UK toys and games industry

PESTLE analysis Factor Current situation Implications Political/ Legal/ Environmental 1) Restrictions in marketing to children 1) ethical and legal aspects should be taken in marketing to children; damage to company reputation In case of offence Economical 1) Recovery after recession and economic downturn 2) GAP growth 3) Industry trading deficit Increased by 40% 1) ruling costs and falling prices, currency rate volatility etc, ) disposable income growth 3) price competition may take place Social 1) Less spending on toys and more confectionery, video game and consoles, children magazines 2) Children birth rate growth 3) Children sophistication and as;nary 1) development of new markets/segments 2) market potential growth 3) educational or Interactive toy products Technical 1) Easy Internet access and high Internet penetration 1) types and channels of communication with customers are shifting to digital ones External environment both complicates and provides new growth opportunities for Horny company. Economical and social forces define customers behavior. Digital presence and social media marketing (SUM) are a must nowadays. II. Competitive environment The majority of Issues may outcome from the Industry. To summarize market environment It Is better to use Porter’s Five Forces Model. Barriers to enter the toys and games market are relatively low.

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Therefore, if local competitors appear they are likely to take a niche segments; the more threat should be expected from overseas markets when competitors take a decision to enter the UK market or increase import volume to the I-J (like Matter or Hasher, US owned impasses operating in the I-J) . ; In terms of distribution channels Internet clears up geographical boundaries and barriers and provides an unlimited access to on-line toys and games shops of different producers all over the world. Rivalry (high): ; Market rivalry is extremely intensive. Horny has a number of strong competitors both in the whole market (Leg, Disney, Hasher, Matter etc) and in the toy vehicles segment (Horny vs. Pepco/Buchanan/Adapt or Sclerotic vs. FAX/Matter (Hot Wheels)/ Tommy/ Tycoon).

Bargaining power of buyers (medium): End-user customer base is expected to grow (due to rise of children population in he I-J) (J power) ; Customers’ disposable income growth (due to GAP growth) ( J power) ; Low cost of switching to another brand (t power) Toys are consumer goods with elastic demand (t power) Bargaining power of suppliers (medium): High cost in case of local production (t power) Opportunity to switch to overseas producers with lower production cost exists ( power), however, a range of additional risks occurs in this case (egg, currency rate risk) Power of substitutes (high): ; Horny owns 7 brands and product ranges: Horny, Sclerotic, Corgi, Airfoil, Humbler, Lima and Electron. Only railway brand encounters 650 products.

From customers perspective the chances of rivalry between products exist as they may face to dilemma which Horny product to choose. There is an implication of proper product portfolio management to avoid potential trade-offs. ; It is very easy to switch from one toy product to another. Ill. Strategic review From the strategic point of view – how Horny can go further – both Insofar growth and Porter’s generic strategies have to be used simultaneously. Market development options: Entering new markets as an opportunity to reduce reliance on UK sales. ; Targeting new market segment, egg busy people who have no free time and prefer on- nine shopping. ; Cooperation and partnership with other brands through licensing and product tie-ins.

Product development options: performance; limited edition of trains or cars. ; Horizontal line stretching, egg Horny trains or Sclerotic cars of different colors. ; New products and lines: launching education and interactive toys. Product penetration options: Regular advertising to maintain Horny brand awareness and marketers. ;More number of Horny Visitor centers. With the current state of the highly competitive marketplace the growth strategies can be supported with differentiation strategies. Differentiation points may be guided by a brand values: quality, passion and a commitment to the detail of the subject. IV. Marketing Mix Product . There are 7 brands in Horny portfolio.

Electronic locomotives: Horny, Lima and Electron; cars: Sclerotic and Corgi; other toy vehicles: Airfoil and Humbler. Horny Products belong to shopping consumer goods and consumers do a lot of selection and comparison based on various parameters such as cost, brand before buying an item. Shopping goods are purchased only after the buyer compares the products of more than one store or looks at more than one assortment of goods fore making a deliberate buying decision. This may have an implication on consumer purchase process. Due to lack of numerical information (egg, sales performance) in the case with regards to Horny products matrix approaches are hardly applicable.

However, due to availability of chronology of company development we may assume that the majority of Horny products are at maturity stage of product life cycle. This means Horny should seek means of prolonging the product life by permanent modifying the products and searching for the new market segments. Price. Price is the measure of value exchanged by the buyer for the toys (value) revived by Horny. Premium pricing strategy is Justified by brand image for quality products and added value – aspiration by owning Horny products. With regards to competitors price cuts Horny tends maintain prices and respond with non-price actions Justifying its price differential with product quality and brand heritage.

High price is also a reflection of economic (non-manageable) factors, internal (manageable) factors: objectives (strategic and pricing), cost of production, elastic demand of the product, consumer aspects (perception and value for money), spend on NYPD, advertising. As Horny products are also sold beyond the I-J a company should pay attention to personal objectives, competition, positioning, extra costs on export, advertising adaptation, packaging while pricing products on those markets. Place. There are only two channels of sales: retail (above 800 independent retailers Horny Visitors Centre is not a sales channel, however, plays a significant role in sale endorsement.

Even though we are lack of numerical information about the channels performance, we may assume that due to technical trends the on-line sales share will intention to grow. Promotion. In terms of advertising 80% of media budget is spent on TV advertising to children (40% Horny range and 60% Sclerotic range) and 20% – for other mediums (egg, print advertising) targeted at adult enthusiasts and hobbyist. In general budget split is relatively fair as end-users are children, however, which range or communication channel requires more investments is a matter of company targets. Due to shifting to on-line communication channels – corporate website, Backbone, Youth and Twitter accounts – the role of public relations and direct marketing increases.

With these channels Horny generates more publicity: handle press releases, support product publicity, create and maintain the corporate image, handle matters with lawmakers, guide management with respect to public issues; can directly communicate to its customers. The rest As – people, processes, physical evidence – are of less importance to due to non-service nature of Horny products. V. Stakeholder analysis. This help to identify those individuals/groups that influence the company in different ways. The table 2 provides a brief description of stakeholders with medium and Geiger impact levels. As each stakeholder has its own needs, expectations and interest conflicts may arise, therefore a stakeholder management strategy should be developed. Table 2.

Stakeholder analysis Stratospherically Stake in business Impact Attitude Stakeholder management strategy Internal Horny employees Are fully responsible for doing business High Strongly in favor Employees have must the necessary competences; utilize internal marketing and enhance people management Parapsychologists Invest money with expectation to gain profit Medium Weekly in favor Public relations are important to keep them informed (egg, shareholder meetings) Primary Retailer’s Horny products High Weekly in favor To encourage retailers to sell more by negotiating long term agreements; reward for good performance Primary Producers (suppliers) Produce Horny products High Strongly in favor To select and work with the suppliers who can be a sustainable partner and provide toys in compliance with Horny toy policies Primary Customer groups Buy/own Horny products High Strongly in favor To provide easy access to the company/company products, engage, inspire and communicate with them; gather feedback and react correspondent’s Primary Licensor Gain profit by selling licenses Medium Weekly in favor To monitor and negotiate deals which may have mutual benefit for both partners Secondary Competitors (egg Pepco, Buchanan) Eventually influence on Horny sales correspondent reactive steps should taken regarding their activity VI.

STOW Horny has a range of strengths which differentiate it from other competitors and can be considered as a source of competitive advantage. However, some improvements are required: possible trade-offs between Horny products push the company to seek alternatives to diversify product portfolio. External opportunities are favorable for the company and they will obviously have a positive effect. However external threats which outcome from the industry can significantly harm Horny business. Therefore Horny must concentrate on product and market development utilizing its competitive advantages to address threats and succeed on the market. Table 3.

STOW Strengths ; Brand leader in model in the UK railway toy market Major competitor in provision of other types of toys Product portfolio of 7 various toy brands Good price/quality perception Brand heritage and values Weaknesses Possible trade-offs between Horny brands Lack of educational or interactive toy products Additional factors/risks with regards to moving production overseas ; reliance on off-line sales in the UK Low digital marketing investments Opportunities Recovery after recession and economic downturn GAP growth children birth rate growth Easy Internet access and high Internet penetration Cross market partnership (character licensing) Threats Restrictions in marketing to children ; Industry trading deficit increased by 40% Heavy magazines ; Intensive rivalry Low market entrance barriers High power of substitutes