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International Marketing (MKT630)
Assignment No. 01 “Case Study” Marks: 15
Vermont Teddy Bear Should Vermont Teddy Bear go abroad?
As Elisabeth B. Robert, CEO of The Vermont Teddy Bear Company wakes up on 30 June 2006. She can look back on one of the most eventful years in the history of the company: On l6 May 2005 Vermont Teddy Bear announced the signing of a definitive agreement that enabled the company to be taken private by an investment group led by The Mustang Group, a Bostonbased private equity firm. The main motive for taking this step has been stated by Elisabeth B. Robert: 'As a private company, Vermont Teddy Bear will no longer face the challenges of a small company trying to comply with increasingly complex and costly public company requirements. We will have more time and resources to devote to growing our business'. The key financial figures for 2005 were: 2005 Net revenue: Net profit:
$ 39.0 Million $ 2.5 Million
The number of employees at the end of 2005 was 352. But Elisabeth has further ambitions for the company:
My longer-term vision for the company is to leverage our marketing and operational strengths with a sound brand strategy to grow our company with teddy bears and other products in the gift delivery service industry. Unlike other Internet companies, we have proven our ability to profitably market a gift delivery service using radio and the Internet. Unlike other Internet companies, we have an established, state-of-the-art, cost-effective fulfillment operation with integrated systems to customize, personalize, pick, pack, and ship, and provide superior customer service. And, the people of The Vermont Teddy Bear Company are not only persistent and smart, they have become over the past several years extremely good at what they do. Why shouldn't we aspire to be one of the premier gift delivery services in the world?'
Source: Vermont Teddy Bear Annual Report
The company Vermont Teddy Bear's principal activity is direct marketing in the gift delivery industry Founded in 1981 in Vermont. Vermont Teddy Bear expanded very quickly. In 1992 Inc. Magazine recognized The Vermont Teddy Bear Company as the 80th fastest growing private company in the United States. The same year, Vermont Teddy Bear went on the stock
Vermont Teddy Bear (VTB) has six operating segments: The bear-Gram service segment involves sending personalized teddy bears directly to recipients for special occasions. Building on its success with its bear delivery services. Vermont Teddy Bear launched PajamaGram in April 2002. with year on year growth of more than 100%. retail operations. Vermont Teddy Bear began a new business segment in fiscal 2001. 8%. The wholesale/corporate segment proactively develops opportunities in the corporate affinity market and certain wholesale markets. 2%’ sendAMERICA. with Valentine’s Day and Mother’s Day its largest sales seasons. The sendAMERICA segment extends the group’s product offerings in the gift delivery service industry to include other US-made gift products in addition to teddy bears. corporate/wholesale (including licensing). Its corporate sales program offers promotional products and corporate gifts for mainly large companies. The company’s bear-gram segment sales are heavily seasonal. with its Send AMERICA subsidiary selling handicrafts and foodstuffs made by US artisans and growers. The retail operation segment involves two retail locations and family tours of the teddy bear factory and store. 1 % and the pajamagram service. The B-t-B – ‘Bear-to-Business’ The B-t-B or ‘Bear-to-Business’ program is Vermont Teddy Bear’s fastest growing segment. The Pajama service segment involves sending pyjamas and related loungewear and spa products to recipients for special occasions and holidays. In 2002 the bear-gram service accounted for 88% of revenue. 2002 Sales Valentine’s Day Mother’s Day Birthdays Get well New births Christmas Others Total % 30 13 11 9 9 7 21 100 The company primarily uses the internet to market its bear-gram gift delivery service.exchange in New York to finance further expansion. . 1%.
In 2005 nearly 60% of the orders were received via the Internet. which can be ordered by telephone and over the internet for special occasions and are delivered by express service in a manner similar to bear-gram gifts. Among Vermont Teddy Bear's corporate customers are Johnson & Johnson. Marriott International and Pepsi Cola. the management is exploring some opportunities in other parts of the world. The company also competes to a lesser degree with a number of companies that sell teddy bears in the United States. and accordingly there can be no assurance that additional companies will not seek to compete directly with Vermont Teddy Bear. recognizing that the website provided visual support of the company's radio advertising campaign across the country and was a convenient way for customers to place orders. Across the country. Competition The company competes with a number of sellers of flowers. Online ordering The company began taking orders on its website in March 1997. confectionery. which regularly uses the Bear-Gram gift delivery service to congratulate and thank both employees and clients for their dedication and service. Many of these competitors have greater financial. including those with greater resources. Another example of a corporate customer is BMW of North America. Dakin. In December 1997 online orders represented 7% of total Bear-Gram orders. However. Kraft Foods. More than 50% of this production is outsourced to overseas manufacturers. Steiff of Germany. but not limited to. North American bears and Gund. often at the last minute. As Elisabeth Robert says: . There are no material barriers to entry into this market. 20 million liter bottles of Seagram’s Ginger Ale were labeled with a chance to win a Vermont Teddy Bear and carried a coupon for a 20% discount on any of the Vermont-made bears offered through the Bear-Gram gift delivery service. mainly in Asia. triple the level of the prior year. including. The company sees it bear-gram gift delivery service as a ‘creative alternative to flowers’ approximately 62% of bear-gram gifts are purchases by men.One example of the ‘Bear-to-Business’ program took place in late 199 when the company had a co-promotion with Seagram’s Ginger Ale. cakes and other gift items. sales and marketing resources than Vermont Teddy Bear.000 bears are assembled per year. Approximately 350. In April 2000 approximately 35% of the Bear-Gram orders were received vii the Company's website. balloons.
(2007). 1. What kind of difficulties would the Vermont Teddy Bear meet if it were to internationalize its business? 2. by internet? 2. we avoid setting up an international distribution infrastructure.Gift giving is a deeply rooted tradition in many foreign cultures. by a combination of two? 4. Boston and Philadelphia. 3rd edition. Prentice Hall. by physical stores? 3. until now the company has only been selling to US customer. Handling an order from Tokyo is now no different than handling one from St Louis. How should the company penetrate the foreign markets? Justify your selection. Source: Vermont Teddy Bear Annual Report. London. Hollensen. Questions: (your answer should not exceed one page for each question) 1. Using common carriers such as FedEx and taking orders on the internet. However. by other means? Source: 1. S. primarily in the big cities on the east coast: New York. . Global Marketing: A decision-oriented approach.
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