In dealing with bullies, as a parent you need to talk to the higher authority like in school where you need to talk to the counselor so that he/she will be able to observe "that" bullies behavior.. or in neighborhood, you need to talk to the community leader or something so she/he can assess the situation then prolly talk to he parents of the bully. Because there are actually proper sanctions that parents should do when they find out that their child is indeed bullying. I mean, if your child is a bully, its not a good image to you too because its definitely a sign that you have done something that lead you child to bullying. And for the parents of the victim, you need to enroll your child in a self-confidence seminar or something because sometimes bullies bully those who they see cannot stand on their own. Good Luck, hope you pass this crisis.
Silence is the ally of bullying. Confront the problem directly, whether either side. This does not mean fighting. Many bullies have themselves been bullied, and are just repeating the misbehavior. Most parents don't like to hear that their child is a bully. Once advised, perhaps they will deal with the situation properly. If not, there are other steps. Bullied children may be bullied again, and by others. Self-confidence is important, but so is the knowledge that others will stand up for them. Don't keep it a secret. Parents, friends, teachers, coaches, can help.