The Study Of Toys Industry Marketing Essay

2219 words (9 pages) Essay

1st Jan 1970 Marketing Reference this

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Toys have kept humans company since time immemorial. Archaeologists have discovered toys from the Indus Valley dating back many centuries. The toys have changed but the emotional connect that people have always had with toys has lived on.

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US, China and Japan rank amongst the top 3 in terms of toy sales worldwide. Other countries with a significant toy sector include Germany, Brazil, France, India, Australia and Canada. The world’s largest toy manufacturer and exporter China makes 2/3 of the world’s toys. China’s plush toys enjoy a large share of the total sales in European & American market.

The Indian toy industry is estimated at about 850 million US dollars and until now has generated only 0.5 per cent of the global market. However, the growth of around 15 per cent promises to rapidly raise this figure, especially in the context of the growing middle class and the increasing willingness to spend money on luxury goods. According to a Euromonitor study, spending on toys and games in India is set to grow at 157% between 2009 and 2014, much faster than other Asian countries such as China (84%), Taiwan (35%), South Korea (33.1%) and Singapore (17.2%).

India itself has more than 800 toy manufacturers, exporters and suppliers, which means that 60 per cent of the market is handled by Indian manufacturers and foreign companies with subsidiaries in India. The Toy Association of India estimates that about 90 per cent of the Indian toy industry belongs to the non-organised sector.

The figures for the retail toy trade are similar: As much as 65 per cent, i.e. 547.4 million US dollars, is handled by the non-organised sector, but a shift towards the organised retail trade is clearly recognisable.

The children usually accompany their parents and have a direct influence on the decision to buy. TV advertising plays a major role here. The most popular product categories are electronic toys, followed by soft animals and hard toys.

Attention deficit of working parents towards their children is certainly one of the reasons for booming toy market, but keeping kids engaged is in itself a very big task. So, here toys and gadgets come into play. So, kids are running the show, as working parents – richer and much busier than the previous generation – try to make up for their lack of time to spend with kids by pampering them and conceding to most their demands

Presents make up a significant share of toy sales. Indian tradition demands that the person receiving a present must give back something similar. Experts suspect that this accounts for about 50 per cent of the market for gifts for people outside the family.

The average Indian parent spends around Rs 250-300 on a toy and this is going up more and more innovation-driven high-end toys and games – from high-priced board games and play gyms to BeyBlades and remote-controlled planes – enter the market.

Economic Data & Statistics

The toy industry’s annual Total Economic Impact in the U.S. is nearly $80.9 BILLION.

The average price of a toy is less than $8, but the estimated 3 Billion units sold across the nation each year generates approximately $21.2 Billion in direct toy sales.

From toy inventors to store clerks in every state from Alabama to Wyoming, the toy industry supports an estimated 533,177 jobs (FTE) generating $25.8 Billion in wages for U.S. workers.

The toy industry also generates $11.1 Billion in tax revenue each year (combined State taxes of $5.2 billion; combined Federal taxes of $5.9 billion).

Global Players

The major global players in the toy industry are Mattel, Hasbro, Lego Group. Let us look at these major players in brief:

Mattel:

It is the largest toy maker in the world. It was founded in the year 1945. It is the producer of iconic toy brands like Hot wheels and Barbie dolls. After the release of the Barbie doll, Mattel revolutionized the toy industry with its talking dolls and toys. The popularity of the Barbie brand can be gauged from the fact that there is a separate museum dedicated to it. In late 2009, Mattel signed a deal to make WWE toys from 2010.

Hasbro:

Hasbro is an American multinational toy and board game company. It is one of the largest toy makers in the world. The corporate headquarters is located in Pawtucket, Rhode Island. The majority of its products are manufactured in East Asia. It is the producer of the iconic G.I.Joe action figures and the monopoly board game which is the most popular board game of all time.

Lego Group:

It is a privately held company based in Billund, Denmark. It was founded in the year 1932. The company’s flagship product, Lego, consists of colorful interlocking plastic bricks and an accompanying array of gears, minifigures and various other parts. Lego bricks can be assembled and connected in many ways, to construct such objects as vehicles, buildings, and even working robots. Anything constructed can then be taken apart again, and the pieces used to make other objects.

The India Story

The industry in India is a very unorganised and diverse one. The major players in the organized market are very few in number. Two of the majors in the Indian context are Mattel Toys (India) Pvt Ltd & Funskool.

Mattel Toys (India) Pvt Ltd is a leader in traditional toys and games in India and has plans to aggressively expand its operations in the country. The company wants to grow through the introduction of new products, and has lined up many new introductions across traditional toys and games for launch in India. Mattel Toys (India) Pvt Ltd also wants to explore the unorthodox retail chains such as cafés in order to further grow its business. The company is also increasingly recognising the newer growing channels of distribution such as Internet retailing, and plans to further improve its presence on Indian portals. Although the company faces issues like the use of toxic materials in its toys, its India operations have a strategy that carefully avoids running into these troubles.

Funskool:

Funskool India Ltd, is a joint venture between Indian tyre giant MRF, and Hasbro, Inc., the worldwide leader in children’s and family leisure time products. Its Operations started way back in 1987.

The commercial operations began with setting up of a factory at Goa with all the machinery and equipment to manufacture high quality toys. To cater to the increased demand a second factory was set up at Ranipet, about 100 miles from Chennai. Both facilities have more than 60,000 square feet of built up area with multiple technologies to produce high quality toys.

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Funskool offers a wide range of products targeting vivid age groups from tiny tots to pre-teens. Be it squeaky toys, rattles and teethers for infants, play sets and crawling aids for slightly older babies, multi activity toys, assembly and construction toys and pull along toys for pre-school children.

As the learning process begins, so does the fun, Exciting vehicles and Play-Doh activities have kept children absorbed in their fantasy world for hours together. There’s so much for the family too – board games, memory games, party games… the list is endless.

Funskool’s range of products is a blend of art and science – they have been aesthetically created with exciting colours and designs that would delight children. They are also very scientifically thought out, so as to improve various skills and functions, from hand-eye coordination to problem solving skills, from reflexes to colour and shape recognition.

Most Funskool products are easy to carry anywhere and hence offer hours of entertainment where ever you go.

New Product Development

Although meant to be play things, toys also undergo a very rigorous designing process. The designing begins by studying and collecting information from psychologists, parents, educators, child development experts and other designers as well. This feedback aids the `designers in knowing the kind of product that their customers want or probably would like, whether they are ready for the toys they plan to design and make etc. A few of the major toy makers even have on site year round child care centers where they provide children with their new toys. They then go about studying their responses, interactions and desires in house.

Once they decide on the kind of toy to make, the designers begin by making a mere sketch of the toy. This is followed up with a colour illustration. At this stage, the designers resort to brainstorming with the artists regarding colour schemes, looks, composition etc. Then a wax model is made. This serves as the preliminary design. This design is then put to feasibility studies to determine its manufacturing worthiness. If the preliminary design passes the feasibility test, it is moved to the next stage. In this stage, a final design called the master design for the product is made. This is the design used to make the moulds for production

Manufacturing

Raw Materials

Plastic dolls are mainly made from PVC (polyvinyl chloride). Prior to its use, PVC must be compounded. Flexible PVC contains 40-60 of resins. PVC has other additives such as plasticizers, processing aids, pigments, fillers and stabilizers.

Manufacturing Process

The manufacturing of plastic dolls is done using either of two processes, rotational moulding and blow moulding. The head and limbs are manufactured using rotational moulding. Rotational moulding is used for making hollow and seamless products of all shapes & sizes. If the manufacturer intends to save on costs, blow moulding can be resorted to.

In the rotational moulding technique, the raw material in liquid form is filled in the mould cavities along with the resins. It is then subjected to heating, which melts and fuses the resins, all while continuously rotating bi-axially.

After a predetermined period of time, the moulds are subjected to cooling in a chamber via air and water. After cooling, the moulds are removed from the chamber, opened & the finished part is removed. After the finished part is removed, it is flanged by hand. Before attaching other body part, the face is made up. The process of making up the face can involve upto 15 steps. The hair is rooted into the head by hand using a special sewing machine. The hair is then treated and combed before putting the head and body together.

The look of the toys is decided by a large team of designers. The factors behind these decisions range from the changing time to popular demand for characters that one can relate to. Based on these decisions, the material is procured and put to use in decorating the toys.

Major Challenges faced by the Toy Industry

Safety and Regulatory Issues

There have been quite a few instances of impermissible levels of harmful chemicals/materials found in the toys. For example, Mattel had to recall more than two million of their toys containing very high levels of lead paint. In order to counter this, the American legislators enacted Consumer Product Safety Improvement Act (CPSIA). Some of the regulations in this act include stringent new product testing, heavy and strict penalties for non-compliance etc. This has led the toy manufacturers to include a stringent quality assurance system in place.

China which is the largest toy manufacturer in the world, accounting for almost 70% of the global market share is facing a challenge from the stricter safety requirements for toys in the European Union. The new rule puts tighter control over the chemicals that can be used in toys. This will increase the manufacturing costs of the Chinese toy makers squeezing their already thin profits.

Changing Play Patterns

Due to media and other forces, children are aspiring for adolescent interests at a younger age. As a result, toys are now increasingly targeted at children aged 12 or less instead of the usual 14 or less. Also, children these days spend more time in front of the computers playing online games.

Localized Global Market

Toy companies seek to produce toys with mass market appeal so that they can achieve economies of scale. However, variations in cultural norms pose a challenge. For example, Leapfrog, an educational toys manufacturer found that processes to sell their products in United States needed significant modifications in the other countries due to the cultural variations.

Future Outlook of the Toy Industry

According to industry body Associated Chambers of Commerce and Industry of India, the Indian toy industry is expected to reach Rs 13,000 crore by the end of the year 2015 due to growing consumerism and population. In order to meet with the regulatory demands that the toy makers face, there is a great need to improve manufacturing processes, thereby reducing costs. The toy makers need to look towards newer and more vibrant markets. They have to expand rapidly and come up with innovative products.

Toys have kept humans company since time immemorial. Archaeologists have discovered toys from the Indus Valley dating back many centuries. The toys have changed but the emotional connect that people have always had with toys has lived on.

US, China and Japan rank amongst the top 3 in terms of toy sales worldwide. Other countries with a significant toy sector include Germany, Brazil, France, India, Australia and Canada. The world’s largest toy manufacturer and exporter China makes 2/3 of the world’s toys. China’s plush toys enjoy a large share of the total sales in European & American market.

The Indian toy industry is estimated at about 850 million US dollars and until now has generated only 0.5 per cent of the global market. However, the growth of around 15 per cent promises to rapidly raise this figure, especially in the context of the growing middle class and the increasing willingness to spend money on luxury goods. According to a Euromonitor study, spending on toys and games in India is set to grow at 157% between 2009 and 2014, much faster than other Asian countries such as China (84%), Taiwan (35%), South Korea (33.1%) and Singapore (17.2%).

India itself has more than 800 toy manufacturers, exporters and suppliers, which means that 60 per cent of the market is handled by Indian manufacturers and foreign companies with subsidiaries in India. The Toy Association of India estimates that about 90 per cent of the Indian toy industry belongs to the non-organised sector.

The figures for the retail toy trade are similar: As much as 65 per cent, i.e. 547.4 million US dollars, is handled by the non-organised sector, but a shift towards the organised retail trade is clearly recognisable.

The children usually accompany their parents and have a direct influence on the decision to buy. TV advertising plays a major role here. The most popular product categories are electronic toys, followed by soft animals and hard toys.

Attention deficit of working parents towards their children is certainly one of the reasons for booming toy market, but keeping kids engaged is in itself a very big task. So, here toys and gadgets come into play. So, kids are running the show, as working parents – richer and much busier than the previous generation – try to make up for their lack of time to spend with kids by pampering them and conceding to most their demands

Presents make up a significant share of toy sales. Indian tradition demands that the person receiving a present must give back something similar. Experts suspect that this accounts for about 50 per cent of the market for gifts for people outside the family.

The average Indian parent spends around Rs 250-300 on a toy and this is going up more and more innovation-driven high-end toys and games – from high-priced board games and play gyms to BeyBlades and remote-controlled planes – enter the market.

Economic Data & Statistics

The toy industry’s annual Total Economic Impact in the U.S. is nearly $80.9 BILLION.

The average price of a toy is less than $8, but the estimated 3 Billion units sold across the nation each year generates approximately $21.2 Billion in direct toy sales.

From toy inventors to store clerks in every state from Alabama to Wyoming, the toy industry supports an estimated 533,177 jobs (FTE) generating $25.8 Billion in wages for U.S. workers.

The toy industry also generates $11.1 Billion in tax revenue each year (combined State taxes of $5.2 billion; combined Federal taxes of $5.9 billion).

Global Players

The major global players in the toy industry are Mattel, Hasbro, Lego Group. Let us look at these major players in brief:

Mattel:

It is the largest toy maker in the world. It was founded in the year 1945. It is the producer of iconic toy brands like Hot wheels and Barbie dolls. After the release of the Barbie doll, Mattel revolutionized the toy industry with its talking dolls and toys. The popularity of the Barbie brand can be gauged from the fact that there is a separate museum dedicated to it. In late 2009, Mattel signed a deal to make WWE toys from 2010.

Hasbro:

Hasbro is an American multinational toy and board game company. It is one of the largest toy makers in the world. The corporate headquarters is located in Pawtucket, Rhode Island. The majority of its products are manufactured in East Asia. It is the producer of the iconic G.I.Joe action figures and the monopoly board game which is the most popular board game of all time.

Lego Group:

It is a privately held company based in Billund, Denmark. It was founded in the year 1932. The company’s flagship product, Lego, consists of colorful interlocking plastic bricks and an accompanying array of gears, minifigures and various other parts. Lego bricks can be assembled and connected in many ways, to construct such objects as vehicles, buildings, and even working robots. Anything constructed can then be taken apart again, and the pieces used to make other objects.

The India Story

The industry in India is a very unorganised and diverse one. The major players in the organized market are very few in number. Two of the majors in the Indian context are Mattel Toys (India) Pvt Ltd & Funskool.

Mattel Toys (India) Pvt Ltd is a leader in traditional toys and games in India and has plans to aggressively expand its operations in the country. The company wants to grow through the introduction of new products, and has lined up many new introductions across traditional toys and games for launch in India. Mattel Toys (India) Pvt Ltd also wants to explore the unorthodox retail chains such as cafés in order to further grow its business. The company is also increasingly recognising the newer growing channels of distribution such as Internet retailing, and plans to further improve its presence on Indian portals. Although the company faces issues like the use of toxic materials in its toys, its India operations have a strategy that carefully avoids running into these troubles.

Funskool:

Funskool India Ltd, is a joint venture between Indian tyre giant MRF, and Hasbro, Inc., the worldwide leader in children’s and family leisure time products. Its Operations started way back in 1987.

The commercial operations began with setting up of a factory at Goa with all the machinery and equipment to manufacture high quality toys. To cater to the increased demand a second factory was set up at Ranipet, about 100 miles from Chennai. Both facilities have more than 60,000 square feet of built up area with multiple technologies to produce high quality toys.

Funskool offers a wide range of products targeting vivid age groups from tiny tots to pre-teens. Be it squeaky toys, rattles and teethers for infants, play sets and crawling aids for slightly older babies, multi activity toys, assembly and construction toys and pull along toys for pre-school children.

As the learning process begins, so does the fun, Exciting vehicles and Play-Doh activities have kept children absorbed in their fantasy world for hours together. There’s so much for the family too – board games, memory games, party games… the list is endless.

Funskool’s range of products is a blend of art and science – they have been aesthetically created with exciting colours and designs that would delight children. They are also very scientifically thought out, so as to improve various skills and functions, from hand-eye coordination to problem solving skills, from reflexes to colour and shape recognition.

Most Funskool products are easy to carry anywhere and hence offer hours of entertainment where ever you go.

New Product Development

Although meant to be play things, toys also undergo a very rigorous designing process. The designing begins by studying and collecting information from psychologists, parents, educators, child development experts and other designers as well. This feedback aids the `designers in knowing the kind of product that their customers want or probably would like, whether they are ready for the toys they plan to design and make etc. A few of the major toy makers even have on site year round child care centers where they provide children with their new toys. They then go about studying their responses, interactions and desires in house.

Once they decide on the kind of toy to make, the designers begin by making a mere sketch of the toy. This is followed up with a colour illustration. At this stage, the designers resort to brainstorming with the artists regarding colour schemes, looks, composition etc. Then a wax model is made. This serves as the preliminary design. This design is then put to feasibility studies to determine its manufacturing worthiness. If the preliminary design passes the feasibility test, it is moved to the next stage. In this stage, a final design called the master design for the product is made. This is the design used to make the moulds for production

Manufacturing

Raw Materials

Plastic dolls are mainly made from PVC (polyvinyl chloride). Prior to its use, PVC must be compounded. Flexible PVC contains 40-60 of resins. PVC has other additives such as plasticizers, processing aids, pigments, fillers and stabilizers.

Manufacturing Process

The manufacturing of plastic dolls is done using either of two processes, rotational moulding and blow moulding. The head and limbs are manufactured using rotational moulding. Rotational moulding is used for making hollow and seamless products of all shapes & sizes. If the manufacturer intends to save on costs, blow moulding can be resorted to.

In the rotational moulding technique, the raw material in liquid form is filled in the mould cavities along with the resins. It is then subjected to heating, which melts and fuses the resins, all while continuously rotating bi-axially.

After a predetermined period of time, the moulds are subjected to cooling in a chamber via air and water. After cooling, the moulds are removed from the chamber, opened & the finished part is removed. After the finished part is removed, it is flanged by hand. Before attaching other body part, the face is made up. The process of making up the face can involve upto 15 steps. The hair is rooted into the head by hand using a special sewing machine. The hair is then treated and combed before putting the head and body together.

The look of the toys is decided by a large team of designers. The factors behind these decisions range from the changing time to popular demand for characters that one can relate to. Based on these decisions, the material is procured and put to use in decorating the toys.

Major Challenges faced by the Toy Industry

Safety and Regulatory Issues

There have been quite a few instances of impermissible levels of harmful chemicals/materials found in the toys. For example, Mattel had to recall more than two million of their toys containing very high levels of lead paint. In order to counter this, the American legislators enacted Consumer Product Safety Improvement Act (CPSIA). Some of the regulations in this act include stringent new product testing, heavy and strict penalties for non-compliance etc. This has led the toy manufacturers to include a stringent quality assurance system in place.

China which is the largest toy manufacturer in the world, accounting for almost 70% of the global market share is facing a challenge from the stricter safety requirements for toys in the European Union. The new rule puts tighter control over the chemicals that can be used in toys. This will increase the manufacturing costs of the Chinese toy makers squeezing their already thin profits.

Changing Play Patterns

Due to media and other forces, children are aspiring for adolescent interests at a younger age. As a result, toys are now increasingly targeted at children aged 12 or less instead of the usual 14 or less. Also, children these days spend more time in front of the computers playing online games.

Localized Global Market

Toy companies seek to produce toys with mass market appeal so that they can achieve economies of scale. However, variations in cultural norms pose a challenge. For example, Leapfrog, an educational toys manufacturer found that processes to sell their products in United States needed significant modifications in the other countries due to the cultural variations.

Future Outlook of the Toy Industry

According to industry body Associated Chambers of Commerce and Industry of India, the Indian toy industry is expected to reach Rs 13,000 crore by the end of the year 2015 due to growing consumerism and population. In order to meet with the regulatory demands that the toy makers face, there is a great need to improve manufacturing processes, thereby reducing costs. The toy makers need to look towards newer and more vibrant markets. They have to expand rapidly and come up with innovative products.

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