Knowing your external environment makes you aware of your company's opportunities and threats. Knowing the internal environment teaches you about the company's strengths and weaknesses.
Bryson (1989) outlines general steps for conducting an environmental scan:
- Identify the purpose, participants and time commitments.
- Carry out the scanning activities.
- Analyze and interpret the strategic importance of issues and trends.
- Select issues and trends for further action.
- Report and disseminate the results.
A way to measure the resulting factors is by creating an External Factor Analysis Summary, (EFAS) or Internal Factory Analysis Summary (IFAS) table. Scores on these tables inform a company how well they are "...responding to current and expected factors..." in their respective environments (Wheelen et al, 2002 p. 101). An example of an EFAS table has been created for VTBC’s. The total weight of 4.025 means the company is above average in the bear market.
External Factor Analysis Summary Table
Explanation of Scores
- Row 1 - List the opportunities and threat to the company
- Row 2 – Weighs each factor from 1.0 to 0.0 ( Most important to not
important)
- Row 3 - Rates each factor from 5.0 to 1.0 ( outstanding to poor)
- Row 4 - weighted scores is equal to weight multiplied by Rating
- Row 5 Rationale for each factor
- Totals – total weighted score tells how the company is responding to the
factors in the external environment (Wheelen et al, 2002, p 74)
In creating the EFAS Table it was found that Bear-Grams, retail stores, offshore productions, edgier products and catalog sales are opportunities that were created by scanning the external environment of VTBC. Below are reasons why they present opportunities for the company:
- Despite the huge bear market, Vermont Teddy Bear Company, Bear Gram
continue to be a leader in the market.
- Retail stores provide the customer to see actually see the bear they wished
to purchase. This visualization was missing in radio ads and over the phone
orders.
- Offshore sourcing present the company the opportunity to not only expand
its product line to meet customer needs and cut costs but allows for
contracts with foreign markets (p. 27-6)
- Creating an "edgier" look of the Vermont Teddy Bear allowed the company to
broaden its market and change its strategic marketing by promoting its for
both kids and adults, (kids from 1 to 100) maintaining the company’s
uniqueness.
- Like retail stores, catalog sales also created a new connection with
customers and allows for product expansion.
In contrast, threats to The Vermont Teddy Bear Co., were Disney’s Pooh
Grams, its competitors, and chocolate, flowers and greeting card companies
etc. Reasoning is as follows:
- Disney became probably the company’s biggest threat when they
themselves marketed the Pooh Gram. The Vermont Teddy Bear Co., claimed
unfair competition and trade mark infringement (27-16).
- The Vermont Teddy Bear’s uniqueness allow them to can cater to customers
as does chocolate, flowers and greeting card companies. While they may
present a low threat; the company needs to be aware of changes in
trends and price.
The relationship between an organization and its environment depends upon the internal strengths and weaknesses of the company, which means that an opportunity for one company will be viewed as a threat to another company, depending on how well each is positioned to deal with the specific trend or issue. After the scanning is completed, the company may want to summarize their analysis of the factor. This can be done using an Internal Factor Analysis Summary Table. The use of Barney’s VRIO frame work can be use in considering the company’s strengths (p 101). Below is an Internal Factory Analysis Summary (IFAS) table for the Vermont Teddy Bear Co.
Internal Factor Analysis Summary Table
Explanation of Scores
- Row 1 - List the opportunities and threat to the company
- Row 2 – Weighs each factor from 1.0 to 0.0 ( Most important to not
important)
- Row 3 - Rates each factor from 5.0 to 1.0 ( outstanding to poor)
- Row 4 - weighted scores is equal to weight multiplied by Rating
- Row 5 Rationale for each factor
- Totals – total weighted score tells how the company is responding to the
factors in the Internal environment (p 102).
Performing the internal environment at the Vermont Teddy Bear Company the following strengths were found. They are as follows:
- The quality of the bears has always been a concern for the VTBC.
Mr. Sorino wanted to produce American made with American
materials and it did for a few years. Offshore sourcing has not
diminished the quality or time spent making sure each bear is perfect.
- Known as "Bear People", employees at VTBC are dedicated, caring people.
This is one of the key to success.
- Vermont Teddy Bear claim Disney infringed on their trademark. They won
as a result of their registered trademarks and patent protection. This
ensures that no company can try and create a similar business and
become competition.
- The unique way of marketing their bears is what sets VTBC apart from
other companies.
- Bear Grams continue to been Vermont Teddy Bear's most profitable
venture for the company. Other Ventures have been tried but none took off
like the Bear Gram.
Vermont Teddy Bear Company weaknesses are as follows:
- Continuous changes in CEOs portraits the company as weak and with out
direction. While VTBC have seen many profits, despite efforts to cut back
and expand has suffered some disappointing lost, with minimal financial
recovery.
References
Bryson, J.M. (1989). Strategic planning for public and nonprofit
organizations. San Francisco: Jossey-Bass.
Wheelen, T., & Hunger, J. (2004). Strategic management and business policy 9th ed. Upper Saddle River, NJ: Prentice Hall.
Vincelette, J., Fogarty, E., Patrick, T., & Wheeling, T. (2002). Strategic
management and business policy: Case 27: The Vermont Teddy Bear
Co., Inc.: Challenges Facing a New CEO. . 9 ed. Upper Saddle River,
NJ: Prentice Hall.
