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Chaos Bear Business plan

Innokentii Kamyshnikov

Master of Science in International Business, Swiss Business School

MET 590 AY 2023-2024: Entrepreneurship and Innovation

Dr. Bert Wolfs

18.03.2024
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Executive Summary:

The business plan for Chaos Bear emerges from a recognition of the declining

happiness levels across the United States, marking a historic low over the past 50 years. In

response to this societal challenge, Chaos Bear is envisioned to revive joy and connections

through its unique offering: plush toys with a twist. These are not ordinary toys; each Chaos

Bear has a rich backstory, designed to resonate with adults seeking meaningful, humorous,

and unexpected gifts.

Chaos Bear's mission is to provide a perfect gift option that adds a spark of happiness,

leveraging the significant potential of social media for viral marketing. The business model

capitalizes on current social trends, aiming to fill a gap in the adult gift market by offering

plush toys that combine humor, nostalgia, and a touch of the unexpected. Our products stand

out for their hard-hitting humor and capacity to surprise, making them not just gifts but a

source of shared laughter and joy.

The goals of Chaos Bear include diversifying product design to cater to various

customer preferences, maximizing sales through effective marketing strategies, achieving an

industry-standard cost structure, and eventually establishing a dedicated production plant.

The initial focus will be on leveraging third-party production facilities to maintain flexibility

and minimize upfront costs, with a long-term vision of in-house production for greater

control and cost efficiency.

The toy industry, valued at approximately $28 billion in the U.S., presents a mature

yet dynamic market. Chaos Bear aims to carve out a niche within this space by targeting an

adult demographic, a segment often overlooked by traditional toy companies. Our approach is
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informed by a comprehensive analysis of industry trends, including sustainability,

technological integration, and personalization. The strategic use of crowdfunding will serve

as the cornerstone for our initial financing, supporting the development, marketing, and

launch of our flagship product.

Chaos Bear's management team brings together expertise in business administration,

operations, finance, marketing, and legal matters, ensuring a robust foundation for the

company's growth and success. The marketing strategy focuses on creating emotional

connections with the audience through storytelling and social media engagement,

encouraging the sharing of Chaos Bear as a unique gift.

In summary, Chaos Bear is poised to introduce a refreshing and innovative product to

the toy market, targeting adults seeking novel and meaningful gifting options. With a strong

strategic foundation, a clear understanding of market dynamics, and a commitment to

delivering joy and laughter, Chaos Bear is set to make a significant impact on the industry

and bring happiness back into the lives of many.

Business Description:

Vision and mission

By the survey done by Chicago university, it is stated that the happiness level has

reached lowest levels in 50 years recently. (Davern, Michael et al., 2022).

Figure 1

Chart of US citizens responding to the question, whether they are Verry Happy, Pretty Happy

or Not too happy.

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Happiness Levels
70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00

2002

2010

2018
1972
1973
1974
1975
1976
1977
1978
1980
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1993
1994
1996
1998
2000

2004
2006
2008

2012
2014
2016

2021
2022
Very Happy Pretty Happy Not too happy

The increase of “Not too happy” and decline of “Very Happy” were extreme in 2021

and it is proven not to return to the previous level that fast.

The author considers this problem seriously, since happiness is a sense of life for a vast level

of population.

The vision of Chaos bear is to make it easier for people to help each other to get

happy again.

The mission of Chaos bear is to make plush toys that are going to be a perfect present

for the people who don’t know what present to give to a person.
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Goals

Table 1

The goals and objectives of Chaos Bear

Goal Description KPI

Different designs of In order to make sure that the Number of products
the product product is suiting
Sales Number of sales is an important Revenue
goal for the business, it is
specifically important for this type
of business, since the economy of
scale can be used to minimize
costs
Reaching an industry In order to operate sustainably, the The % of each cost to come
cost of structure company needs to make sure that to the industry average
it reaches industry’s benchmark in
costs structure
Creating a plant for After reaching the certain level of Number of employers
production of plush sales, it makes sense to refuse the working at the plant
toys outsourcing of the production and
make production on the plant that
belongs to the Chaos Bear
Strong marketing Strong marketing presence, Social media followers,
development of viral marketing level of brand recognition
materials
Go-To Market Giving out the bears as the present Number of presents given
strategy fulfilment to close people that would then from the owner of the
consider it as a present idea to give company
it to others.

Reasons for starting the business

The main reason for starting the business is the potential that social media brings to

development and creation of viral marketing adds and the level of unhappiness of people.

The products of Chaos Bear are going to shock the industry. It is completely different

from the idea of plush toys and the hard-hitting humour that will be full of bear phrases that

no one would expect from a teddy bear, the potential for social media is incredible.

Unhapiness plays just as big a role. People just need something to put a smile on their

face. Receiving such a gift will be fun, interesting and unexpected. Just what you need from a

gift.
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Description of product offered

The product that Chaos Bear is offering is a teddy bear that looks tired. His

background is that he was a teddy bear gifted to a loving girl, who then threw it away because

she was too old. Teddy lost his home, so he had to work to rent a house. He met another

teddy bear woman at work whom he married, however as it happens in life, all good things

come to an end and they divorced. His wife took his children. He started drinking, lost his

job, and that's the state we see him in. There is little left in the bear's life but to remember the

past, to joke about life and have fun with his new owner.

The product has the potential to explode, as it will be possible to create a whole

universe of toys with different stories, at different stages of life and thus close more social

dem segments.

It will also be possible to make products that reference popular personalities.

Businessmen, politicians, artists. You can release them for important events. Be it tours,

elections, new movie releases, personal life events to promote a personal brand. Such releases

should be coordinated with the personalities and a percentage of the proceeds should go to

them.

However, a big aspect that arises in this case is to make sure that the business has the

rights to such activity and that there will be no unpleasant cases with the law, which is why a

separate activity within the organization will be work with the law.

It may also be possible to customize the product for yourself and make your own

small version, but the question is how expensive it would be to produce with design in mind.
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Business model

Figure 2

Osterwalder Business model of Chaos Bears

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It is very important to realize that business is a journey, and this also applies to the

company's product.

Initially, the production will be on a third party. The strength of the manufacturers is

relatively small, there are a lot of them, so using them in the initial stages does not seem like

a bad idea. Once it becomes clear that the product will be realized on a larger scale, it will be

necessary to create production on the company's side. Where exactly the production will take

place is a question that requires further research. It will be possible to produce on a third

party for quite some time. Switching to in-house production is a long-term initiative aimed at

reducing costs, taking into account economies of scale.

Until then, the company's main activities will be marketing and branding, toy design,

rights registration and legal work.

The big disadvantage of this business model is that the life time value of the customer

is unbelievably small and can only increase through the release of new products, the

emotional connection with which will be greater. Office teddy bear, teenage teddy bear, teddy

bears under the copy of popular personalities.

Company’s value proposition

The main value for our customers is a warm gift for an adult that will not be perceived

as awkward, strange, but will be perceived as an adult gift despite the fact that it is a teddy

bear. The kind of gift that will not imply inter-role relationships, but will simply be a nice gift

from person to person.

Industry Analysis:

Industry’s size, segments, maturity

For 2023, retail toy sales in the U.S. fall slightly after 2022 to $28 billion (D. Tighe

2024)
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The market is quite large, with a small year-to-year variation that holds around $30

billion, but plush toys are one of the smaller segments of the market. Plush toy market can be

segmented by product type (e.g., cartoon characters, animals, fantasy), age group (infants,

toddlers, older children), and sales channel (online retail, specialty stores, mass market

retailers).

Top Leading Companies in the Toys Market: Mattel, Inc., Bandai, Namco Group,

LEGO A/S, Hasbro, Inc., Simba Dickie Group, Spin Master Ltd., Busies LLC, Giant

microbes, Inc.

When it comes to the maturity of the Market, the first teddy bear was made in 1902,

Mattel is 79 years old, Bandai is 74 years old, Hasbro is 101 years old. So the industry can be

considered as mature.

Opportunities and Threats in the industry, including barriers to entry

One of the biggest opportunities that we are going to try to facilitate is no presence in

the adult market. There are almost no players that are targeting adult audience (except for the

18-25 years old females). Which creates a free space for the Chaos Bear to conquest the

market.

The main challenges, however, are the size and the maturity of the existing players.

The only advantage we will use to get around this problem is that the product is too risky and

could severely damage the brand reputations of large companies should they try something

like this.

However, we should also consider that the barriers are generally not very high and we

may see a large number of copies of our product if it is successful. That is why it is necessary

to patent our products, thus creating a barrier for new players.

The buyer's power in the market is not large, the suppliers' power is not large, the

competition in the market is very high, and there are a lot of substitutes.
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Overall trends and outlook for the industry

The trends of the industry are considered to be:

Sustainability and eco-consciousness. Products made from easily recyclable materials,

eco-friendly product design, reselling toys that have already been used by someone else.

Technology Integration. There are toys, when you buy which part of the money is

transferred to the protection of animals, these toys are embedded with NFC chip, which

shows information about the animal that was rescued. There are also trends. On integration of

AR technologies, when toys come to life.

Personalization and customization. Now many toys can be customised for you. Build

a bear, for example, where you create your own bear.

As for the future of the industry, we're more likely to see more technology used in

plush toys.

PESTEL Analysis (macro-economic perspective)

Political:

Stability: The United States is politically stable, which is conducive for business

operations and consumer spending.

Corporate Tax Rates: Varies by state, with federal corporate income tax rates at 21%.

This affects profit margins and investment capacity.

Trade Policies: As a global trade participant, the U.S. has various trade agreements

that could impact import costs for materials or the export potential of the product.

Economic:

GDP per Capita: As of my last update, the GDP per capita in the U.S. was

significantly high, indicating a potentially strong consumer spending capability.

Interest Rates: Interest rates set by the Federal Reserve can influence borrowing costs

for businesses and consumers, potentially affecting sales and expansion.

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Employment Rates: Employment rates can affect consumer spending power. High

employment usually translates to higher disposable income for luxury items like novelty toys.

Consumer Spending Trends: Spending on toys and novelty items can be influenced by

overall economic health and consumer confidence.

Social:

Cultural Trends: There's a growing trend towards unique, personalized gifts, and

products with a story or character, like Chaos Bear, could tap into this.

Demographics: Target demographics for Chaos Bear could include not just children

but also adults with a sense of humor or nostalgia for unique plush toys.

Social Movements: Trends towards mental health awareness could see Chaos Bear as

a humorous, comforting presence, appealing to those who value mental wellness.

Technological:

Advancements in Sound Technology: The ability to include high-quality prerecorded

jokes and sound effects in plush toys can enhance product appeal.

E-Commerce and Online Marketing: The growth of online shopping and digital

marketing tools offers avenues to reach a broad audience directly and cost-effectively.

Manufacturing Technology: Innovations in manufacturing can help produce the toy

more efficiently and with higher quality, affecting scalability and margins.

Environmental:

Sustainability Concerns: Consumers are increasingly environmentally conscious,

preferring products that are sustainably made and packaged.

Regulations on Materials: The use of non-toxic, environmentally friendly materials in

toy manufacturing is not only a regulatory compliance issue but also a marketing point.

Legal:
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Product Safety Regulations: Strict regulations govern toy safety in the U.S., including

materials used, age-appropriateness, and choking hazards.

Intellectual Property: Protecting the unique design and concept of Chaos Bear is

crucial against copycats.

Labor Laws: Compliance with labor laws in manufacturing and operations, ensuring

ethical practices in all aspects of production and distribution.

Ethical:

Social Responsibility

Consumer Trust: Transparency about the product’s manufacturing process, materials,

and the ethical stance of the company can build consumer trust.

Product Impact: Given Chaos Bear's backstory, ensuring that the humour is

appropriate and does not inadvertently promote negative messages about sensitive issues like

unemployment or substance use is vital.

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The Company’s Competitive Advantages and their Likely Impacts on its Success

SWOT analysis.

Figure 3

SWOT analysis for Chaos Bears

The company has multiple competitive advantages, that turn into the opportunities in

the market. With the unique Client Value Proposition and strong design of the product we can

create Viral adds and use the Word of Mouth. However, the huge weakness is that Chaos

Bear is diving into the market with a huge competitive pressure and the company might

struggle to get the market share and become profitable.

Management Plan:
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Form of ownership

The form that the author is proposing to Chaos Bears is LLC, due to: Limited

Liability protection, tax benefits, management flexibility, fewer formalities and requirements.

Organizational chart

Figure 4

Organisational chart for Chaos Bears

The chart reflects the structure of the LLC and represents core management by major

function. Marketing, operations, legal, and financial functions of the business.

Qualifications, Experience, Expertise, and Roles of Members of the Management Team

1. Chief Executive Officer (CEO)

Qualifications: Degree in Business Administration or related field; MBA preferred.

Experience: Extensive experience in the toy or related consumer goods industry, with

a proven track record of successful leadership and business growth.

Expertise: Strategic planning, leadership, industry knowledge, crisis management.

Role: Sets the overall strategic direction of the company, leads the management team,

and represents the company to stakeholders, investors, and the public.

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2. Chief Operations Officer (COO and logistics)

Qualifications: Degree in Business Management, Operations Management, or related

field.

Experience: Significant experience in manufacturing, supply chain management, and

operations in the toy or consumer goods sector.

Expertise: Operations efficiency, supply chain management, product development,

quality control.

Role: Oversees day-to-day operations, ensures operational efficiency, manages

manufacturing and supply chain processes, and ensures product quality and safety standards

are met.

3. Chief Financial Officer (CFO)

Qualifications: Degree in Finance, Accounting, or related field; CPA or similar

certification.

Experience: Extensive experience in financial management within the toy or

consumer goods industry.

Expertise: Financial planning and analysis, risk management, compliance, accounting.

Role: Manages the company’s financial actions, oversees budgeting and financial

planning, risk management, and ensures compliance with financial regulations. Prepares

financial reports and guides investment decisions.

4. Chief Marketing Officer (CMO)

Qualifications: Degree in Marketing, Business, or related field; MBA preferred.

Experience: Proven experience in marketing roles within the consumer goods sector,

preferably with experience in toys or children’s products.

Expertise: Brand management, digital marketing, consumer behavior analysis,

strategic partnerships.
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Role: Develops and executes marketing and branding strategies, oversees advertising

and promotion, analyzes market trends and consumer behavior, and manages marketing

communications and public relations.

5. Head of Law

Qualifications: Juris Doctor (JD) degree and admission to the state bar.

Experience: Experience in corporate law, preferably with specific experience in

consumer goods, intellectual property, and liability issues.

Expertise: Corporate law, intellectual property, product liability, regulatory

compliance, litigation management.

Role: Advises on legal matters, manages company compliance with laws and

regulations, oversees intellectual property matters, handles contract negotiations, and

manages litigation risks and strategies.

However, since the budget is really limited, it is To Be of the organizational chart.

Until the size of the business allows us to hire all the management, the function specialist

would be presented in the board of directors of the company and will advise the CEO.

Marketing Plan:

Marketing strategy

The strategy is to try to leverage users to share and give people bears, to create viral

content on social media.

To make the emotional connection stronger with the bears, the company can make a

small cartoon about the bear, its life and what it is living now. Advertisements like the one

that Lazy Square's YouTube channel does.

The main disadvantage of the strategy is that the main bet is on the users and the fact that

they will like the product a lot. In the event that this turns out not to be true, you will have to

close the business, or change your CVP and marketing strategy.

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Marketing mix

Product: A toy bear that has prerecorded funny voicelines, based on his lore.

Pricing: 50 USD per bear. Different sizes with the price difference of 15%

Place: An e-commerce website. This way the company is making sure that the

children are not ordering our products, the company is limiting them from using the website

via requiring birthday information in the beginning. There is also an option to sell the product

during the temporary exhibitions and festivals that allow businesses to sell their products.

Bringing the bears to the physical stores is hard, due to the hard process of negotiating

and unwillingness of big companies to put our product. But we can still try to negotiate with

the small chains of present and souvenirs shops.

Promotion: Viral social media content, series of animations about the bear. Discounts

for the holidays, discounts if a person is buying in a vast amount.

Media usage: The company is going to create account in major social medias to make

sure that the community is active, updating the users with the information about new

products, creating short videos displaying the products, running contest for the jokes and

voting for new characters.

Public relations: The company will try to do all the public relations from the point of

the bear. Using the same language and communicating with the clients in a little bit rude,

funny way. This is a huge differentiator from the competitors, although it can be seen as an

offensive act.

Marketing plan budget: 10000 USD

Website development – 1000 USD. A relatively simple website, however with all the

Cartoon films budget – 8000 USD. A detailed animation requires a really big amount

of working hours of the animator. That’s why it will turn out to be expensive

Festivals rent and place – 1000 USD.

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Operational Plan:

Human Resource needs

The company can start with just one person, as the toy designs are provided as a

service by their creator. As the company grows, the need will grow to a full-field

organizational chart, and then grow after the decision to have its own production. It seems to

me that eventually the headcount will reach 25 FTE equivalent people

Physical Facilities Requirements

Regarding Physical Facilities Requirements. As the author wrote earlier, the need for

a factory will appear after some time, until then Physical Facilities will not be owned or

leased directly by the company. It will be owned by subcontractors and the company will

only use their services. The only thing the company needs is the resources needed to put up at

fairs during the holidays. Equipment, posters, special materials.

Technological Resource Needs

The CEO only needs a website and a notebook at first to start the business.

Logistics and Supply Chain Management

When it comes to logistics and supply chain management. A chain should consist of

three main components.

1. Factory

2. Warehouse

3. Buyer's house

This process has three main stakeholders: the teddy bear contractor, the logistics firm

that delivers from the manufacturer's warehouse to the warehouse in the U.S., the logistics

company that handles delivery from the U.S. warehouse to the door.

In the future, logistics can be handled by a company, but before that, it will need to

grow to the point where it makes economic sense.

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Financial Plan:

Possible sources of initial financing:

When it comes to the initial financing and the seed funding of the organization, the

usual sources used are friends, family and fools. Since the information about family and

friends is hard to gather and provide in accordance with academic standards, the author tend

to discuss Crowdfunding as a main source of initial financing.

Crowdfunding. Games and toys is a category that is usually successful on

crowdfunding platforms. And with the big market differentiation that the product has it will

be relatively easy to market the crowdfunding campaign on the platform.

The firm is planning to get 50000 USD on the crowdfunding platform, gathering the

initial financing.

Initial investment:

Product Development and Prototype: $5,000 (design, materials, prototype

manufacturing, negotiations with manufacturers, and logistical partners, business travelling)

Inventory Purchase: $15,000 (initial batch of teddy bears, including manufacturing

and shipping)

Marketing and Advertising: $10,000 (website setup, social media campaigns,

promotional materials)

Legal and Administrative: $15,000 (business registration, legal advice, trademarks)

Miscellaneous and Contingency: $5,000 (unexpected expenses and additional costs)

Sales forecast:

The assumption of the author is that during the first month 100 bears would be sold

and that this number will grow 10% monthly.

Financial model:
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Table 2

Financial model of Chaos Bears

According to the financial model, during the first year of operations Chaos Bear will

sell 2121 bears, generating Revenue of 106,050 USD and making 29025 USD, however, not

reaching the breakeven point.

The breakeven point will be reached in 14 months or approximately 2430 bears sold.

What the author wants to mention is that the initial breakeven status was measured as

Initial investment – inventory purchase, since the cost of goods sold is already considering

the inventory purchase.

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References

Davern, M; Bautista, R; Freese, J; Herd, P; Herd M, Stephen L. (1972-2022). General

Social surveys.

https://gssdataexplorer.norc.org/trends?category=Gender%20%26%20Marriage&measure=ha

ppy&Measure%20Category=Very%20happy&Breakdown%20Label=Total

HBS – Institute for Strategy and Competitiveness (2024). The Five Forces.

https://www.isc.hbs.edu/strategy/business-strategy/Pages/the-five-forces.aspx

Internal Revenue Service (IRS). (n.d.). Limited Liability Company (LLC).

https;//www.irs.gov/businesses/small businesses self employed/limited liability company llc

MindTools (2024). SWOT-Analysis. https://www.mindtools.com/amtbj63/swot-

analysis

Osterwalder, A. (2024). Business Model Canvas. https://www.alexosterwalder.com/

Tighe, D. (2024) Total retail sales of toys in the U.S. 2020-2023.

https://www.statista.com/statistics/195054/total-revenue-of-us-toys-and-games-market-since-

2005/

Washington State University (2024). Pestel Analysis.

https://libguides.libraries.wsu.edu/c.php?g=294263&p=4358409