We begin with the PEST analysis because it will help us better understand the current global trends. Figure 1 shows a trend analysis n four critical areas: political, economic, social, and technological. Figure 1: PEST Analysis of Global Trends political Ban and taxes in product imports from other regions. Economic Market decrease in developed countries. High import taxes in developing economies. The global economy slow growth. High growth of middle class in emerging countries. National regulations in order to promote the safety of children.
Vulnerability and unstable currency in some countries. International presence of their factories makes them vulnerable to unstable political issues. Social The pressure to produce environment friendly toys. The pressure to produce educational toys. Caution with gender biased toys production Technological New AD printing technology. Mobile gadgets like tablets and smartness usage growth. Internet availability Social trends are that obviously safety should come first, especially when the products target market are usually young kids.
Also education, there is a need for companies to produce toys that not only entertain kids but also try and educate them. The technological trends here are general and expected in this analysis because technology keeps evolving at a fast pace so it is almost impossible to survive without adapting to he changes. The political and economic trends for LOGOS could be called standard for a global company that does business in different parts of the world where economies are a constant concern because of their instability The Porter’s Six Forces will help us to better understand the toy industry.
The e toy industry consists of a variety of different market segments with Logo’s current TTYL the top brand in the industry. The supplier power in the toy industry is high due to trademark arks and licensing to be able to use the likeness of characters and dictating which company they chi Jose to carry their products. The threat of entry is low because the market is highly saturated WI the many key players already in place dominating the majority market share.
Figure 2: Porter’s Six Forces Analysis of the Toy Industry Supplier Power High Trademarks Licensing Produce mass quantity efficiently and effectively Threat of Us obstruction Low Books Sports Exercise Threat of Entry Highly Saturated market Startup cost Key players own market share Industry Rivalry – High Building Blocks and Sets LOGO, Buchanan Trains, Crazy, Erector, Elite BRI, McFarland Toys, Mechanic, Spin Master Video Games LOGO, Nintendo, Microsoft,
Activation, Banzai Monaco, Deep Silver, Electronic Arts, Disney, Sony, Hour, Warner Brothers Action Figures Activation, DC Comics, Diamond Select Disney, Doodle Jump, Funk, Goalie International, Hasher Marvel, Mezzo, NECK, Nickelodeon, Playbook, Sesame Street Industry Rivalry Continued Vehicles and Remote Control Estes, Hot Wheels, Lionel, Moose Toys, Revel, Spin Masters, Tech 4 Kids, Innovation First, Reeves Riding Toys Disney, Power Wheels, Kid Motor Buyer Power High Complements No Loyalty Many products to choose from Based on trends None Industry rivalry is high due to the vast amount of market segments within the industry.
Logo’s currently ranks as the number one industry leader as they have extended thee r market outside of just building blocks. Due to the different segments that make up the toy Indus story, buyer power is high because they have countless products to choose from. They are not loyal I to any one company and the industry is based on trends that are constantly changing to the next big hit. The porters can also be used to better understand the makeup of the building blob KC segment inside the toy industry. Porters Six Forces Analysis of the Building Block Segment Supplier Power Low Low switching cost
Cheap molds to mass produce building blocks The read of Substitution High Outdoor Games Electronic Games Dolls Threat Of Entry LOGO owns majority Other competitors solidly in place behind Industry Rivalry – Low LOGO, Hasher, Matter, MEGA Brands, KANE Buyer Power med Small market segment Few options Different types of building block materials In the building block segment, the supplier power is low because the companies face low switching cost to find a different supplier to make a mold for their product to mass produce. The threat of substitution is high considering this is just on segment in a big industry.
The customers can go to electronic games, video games, action figures, dolls, outdoor games or any Other segment throughout the industry. The threat Of entry, however, is low due to the strong market position held by LOGO. Hasher, Matter, MEGA Brands, and KANE also have good positioning in the segment as well. Therefore, rivalry is low in this segment with few players and LOGO owning majority of the market share. Buying power is medium in this market due to being a small market segment with few options. The buyer can control the different types of mold required for specific blocks to be made.
There are no compliments for this SE segment either. Next, using the Porter’s Six Forces Analysis, we will analyze the video game SE segment of the toy industry. Figure 2: Porter’s Six Forces Analysis of the Video Game Segment in 2014 Supplier Power Medium Many video GA have individual developers, making supplier power lower Retailers and distributors have the power and control where the game is showcased – Medium Independent developers These developers may often work with an established publisher Industry Rivalry Very High Threat of Substitution Medium TOYS Other hobbies Television ; Welkin Video Game
Developers: o Busiest, Electronic Arts, Midway, Acclaim, Activation, Sammy Corporation, Nintendo, Microsoft, Lucubrates, k Sports, Infinity Ward Independent developers Buyer Power Medium Little to no switching costs Consumers may stay loyal to a video game series, but are opened to other alternatives Online engage purchases the Porters Analysis on the video game industry, there are many different face torts that affect how the industry plays out. First, the threat level of entry in this industry is medium.
Since there are independent developers that can create their own game with their own software, any determined signer could create their own video game. On the other hand, these independent developers may need an established brand, such as Electronic Arts, to further develop and distribute their product. Next, the supplier power is also medium. Because of these independent developers, they create their own product; in a sense, they are their own suppliers.
The power in this section is in the hands of the retailer because they control where the game is showcased, but since outside suppliers don’t control production, the supplier power is medium. In the industry rivalry is very high. There are many different video game impasses that cover all types of video game genres. Some companies competing include: Electronic Arts, busiest, Lucubrates, Activation, k Sports, etc. Also, with independent video game developers, there is always an opportunity for unexpected competitors.
The buyer power in the video game industry is medium. There are no switching costs for customers to choose a different product. There is a decent amount of customer loyalty within this industry to certain video game series, but most consumers are opened to other alternatives. The substitutes to video games are other recreational activities. Toys, sports, other hobbies, books, and television are other ways that consumers in this industry may spend their free time.
With the addition of online gaming around 2002, a good complement in the video game industry has been the ability for the consumer to make engage purchases for a specific game through the online store of the console the are using. This provides an opportunity for the video game developer to gain more revenue even after their game was purchased. Figure 3 SOOT Analysis, LOGO Company Strengths Strong brand Core products are still relevant Market for Logo products still remains
The right management seems to be in place Weaknesses F-uncial fundamentals distressed In housewifeliness production abilities C] more poor performance before it turns around Opportunities The retreats Outsourcing production should help margins Focusing on core products could lead to strong cost cutting strategy – improving financial health in the near term The addition of further products could benefit the company in the long term Toy market dislikes Logo only focusing on core products and wants more. CLC Outsourcing risks Pressure from creditors if poor financial performance continues
The company will still see The SOOT analysis helps us to understand the strengths, weaknesses, opportunities and threats of the business situation Logos is in. One of the keys to a turnaround at Logos is the strong brand they have built. The company will have to rely on the strong brand awareness and quality it represents to get them through this tough business time. Outsourcing production to cut costs to improve margins is one of the greatest opportunities the company has. Outsourcing production has been a very common trend over the past few decades that the company is probably behind.
Cutting costs from smaller product mixes and outsourced production will drive margin expansion and stabilize the business. The company is facing threats from the toy market and its financial situation. Poor financial performance that will probably worsen before it improves will hurt the company’s ability to raise capital needed to turn the business around. Outsourcing production carries some risks that include maintaining the same level of quality as in house production and maintaining the reliability of meeting supply demands. This could temporarily threaten margins and sales but he costs benefits should play out in the long run.