Case Study - Fisher-Price Toys, Inc.
Essay by pinven • October 18, 2012 • Case Study • 1,290 Words (6 Pages) • 4,799 Views
1. Basic information
1) Company: Fisher-Price Toys, Inc. (Industry: Child toys)
2) Business dilemma: a rash marketing decision has to be made on carrying out whether a new quality product (product name: ATV Explorer) at exceptional high price or a new less-quality product at moderate price
2. Business dilemma
1) Key problem:
(1) price-point: Cost for a projected toy can't be made within budget, resulting in a much higher price ($18.5) than planned. High price disobeys the traditional brand image of the Fisher-Price company -less-than-$5 convention.
(2) Marketing strategy: launch the ATV explorer whether as an independent product or as a new product in an existing product line, and corresponding advertising/promotion strategy
2) Fisher-Price must decide quickly before August to catch the sale peak:
(1) trade-off between product quality and price;
(2) Independence of the product
3. Case analysis
1) Current Market strategy ("4P" / "4C")
(1) Product → Commodity: innovative products / safe, durable and educational
(2) Price → Cost: moderate price / good value for money
(3) Place → Channel: Aggressive to increase the market reach and improve sales
(4) Promotion → Communication: focused strategies for advertisement and promotion of differentiated range and group of products
2) SWOT analysis
(1) Strengths (Internal)
1- Internal operation
well-run
established professional management expertise from diverse industries
excellent sales history (continuous sales increase during the last 10 years)
effective product testing and marketing programs facilitate internal toy design
sound financial condition
2- Market positioning
A leading toy manufacturer with a wide range of quality toys at moderate prices.
has relatively good market for specialty toys, which has grown substantially over recent years
3- Brand & Reputation
the best know brand for toys, has the largest market share (64.7%), and is brought most often (82.7%)
Enjoys a reputation for intrinsic play value, good value for money, ingenuity, strong construction and action.
ranks first in brand loyalty (60.5%)
(2) Weaknesses (Internal)
1- Internal operation
Reluctance of change / comparatively conservative management teams
Inflexibility in the decision making process
2- Irreducible escalating cost
a high initial investment of $161,000
additional special tooling costs of $18,000
High selling price disobeyed its conventional price image
Low margin and profitability
3- Channel
highly dependent on US market with little or no presence overseas
Limited sales channels (trade only)
Channel of discount stores could jeopardize brand image
(3) Opportunities (External)
1- Market potential: Foreseeably the size of potential consumer (children under 6-year-old) is expanding
2- Merges: horizontal (M&A competitors), vertical (franchise or strategic alliances with supplier and traders) , and conglomerate
3- Market explore
4- Cost-cutting effort: operation re-construction or innovation.
(4) Threats (External)
1- Macro-environment:
Adverse economic condition.
Seasonal nature of the business
2- Micro-environment
As a premier toy manufacturer, receives most attention and faces most fierce competition
Product similarity leads to homogeneous competition
Intense Price competition
Directly challenge from foreign manufacturer on cheap low quality products
Technological advancement gadgets including toys
3) Main Considerations
(1) Commodity:
1- Adverse economic condition where people would not be willing to buy premium products
(2) Cost:
1- Initial investment on molds (A single mold is sufficient for producing 500000 ATV units only ) and tooling costs
2- retail selling price: would have to be $18.50, far more than initially $12 and could lead to poor sales records
3- Trade-off between quality and price is against Fisher-price policy.
(3) Communication:
1- Positioning as an independent product is against the advertising policy.
(4) Channel
1- Reduce on markup production margin on direct costs could sacrifice future products margin
2- High price product could result in traders' stock pressure and affect future cooperation
4. Discussion of several alternative solutions
Solution Pros Cons
cheaper version as an independent item 1. Reduce initial investment requirement would be considerably
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