business to Avion, but they had no interest. Her next step was to ask them if she could take the idea and develop it on her own. Surprisingly, they agreed.

Ruth had not worked outside the comfortable confines of a corporate environment. A brief investigation into setting up her own operation revealed that investment money for an unproven entrepreneur with an unproven idea was not exactly forthcoming.

Ruth's best offer for funding involved her providing 25 percent of the money for the venture from her own bank account, while giving up 49 percent of the company to a group of four private investors. Determined to make it work without the investors' money, she plunged into business, naming her venture Gardener's Eden.

Ruth's first stop was the printer. To a mail order company, the single largest expense is the printing and mailing of the catalog-a line item that can account for up to half the costs in the

business. Ruth needed both a fantastic print job and good financial terms---- two elements that are usually mutually exclusive. So she proposed a scheme where the printers would bid on her first two catalogs rather than just her first one.

This showed the printers that she was willing to make a commitment to them, in exchange for favorable treatment on their part. Her suggestion was novel to the industry and was well received. So when she went in and said, "Gee, the other printers are offering me 90-day terms. Can't we do better than that?” the printer gave her six months to pay.

Gardener's Eden needed more than catalogs, however. And Ruth doggedly pursued each supplier necessary to make the venture happen.

She negotiated with the utilities so that she did not have to tie up her cash with deposits for electricity and telephones. She arranged long credit windows with the suppliers that manufactured the exotic gardening items she intended to sell. She drove hard bargains with both her landlord and with the credit card company for unusually low terms. She even pursued her local postmaster, visiting him again and again until he turned up a forgotten regulation that enabled her to collect her daily mail without any service charge.

Ruth's strategy was simple: figure out who would benefit from her success; tell them the story about what she was trying to accomplish; explain to them why they were critical to the venture and

how they would be successful when she was; and push each entity to make an investment to help her be successful.

She negotiated everything with everyone until she got what she wanted. Unknowingly, she was successfully applying affordable loss to her venture.

As the picture came together, Ruth had built an environment where everyone around her had a reason to do something special to make her successful-an environment where she had transformed suppliers to the venture into partners with the venture -an environment where she was able to succeed.

Ruth's revenues well exceeded US$1 million when stylish retailer Williams-Sonoma acquired Gardener's Eden less than four years after she launched the venture.

v  Answer the following questions.

a)    List down the principles (Only) of effectuation theory, highlighted in the above case

b)   Was the opportunity created or found? Briefly explain. (Max 100 words)

c)    As per our discussions many times in class identify the skills which guided Ruth towards her success ( Max 100 words)

Homework Answers

Answer #1

Q1.

A. ANS: These are the following Principes of effectuation theory, highlighted in the case study:

  • Bird in Hand principle: start with what you have
  • The crazy quilts principle: Forming Partnership
  • The lemonade principle: Leveraging surprises.
  • The affordable loss principle.

B. ANS: Ruth Owades found an opportunity in the form of easy access to premium speciality gardening equipment. The “found” view assumes that the budding venture is sufficiently similar to an existing business so that historical information will inform decisions in the new venture, and the environment is sufficiently stable so that outcomes from the past will be relevant to the current situation and the future. She saw an opportunity that can improve the relationship between the supplier and its customer in the form of Seeding Symbiotic Relationships. Ruth's wanted to improve access to high-grade speciality gardening equipment that would have created a premium market segment.

C. ANS: Skills which guided Ruth towards her success:

  • Soft skill: she can communicate, persuade and Negotiate with its supplier and with other stakeholder's that has made her successful with its new venture.
  • Curiosity: she found out new opportunities refactoring the existing business operation and identified a solution to achieve them.
  • Management skills: she was able to manage various parties associated with its business to make it a successful venture.
  • Networking: she created a network that facilitated her in partnership deals with its vendors.
  • Strategic thinking: she was able to decompose its problem and identified a creative solution to achieve his target.
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