The Vermont Teddy Bear Co. Inc.: Challenges Facing A New Ceo

Case 27

The Vermont Teddy Bear Co., Inc.: Challenges Facing a New CEO

I. 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. Sortino's 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 company's 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 1980's 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

II. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS

Strategy Formulation Strategy Implementation Evaluation & Control

1A 1B 2 3 4 5A 5B 6 7 8

Ш X Ш X X X Ш X Ш Ш

Ш = Emphasized in Case X = Covered in Case

III. CASE OBJECTIVES

1. To discuss Company Philosophy

2. To discuss Products and Services

3. To discuss Marketing Strategies and Distribution Methods

4. To discuss Facilities and Operations

5. To discuss the company's competitors

6. To discuss the company's market segments

7. To discuss Patents, Trademarks, and Licenses

8. To discuss the Finance issues

VI. DISCUSSION QUESTIONS

1. What are the strengths and weaknesses of the Vermont Teddy Bear Co., Inc?

2. What are the opportunities and threats facing VTBC?

3. What are the strategic factors in VTBC's situation?

4. What are VTBC's core competencies?

5. Does VTBC have distinctive competency?

6. What has been the secret of the success of VTBC?

7. What competitive strategy has VTBC developed for its products?

8. What industry is VTBC a part of?

9. What are the other current industry forces, such as power of suppliers, distributors, etc.?

10. How is VTBC's industry changing?

11. What is the impact of the Internet on the company's future financial success?

12. What types of strategies must the company develop and implement?

I. 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 isn't the German toy manufacturer Steiff, it is 1-800 Flowers," (Wheelen & Hunger, 2004).

A. Past Performance

* Total sales in 1989 rose to $1.7