Internal and External Factors of the Vermont Teddy Bear Incorporated - Case Study Example

Internal and External Factor Analyses of the Vermont Teddy Bear Co., Inc. Introduction: Internal and external factor analyses are essential tools in ascertaining the performance of a certain business entity. The internal factor analysis provides us a very in-depth insight in the functioning of an individual firm by looking at the internal aspects of the organization and business operation. Meanwhile, the external factor analysis presents the external environment of an organization and how it affects a business entity. Together, these tools offer an adequate rating for a company. This paper will look at the internal and external factors affecting the Vermont Teddy Bear Co., Inc. The first section will present a brief profile of the company. The next section will then tackle the opportunities and threats faced by the company which will lay the foundation for the external factor analysis. Lastly, the paper will look at the internal functioning of Vermont Teddy Bear Co, Inc., through its strengths and weaknesses. The paper will also present summaries of the internal and external factor analyses. Company Profile: Vermont Teddy Bear Co, Inc. began in the streets of Burlington, Vermont in 1981. Its founder, John Sortino began this business by "selling hand sewn teddy bears out of a pushcart." His venture marked the foundation of a business which is basically involved in the conceptualization, manufacture, and marketing of teddy bears. The company is known for its products which are manufactured by Americans using local inputs. Vermont Teddy Bear Co., Inc., however, has begun utilizing imported materials to lower the costs of production and boost profitability. The major business line of the company is the marketing of bears through a program called Bear-Grams which delivers the company's products to customers who can order online or through phone. Bear-Gram was originally advertised through radio stations and orders were taken for special occasions like birthdays, Valentine's Day, and others. The company has latter diversified in the retail of its products. Expansion also meant opening up retail outlets in lucrative areas in the United States. This expansion aimed to promote Vermont Teddy Bear as a national brand. Vermont Teddy Bear Co., Inc.'s performance peaked during 1994 but slipped off due to managerial problems and constraints (The Vermont Teddy Bear Co., Inc 1994). External Factor Analysis External factor analysis is lifted from the opportunities and threats faced by Vermont Teddy Bear Co., Inc. Opportunities include market developments, competitors' vulnerabilities, lifestyle or industry trends, technology development and innovation and a lot more which poses an opportunity which can enable the company to grab a larger portion in the market, maximize shareholders' value, or boost profitability. On the other hand, threats can be political events, drop in market demand, and other obstacles faced by a business entity. Table 1 is a summary of the external factor analysis conducted on Vermont Teddy Bears Co., Inc. Opportunities abound for Vermont Teddy Bear Co., Inc. The boom in the collectible market posts a bright prospect for the company this means a larger customer base which can be serviced by Vermont. The collectible industry is estimated to be a $9.2 billion industry with the plush collectibles segment cornering a $441 million share (Calta, 1995). In the past five years, there has been a growing preference for the upscale bear, the limited editions, and the artist-designed bears (Leccese, 1998). Companies in the teddy bear industry can take advantage of this trend by expanding their product lines in response to this growth. Vermont Teddy Bear Co., Inc. as one of the most prominent players in the teddy bear industry is in a very advantageous position to grab this opportunity. Manufacture of bears to suit the changing needs of customers can be pursued. Market diversification strategies can also be undertaken by the company both in the United States and worldwide. According to the Vermont's CEO Elisabeth Robert, the company will take advantage of the rising demand for teddy bears by marketing the teddy bears not just a local but a national product. Diversification to foreign markets like Great Britain, Canada, and Japan also proves to be profitable. This expansion will require additional capital resources and financing. However, we can see that the company is not yet capable and well-positioned to pursue this opportunity. This is due to the fact that Vermont Teddy Bears does not have the adequate resources to finance larger marketing and production. Globally, there is a growing trend of offshore outsourcing to take advantage of the lower input costs of outsourced materials. In fact, business process outsourcing is also widely practiced by known companies like IBM to cut costs and concentrate on their core competencies. Vermont Teddy Bears Co., Inc. can take advantage of offshore outsourcing to minimize input costs and manage the production expenses more efficiently. Plush materials imported from foreign suppliers are often of better quality and less costly relative to the inputs from United States. This will enable the company to produce higher quality products. This option, however, can be detrimental for the company as it can damage the company's reputation of being an "all American product." Aside from opportunities, the external factor analysis also highlights threats faced by the company. One of the major obstacles faced by Vermont Teddy Bears Co., Inc. is the more stringent competition from other industry players like the Pooh-Grams. This move by the competitors further squeezes the market leaving less room for the teddy bear company. The two other threats listed in Table 1 are major impediments for Vermont Teddy Bears Co., Inc. in their expansion opportunities. Zoning restrictions will have a large bearing in the production capacity of the company as it will unable them to build a larger facility for manufacture. Investor confidence is another threat as it is apparent that they are considering the profitability of their investments in the company's stocks. This is evidenced by the sharp crash in the business' common stock prices. The stock price during the IPO in 1994 was $10 and even rose to $19 at the end of the day. Now, it is only valued from $2.56 and $0.75. Generally, Vermont Teddy Bear Co., Inc.'s external factor analysis yield a score of 2.4 implying the company is not well positioned to face the opportunities and threats in its environment. There are a lot of opportunities in the market, yet the company should be able to raise the much needed capital, resources, and management to efficiently take advantage of these lucrative areas. Internal Factor Analysis The strengths and weaknesses of Vermont Teddy Bears Co., Inc. are highlighted in the company's internal factor analysis. These are shown in Table 2. The company's main strength comes from its strong brand equity. Vermont's teddy bears have already established a good position in the mind of the customers due to the product's quality and popularity in the United States. The company has also been awarded due to its excellent performance. Another strength of the company is its wide product line. Vermont Teddy Bears Co., Inc. offers teddy bears for any occasion for any customer. It also gives its customers a chance to customize their teddy bears and to add optional gifts such as flowers and chocolates. The company also boasts of excellent customer service by being prompt in the responding to the buyers' queries and complaints. Vermont Teddy Bears can be reached through telephone and their user friendly website. Favorable working condition in the company fosters harmonious working relationship between employees. Vermont Teddy Bears Co., Inc. is one of those few companies without labor unions. However, the company also has weaknesses especially in the field of finances. It can be noted that Vermont Teddy Bears Co., Inc. manage its finances inefficiently as it cannot control the ballooning costs associated with its operations. This lead to the company's declining performance as evidenced by the slump in its profit, sales, market share, and stock prices. Taking the strengths and weaknesses of the company, we came up with the table summarizing the internal factor analysis for Vermont Teddy Bears Co., Inc. The total score is 2.2 which indicate that the company's weaknesses outweigh its strengths. It is then imperative that the company upgrade its resources in order to take advantage of the opportunities present in the future. Most significantly, it should focus on more efficient management of its finances. The company should also focus on improving its product and services, satisfying its stakeholders, and making its internal processes more efficient. References Calta, M. (1995). Cub Scout. Detroit News (March5, 1995), pp.22-D, 23-D. Leccese, D. "Growth at a Price," Playthings (June 1998), p.30 The Vermont Teddy Bear Co., Inc., 1994 Annual Report Read More