Companies must be aware of different legal frameworks across countries Strict laws and regulations on safety being the most common hazards for children: Choking or aspiration of small parts Strangulation Cuts by sharp parts of the toy Injury byprojectiles Drowning Motor vehicle incidents involving toys Lead paint These regulations are getting stricter every day due to the lack of carefulness of some Chinese manufacturers. With more rigorous legislations, other countries will stop importing Chinese cheaper products which will force them to improve the toys. Weak Economy → Postponing consumption Increasing seasonality of sales Thecombination of these two characteristics and the threat of videogames led the toy industry to a setback during the last years but it is now slowly recovering. Shrinking global child population Reluctance to buy Chinese products Booming in the demand for electronic products Consumers look for “value” however they do not shift to less expensive toys Environmental and Social Responsibilityincreasing awareness Widespread use of internet and PC games have a great impact on the toy industry Toys must be constantly evolving, otherwise companies will not succeed
POLITICAL - LEGAL ENVIRONMENT
SOCIO - CULTURAL ENVIRONMENT TECHNOLOGICAL ENVIRONMENT
There are two distinct segments whose criteria of differentiation is thenature of buyers/users: 1. The buyer is not the user (S1, children): Adults buy for children. Studies show that many times, to not disappoint children, parents make sacrifices to offer their kids exactly what they want. 2. The buyer is the user (S2, adults): Many grownups are enthusiastic about toys like puzzles, board games, Lego or figures. The toy industry is highly fragmented. There are somemore relevant companies like Hasbro, Mattel, Lego or Bandai whose combined total market shares are less than 20%. Due to the cheaper workforce in Asian countries like China, most of the suppliers are from that region. Also eastern European countries are common suppliers.
Industry Attractiveness: The toy industry may seem attractive due to its large size. In 2009global sales were around $80.2 billion and the NPD group, a North American market research company, forecasts worldwide toy sales to top $83.9 billion in 2012, which means that the growth is medium. Despite the existence of two client segments, when comparing them, it is clear that the sales from the children segments are lower than the sales from adults’ one, meaning that the size and growth of thelatter segment might be lower. To analyze the margins I used the Five Forces Model below and concluded that in a scale from 1 to 5, a good estimate for the margin of Segment 1 would be 2 and for Segment 2 would be 3.
Threat of new entrants: Technology, as well as preferences, are always evolving and in this market it is easy to have success with one product only S1 and S2: MEDIUM LOW