Strategic Management

Challenges Facing a New CEO

Joyce P. Vincelette, Ellie A. Fogarty, Thomas M. Patrick, and Thomas L. Wheelen

"A teddy bear is almost a 100-year-old product that has been made in every conceivable size, style, fabric, and price combined with a saturated market. Yet the teddy bear industry stands as a model of strength and durability. Every year, bear makers create and market hundreds of original models."1

Vermont Teddy Bear Company was founded in 1981 by John Sortino selling hand-sewn teddy bears out of a push-cart in the streets of Burlington, Vermont. Since this time, the company's focus has been to design, manufacture, and direct market the best teddy bears made in America using quality American materials and labor.

Until 1994, Vermont Teddy Bear experienced a great deal of success and profitability. Problems arose in 1995. Since 1995, the company has 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 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.

Elisabeth Robert assumed the titles of President and Chief Executive Officer in October 1997 and began to cut costs and position the company for future growth. According to Robert, there were many reasons to invest in The Vermont Teddy Bear Company. "I believe that there is growth potential in this company. We are going to regain our balance this year. This is a rebuilding year. 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 fiexibility 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. We have