Tiny Tots Toymakers Business Analysis

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Table of Contents

Strengths and weaknesses of tiny tots as a business
PEST factors for the Toys industry
Porter’s five forces analysis
Capabilities and competitive forces
References

Strengths and weaknesses of tiny tots as a business

Tiny Tots toymakers is a business venture which is involved in the manufacture, sale, and supply of toys within and without the boundaries of New Zealand. The company, which is run by Ray, its founder, and owner, his wife, and a few employees, has some strengths and weaknesses as they shall be outlined in the following paragraphs.

Strengths

Convenience: – according to the presented case study, the management of the company is concerned with the convenience of the customers in that their orders are respected and regarded highly. This is evident in the delivery process and also in the manufacturing process. The study has explicitly stated that the customers usually place their orders through post or mail or by making telephone calls. Once this has happened, the toys are made according to the customer’s specifications. On completion, the toys are packed and delivered conveniently to the customers. For any business to move along successfully there has to be enough conviction to the customers that they will get whatever they want conveniently from the store of their choice. This means that it is thus a very big advantage for tiny tots to have won the favor of recognition from the customers (Hill & Westbrook, 1997, 51).
Special features and benefits– Tiny tots is a factory that is involved with the manufacture and sale of toys. According to the proprietor, Ray is not vastly interested in sales but is more towards production. He claims to like doing the work himself and doing it in a very perfect way. In this manner, he tailors his products according to the specifications of the customers. The colors that they want, the design, and any other specifications. This has made hiss customers always get back and order certain toys from him.
Specialist skills– Ray is a person who has to love toys. After his degree from the university, there was nothing much he could do in agriculture so he got employed in a toy factory. Adding up his passion and his employment record, he was the right person to have such a factory. Moreover, he did the toy manufacturing on his own so he knew what was required to satisfy the customers. As a business, the company enjoyed first-hand specialist skills.
Self-discipline– the proprietor has also shown a sense of self-discipline in the cause of his work. This is evident in the way that he insists on training his employees and keeping them to a minimum level to avoid risking quality. This is an outright strength that has been able to keep the company afloat. Any business should focus on the requirements of the customers to very high levels.

Weaknesses

Perfectionism– one of the major business weaknesses in tiny tots is perfectionism by the proprietor. He insists to do most of the work by himself. As much as this might be the reason as to why his customers have stuck by him, it gets a little harder to expand as he cannot be able to serve all the customers with a handful of employees. This is evident from the turnover report. With three employees, he was able to earn more annual turnover which has been stated to be more than 10 years ago. If he would have continued with the trend he would probably be earning much more than the $140, 000 he is earning at the moment.
Limited expansion: – any business needs to be diversified and needs to have room for growth. In such a case, Tiny tots are weak in that it has oriented itself to only one area of operation; manufacture and distribution according to the case study, the proprietor of Tiny Tots has a chance to involve his business in sales. In the showroom, there are potential buyers though he claims he is not interested in selling and so only offers the toys with minor blemishes for ale in the showroom. This is a weak point in that, there is not enough testing that was done to disapprove it as a line of business. Being oriented to one area is putting the business in jeopardy if the line was to be affected by unprecedented circumstances (Coyne and Balakrishnan, 1996).

Opportunities

Increase in demand: – Ray started the business with a $6, 000 loan from his parents. He did not take the business to be long time viability but took it to be a hobby. This was not the case as, after some time, his business came to expand on the southern island. With time he started getting customers from the north and the number of shops that were buying directly from Tiny tots expanded in New Zealand to over 100 shops. With time the business started swelling up and got more customers from Japan and Switzerland. Being without any serious form of marketing or advertising, a little input into the business can then mean a very big growth opportunity for the business.
Internet: – the company has also had the opportunity to reach new markets from the recently developed website which was done by one of Ray’s sons. With the internet and a well-advertised web page, more people will be able to reach the showroom virtually. As seen from the slow increase in the number of customers since the launch of the website, it is possible to have more customers with an increase in internet marketing (Rainer & Turban, 2009, 40).
Possible European market: – by the presented case study, there is a possibility of getting more European customers if tiny tots were to venture into the upcoming market. The telltale sign of this market is the decline of the quality of timber in Germany. This means that more countries will not be having access to good quality hardwood which is essential for making the best quality toys. In some other parts of the study, there is information on decreasing supplies of timber in Europe and also the increase in the price. This is bound to favor tiny tots who have access to higher and better quality timber.

Threats

Possible competition: – as much as there is no stiff competition in the market at the moment, if there was to arise another company which would specialize in the manufacture of toys, there is a threat of decline in the market. This is due to the companies’ poor marketing and dependence on bank overdrafts and lack of a formidable expansion plan (Selden, 1997).
Continuity: – considering that the company is a family business, there is a likelihood that the company can go down if Ray gets incapacitated in any form this is mainly because he does most of the work himself and thus the company would have lost a very valuable worker. After some time, the business might go down as his sons seem less willing to take over the business from him.

PEST factors for the Toys industry

PEST analysis is mainly about factors that are not within the bounds of the organization. There are external to the industry though they are bound to affect the operation and the profitability of the industry.

Political factors: – one of the factors that can severely affect the industry is the imposition of taxes on the importation of materials. This can affect production if the materials are got from another country. Exportation taxes may also have an impact on profits. This is an issue that can limit production and withhold the companies from exportation and thereby limit them to local operations. Other probable political factors that can affect such an industry are environmental regulations. In some cases, the raw material might be from natural products like wood. If the government imposes bans o logging, it, therefore, means that there will be timber shortage and thus little input into the business.
Economic: – this is a very crucial area in this industry. Toys, in the first place, are tools which are used by children to play or learn with. They are not basic needs that cannot be avoided. Due to this, there is a likelihood that in hard economic times, parents would choose cheaper toys that are easily accessible. This would mean doom to companies that specialize in toys alone. The rates of inflation at any one time are bound to affect how different parents react to the necessity of their children having some certain types of toys (Armstrong, 2006).
Social factors: – the most important social factor in the toy industry is the health of the child. Toys are sensitive objects which tend to make part of the life of the child. When children use certain types of toys, their parents need to have an assurance that they are very safe. Contrary to that, no parent would risk buying a toy for their young ones.
Technology is slowly affecting all industries; toy companies should keep abreast with technology to satisfy the needs of all children ages. With an increase in age, the children tend to learn more from their friends and media and they would then require toys that are in almost the same line. Old fashioned toys are fading away. The internet is also affecting this industry. More people have access to the internet and thus more information on the best toys for their children. It is hence upon the toy companies to ensure compliance with current standards to keep in the market (Armstrong, 1996).

Porter’s five forces analysis

Supplier bargaining power: – depending on the ram materials being used, and all other inputs, the supplier might feel like increasing their bargaining power. In a place like tiny tots, the suppliers of timber might affect business if there was to be a low supply of timber in the country. This can also be interfered with depending on the profit margins that are being earned by both industries. In the current situation, it is less likely to affect business.
Customer bargaining power: – this increases with an increase in alternatives. With the uniqueness of Tiny tots, there is a high likelihood of them remaining in business if they were to offer good prices. With the customer base increasing, toys are likely to remain in business as they will always be needed as children are born every day. The effect of this force is little as there is a little likelihood of anyone else producing the same stuff.
New entrant’s threats: – this is a potential threat if a certain company s to come up with a new and better brand of toys into the market. To avert this risk, toy companies should target on improving their brand to earn brand loyalty from their customers. The companies should also keep abreast with recent improvements such that the new players will be left with limited choices of improvement. A company like tiny tots can focus on long time contracts with different shops.
Substitute threats:- this is one of the least threats considering that it is almost impossible to have substitute toys. In the case of local inventions, brands cannot be fully replaced so they will always be in need (Porter, 1980).
Competitive rivalry: – competition is an area that helps the customer get better quality goods. This is yet still a very potent threat in the toy world. Because all children require a certain genre of toys at various ages, the companies should make sure that they provide the best quality of the genres. In this area, the question of the brand comes in. the companies should ensure that the toys which they are supplying or selling are always the best and of the highest standards. In this case, they will win brand and hence customer loyalty and hence be able to mitigate the risk of being drained by competition (Porter, 1981, 44).

Capabilities and competitive forces

Tiny Tots is a company that has great growth potential. Looking at its annual turnover, the management should focus on marketing their products to a greater notch which would keep the company at greater heights. The management should seek ways into which the company should be expanded and stop venturing on a single business line but incorporate other ideas like selling (Armstrong, 1982, 199). The addition of employees will make the company capable of being the biggest toy supplier in New Zealand and its outskirts.

The competitive forces are not such a big problem to this company considering its uniqueness. At the current rate of minimum few employees, the possibility of being taken over by another company holds and it is upon the management to rush to making better decisions (Menon, 1999, 31). Competition can arise from companies who offer similar toys but at a lesser price. One example is a company dealing with the same toys but out of plastic. To avoid this, the marketing department can be improved to make sure that the proper differentiating incentives are applied.

How have the personality and goals of the owner of Tiny Tots Toymakers affected how the firm has developed?

In 25 years, the owner of Tiny Tots Toymakers has built up a fairly successful toy-making business. The owner set out to start a hobby-like activity since he could not see toy making as a workable long-term business. Certain personality traits and aspirations of the owner have set the course of the business and influenced its development over the years.

The owner is action-oriented. The owner initially presented his business idea to the Business Advisors at a University Business Development Center to get funding but was not offered any help. This did not deter his efforts; he went ahead and sourced the start-up money from a loan that was provided by his parents. The setting up of the business was very challenging, and he could have easily given up, but the owner remained decidedly motivated and worked even harder to see his business get off the ground. Since the business did not seem to have long-term prospects at the time he worked part-time to supplement the earnings of the toy-making business.
The owner is self-fulfilled. The owner chose to pursue a business that would put him in charge of his future and overlooked a secure career in the field of agriculture, for which he had earned a degree in Agricultural Science in university and had even landed a job as an agricultural advisor, right after college. After a stint as an agriculturalist, the owner chose to pursue his passion for manufacturing toys. Albeit, this was risky and did not seem like it had much of a future, the owner chose to pursue his passion, over the security and comforts that would have easily been provided by a career in agriculture.
The owner constantly seeks quality. The owner is always looking for ways to improve his products and uses high quality as the main selling point. During the early stages of the business, the owner traveled back to the toy factory where he had developed a love for making toys. While there he observed how high-quality materials were being used to produce toys and he made contacts that he would use for his production back home. Later on, when the quality of materials that were being supplied with deteriorated, he decided to make them himself. He had to invest time to learn new skills and the funds to acquire more machinery.
The owner is collaborative. The owner worked together with people who shared in his dream, he assigned tasks to others and created relationships with other people who would take over some of those duties that he felt he could carry out as well as it should be, for example, sales and marketing. In the initial stages, the owner was tasked with overseeing all aspects of the business, from sourcing materials, production, sales, and marketing. When the owner got married, he involved the wife in the business. The wife of the owner was tasked with maintaining the accounts of the business, product assembly, and packaging. The sons of the owner were also involved in the running of the business, and they would work at the factory during school holidays.
The owner is tech-savvy. The owner employed technology to give his products an edge over competitors and make his business more cost-effective. To improve the visibility of his products, the owner had one of his sons design the company’s website. The website brings in orders for the company and saves the cost that would be used to frequently advertise on the radio or newspapers.

If this was your business, what plans might you make for the future?

Certain strategies can be employed to make Tiny Tots ToyMakers a more profitable enterprise, expand its operations, and make it more sustainable in the long term.

Franchising. Franchising will be used as a means of expanding the toymaker’s operations. This would also expand the ownership of the business, to areas beyond those of the original location. For example, operations would be expanded to Australia and Japan. These markets would be better served by a more localized service while still maintaining the high-quality standards that were originally envisioned by the founder of the toy-making enterprise. Franchising will allow operations to be set up where source materials are easily available, thus reducing the overall costs of doing business. Franchised operations will enhance the visibility of the toy-makers products by exposing the brand names of the enterprise, thus serving the dual purpose of marketing the Tiny Tots brand name. By franchising the business operations, the enterprise will be creating more business opportunities for the localities that it will be based in.
Licensing. When the branded products of the toymaker are licensed, it becomes a more effective means of growing the sales base inexpensively. The licensed products will mean that the enterprise will generate extra income from royalties that will be paid out when the products become successful in the market. Licensing is a relatively low-cost model for selling the products since it means that the enterprise will forego the extra cost of undertaking the production and marketing of the product. Licensing partners will be sourced in the local markets that the toys are being targeted to be sold to. For example, a partner in Japan, where the product has already been established will result in income whose margin has not been narrowed by the shipping and local marketing expenses. The products will remain the intellectual property of the toy-maker thus the enterprise will still maintain control over its products.
Diversification. The toymaker will broaden its product offerings by producing complementary goods for the toys, for example, storage containers for the toys, or offer services that can be paired with the toys, like educational services. The toymaker can also venture into other businesses like buying licenses for other products that are closely related to the toys, and in so doing widen the choice for its customers. When the products of the toy-making enterprise are expanded, it would mean that the toymaker will be receiving income from sources, thus ensuring there is an income even when the sales of a particular product reduce. When the enterprise diversifies its product offering, it means that it would be exposed to a wider market thus, the visibility of the toymaker will be strengthened across different market segments, which assures the viability of its brand name.
Making use of the internet. The toy maker’s website will be used to generate more sales for the enterprise by increasing the visibility of the business since more and more people are relying on the internet to decide which products they will buy. The content of the website will be relevant enough to enable the site to be better ranked in the web search engines, thus drawing more potential customers. The enterprise’s visibility can be bettered through the use of forums and social networking sites, for example, Facebook, MySpace, and Twitter. A constant presence on networks that deal with the related line of work will enable the toymaker to be noticed as the go-to firm, eventually making it an authority. The internet will broaden the reach of the toymaker’s marketing strategy in a low-cost model, whose potential returns will far outweigh the invested resources.
Increasing the global footprint. An increased presence in the global marketplace will result in larger sales volumes, the strengthening of the brand name of the enterprise, a long-term sustainable growth. A far-reaching expansion in the global market can be achieved by establishing partnerships with businesses that are better equipped and better placed to exploit the opportunities that are available in their locales. This would mean integrating the operations of the toymaker with other firms without having to necessarily incur the costs of acquiring or setting up operations from the ground up. Partnerships can be established with distributors that are established in the targeted markets. The distributor will acquire stocks of the toy-maker and then re-sell in their markets. The toymaker will have its product sales increased at virtually no cost and the same support the local-economies of the targeted markets.
Acquiring and merging with other businesses. When an opportunity to purchase another enterprise that deals with a related venture is realized, the toymaker can use it to cheaply expand its operations by riding on the establishment of the acquired firm in its local markets. The toymaker can easily increase or even double its market value when the acquired business’ profits eventually cover the cost of acquisition. The toymaker can venture into new markets and keep a close eye on the existing competition because it can they can run into difficulty or change strategy, thus the toymaker should be ready to take them over and leverage on their existing networks and workforce to enhance its footprint in other markets. The toymaker can acquire other enterprises that deal with particular aspects of its model. For example, businesses that produce materials that are used as raw materials by the toymaker can be acquired so that the quality of sources can be controlled and directly determined.
Working with the government. The government offers a great opportunity for an enterprise to expand its operations sustainably and in the long term. When the government becomes a customer of the enterprise, a constant income stream will be guaranteed. Since the government can afford the enterprise a fairly safe market, the toymaker will then be free to venture into new markets, without the risk of losing ground on already established contacts because contracts which are awarded by the government ensure that the enterprise will not be exposed to stiff competition for the period of the contract from other markets. Working for the government enables the enterprise to be better placed to access policymakers who can influence the different aspects of the business setup. For example, the enterprise will be better placed to take action, when legislation is being formulated that influences how raw materials are sourced, like wood, will be affected by legislation on forests.
Developing alliances. The toymaker can easily increase its market base by getting into partnerships with other business that deals with the production of related products or offer service that corresponds with the toymakers line of work. In a tit-for-tat scenario, the toymaker may support another firm to market its products, for example by marketing popular television characters, modeling them, and marketing them as part of its product portfolio. The television company can then advertise the toy maker’s products. This results in a win-win scenario, whereby both of the enterprises increase their sales. Alliances can also be used to access markets that have already been established for a different product and leverage it to increase your sales, without having to have had gone through the traditional marketing strategies. As an example, a toymaker can easily access the market of the movie industry by creating models of popular characters.
Growing within an emerging market. The toymaker can increase its market base by establishing itself in markets that are in its emergence phase. These markets are usually composed of first-time customers thus, the high growth rates of these markets will become the growth rates of the enterprise, and can even be exceeded by the toymaker. First-time customers, usually have an unbiased need for the product being offered thus, the enterprise has a better chance of influencing their loyalties before they have been fully developed. Since first customers do not have existing product loyalties, there is less chance that a competing firm will launch counter-marketing campaigns. The same strategy can be applied to tap into niche markets that are within existing markets. Since a niche market will not be previously serviced, the completion will be less and the enterprise will be assured of a ready market.

References

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Hill, T. & Westbrook, R (1997). “SWOT Analysis: It’s Time for a Product Recall”. Long Range Planning 30 (1): 46–52.

Menon, A. et al. (1999). “Antecedents and Consequences of Marketing Strategy Making”. Journal of Marketing (American Marketing Association) 63 (2): 18– 40.

Porter, M., Argyres, N., and McGahan, M. (1981)”An Interview with Michael Porter”, The Academy of Management Executive 16:2:44

Porter, M.E. (1980) Competitive Strategy,New York: Free Press.

Rainer and Turban, Introduction to Information Systems second edition, Wiley, 2009, pp 36–41.

Selden, P. (1997). Sales Process Engineering: A Personal Workshop. Milwaukee: WI.

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