Traditional Toy Business in the United Kingdom - Case Study Example

TRADITIONAL TOY BUSINESS IN THE UNITED KINGDOM Introduction The article carries out an analysis and proposes amarketing strategy for the traditional toy business in the United Kingdom focusing specifically on the core business and development of traditional toys in the country. It will carry out a thorough examination of the manner the business has to progress as well as identifying the key drivers in the industry and the competitive strategies. It will also analyse the toy market of United Kingdom and its level of attractiveness and compare with other players taking in mind that the country offers a great opportunity for expansion. In addition, it will perform a detailed analysis of the macro-environment and an analysis of the toy sector to allow for a detailed proposal about the plan for implementation concerning the method of entry, the resources required and the best means of exploring capabilities in the country. This will include the manner of establishing a strategy for direct exporting of the new products. Environmental context The toy market in the country, according to Tharakan and Kerstens (1995) consists of a big majority of various products mostly divided into various segments. Traditional toys are just a representative position in the toy market with major objective of providing leisure to children (Izushi & Aoyama 2006). The toy market in the United Kingdom experiences stable growth in terms of revenue collected from sales but recorded a 1.1% decrease in the year 2008 because of the financial crisis in the country. In the year 2009, it recovered and expanded up to 3.6% to reach around sixty billion Euros led by japan, the United States and China. In 2014, the toy market can accelerate to round 5% (Fonseca 2012). Analysis of the country United Kingdom has a gross domestic product of around one thousand six hundred and eighty pounds with a moderate rate of inflation of around 2.2% per year. It has a large population of around sixty five million people that gives a reflection of the large market for the products. The government of Britain focuses on the reduction of deficit and development of the economy and hence encourages expansion of business activities in the country. Concerning the regulation of business activities, the government uses a very effective and efficient strategy to enhance competition and prevent the development of monopolies. There are therefore, no restrictions to the establishment of business enterprises in the country. Furthermore, the government treats foreign investors and domestic investors equally and guarantees the protection of investments. To encourage business activities, the government allows free repatriation of the profits earned from business in the country. The labour in the United Kingdom is very efficient and qualified to offer high quality services. The financial system of the country is very competitive and transparent and hence eliminating uncertainties to encourage investment (Fonseca 2012). The United Kingdom is a member of almost all-pertinent trade, economic and political unions including the European Union, ONU, Commonwealth, OECD, IMF as well as the World Trade Organization. Because of being a member of the European Union, the United Kingdom participates and adhere to the policies of the Union that include free movement of both labour and products between the members as well as sharing the same trading policies with the other countries. However, there has been an increase in the financial burden in the form of value added tax (VAT) that very recently increased to 20% from 17.5%. The government is also making efforts to enhance public awareness concerning the necessity of safer production activities friendly to the environment as well as better living standards (Fonseca 2012). The government appreciates the culture of waste reduction, energy saving, energy generation, better travel, leisure as well as climate changes. Therefore, each individual operating in the country has a responsibility of protecting the environment and conservation of resources through efficient use. The toy industry The United Kingdom is the fourth largest toy market in the world with a total market size of around three thousand one hundred and eighty five million pounds. This is approximately 5.4% of the world market share. Despite the adverse effect caused in the economy of the country because of the loss of more than eight hundred Woolworth stores in the month of December 2008 as well as the decrease in the market in 2008, the country enjoyed the highest toy sales in the European Union with around twenty-one percent of the market share (Fonseca 2012). Market segmentation The city of London is the capital of the country as well as the most populous with approximately more than eight million and six hundred thousand people. Birmingham is the second with more than two million people and closely followed by Manchester city. In the year 2009, most experts expected that the country would contribute around 1.19% of the world traditional toy market. In the year 2009, infant-preschools estimated to be in the toy and game market, taking around 23.3% of the national market share but closely followed by ride-ons and dolls that seized 22.5% and 10.9% respectively. The toy shops sold very large number of toys taking around 38.8% of the market share followed by non-toy stores not specialized in the sale of toys (Fonseca 2012). These grabbed around 26.9% of the market and supermarkets/hypermarkets taking around 10.9%. The major relevant retailers, non-specialist and specialist operating in the market are Hamleys, Smyths, Argos, WH Smith, Asda, Alworth, HMV, Toy Master, TK Maxx, Sainsbury’s, John Lewis, AIS, Morrison’s, Early Learning Centre, Toy Town, The Entertainer and Mothercares. In addition, we have North West, Kent East Midlands and the Thames Valley Airports are very significant areas of toy manufacturing in the country. The large number of players in the sector provides an indication that the business must prepare to deal with high rivalry in the market. To earn a place in the market requires better marketing strategies (Fonseca 2012). Market Trends The big increase in sales during the Christmas period, the Easter as well as the end of scholar year period is the major sales pattern that describes the behaviour of the market. Regarding the tendencies of the market, the London Toy Fair is the biggest committed toy, hobby and game exhibition in the United Kingdom. Among the most significant magazines in the toy sector, include Toyworld, Toy News as well as Toys and playthings. One of the evolving strategies of differentiation used to fight competition in the industry is the use of the Lion Mark that is a logo, which certifies that the toy is a product of the British Toy and Hobby Association (Fonseca 2012). Market rivalry Pertaining competition that occurs directly, the topmost companies supplying traditional toys include Hasbro and Mattel. On the other hand, the major indirect competition will come from brands such as Blast Lab, National Geography, John Adams, Wild Science, Horrible Science, 4M, Interplay, Edu-Science, Clementoni as well as Trends United Kingdom. Wild Science is amongst the key players in the market offering a very wide range of educational scientific toys that incorporates boys and girls’ science, wild science to eco science as well as cosmetic science (Fonseca 2012). The Mulberry Bush offers a very wide range of traditional wooden toys which provides very stiff competition to all other players selling wooden toys in the country. Mode of entry The decision as well as the procedures to start operating the business must agree with all the objectives that the management intends to achieve from the project. The management must consider the configuration of the host market as well as the degree of experience in international marketing. The earliest strategy should be an exporting strategy by means of electronic commerce that will help to bring higher value for the business (Salmon & Tordjman 2002). Concerning the form of export, indirect export will involve the use of an indigenous intermediary that will help to reduce the costs of exporting as well as the financial risks involved. It also gives access to the knowledge of local intermediary. Nevertheless, the management should prepare to encounter problems connected to low margins and lack of control of the operations. Another problem is that the intermediaries usually deal with more than one product; hence, they may have the tendency of favouring the ones presented to them at a higher profit. At the same time, they do not have the responsibility of presenting data concerning the export market to the exporter. These two factors will pose some pressure on the business for consistent supervision of foreign operation. However, direct exporting will present the problem of lack of knowledge concerning the market despite allowing for much control to the business in all the fields, customer contract, negotiations, marketing policies as well as technical interaction. Hence, upon understanding the market after gaining enough knowledge, the business has to focus on the strategy of direct export for big retailers to high control of its operations and optimize profits (Wong, Arlbjørn & Johansen 2005). The team for implementing the strategy must have experts to provide the business with superior knowledge and experience to reduce the challenges that may arise because of lack of knowledge about the market. The business must grant the certification of BTHA and make partnership with toy museums as well as with a relevant institution of learning to ensure certification of the products and hence enable differentiation (Burton 1997). When carrying out an analysis of the competition that the business will face in the traditional toys niche in the United Kingdom market, the main gap that the business has to consider is its potential of presenting toys that closely relate to the cultural beliefs of the people with the capability of meeting their needs. Concerning the location of the business, the business has to establish a branch in London because of the large size of the market provided by the large population in the city. Nevertheless, it also has to establish a location in Heathrow airport to reduce the operations costs. This is because this will allow for effects of spillover and rents that are less expensive. During the second stage of the process of internationalisation, the business will have to seek the services of an intermediary to address the toy shops of the United Kingdom since this segment require a good knowledge of the market (Nwankwo & Lindridge 1998). After sometime, the business can successfully open its own stores as part of its expansion strategy. Marketing Strategies To successfully survive in the market, the business must adopt perfect marketing strategies of its products to be able to capture a large group of consumers. This will guarantee its growth and expansion as well as maximization of profits. The following are the marketing strategies that will suit the business and will help to gain a competitive advantage. On part of the product strategy, the management must ensure that the new products are going to address the opportunities that exist in the United Kingdom (Kent & Brown 2006). In addition, the management must introduce some changes in its products in the name of differentiation to make its products unique to enable consumers to identify them easily. Introduction of various brands targeting different classes of consumers ranging from rich to middle class and low-income earners will help expand the market share for the products of the company. The product brands must have British names that will comply with the culture of the people of United Kingdom. This has an effect of making the products significantly, natural and accepted by the majority of consumers. The brands must include features that are more interesting and appealing to the users to match their interests and preferences. The products must have the renowned logo of the British University and the lion mark of BTHA. Finally, the products must have the tickets offerings of the museum of United Kingdom to comply with all the standards and requirements of the country (Fonseca 2012). On the part of the pricing strategy, the business must define the price of each brand of its toys by considering the prices of competitors (Keller, Parameswaran, & Jacob 2011). Because of the high similarity of the toys offered in the market, the business will have to set inferior prices to be able to attract a large group of consumers who mostly fall in the category of middle class and low-income earners. Furthermore, the business should employ very efficient methods of production to be able to minimize the production costs below that of the competitors (Romero 2005). When the production cost is very low, the business can benefit in two ways. First, it can decide to lower the price below that of the competitors to expand its market share. Secondly, it can decide to sell at the same price level as the competitors to earn higher profits than competitors do. Therefore, cost leadership is the best marketing strategy for the business, as it will achieve a high competitive advantage in the market (Keller, Parameswaran, & Jacob 2011). On the part of the promotion strategy, specialized newspapers and magazines prove most convenient owing to the fact that being a new business in the market, it is important to create awareness of its brands (Jackson 1997). Because of the fact that the largest percentage of the revenue will come through business-to-business collaboration, it is important for the company to be present in toy fairs and showrooms to get the opportunity of presenting its products. The business should also create partnerships with the museums, BHTA and the local universities as well as other relevant institutions as a means of certifying the quality of its brands that it offers in the market (Martin & McCracken 2001). In addition, the management will have to consider other tools that may assist in promoting its brands (Davies & Ellis 2000). These include the establishment of online games to interact with consumers, which will also assist in creating awareness of the brands among children. The business may also establish partnerships with relevant organizations such as British Petroleum that will assist in creating products that are friendly to the environment. This will help in enhancing the market share since most consumers in the current market, are increasingly, becoming environmental conscious. Advertising the products using the most appropriate slogans, announcing specific events and the provision of services after the sale of products may greatly assist the business in attracting more customers. On the part of placement strategy, the business should first focus on London, which provides the largest market for the products because of the high population. Upon passing the implementation stage, the business must expand its operations to Birmingham as well as Manchester while targeting the big toy retailers in the various locations. More important, the strategy adopted for selling the products must aim the big retailers since this will assist in a huge foundation of customers (Lindahl & Beyers 1999). Designing for Christmass During the December, the demand for traditional toys is at its peak and consumers tend to be less sensitive to price differences while focusing on the most desirable characteristics of the toy (Davis 1972). The availability of stock is therefore an important factor to ensure that the products are always available at the right time. The design of the toy should be simple to allow quick production but should also meet consumers’ requirements. Since most of the shopping occurs based on the choice of parents, matters of safety about the toy is one of the major properties that the toy must consider. The wooden toy is therefore very suitable for the season as it is simple to produce and completely safe in terms of physical, mechanical and chemical harm. During the Christmas time, buyers are always in a hurry and therefore must gain a good understanding of the availability and suitability of the toy since they have less time to do market research (Brown 1998). The design must therefore include all the important features that connect to the main events that occur in December. The incorporation of words and figures that express happiness, though may not be well understood by the child can help to build interest in parents who buy the toys for their children. Massive advertisement using the television and the internet should increase as we move towards the end of December to match the high pace of increase in demand Marcussen 1997). In addition, actual shops will be the most appropriate means of selling the products since during the Christmas time, buyers prefer moving physically in the streets as this helps them in meeting friends and sharing fun. Online advertisement should only be present to poplurise the brands and direct buyers. As a means of adding value to the brands offered by the business, the inclusion of books for children readings can add up to the uniqueness of the mode of selling employed by the business. The readings in the books must describe the Christmas season to make them more relevant and this may greatly help in capturing the attention of buyers. The different brands of the toys must reflect to the differences in the age of children to be able to gain a large share of the market. In addition, the variety of the brands must be available at the same time and premise and arranged in a manner that it becomes easier for the speedy Christmas buyers to see them (Brown 1998). However, it is necessary to keep proper monitoring of the situation and respond quickly on daily basis to optimally benefit from the season. Conclusion The United Kingdom provides all the opportunities for the growth and expansion of the toy business because of its large market size and high purchasing capability of the people. The United Kingdom is just the starting point that will open up opportunities for the business to diversify its operations in all Anglo-Saxon societies as part of its objective of operating in many countries. With low operating costs and differentiation of its products, the company is going to withstand the high pressure from its rivals and gain a large share of the market. The management must however understand that they have the responsibility of adopting the best strategies that will influence a high degree of awareness as well as acceptance of its brands. This is because, consumers make decisions based on the information availed to them concerning the functionality of the brand. The management must always explore possible means of improving the products with the aim of matching the rapid changes in the tastes and preferences of consumers. 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