[Type the company name]

International Marketing
Strategy of BBW
Case Study Review
Newports

13
Table of Contents
Part One: BBW Marketing Strategy ............................................................................................................. 3
Part Two: Value Chain and Resource based view of BBW ......................................................................... 4
2.1 Value Chain Analysis ....................................................................................................................... 4
2.1.1 Primary Activities: ........................................................................................................................ 5
2.1.2 Support activities .......................................................................................................................... 6
2.2. Resource Based View: ...................................................................................................................... 7
Part Three: Key Criteria for Potential Market Assessment process of BBW. ............................................. 9
Part Four: PMA for International Operations in China ............................................................................... 11
4.1 Chinese Market Analysis ............................................................................................................ 11
4.2 Porter National Diamond Theory................................................................................................ 12
4.3 Hofstede Cultural Dimensions .................................................................................................... 13
References ................................................................................................................................................... 15
Part One: BBW Marketing Strategy
The unique nature of Build-A-Bear Workshop customer experiencing brand is the strength and a
competitive advantage for the company. It is a mall based retailer company that drives sales through
customers’’ referral and interactive marketing campaigns through website and consumers’ groups. BBW
has been extensively used marketing strategies to drive sales, brand awareness, and increase visitors’
traffic on the stores websites. The aim of the company is to increase the brand awareness as a complete
experience based shopping destination for the children under 12 years of age and their parents. The
promotion strength of the company lies in regular TV and print advertisements to address both children
and adults about the brand and announcement of new products/ stuffed animals categories. Strength is
the average pricing of products lies in the range of $10-25. On average, a customer spends about $50 on
all accessories and products per purchase in BBW (Annual report 2010). Cause related marketing with
WWF has enabled BBW to launch endangered species like Panda in stuffed animals.
The weaknesses of the marketing strategies is total dependence on experiential marketing of the
brand to children of age groups less than 12 years , but the campaigns are found to be more attractive for
parents and elders. Also, the direct mail and email programs cannot meet their targets completely due to
the age group of target market. Also, the location based advantage of the company has surpassed the
marketing initiatives of the company, and in store promotions became more valid due to a mall based
outlets nature. The opportunities of marketing strategies lie in development of new markets in Asia and
Africa. Increase in customers’ preference of experience brands n shopping, changing life styles in
developing nations, and increasing brand awareness of the company will generate more marketing venues
for BBW. Partnerships with WWF, Disney world, and other entertainment companies opened new
opportunities to access more consumers base. The threats to the business are new stuffed toys companies,
movie/theatre experiences, other shops in the malls, and internet games/entertainment for kids are some
important substitute of BBW experience. The marketing activities of BBW need to target the attention
grabbing alternatives of BBW for the target consumers in order to access the consumers’ base
uninterrupted.
In international business, cultural conflicts, lifestyles of target consumers, economic conditions, and mode
of company operations are some important factors that affect the marketing strategies of the company. For
instance, In Japan and Germany, store has to translate the slogans in Japanese and German languages that
change the meanings. Changed culture affects the penetration and awareness of the local consumers in
international markets. Accessories styles, age, colours choices, type of animals, and marketing strategies
are dependent on the choice and life styles of consumers in particular market. In order to cater the needs
of international markets, company website, www.buildabear.com, cater the needs of over one million
visitors per month with information, games, customized orders selections, and virtual life of the owned
stuffed toys for their owners where they trade, purchase and access latest games and news of BBW.
Tourism marketing, store events, and loyalty programs of Stuff Fur Stuff ® club increase the harmony of
marketing in international operations of the company. Loyalty points on every purchase and issuance of
rewards certificate on collection of 100 points lead to further discounts in future purchases.BBW has
taken initiatives of direct mail marketing and e-mail messaging to the clients in overseas markets of
Britain, Canada, and Scotland. In order to reach new markets, the web- enabled marketing programs and
campaigns will play a vital part in future expansions also.

Part Two: Value Chain and Resource based view of BBW

In order to analyse the competitiveness and core competencies of the organization, this section is
used the value chain analyses and resource based view for the company.

2.1 Value Chain Analysis

Porter (1985) has suggested the model of value chain analysis to analyse the input and output
primary and secondary activities of the company and suggested that all these activities are
integrated and attached to generate profitable operations. This value chain is comprised of the
internal activities to devise, create, market, distribute and sustain the offered products and
services. The collection of individual activities to generate a sustainable picture of value chain
for BBW is presented in the following figure:
2.1.1 Primary Activities:
In primary activities of the company, the process of converting raw materials to finished goods is
involved. The functional departments of production, marketing and sales, and customer care are
involved in primary activities of BBW:
1. Handling of material and warehousing: The operations are based on the designing and
assembly of stuffed animals in the mall stores of BBW. The manufacturing of parts and
accessories are performed in the factories located in China and Thailand due to cost
benefits and ease of supply chain network. Consumes feedback about addition and changes
in any product category, transferred to manufacturers that alter or create the products for
the company. High dependence on suppliers and less control on manufacturing quality are
some drawbacks of this outsourcing strategy for BBW.
2. Production and Distribution
 As a total customers experience brand from selection to the naming of the stuffed bears
(other animals). Production and assembling is totally performed in the ‘mall outlets of the
company. Customers (kids) and their parents are part of the formation of complete stuffed
toy. This unique experience not only gives customer a complete authority of selection but
force the company to strengthen the research and development area. Customers feedbacks,
input from the panel of teenagers, and direct involvement of Maxine Clarke in all processes
had created a interesting production experience for the consumers at BBW.
3. Marketing and Sales
A very important t aspect of primary activities and acting as a backbone of the value added
activities of the company. Direct marketing, virtual presence, and interactive mall activities
and regular customer involvement are keys to BBW marketing initiatives. Cause related
marketing activities and entertaining store assistants affected the decision making of
consumers and resulted in surety of sales. High brand awareness and loyalty, economical
pricing, and unique brand attributes are some strengths of marketing and sales division.
4. Customers Relationship Management
The most important primary activity of BBW is continuous customer engagement and
relationship initiatives of the company due to its customer driven sales. The primary target
market of BBW is internet savvy customers therefore around 4000 mails are received
personally by Maxine Clark, other than websites official mails. The personal responses
from CEO, acceptance of suggestions, Rewards and loyalty points, and the involvement of
club advisory board in company’s decisions are some examples of the strong customer care
at the company.

2.1.2 Support activities

These are the activities that support primary activities of BBW in the areas of procurement,
Information technology, finance and Human resources. .
1. Procurement
Purchases are involved from factories in finished goods form as production orations are outsourced.
The licensing and franchising agreements of the company have also facilities the procurement
operations. A part from 30-35 animal varieties, officially sanctioned NBA, NFL and MLB teams’
apparels, SKECHERS ® shoes for these animals are also part of customers’ selections. On average, 450
SKUs are present in an average BBW store at any one time and proved to be highly productive.

2. ICT Development
Web enabled marketing programs have increased the dependence on the website
www.buildabear.com, operations and e-mails for addressing and feedback of customers. Round the
clock information technology support has enabled the company to expand internationally in a small
span of 15 years to 346 stores.

3. Human resource management

The direct human resource of the company is around 10,000 on full and part time basis.
The selection, management development, appraisal, promotion and placement, and
employee relations are main tasks of this department. Company has maintained above
average employee retention rates since 2006 onwards and offer regular trainings and
enrichment of employees through Bear University ® program at all owned and franchised stores.
The value chain strength and activities of BBW reflect its corporate strategy of focusing on
competitive advantage and vertical integration of all activities in international operations.

2.2. Resource Based View:

In resource based view, Mintzberg (1991) stated it as a strategic tool that facilities the corporate
strategy of the company in identifying thattangible and non tanginble resources and capabilities
to analyse the strengths and weaknesses of the company.
Fig. 2: Resource based view of an organization
Adapted from: Kotler (2009)
This is another view point of analysing the core competencies and advantage of the
company through its value based activities. The value creation process of the company can
be described as follows:
Figure 3: Value Creation Process

Source: Kotler (2009)

In BBW, the company is struggling to come out of the low profit situations of 2009 after the
economic crisis in USA and UK, since the 85% outlets of company are situated in US and
Europe. Finley (2009) referred this strategy as both “inside out” and “outside in” view of the
market based view of the corporate strategy. The positioning view of Mintzberg strategy schools
has been applied on BBW due to its strong competitive advantage based positioning ain all these
years. Unfortunately, due to the arrival of other toy makers in experiential branding like toys R
Us and Barbie.com, the differentiation of BBW is diluting (Johnson et al, 2008). Therefore, in
international markets, cultural based and locally convergent ‘business strategies will create the
competitive advantage for the company as the brand needs to penetrate the strong oriental
cultures like that of China and Far East courtiers. BBW required an efficient competitive strategy
by using internal abilities with exploiting external capabilities as a firm-specific objective. The
global recession and decreasing purchasing powers of the target consumers household had been
alarming signs for the profits since 2008, but a recent comeback of these economies make the
picture a little bright for the company.

Part Three: Key Criteria for Potential Market Assessment process of BBW.

BBW has followed the strategy of entering on overseas countries through the requests of
interested franchisees, venture capitalists finances, and attraction due to the emerging markets
economic conditions. This vertical integration of the company by using internal and external
resources in expansions overseas has posed many benefits to the company as shown in following
diagram.
Fig 4: Vertical Integration Benefits
The initial explanations of internationalization and entry modes are based on the market driven
strategies and focused on the company’s core competencies as seen in the case of BBW also
(Prahalad and Hamel, 1990). Customer based experience brand has its unique features and has
become the core competitive advantage for a decade, therefore, the decisions of international
expansions after 2002 were based on this core advantage of the company. The main argument of
this approach is that the cost of foreignness required a compensating marketing and
technological resources and expertise as an advantage (DeWit, & Meyer 2004). The choice of
entry mode has also played an important role in BBW international expansion. The mode of
franchising bear minimum risks for the franchisor and franchisee both but leaves very little
increment in profits for the parent company. In case of BBW, the franchising fees from total
outlets overseas were only amounting to 1% of the total revenue in 2009 (Case Study). Also, the
investment of research and development, marketing strategies, training of human resources, and
other innovations are part of the BBW corporate investments, therefore, company owned
operations as an entry mode have created more profitable opportunities for the company.

The assessment of potential markets for international expansions needs a framework of necessary
criteria to overcome the hindrances and to estimate the future productive state of the potential
markets. Arnold and Quelch's (1998) have presented the long term assessment tool as market
demand driven model, which is based on the analysis of the demand in future market to
understand its productivity and market share for the company in respective market. Another
model of Hofstede (1991) was based on the cultural dimensions of the prospective country and
its similarities and difference fro the country of origin of the company. This model is based on
the dimensions of masculinity, power distance, long term orientation, individualism. Porter's
(1990) national diamond theory has also posed criteria of selection on the bases of factors of
production and marketing in the prospective market that complements the resources of parent
company. The BBW business model is based on the customer responsiveness as a customer
driven sales model and international expansion is based on the profitable franchise offers from
customers and venture capitalists that are merely ignored the cultural competencies and the
measure of cultural distances of the prospective country like the example of failures in Germany.

In summary, in view of the above discussed traditional assessment criteria, the company should
include long term potential of the prospective markets, distance of cultural orientations and
dimensions, the competitive position of the relevant industry on local levels, and the
receptiveness of consumers for the products and services. These criteria will help the company to
reduce the gats in expectations and performance of the host country market and the parent
company headquarters. The measurement of the macroscopic indicators like GDP growth rate,
CPI index, and microeconomic indicators like life style patterns of the consumers markets will
facilitate the assessment process for BBW in prospective countries. The internal factors related to
the sentry mode, operations structure, functional strategies and outsourcing of systems are also
important in analyzing the compatibleness of a certain international market.

Part Four: PMA for International Operations in China

The assessment for Chinese market is based on the recent toys market situation of China, Porter
National Diamond Theory, and Hofstede Cultural Factors analysis for BBW.

4.1 Chinese Market Analysis

The game and toys market of China is rising at 40% per annum growth rate and has increased
from value of $3.2 billion in 2004 to more than $20 million in 2010. The sectors expanding
fastest are of electronic and educational toys. However, success In terms of competition is
largely dependent on whether the products can adapt to educational style and custom of china.
China is amongst the most significant markets for the industry of games and toys with its
booming economy and richer people. Yet, right development of the market has not been done as
yet. In 2004, the total value of the Chinese games and toy market was a mere $3.2 billion, which
just amounts to 6% of market in USA. On average, a Chinese child spends not greater than $7 in
an year on toys in comparison to Japan’s $413 and worldwide average of $40. The highlights of
this market are the electronic and educational toys sector which although being relatively small
at present is increasing by almost 100% per annum. Toys are considered by Chinese culture to
contribute towards development of intelligent rather than being just for entertainment. Hence,
willingness of Chinese parents is there to spend much more for toys that have an educational
function rather than just a pretty doll (China daily 2013).

4.2 Porter National Diamond Theory

Porter (1990) found the answer to why a nation achieves achievement in a specific industry in
the course of four broad characteristics a nation possesses. These attributes shape the home
business setting by which domestic firms participate to support or obstruct the establishment of
competitive advantage. The four broad attributes, or what Porter defined as the determinants of
nation advantage, include: demand conditions, factor conditions, support and related
industries, company strategy, firm structure, and industry rivalry. The four determinants work
both as a system and individually to create the environment in which a American toy retail firms
are created and compete to gain and sustain competitive advantage in China. Besides the four
attributes of nation advantage, Porter (1990) incorporated the functions performed by the state
and probability as issues affecting the proper functioning of the nation attributes.
The complete framework developed by Porter was presented in Figure 5 below
Source: Porter (2008) .

For BBW, the firm strategy in China will be based on the types of franchise agreements as
Chinese government favours local ownership businesses. The rivalry is high as Toys R Us and
Barbie is already present in this market. The structure of the firm will be supported by the local
companies’ structure requirements due to the different working environment in China. The
demand conditions in China from the section 4.1 supported a heavy consumer’s base for BBW
experience branding. Positive market size and potential will facilitate the company to exploit
heavy demands in China. The factor condition of this economic and emerging entity of Asia is
also supporting the working structure of Maxine Clarke. The positive sign for BBW is that its
suppliers’ factories are already located in China therefore economies of scale will be achieved in
China due to low manufacturing and distribution costs. On the other hand, cultural dissimilarity
and life style differences will force the customers to demand low prices as compare to that in
USA and Canada.

4.3 Hofstede Cultural Dimensions

According to Hofstede cultural dimensions, Chinese culture is scored less on individualism (20),
less uncertainty avoidance (30), high power distance (80), masculinity (66), and highest on long
term orientation (118), shows a collective and status oriented masculine cultural orientation
(Hofstede 2001). Due to the difference in culture, Chinese often do not find educational game
and toys from the west as suitable. For instance, early linguistic development concentrates more
on Chinese characters’ writing rather than spelling or listening. Moreover, the mathematics
approach and techniques also differ from that in America and Europe. One of the main reasons
for this market’s underdevelopment is the shortage of products appropriate to Chinese culture.
Because of this reason, the educational toys’ market for adults is empty, even though the surveys
have reported large potential being there. Thus, the main success factors for the toy market of
China are products which suite tradition and culture of China and integrate new technologies.
Cognition technology, Wireless networking, biotechnology and nano-electronics are amongst the
most significant technologies to be used by the industry of games and toys in the upcoming
decade. Application of these technologies to BBW products and toys can increase the academic
and recreational alternatives considerably, extend range of products, enhance the value added
and lead to new markets.

In conclusion, China can be a lucrative market for BBW if the management clearly understands
the huge cultural and operating differences between American and Chinese society. The
practices found productive in US and Canada may not be successful in China, a part from the
huge consumers base and economic stability of the country. Introductioon of local animals like
Panda as main mascot of the company in Chinaand a local slogan with collective offerings to the
families will produce more benefits for BBW.
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