Case Study: Fisher-Price Toys, Inc. Essay

Case: Fisher-Price Toys, Inc. 1. Basic information 1) 2) Company: Fisher-Price Toys, Inc. (Industry: Child toys) 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. ) than planned. High price disobeys the traditional brand image of the Fisher-Price company –less-than-$5 convention. (2) 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 Fisher-Price must decide quickly before August to catch the sale peak: (1) (2) 3. trade-off between product quality and price; Independence of the product

Case analysis 1) Current Market strategy (“4P” / “4C”) (1) (2) (3) (4) 2) Product > Commodity: innovative products / safe, durable and educational Price > Cost: moderate price / good value for money Place > Channel: Aggressive to increase the market reach and improve sales Promotion > Communication: focused strategies for advertisement and promotion of differentiated range and group of products SWOT analysis (1) Strengths (Internal) 1Internal operation ­ ­ ­ ­ ­ 2­ ­ 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 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 3Brand & Reputation ­ ­ ­ (2) the best know brand for toys, has the largest market share (64. 7%), and is brought most often (82. %) Enjoys a reputation for intrinsic play value, good value for money, ingenuity, strong construction and action. ranks first in brand loyalty (60. 5%) Weaknesses (Internal) Market positioning 1- Internal operation ­ ­ Reluctance of change / comparatively conservative management teams Inflexibility in the decision making process 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 highly dependent on US market with little or no presence overseas Limited sales channels (trade only) Channel of discount stores could jeopardize brand image 2- Irreducible escalating cost ­ ­ ­ ­ 3- Channel ­ ­ ­ (3)

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Opportunities (External) 1234Market potential: Foreseeably the size of potential consumer (children under 6-year-old) is expanding Merges: horizontal (M&A competitors), vertical (franchise or strategic alliances with supplier and traders) , and conglomerate Market explore Cost-cutting effort: operation re-construction or innovation. Macro-environment: ­ ­ 2­ ­ ­ ­ ­ Adverse economic condition. Seasonal nature of the business As a premier toy manufacturer, receives most attention and faces most fierce competition Product similarity leads to homogeneous competition (product concept) Intense Price competition Directly challenge from foreign manufacturer on cheap low quality products Technological advancement gadgets including toys (4)

Threats (External) 1- Micro-environment 3) Main Considerations (1) (2) Commodity: 1Cost: 123(3) (4) 11Initial investment on molds (A single mold is sufficient for producing 500000 ATV units only ) and tooling costs retail selling price: would have to be $18. 50, far more than initially $12 and could lead to poor sales records Trade-off between quality and price is against Fisher-price policy. Positioning as an independent product is against the advertising policy. Reduce on markup production margin on direct costs could sacrifice future products margin Communication: Channel Adverse economic condition where people would not be willing to buy premium products 24.

High price product could result in traders’ stock pressure and affect future cooperation Discussion of several alternative solutions Solution Pros 1. 2. 3. 1. 2. 3. 4. Low initial investment reduce retail price stay price competitive Low initial investment reduce retail price stay price competitive Can utilize the popularity success of existing product line 2. 2. 1. 1. Cons may affect brand image of good quality disobeys advertising policy may affect brand image of good quality Can affect sales of existing products line 1 cheaper version as an independent item 2 Cheap version as a dependent item 3 Expensive version as an independent item 1. maintain brand image of good quality 1. 2. 3. 4. 5.

High initial investment and production cost Less price competitive Market response is hard to predict disobeys advertising policy Traders’ concerns and cooperation Highest initial investment and Market response is hard to predict advertising and marketing cost would be high Traders’ concerns and cooperation Probably highest initial investment and production cost advertising and marketing cost would be high 4 Expensive version as a dependent item 1. 2. 3. consistent with advertising policy maintain brand image of good quality Can utilize the popularity success of existing product line 1. 2. 3. 4. 1. 2. 5 Both cheap and expensive versions independent items as 1. 2. 3. Attract different consumer segments A relatively safer / moderate solution Cam test market response and preference to help future decision 6 Abort production of any versions 1. Avoid potential business lose 1. Miss the business opportunity 5.

Recommendation 1) 2) Vote: Revised Solution 5 – launch a new product line starting from a cheap version for the first year Reason: (1) Phase 1: launch of cheap version 123456Meet the price / homogeneous competition environment Meet the initial investments requirement and tooling production Can utilize the new channel of discount stores Cam test market response and preference to help future decision Grasp the gold sales peak in November-December to drive the business performance of the year a sound financial condition enables to afford the financial risk of the launch of a cheap version (2) Phase 2: launch of a new product line with upgrade/expensive versions if phase 1 succeeds 12345Pre-market test shows the expensive version is likable and enjoys a high level of repeat usage Could be a new revenue source for a relative long-term Upgrade/expensive version can be pre-promoted to maintain the brand value and image Margin is maximized as consumers are segmented (surveys demonstrated that people are willing to spend money on toys (54. 9%)) Can utilize the good brand recognition and the success records in launching expensive products

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