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Fluff-IT-Up

Fluff-IT-Up. Strategic Management Amazing Robert Julian Robert Grove Mike Reid Kate Willett. Our Viewpoint. Looking to p urchase Build-A-Bear Profitability of new a cquisition Potential for growth Return on investment. Amazing Investors, Inc. Mission & Objectives. Mission

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Fluff-IT-Up

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  1. Fluff-IT-Up Strategic Management Amazing Robert Julian Robert Grove Mike Reid Kate Willett Strategic Management Class Project

  2. Our Viewpoint • Looking to purchase Build-A-Bear • Profitability of new acquisition • Potential for growth • Return on investment Amazing Investors, Inc.

  3. Mission & Objectives • Mission • At Build-A-Bear Workshop®, our mission is to bring the Teddy Bear to life. An American icon, the Teddy Bear brings to mind warm thoughts about our childhood, about friendship, about trust and comfort, and also about love. Build-A-Bear Workshop embodies those thoughts in how we run our business everyday. • 2010 Objectives • Increase Store & Online Traffic • Improve Product Offerings Across the Board • Add Revenue From Experiential Product Ranges • Zhu Zhu Pets to All Company Owned Stores • Increase Membership in BuildaBearville.com • Help to Engage Guests w/ Brand • Influence Additional Purchases • Focus On Strategic Cost Reductions • Open 1 New-Format Store • Relocate 1 Store in North America & Open 2 New Locations in Europe

  4. Connecting In Our Community • Since 1997 • Over 30 Million Donated • Huggable Heroes • World Wildlife Fund • A Champion Fur Kids

  5. History • Founded – 1997 – Maxine Clark • 1st Location – St. Louis - 1997 • $400,000 in Sales in 4 Months • 1999 Retail Success Attracts Venture Capitalists • 10 New Stores Open • 2001 - “Retail Innovator of the Year” • 2003 – International Expansion • 2006 – Acquire “The Bear Factory” • Began Operating its Flagship Store in London • 2007 • 50 Million Bears Sold • 400 Stores • Mainly in Malls • 5 in MLB Stadiums • Entered Video Game Market – Nintendo DS • Tie-In Stuffed Animals • Shrek, The Cat in the Hat, Happy Feet, ect. • Happy Meals at McDonald’s • 2010 • Zhu Zhu Pets • Electronic Hamsters • Similar to Webkinz • Forbes 100 Best Companies To Work For

  6. Business Model • Specialty Teddy Bear Business • Observations • Highly customizableproducts • Highly interactiveexperience • High end market • Majority of stores in high end malls

  7. Current Situation • Not in great shape • Negative operating income in fiscal 2010 and 1st quarter 2011 • Price per share declined by $24/share in past 3 years • Failure to profit from Ridemakerz, LLC. Investment • “Major restructuring of operations” • Also closed Friends 2B Made line (dolls) • However, expanding vertically • Zhu Zhu pets, Bearville.com

  8. Expansion:5 Strategies for 2011 • 1: Product innovation • Larger merchandise stores and limited edition products • 2: Individual product integration and marketing • Each new product launch has unique marketing campaign and promotions/special offers • 3: Compel customers to return to store • Increase incremental purchases • 4: Grow e-commerce sales • Increase engagement in virtual world • 5: Continue to develop new opportunities and revenue streams outside current store base

  9. Sales History

  10. Key Performance Metrics • Performance Metrics • Debt to Equity Ratio = 0 • Return on Average Equity (4th qt. 2010) = 5.52% • 0.06% in fiscal 2010 • Return on Average Equity (1st qt. 2011) = 21.59% • Observations • Operates under no debt • Allows them to stay alive in poor performance • Ridemakerz, LCC. failure had huge impact

  11. Industry Description • Consumer Services Industry • Sells products directly to the consumer, as opposed to the “capital goods” industry, which manufactures goods for sale • Ex. Not un-processed wheat • Consumer Services • Retail • General Retailers • Specialty Retailers

  12. Major competitors • Applause LLC • The Boyds Collection LTD. • Enesco Group, Inc. • Maine Bear Factory • Russ Berrie & Company • Ty, Inc. • Vermont Teddy Bear Company

  13. Product/Service Description • Product • Customizable teddy bear • Customizable stuffed animals • Zhu Zhu Pets • Services • Experience based shopping • Group parties • Online interactive games/services

  14. Board of Directors • Strengths • Account of Directors • Degree of Independence • Varying Backgrounds • Weakness • Chairman is also the CEO • Age Variance

  15. EFAS

  16. IFAS

  17. SWOT Analysis S W • Strengths • "Limited Edition" animals released monthly • 238 U.S. trademark registrations • All store locations are leased • Extensive training for all associates • Weaknesses • All international locations are franchised • 80% of inventory is purchased by 3 vendors • Expensive specialty product O T • Opportunities • Children aged 8 to 11 spend 1-2 hours online daily • International customized teddy bear market • Partnerships with companies such as Disney • Threats • "Make you own" teddy bear mall kiosks • Several other online virtual worlds (i.e. Webkinz.com) • Compete with huge toy retailers (i.e. Toys R' Us)

  18. Situational Analysis

  19. Problems/Decisions • Economic recession • Product relevance • Public vs. private ownership • International presence in growing economies • Focus on core competencies • Reduced mall traffic

  20. Strategic Alternatives & Recommended Strategy • Core Competencies • Children’s Hospital • Mobile party units • Additional sales strategies • Host parties • Additional trademarked bears/animals • Expand Bearvillevirtual world

  21. Mobile Units • Mobile Units • $80,000 Initial Investment • $300 Profit Margin Per Party • 2 Parties per Week • Pay-Off Period – 2.56 Years • Annual Profitability - $31,200 per unit • 5 Year ROI – 87.5% • 10 Year ROI – 275% • Mobile Units • Add revenue • Create brand awareness • Expand party aspect of the company • Control • Average 2 parties per week • Employees are educated & interactive • Product quality is comparable to in-store product

  22. Expansion of Bearville.com • Implementation • 5,000,000 Investment • Goal of 20% Conversion rate • 2,000,000 Visitors per month • Average ticket: $40.00 • Pay-Off Period – 1 year • Annual Profitability - $2,576,000 • Evaluation and Control • Projected 50 Million hours of brand engagement • More educational games to gain Parental Approval • Introduce different levels of Membership • User information can be registered and tracked

  23. Children’s Hospital

  24. To Buy or Not To Buy? • Not to buy. • Fad company • Minimal firm assets • Nothing to liquidate • Leased locations • Already peaked • Minimal potential to grow • 1 year negative net income • 2 year negative operating income • Declining stock price – 3 years

  25. Thank You!!

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