The Vermont Teddy Bear Co. Inc.: Challenges Facing A New Ceo
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Case 27
The Vermont Teddy Bear Co., Inc.: Challenges Facing a New CEO
CASE ABSTRACT
John Sortino founded the Vermont Teddy Bear Company (VTBC) in 1981 by selling handsewn teddy bears out of a pushcart in the streets of Burlington, Vermont (Wheelen & Hunger, 2004). Mr. Sortinos motivation for making the teddy bears in the United States cultivated while playing with his son, Graham, and after noticing his son had many stuffed animals that were made in other countries (Wheelen & Hunger, 2004). Since its inception, the companys focus has been to design, manufacture, and direct market the best teddy bears made in America; using quality American materials and labor (Wheelen & Hunger, 2004).
Throughout the late 1980s and into 1994, VTBC experienced a great deal of success and profitability due to the initiation of the Bear Gram marketing strategy; so much so that it became overwhelming for the entrepreneur, John Sortino, to oversee. By 1995, Mr. Sortino stepped down and supported the hiring of a new CEO that would lead the company from an entrepreneurial company into its future success as being a professionally managed organization (Wheelen & Hunger, 2004).
CASE ISSUES AND SUBJECTS
Manufacturing Industry
Bear Market
Executive Leadership Patents, Trademarks, and Licenses
Ownership Finance
Company Philosophy
Products and Services
Marketing Strategies
Distribution Methods
Facilities and Operations
Human Resource Management
STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS
Strategy Formulation
Strategy Implementation
Evaluation & Control
1A 1B 2 3 4 5A 5B 6
Ш X Ш X X X Ш X
Ш = Emphasized in Case X = Covered in Case
CASE OBJECTIVES
To discuss Company Philosophy
To discuss Products and Services
To discuss Marketing Strategies and Distribution Methods
To discuss Facilities and Operations
To discuss the companys competitors
To discuss the companys market segments
To discuss Patents, Trademarks, and Licenses
To discuss the Finance issues
DISCUSSION QUESTIONS
What are the strengths and weaknesses of the Vermont Teddy Bear Co., Inc?
What are the opportunities and threats facing VTBC?
What are the strategic factors in VTBCs situation?
What are VTBCs core competencies?
Does VTBC have distinctive competency?
What has been the secret of the success of VTBC?
What competitive strategy has VTBC developed for its products?
What industry is VTBC a part of?
What are the other current industry forces, such as power of suppliers, distributors, etc.?
How is VTBCs industry changing?
What is the impact of the Internet on the companys future financial success?
What types of strategies must the company develop and implement?
CURRENT SITUATION
Vermont Teddy Bear Company experienced a great deal of success and profitability until 1994. Since 1995, the company had two CEOs. It changed its name to The Great American Teddy Bear Company and then changed it back to The Vermont Teddy Bear Company when customers got confused. From its inception, Vermont Teddy Bear Company had been known for its Bear-Gram delivery service. In 1996, the company decided to shift emphasis away from Bear-Grams to other distribution channels. By 1998, the company decided to renew its emphasis on Bear-Grams. Vermont Teddy has always been proud of the fact that its teddy bears were made in America with American materials and craftsmanship. In 1998, the company changed this philosophy by exploring the offshore sourcing of materials, outfits, and manufacturing in an effort to lower costs.
Elizabeth Robert assumed the titles of President and CEO in 1997 and began to cut costs and position the company for future growth (Wheelen & Hunger, 2004).
” We are taking key steps to reposition the company. The move offshore is going to provide this company an opportunity to become more profitable. We will gain additional flexibility with price points. There is opportunity for us to expand from a regional brand to a national brand. While we continue to emphasize the premium teddy bear gift business, we intend to expand into larger markets. There is now a whole new opportunity for us in the corporate incentives and promotions market as well as the wholesale market…Our growth will come not only from expansion of our radio markets but in the corporate and wholesale markets as we use offshore manufacturing alternatives to move to broader price points,” (Wheelen & Hunger, 2004).
Robert states, “Our competitors are the people who sell chocolates, flowers, and greeting cards. We target the last minute shopper who wants almost instant delivery,” (Wheelen & Hunger, 2004). She also made the comment, “…we are in the gift and personal communications business. Our competition isnt the German toy manufacturer Steiff, it is 1-800 Flowers,” (Wheelen & Hunger, 2004).
Past Performance
Total sales in 1989 rose to $1.7