1) ethical and legal aspects should be taken in marketing to children; damage to company reputation in case of offence Economical1) Recovery after recession and economic downturn
2) GDP growth
3) Industry trading deficit increased by 40%
1) rising costs and falling prices, currency rate volatility etc.
2) disposable income growth
3) price competition may take place
1) Less spending on toys and more confectionary, video game and consoles, children magazines
2) Children birth rate growth
3) Children sophistication and savvy
1) development of new markets/segments
2) market potential growth
3) educational or interactive toy products
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 Hornby company. Economical and social forces define customer’s behavior. Digital presence and social media marketing (SMM) 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.
Potential entrants (low access):
• Barriers to enter the toys and games market are relatively low. 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 UK (like Mattel or Hasbro, US owned companies operating in the UK).
How e Toys Could Have Made It The functions of managerial accounting include planning, decision-making, controlling, and evaluation. To make good decisions, managers must constantly adapt to technological changes, changes in the organization's needs, and new approaches to other functional areas of business -- marketing, production, finance, organizational behavior, and corporate strategy. Planning ...
•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.
•Market rivalry is extremely intensive. Hornby has a number of strong competitors both in the whole market (Lego, Disney, Hasbro, Mattel etc) and in the toy vehicles segment (Hornby vs Peco/Bachmann/Dapol or Scalextric vs AFX/Mattel (Hot Wheels)/Tomy/ Tyco).
Bargaining power of buyers (medium):
•End-user customer base is expected to grow (due to rise of children population in the UK) (↓ power) •Customers’ disposable income growth (due to GDP growth) (↓ power) •Low cost of switching to another brand (↑ power)
•Toys are consumer goods with elastic demand (↑ power)
Bargaining power of suppliers (medium):
•High cost in case of local production (↑ power)
•Opportunity to switch to overseas producers with lower production cost exists (↓ power), however, a range of additional risks occurs in this case (eg, currency rate risk)
Power of substitutes (high):
•Hornby owns 7 brands and product ranges: Hornby, Scalextric, Corgi, Airfix, Humbrol, Lima and Electrotren. Only railway brand encounters 650 products. From customers perspective the chances of rivalry between products exist as they may face to dilemma which Hornby 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.
III. Strategic review
From the strategic point of view – how Hornby can go further – both Ansoff’s 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, eg busy people who have no free time and prefer on-line shopping. •Cooperation and partnership with other brands through licensing and product tie-ins.
In conventional vertically integrated power utilities, the cost of reactive power support is normally recovered by two means: one is to include the cost of reactive power support into active power price and the other is to use load power factor penalty. In a deregulation environment, the reactive power support, system reserve and operation control services are all regarded as system ancillary ...
Product development options:
•Vertical line stretching, eg Hornby trains or Scalextric cars of different engine performance; limited edition of trains or cars. •Horisontal line stretching, eg Hornby trains or Scalextric cars of different colours. •New products and lines: launching education and interactive toys.
Product penetration options:
•Regular advertising to maintain Hornby brand awareness and marketshare. •More number of Hornby Visitor centres.
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 Hornby portfolio. Electronic locomotives: Hornby, Lima and Electrotren; cars: Scalextric and Corgi; other toy vehicles: Airfix and Humbrol. Hornby 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 before making a deliberate buying decision.
This may have an implication on consumer purchase process. Due to lack of numerical information (eg, sales performance) in the case with regards to Hornby products matrix approaches are hardly applicable. However, due to availability of chronology of company development we may assume that the majority of Hornby products are at maturity stage of product life cycle. This means Hornby 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) provided by Hornby. Premium pricing strategy is justified by brand image for quality products and added value – aspiration by owning Hornby products. With regards to competitors price cuts Hornby 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 NPD, advertising. As Hornby products are also sold beyond the UK a company should pay attention to personal objectives, competition, positioning, extra costs on export, advertising adaptation, packaging while pricing products on those markets.
First, we would like to thank our supervisor, Carl Thunman, for his continuous support and guidance; he has made our work easier and more interesting. We are also thankful for our seminar colleagues for criticizing our work and exchanging constrictive discussions. Finally, we want to thank our beloved families, for helping and supporting us through the last months, without their love and ...
Place. There are only two channels of sales: retail (above 800 independent retailers and 70 in-store concessions) and Internet (dedicated website www.hornby.com).
Hornby 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 continue to grow.
Promotion. In terms of advertising 80% of media budget is spent on TV advertising to children (40% Hornby range and 60% Scalextric range) and 20% – for other mediums (eg, 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, Facebook, Youtube and Twitter accounts – the role of public relations and direct marketing increases. With these channels Hornby 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 Ps – people, processes, physical evidence – are of less importance to due to non-service nature of Hornby 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 higher impact levels. As each stakeholder has its own needs, expectations and interest conflicts may arise, therefore a stakeholder management strategy should be developed.
According to the instructions for this case study, three virtues were to be chosen to identify with the case study. In keeping with the instructions, I have chosen Honesty, generosity and justice as the 3 virtues to associate with the case. Stanford Encyclopedia of Philosophy states, “A virtue such as honesty or generosity is not just a tendency to do what is honest or generous, nor is it to be ...
Table 2. Stakeholder analysis
CategoryStakeholderStake in businessImpact Attitude Stakeholder management strategy InternalHornby employeesAre fully responsible for doing businessHighStrongly in favorEmployees have must the necessary competences; utilize internal marketing and enhance people management PrimaryShareholdersInvest money with expectation to gain profitMediumWeekly in favorPublic relations are important to keep them informed (eg, shareholder meetings) PrimaryRetailersSell Hornby productsHighWeekly in favorTo encourage retailers to sell more by negotiating long term agreements; reward for good performance PrimaryProducers
(suppliers) Produce Hornby productsHighStrongly in favorTo select and work with the suppliers who can be a sustainable partner and provide toys in compliance with Hornby toy policies PrimaryCustomer groupsBuy/own Hornby productsHighStrongly in favorTo provide easy access to the company/company products, engage, inspire and communicate with them; gather feedback and react correspondently PrimaryLicensorsGain profit by selling licencesMediumWeekly in favorTo monitor and negotiate deals which may have mutual benefit for both partners SecondaryCompetitors (eg Peco, Bachmann)Eventually influence on Hornby salesHighStrongly opposedPermanent monitoring of competitors’ environment; correspondent reactive steps should taken regarding their activity
Hornby 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 Hornby 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 Hornby business. Therefore Hornby must concentrate on product and market development utilizing its competitive advantages to address threats and succeed on the market.
Table 3. SWOT
•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
The Ansoff product-market matrix helps to understand and assess marketing or business development strategy. Any business, or part of a business can choose which strategy to employ, or which mix of strategic options to use. This is one simple way of looking at strategic development options: Each of these strategic options holds different opportunities and downsides for different organizations, so ...
•Good price/quality perception
•Brand heritage and valuesWeaknesses
•Possible trade-offs between Hornby brands
•Lack of educational or interactive toy products
•Additional factors/risks with regards to moving production overseas
•Heavy reliance on off-line sales in the UK
•Low digital marketing investments
•Recovery after recession and economic downturn
•children birth rate growth
•Easy Internet access and high Internet penetration
•Cross market partnership (character licensing)
• Restrictions in marketing to children
•Industry trading deficit increased by 40%
•Less spending on toys and more confectionary, video game and consoles, children magazines
•Low market entrance barriers
•High power of substitutes