The Vermont Teddy Bear Co

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