Free Case Study About Fisher-Price Toys, Inc.
Answering the Key Questions 5
Fisher-Price Toys, Inc.is the world-renowned manufacturer of toys from America, whose history began in 1930 in the town of East Aurora, which is located near New York City. The company was founded by Herman Fisher and Irving Price, who took the position of Executive Director. An active part also was taken by Irving’s wife– Margaret Price, who was in the role of artist and illustrator and Helen Schelle, who for years has worked in a toy store in New York, and therefore had a lot of experience in this direction.
The company is very famous for being a pioneer in the production of the range of music box toys. Providing its customers with distinctive features of products, namely fundamental play value, inventiveness, strong structure, appropriate value for the money, and action, Fisher-Price assured stable and reputable growth rate. Exceptional within the business, the company operated a certified on-premise kindergarten school for residentinfantkids at which toy models cold be verified. The company was one of the first to use plastic for the manufacture of toys, so it appeared the first range of such models in 1950.
Fisher-Price, setting the highest standards for quality and safety, produces a toy that gives children the charm and warmth, thrills, joy of communication and the first discoveries. Elaborated and robust toys from Fisher-Price maximally promote the harmonious development of the child from birth to school. The original design, challenging game effects, strength and durability justify customers’ confidence. Its assortment is from a musical rattle to complex role of thematic complexes and the first call with the Fisher-Price.
Its toys bring kids interest, surprise,and joy and fora long time get his attention. Intrigue! And, of course, teach him new skills.Each toy is designed including research of teachers, pediatricians, hygienists and psychologists, which scale (research) in financial terms, is available only to market leaders. Specific recommendations for age are on the packaging and in the catalog.
Products from this brand are not toxic (the paint doesn’t have harmful fumes), cannot be burning and smoked, does not lose color. Soft toys can be repeatedly washed in a washing machine – theyare not deformed and lose their properties. Toys with batteries are not heated and not static. Elastic materials and spring of toys of this brand must withstand at least 10,000 compressions by“automatic fingers”.
Over the years the brand has released more than 5,000 different models of toys. The Fisher-Price’s products repeatedly been honored with prestigious awards at international competitions.
The decision on the launch of the ATV Explorer should include internal organization’s opportunities, industry analysis and sales strategy in order to identify the most suitable policy for the decision-making. Given the fact that riding toys were the most consumed products in the United States with 22% share at retail, the ATV Explorer in this case would have an opportunity to enter the market. However, it is worth to mention that toy industry is considered seasonal, because such products’ are often purchased for special occasions, particularly Christmas period. It was also found that appearance of high-volume discount networks could negatively affect the launch of the ATV Explorer, because as it appeared due to additional research the primary expenses on the toy would be significantly greater than projected. The reason is in the preliminary funds in the mould shape and distinctive tooling expenses. In addition, inflationary pressures and aggregate rate of disposable income were threats because it led to the ability to get rid of money despite the fact that the higher the inflation, the fewer amounts of products can be bought. In case of inflation people try to invest money in valuable assets and toys couldn’t be considered as valuable items. Another threat for the company is the reducing quantity of children under six, who are the main target audience (of course, bearing in mind mothers, who can be considered as intermediaries).
However, the market opened many other opportunities for Fisher-Price. Among them the following can be defined:
Within 1963 and 1967 the amount of hobby and toy and game outlets demonstrated the decrease due to the set of discount chains of various rates (from extreme discount to prestige goods). In this case, the number of company’s competitors decrease.
Different producers were too delicate or very luxurious to attract large customer approval. Fisher’s pricing policy was definitely eye-catching. Its moderate prices could attract more customers and provide them with high quality products.
Recruitment of skilled supervision from other industries allowed the company to achieve better results in promotion, sales and revenue growth. Regular hiring of new people is a good way of a constant inspection and even improvement of the selection criteria. Moreover, the new people bring new perspectives to the company, new ideas and attitude to work.In case of Fisher-Price, the effect of skilled supervision led to the expansion of the product line, the increase in volume of toys at value of $3-$5 and decrease in the quantity of company’s toys cheaper than $1-$2.
The application of pull strategy, which involves high costs of advertising and promotion for consumers in order to create demand from their side, had impacted company’s refusal from no-TV ad procedure. The result of TV campaign was successful.Consumers started to ask the goods from their retailers, retailers from wholesalers, wholesalers from manufacturers.
The ratio between opportunities and threats can be seen in the table below.
Taking into account Fisher’s strengths, namely unwritten rule of not exceeding $5 price for a toy, success of launching Creative Coaster and Family Farm lines, sale of product ranges instead of individual items and hostile merchandising campaign, Fisher-Price Toys had more opportunities and advantages to become successful with the launch of new product line.
Answering the Key Questions
Before deciding on the launch, the company conducted a research, but it wasn’t comprehensive, because the survey made for parents of two-five years’ kids and analysis of kids’ behavior and interest in the toy showed that the ATV Explorer would be well-consumed, however, the assessment of materials’ price was poor. Various options were examined in order to define the most appropriate strategy for launching, if it was applicable.
Reactions among major buyers were similarly mixed. Of the six national chains that accounted for a substantial percentage of Fisher-Price’s volume, two buyers commented that at any price the ATV Explorer would not be a good seller, because the moon theme it conveyed was outdated. Nonetheless, one of these buyers and three of the other four felt that the Fisher-Price name, coupled with the attractive design and engineering of the toy, would assure reasonable sales at the $18.50 level and said they would order the toy if Fisher-Price decided to include it in their 1971-1972 product line. Conversely, the remaining two buyers said they would refuse to order the Explorer, pointing to adverse economic conditions and expressing the belief that people will pay only so much for quality toys.In my opinion, Fisher-Price should launch the ATV Explorer. Despite some drawbacks and relatively higher price of the product, it would attract customers in case of appropriate sales strategy. Severe rivalry in the riding toy field required constant improvement and innovations in order to sustain competitive advantage.
In spite of company’s follow its principle of the retail price under $5, it is recommended to use the strategy of “price skimming”. Its essence lies in the fact that since the launch of a new product on the market its price is set as high as possible in terms of consumers willing to buy a product at this price. Price reduction takes place after the first wave of demand subsides.
Figure 1. The strategy of “price skimming”
This allows expanding the area of sales – to attract new customers.This pricing strategy has several advantages:
• High price makes it easy to correct the error in the price, because buyers are more sympathetic to the lower prices than to its increase;
• High price provides large enough profit margins at relatively high costs in the first period of the release of the goods;
• Increased price allows restraining consumer demand, which makes sense, since at a lower price, the company would be unable to fully meet the needs of the market due to its limited production capacity;
• High initial cost contributes to the creation of image of quality goods for buyers,who can facilitate its implementation in the future at lower prices;
• Increased price increases the demand in the event of a prestigious product.
The main disadvantage of this pricing strategy is that the high price attracts competitors – potential producers of similar goods.
- The size of the market or market segment to which the company takes its product. The more segments, the higher the price the company can establish;
- The number of potential competitors. The more competitors, the maximum price will have a lower value;
- The elasticity of the demand curve for the commodity, i.e. the degree of sensitivity of consumers to changes in the price of goods.
In this case, the company could attract new luxury segment of customers. The strategy is based on creating a psychological effect of reducing the price by a few points against a certain round price. The higher the initial round commodity price, the greater should be the absolute discount for psychological effect.
In the future, Fisher-Price is recommended to use differentiated (segment) marketing, which differs by that company acts simultaneously on several market segments and for each of them developed a specific marketing mix (e.g., launch lines for premium and middle-income segments). Differentiated marketing strategy to a greater extent meets the conditions of competition, since focused on the specific needs of particular groups of consumers. But this strategy requires a lot of marketing costs and a well-established marketing service.
Differentiated marketing is beneficial, as is able to provide highly competitive products. Due to the integrated production the levels of profitability increase. Referring to the many risks associated with changing market conditions, it should be noted that this strategy seems to be quite reliable, as in the case of a drop in demand for one of the types of goods, there is increasing product range to another. This means that the company’s position in the market will always be profitable and stable.
The process of launch of new products to the market faces many unpredictable things and independent of the company’sleaders’ will factors that must be considered. Such factors include the risk, which reduction strategies are being developed simultaneously. The challenge is to choose from a variety of possible variants the variant of management solutions with minimal risk. To do this, a table of probabilities of market conditions and utility, in which each chooses specified probability and utility in a given market condition, is created.
One of the risks the company could face is the change of its management. In recruiting new staff there is some risk. Failures in recruitment of senior management are usually about 30%.Studies show that one of the main reasons for staff turnover among new employees is a discrepancy of corporate culture. Beginners do not necessarily have experience in the industry, as one of their advantages is a fresh look at the situation. But their leadership style and values should match the culture of the company.Secondly, each new manager should go well thought out process of adaptation, during which he must not only become familiar with the formal aspects of the company – the operational work plans, strategic plans and schemes of the organization – but also an idea of the informal aspects, such as of decision-making and project support. Another risk is if the company does not emphasize the uniqueness of a new product, it is unlikely that it will achieve it. Basically, the proposal on the launch of new products is estimated based on expected financial results: what forecasted revenues, market share and profits for a fixed period of time are. Forecasts may be too high if the market at the time the goods will counterparts. A very important point is the ability to adapt the goods to survive and make a profit from unpredictable developments.
Irrelevance risks of new products can be called from – for:
- The dynamics of changes in consumer preferences;
- Inconsistencies valuation of goods (services) to consumers; or scientific and technological progress; or action of competitive forces in the relevant market;
- Consumer uncertainty.
The establishment of the planned or desired timing of the launch of new products on the market depends on the skills and experience of managers, their knowledge of the strengths and weaknesses of the organization, estimates the time required to bring a product to the stage of readiness. Despite these potential differences and subjective factors of decision-making, it is reasonable to assume that the deviations of the actual timing of the products’ output to the markets of planning associated with the emergence of some reasons not specified in the planning stage. Significant delay of new product launch indicates significant managerial mistakes and has important consequences for the company.
Therefore, the launch of ATV Explorer is recommended because of company’s positive reputation and successful operation in the market.The launch of ATV Explorer was aimed at the expansion of toys’ range, increase in company’s profits and attraction of new customers.The decision on the launch of the ATV Explorer should include internal organization’s opportunities, industry analysis and sales strategy in order to identify the most suitable policy for the decision-making.Taking into account Fisher’s strengths, namely unwritten rule of not exceeding $5 price for a toy, success of launching Creative Coaster and Family Farm lines, sale of product ranges instead of individual items and hostile merchandising campaign, Fisher-Price Toys had more opportunities and advantages to become successful with the launch of new product line.In spite of company’s follow its principle of the retail price under $5, it is recommended to use the strategy of “price skimming” for the ATV Explorer.
Thus, selection of Fisher-Price’s toys is huge and everyone can find for his/her baby something useful and interesting. With the occurrencein the family of the company’s toys, parents can be sure about the development and the health of their loved babies because Fisher-Price products meet all safety standards. Now the baby will be a long and passionate about his training in the form of a game unpretentious, putting new knowledge in a small, but very curious little head.
In general, currently the company is constantly working to develop new toys and their testing. Every year, about a thousand parents attend “Game Lab” of the brand to test toys; even 8,000 parents participate in different programs of the company. The company’s designers create every year 2000 new toy series, which are available from the top 100. Future toy before release must undergo 15 different tests and trials.
Kotler, Ph. & Armstrong, G.(2012).Principles of Marketing, 14th edition, Pearson Prentice Hall.
Thompson, A. A. and Strickland, A. J. (2003).Strategic management: concepts and cases, McGraw-Hill/Irwin.
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