Efas/ifas for Vermont Teddy

"Environmental scanning is the acquisition and use of information about events, trends, and relationships in an organization's external environment, the knowledge of which would assist management in planning the organization's future course of action." (Choo, 2001) Environmental scanning can be formal or informal and ranges in practice from customer surveys to market research programs.

After strategic managers have "scanned the societal and task environments and identified a number of likely external factors for their particular corporation" they may refine their analysis of these factors by developing an External Factors Analysis Summary (EFAS) table. (Wheelen & Hunger, 2006) The EFAS table organizes the external factors into two categories - opportunities and threats - and analyzes how well the company's management (rating) is responding to these specific factors in consideration of the perceived importance (weight) of the factors to the company.

In reviewing the case study of the Vermont Teddy Bear Co., Inc., I developed the following External Factor Analysis Summary:

External Factors Wgt Rating Wtd Score Comments

1 2 3 4 5

Opportunities

Upswing in public interest in teddy bears/collectibles .10 4.0 .40 Good potential here - low cost to advertise at trade shows and in specialty magazines

Wholesale sales to unaffiliated retailers .05 4.0 .20 Continued interest from public in teddy bears

Niche market in gifts .10 4.5 .45 Well-positioned

Interest in France & UK .05 3.0 .15 Questionable - need capital to cover high start up costs. Already secured copyrights. Will take time.

Sales through

corporate division .10 4.0 .40 Well-positioned

Retail sales through

factory tours & visits .10 4.0 .40 Well-positioned

Threats

Strong rivalry among toy makers .05 4.0 .20 Unique product with good reputation

Saturation of market .05 3.5 .175 Well-positioned - unique product

Competition in two areas - gifts & plush toys .05 3.5 .175 Well-positioned

Financial overextension and debt .20 1.0 .20 A problem - sales plans must be successful to get Vermont Teddy back on target

Increased cost of producing components stateside .15 1.5 .225 A problem to consider - outsourcing inevitable to lower retail price. Affects product image.

Total Scores 1.00 2.975

EFAS - Vermont Teddy Bear, Co., Inc.

Of course, "monitoring the external environment is only one part of environmental scanning." (Wheelen & Hunger, 2006) The corporation's internal environment - its resources, competencies and capabilities - are also important to strategists. Knowing an organization's internal strengths and weaknesses gives strategists insight into the company's ability to meet the challenges and demands identified in the external market - to sustain a competitive advantage.

The internal analysis involves looking at all resources through the lens of the VRIO framework - resources and capabilities should be valuable, rare, inimitable and the organization should be able to effectively exploit those resources and capabilities effectively. (Jaquier, 2003)

For example, the Vermont Teddy Bear Co., Inc., has employee relations (no unions, diversified and flexible workforce) that would be difficult to imitate. The "Bear People" factor, therefore, is not totally inimitable, but it is difficult to duplicate. This is, then, a strength to the Vermont Teddy Bear, Co., Inc.

Once strategic management has scanned the internal organizational environment and identified factors for their corporation, the information can be displayed using the Internal Factor Analysis Summary (IFAS) table. (Wheelen & Hunger, 2006)

Like the EFAS, the IFAS table offers strategists two categories - strengths and weaknesses - in which to classify the identified factors and then analyses how well that company's management is responding to the specific factors based on the perceived importance of these factors to the company.

In reviewing the case study of the Vermont Teddy Bear Co., Inc., I developed the following Internal Factor Analysis Summary:

Internal Factors Wgt Rating Wtd Score Comments

1 2 3 4 5

Strengths

Strong work culture/HR .20 4.0 .80 "Bear People" loyal employees, no unions, flexible work force

Experienced management .15 3.0 .45 New CEO identified gift market as strongest competition. Good potential.

Good public reputation .10 3 .30 High quality product, good customer service

Weaknesses

Financial problems .20 2.0 .40 High debt load/overextension

Expansion to foreign markets .10 2 .20 No capital to expand overseas, despite apparent demand in UK and Japan

Upgrade of existing computer system .10 2 .20 Discussion over necessity to upgrade computer system

Decreasing sales .15 3 .45 Aggressive plans for more corporate and retail sales, as well as focusing on gift market niche

Total Scores 1.00 2.80

IFAS - Vermont Teddy Bear Co., Inc.

Internal Factors Wgt Rating Wtd Score Comments

1 2 3 4 5

Strengths

Strong work culture/HR .20 4.0 .80 "Bear People" loyal