Company Overview:
Armo, founded in 2008 by entrepreneur Sarah Greene, is a toy company that specializes in manufacturing building blocks made from recycled plastics. The company was born out of Sarah’s passion for sustainability and her desire to reduce plastic waste by repurposing it into high-quality, durable toys. Initially operating out of a small warehouse in California, Armo quickly grew due to its innovative approach to eco-friendly toys, capturing the attention of environmentally conscious parents.
Armo’s core product is a set of interlocking building blocks designed for children of all ages. The blocks are known for their vibrant colors and durability, making them both fun and long-lasting. From its inception, Armo has prided itself on using 100% post-consumer recycled plastic, making its products a popular choice in a growing green market.
History and Previous Operations:
For most of its history, Armo operated on a linear business model—plastic waste was collected, processed, turned into blocks, and sold to consumers. Once sold, however, there was no further interaction with the product. Customers would typically use the blocks for several years and, in some cases, eventually discard them, adding to landfill waste. Despite their eco-friendly image, Armo recognized this as a limitation in their sustainability efforts, as the end life of their products was not accounted for.
The company was originally structured as a private limited company (Ltd) to retain control and ensure Sarah’s vision for sustainability wasn’t compromised by external investors seeking profit over purpose. This structure also provided flexibility as Armo scaled up while maintaining its core values. However, the company realized that they needed to do more to truly embrace sustainability.
The Transition to a Circular Business Model:
In 2024, Armo made a strategic decision to implement a fully circular business model across its entire operation. The new strategy involves not just producing blocks from recycled plastic but also taking back used blocks from customers to be reprocessed into new products, ensuring a closed-loop system where no plastic waste re-enters the environment.
Key aspects of this circular business model include:
- Product Takeback Program: Customers can return old or damaged building blocks through a mail-in program or designated drop-off locations. These returned blocks will be cleaned, melted down, and reprocessed into new blocks.
- Subscription-Based Service: In addition to selling blocks, Armo plans to offer a subscription service where customers can regularly exchange old blocks for new ones, encouraging repeated use and reducing single-time purchases.
- Modular Design: Future product lines will focus on modular designs that make it easier to disassemble, repair, and reuse individual components.
- Partnerships: Armo is collaborating with schools and daycare centers to create toy leasing programs, allowing institutions to rent building blocks and return them once they are worn out.
This new approach will require changes across the company, from redesigning products for longevity and reusability to expanding its reverse logistics infrastructure to handle the take-back process. Armo aims to reduce its overall environmental footprint, stay ahead of competitors, and build stronger customer loyalty by offering products with a genuine circular lifecycle.
Questions:
Q1. What type of business entity is Armo?
Q2. Explain one advantage and one disadvantage of being structured in this way.
Q3. Define circular business model.
Q4. Explain two possible tactics for Armo given the strategy described in the case study.
Q5. Explain two advantages of Armo implementing a fully circular business model.