The Vermont Teddy Bear Co - Essay Example

Case Study - The Vermont Teddy Bear Co. In 1981, Mr. John Sorinto founded the Vermont Teddy Bear Company which turned out to be a slam dunk in the bear industry. The company started expanding fast and it soon became too big for Mr Sorinto to manage. In 1995, he gracefully stepped down and paved way for the new CEO. The company kept its focus mainly on soft cuddly teddy bears, which by then had become a must child toy in United States. Since inception, the company's hallmark remained its bear-gram delivery service. The company successfully implemented its marketing strategy through radio advertisements by popular disc jockeys, and catalogs. This study will carry out an environmental scanning basically to assess the elements having profound bearing on the Vermont Teddy Bear Co. Accordingly, a SWOT analysis has been conducted to identify the strategic factors (external and internal both) which will determine the future of the company (Wheelen, 2006, p. 9). External Factors Analysis Summary Table Factor Weight Rating Weighted Score Comments Opportunities Bear Grams .20 5.0 1.0 Remained Profitable Distribution Methods .10 4.0 .40 Direct Market Strategy Offshore Outsourcing .15 2.8 .42 To cut costs Expansion to New Markets .05 1.5 .075 To develop over seas Technological Advances .05 2.5 .125 Use of Internet Threats Disney Pooh Grams .10 2.0 .20 Bargained to share Competitors (flowers, gifts, collectibles) .15 2.0 .30 Variety offered by competitors Products & Services .10 2.0 .20 Costly and Expensive Seasonal Market Demand of Product .10 3.0 .3 Sales high only on special occasions and holidays Total 1.0 - 3.02 While considering opportunities in external factors, on top of the list is the bear grams. Despite the huge toy market, Vermont Teddy Bear Company has remained a front runner in this field. As pointed out by the Wheelen and Hunger "Bear-Grams were personalized teddy bears that were delivered directly to recipients as gifts for holidays and special occasions. Bear-Grams were gift-boxed in unique containers complete with air holes for the bear"(2006, Case 22-9). This reflects the exclusivity and distinctiveness of the product. The second factor considered is the distribution method. After having experimented various methods, the company concluded that the direct marketing strategy of Bear-Grams was the most profitable. Methods of distribution used were the company owned retail stores, direct mail catalogs, and licensing and wholesale agreements. In order to expand its product line and cut costs, the company went into offshore sourcing. It provided the flexibility to meet a broader range of customers by finding new markets thereby increasing its production and profitability. While responding to new challenges, the company also went into adapting the new technology by marketing its product line through new channels like internet. At the same time, the company found various external threats in the shape of Disney, competitors, products & services, and the seasonal market demand of the product. The launching of Disney Pooh-Grams forced the Vermont Teddy Bear Company in suing the Disney and later reaching on an agreement of sharing the profits. The vast variety offered to the customers by the competitors is a great threat to the company as well. More so, especially when the product line of the company is based on seasonal market. Internal Factors Analysis Summary Table Factor Weight Rating Weighted Score Comments Strengths Quality Product .10 4.2 .42 Catalog increases Sales Close Retail Stores .10 3.0 .30 To cut losses Effective Packing/Shipping System Change .05 5.0 .25 Decrease damage to Product, Air-filled Bags Quality of Employees .10 4.0 .40 Dedicated and motivated workers Shelbourne Factory Store .10 3.7 .37 Products for purchase and factory tours Weaknesses Insufficient Management Cover .20 1.5 .30 Numerous CEO changes Financial Position .15 1.5 .225 High Debt Customer Service .05 2.0 .10 Guarantee for Life-Costly Decreasing Market share Prices .05 2.0 .10 Five Years of Falling Stock Prices Working Capital/ Loans on Shares .10 4.0 .40 To establish a working line of credit and working capital Total 1.00 - 2.865 While scanning for internal factors which offered strength to the Vermont include the product quality, closing of retail stores, effective packaging, quality of employees, and the Shelbourne factory retail store. Since 1992, the company experienced huge increase in its growth primarily due to its unique and top quality products having effective packaging system. The company has dedicated and highly motivated employees which give a boost to its integrity. The opening of company's factory/retail store in Shelbourne, Vermont had averaged 130,000 visitors per year since 1995. This prompted the company to open more retail stores. By the end of 1997, the new stores were operational at New Hampshire, New York City, and Maine. The end result of fiscal year 1997 was a loss of $1,901,795, which ultimately forced the company in closing these retail stores except the one at Shelbourne. The weaknesses offered by internal environment of the company include management tribulations, financial position, customer service, decreasing market share prices, and no working capital. After the stepping down of John Sortino as CEO and President, the company went into management crisis. In 1995, Patrick Burns took over as CEO but had to leave after the mess created by the retail stores. He was replaced by Elisabeth Roberts. This puts a big question mark on the company's strategic planning , ultimately preventing the CEO from taking any strategic decisions. In 1993, the company's share value in stock market had gone up to $ 17.19. By the end of 1998, it stood at $ 1.06 (Wheelen & Hunger, 2006, Case 22-6). This is a clear indicative of the investors shattered confidence in the company. The company had to spend heavily in maintaining the good quality of customer service. However, the weak financial position of the company forced her in taking out a loan for $200,000. The company also went into selling 495,868 shares to Shepard Group for an equity investment of $600,000. Justifying the loans and share transactions, Elisabeth Roberts stated "the additional funds will provide working capital for the company to pursue growth in the Bear-Gram channel and to maximize the benefits of importing raw materials"(Wheelen & Hunger, 2006, Case 22-21). It is quite clear that the Vermont Teddy Bear is having a good business. It had few hiccups in the past but managed a timely rectification. There are however some concerns about the company's future. The company seems to lack strategic planning to expand its operations into the international market. Perhaps, the Vermont Teddy Bear Company needs to have an effective management to keep it on the right track. References: Chapman, Alan. (2005) SWOT analysis template. Retrieved June 16, 2006, from http://www.businessballs.com/freematerialsinword/free_SWOT_analysis_template.doc The Vermont Teddy Bear Company (2006). www.vtbear.com and http://www.vermonteddybear.com/ Wheelen, T. L., & Hunger, J.D. (2006). Strategic Management and Business Policy. (10th ed.) Upper Saddle River, NJ: Prentice Hall. Read More