Note to instructors: Blue Moon Natural Foods.

Blue Moon began as a natural foods market in Exeter, New Hampshire, added a small restaurant to its deli, and opened an upstairs space for classes by instructors from the local community. Blue Moon's founder, Kathy O'Leary Gallant, had a vision that had evolved over time and a strong commitment to her customers. Kathy added new business segments in response to perceived opportunities, and to what interested her.

This case describes an actual small business whose growth has been driven by the owner's desire to provide a place in town with a sense of community, get to know her customers, and cook for people who appreciate good food. It was clear from the beginning that Blue Moon Natural Foods was not just a business, but an extension of Kathy's lifestyle.

Key Issues and Discussion Points

The focus is on Kathy Gallant's interest in determining a future for her business and herself; the case involves issues of strategic positioning and entrepreneurial lifestyle. Challenges include Blue Moon's marginal profitability despite continued growth, the emergence of chain store competitors in natural/organic foods retailing, and whether and how to separate her personal goals from those of the business. Many of the dilemmas of small business described by Churchill and Lewis (1983), particularly in terms of whether to disengage of position the business for the long term, are discussed in this case. The entrepreneur's values and their impact on her decisions are intertwined. Key issues and discussion points include:

1. Definitions of success, including the triple bottom line.

2. Entrepreneurial skills and values, including growth versus lifestyle.

3. Competitive analysis and sustainable competitive advantage.

4. Strategic positioning in a changing market.

5. Development of an exit strategy congruent with the values of the entrepreneur.

Potential Audience and Uses

This case was developed for courses in entrepreneurship and small business management at either the undergraduate or graduate level. It can be used early in the course to evaluate entrepreneurial characteristics and "success." Positioned later in the course, the case can highlight the development of specific strategies for sustainability, continued growth, and/or the founder's exit from the firm.

Suggested Teaching Approach

Issues of entrepreneurial values/vision and competitive advantage/positioning can be developed in one class period. Asking the students if they "think Kathy is successful" can start the discussion, leading to consideration of how personal values can influence decision making and of Blue Moon's strengths and weaknesses, followed by its competitive positioning. If the case is used to develop a growth (or viability) strategy, discussion should begin with a look at competition and at whether Blue Moon has a sustainable competitive advantage. An instructor who prefers to use the case mainly to discuss exit strategies should begin with a brief look at Kathy's current businesses and its future potential as a prelude to discussion of her ability to attract a buyer. This discussion should still involve consideration of Kathy's values, as they will determine her willingness to pursue various exit options.

Financial analysis may be frustrating due to the informal and incomplete nature of the data. Thus students are faced with the problem of subjective evaluation of Blue Moon's position--but this is also precisely the type of information that is available to this business owner, which is not an uncommon situation. The instructor may want to assign outside research into industry averages (e.g., RMA Annual Statement Studies that include data for 2002) for students to use as the basis for estimating the profitability of Blue Moon's market segments. Alternatively, they can examine the growth of the natural foods industry in the mix of food purchases, using the "Note" included at the end of the instructor's manual or their own outside research.

Outside or Supplementary Readings

Barney, J.B. (1995). Looking inside for competitive advantage. Academy of Management Executive, 9(4), 49-61.

Churchill, N.C. & Lewis, V.L. (1983). The five stages of small business growth. Harvard Business Review, 61, 30-50.

Elkington, J. (1997). Cannibals with forks: The triple bottom line of 21st century business. Oxford: Capstone Publishers.

Role of the Authors

The idea for the Blue Moon Natural Foods case came from the first author, a regular customer since Blue Moon opened, who noticed Kathy's interesting management style, the growing number of customers, and the store' s ever-changing product selection. Kathy agreed to the case because she "probably would learn a lot" and thought that "students could learn something from [my] business" Information was collected through multiple interviews with Kathy, interviews with her daughter Meadow, and direct observation of the store. It was supplemented by secondary research into the natural foods industry; financial records were constructed from rubber-banded pieces of paper stored in boxes. An earlier version of this case has been taught in the undergraduate entrepreneurship program at the University of New Hampshire, with Kathy Gallant as a guest in the class.

Please send correspondence to: Margaret J. Naumes, tel.: 603-862-3371 ; e-mail: margaret.naumes@unh.edu.

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