Build-A-Bear - Mark

Report
Strategic Management
Amazing
Robert Julian
Robert Grove
Mike Reid
Kate Willett
Strategic Management Class Project
1
 Looking to purchase Build-A-Bear
 Profitability of new acquisition
 Potential for growth
 Return on investment
2

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


Add Revenue From Experiential Product
Ranges


Zhu Zhu Pets to All Company Owned
Stores
Increase Membership in
BuildaBearville.com




Improve Product Offerings Across
the Board
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
3
 Since 1997
 Over 30 Million Donated
 Huggable Heroes
 World Wildlife Fund
 A Champion Fur Kids
4


Founded – 1997 – Maxine Clark
1st Location – St. Louis - 1997


$400,000 in Sales in 4 Months
1999 Retail Success Attracts Venture Capitalists






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

Happy Meals at McDonald’s


10 New Stores Open
2001 - “Retail Innovator of the Year”
2003 – International Expansion
2006 – Acquire “The Bear Factory”
Shrek, The Cat in the Hat, Happy Feet, ect.
2010




Zhu Zhu Pets
Electronic Hamsters
Similar to Webkinz
Forbes 100 Best Companies To Work For
5
 Specialty Teddy Bear Business
 Observations
 Highly customizable
products
 Highly interactive
experience
 High end market

Majority of stores in
high end malls
6
 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
7
 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
8
9
 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
10
 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
11
 Applause LLC
 The Boyds Collection LTD.
 Enesco Group, Inc.
 Maine Bear Factory
 Russ Berrie & Company
 Ty, Inc.
 Vermont Teddy Bear Company
12
 Product
 Customizable teddy bear
 Customizable stuffed animals
 Zhu Zhu Pets
 Services
 Experience based shopping
 Group parties
 Online interactive games/services
13
Build-A-Bear Board of directors
Board of Directors: 14
Insiders
Names
Age
Since
Current Position
Maxine Clark
62
2004
Chairman of the Board, Chief Executive Bear
John Haugh
48
2010
President Bear
Tina Klocke
51
2009
Chief Operations and Financial Bear, Treasurer, Secretary
David Finnegan
48
Tereas Kroll
56
2010
Chief Entertainment and Digital Marketing Bear
Peter Coleman
62
2009
Lead Independent Director
James Gould
62
2000
Director
William Reisler
54
2000
Director
Mary Fiala
59
2005
Director
Louis Mucci
69
2004
Director
Katherine Savitt
47
2009
Director
Virginia Kent
56
2010
Director
Braden Leonard
40
2011
Director
Chief Bearrister, General Counsel and International Franchising
Outsiders
14
 Strengths
 Account of Directors
 Degree of Independence
 Varying Backgrounds
 Weakness
 Chairman is also the CEO
 Age Variance
15
External Factors
Weighted
Weight Rating Score
Comments
Opportunities
Children aged 8 to 11 spend 1-2 hours
online daily
International customized teddy bear
market
0.10
3.2
0.32
0.20
4.1
0.82
Partnerships with companies such as
Disney
0.25
4.5
1.125
More Bearville.com users
Great opportunity for
company growth
Partnerships allow for the
creation of trademarked
products
0.35
Well positioned due to
branding
Threats
"Make you own" teddy bear mall
kiosks
0.10
3.5
Several other online virtual worlds
(i.e. Webkinz.com)
0.05
2
0.1
Compete with huge toy retailers (i.e.
Toys R' Us)
0.30
3.9
1.17
Total Scores
1.00
Many other online
competitors
Customers may elect to
purchase a ready made
product
3.885
16
Internal Factors
Weighted
Weight Rating Score
Comments
Strengths
"Limited Edition" animals released
monthly
0.20
4.5
0.9
238 U.S. trademark registrations
0.15
3.2
0.48
All store locations are leased
0.10
3.5
0.35
Extensive training for all associates
0.15
4.0
0.6
Customers have a reason to keep
coming back
Creates a very unique customer
experience
Some contain minimum annual
sales termination provisions
Well-tuned bear-building process
and great guest experience
Weaknesses
All international locations are
franchised
80% of inventory is purchased by 3
vendors
0.12
2.5
0.3
0.18
2.0
0.36
Expensive specialty product
0.10
3.0
0.3
Total Scores
1
Possibility of a different customer
experience
Vendors' prices have a large
impact on annual profits
Some consumers could be unable
to purchase products
3.29
17
S
O
Strengths
•
•
•
•
"Limited Edition" animals released
monthly
238 U.S. trademark registrations
All store locations are leased
Extensive training for all
associates
W
T
Weaknesses
•
•
•
All international locations are
franchised
80% of inventory is
purchased by 3 vendors
Expensive specialty product
Opportunities
Threats
•
•
•
•
Children aged 8 to 11 spend 1-2
hours online daily
International customized teddy
bear market
Partnerships with companies
such as Disney
•
•
"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
Strategic Factors
S1 "Limited Edition" animals released
monthly
S2 Extensive training for all
associates
W2 80% of inventory is purchased by
3 vendors
O1 Partnerships with companies such
as Disney
Weighted
Weight Rating Score Short Intermediate Long
0.2
4.5
0.90
0.15
4.0
0.60
0.25
2.0
0.50
0.15
4.5
0.68
X
X
X
X
X
T1 Compete with huge toy retailers
(i.e. Toys R' Us)
0.25
Total Score
1
3.9
0.98
X
X
Comment
Keeps customers
coming back
Best customer
experience
Possible issue with
cost of materials
More options for
consumers
Cheaper, faster
alternative
available
3.65
19
 Economic recession
 Product relevance
 Public vs. private ownership
 International presence in growing
economies
 Focus on core competencies
 Reduced mall traffic
20
 Core Competencies
 Children’s Hospital
 Mobile party units
 Additional sales strategies


Host parties
Additional trademarked
bears/animals
 Expand Bearville virtual
world
21
 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
 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
Initial Investment
$
750,000.00
Furry Friends Sold Since Inception
90,000,000
Operating Expenses
Franchise Fee
$
48,301.59
Years in Operation
Average Number Sold Annually
Rent (Annual)
$
24,000.00
Total Number of Stores (C.O.&F)
407
SG&A
$
402,727.27
Average Number Sold Per Store
17,010
Store Preopening Costs
$
177,000.00
Average Price Per Friend
Annual Salary for Employees
$
80,000.00
Total Operating Expenses
Total Investment
Investment Gain
Total Investment
ROI
13
6,923,077
$40
Total Average Sales from Friends
$
$ 732,028.86
$ 1,482,028.86
Total Investment
$ 1,482,028.86
$
5 Years
10 Years
Total Average Sales from Friends
Children's' '07-08 Inpatients
$ 963,971.14
$ 1,482,028.86
$ 3,409,971.14
$ 1,482,028.86
Average Price Per Friend
Selling Average (Assumption)
$
40
50%
Average Annual Sales from Friends
Years to Break Even
$
489,200
3.03
-35%
130%
680,400.68
680,400.68
24,460
24
 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
26

similar documents