The Strategic Issues facing Funskool

This report intends to cover the current and the future attractiveness of the Indian toy industry by focusing on one specific company named Funskool. The report would be completely based on the case study of the company. This report would focus on the strategies used by the company to ensure that they are able to earn substantial amount of profit in the market and meanwhile analyse the impact of the macro-environmental factors as well. It is also essential that the report encourages the idea of reflective practice to ensure that the operations are being conducted effectively and that the assessment leads to the proper understanding of the strategies used by the company. The reflection would later focus on the knowledge and experience gained by the learner with the help of this assessment and if the outcome justified the knowledge he had managed to gain for a substantial amount of time.

This report would be entirely devoted to the strategic analysis of the organisation named Funskool. This company cited that toys play an integral role in the proper growth and development of children. It also contributes towards the proper psychological development of a child. The report provided below intends to cover the strategic issues facing Funskool. The report would also cover the effect the macro-environmental factors in enhancing the potential of the industry and the current ongoing competition among the top players.

The Indian toy industry is considered extremely sensitive and challenging mainly due to the extreme price sensitivity showcased by the customers. There was an increase in the personal disposable incomes of the customers but there was a problem in making a reliable purchase from the side of the customers. They had their entire attention focus towards the use of video games that were gaining popularity among the children. At the same time, despite substantial amount of increase on the personal disposable income of the people, the average amount spent on the toys for children was relatively lower in India than in any other country. Also, it is necessary to consider that an increasing amount of urbanization has also led to most of the families opting for the idea of nuclear family implying that they would have a single child and rather spend reasonable amount of money on their video games than the actual toys.

There is an extensive amount of competition in the Indian toy industry and the company faces extreme amount of competition from the Chinese market. However, some of the major strategic decisions made by the company has allowed them to enhance their operational capability and enhance their sales in the market. Majority of the strategies initiated by the company after the time of 2010 were mainly intended towards generating their idea of market leadership and implement in the practical. The company also managed to strengthen its position in the market and did not face enough strategic challenges. The company however, encountered multiple challenges in terms of the production of their traditional toys that have not manage to garner enough attention.

The effect of macro-environmental factors in shaping the toy industry and the likely impact of macro-environmental factors on the attractiveness of that industry

Another strategic challenge that the company encountered was in terms of using their price segmentation strategy to defeat the Chinese toy industry. The premium price segmentation of the company did not work well enough for the company and when the products of two different companies were placed together it was being identified that the Chinese products were considered to be accessorized in a better way, had a similar or better quality due to the difference in the materials used and were priced much lower than that of the products of Funskool. The drawbacks witnessed by the company was also replaced the kind of success they generated from the application of various growth strategies and the ever changing market of the country.

There are multiple other social and demographic changes that have also contributed to the success of the company. The company followed prudent strategies and beat the Chinese manufacturers in terms of sales and profitability. At the same time, the company also managed to gain substantial amount of profit with their business and ensured that they are able to maintain their upward growth trajectory.

The effect of the macro-environmental factors comprises of six integral elements that allow in the better understanding of the factors that would contribute in the better functioning of an organisation. These six elements are also considered as the external factors that tend to influence the decision-making process of an organisation.

The standards initiated by the Indian government regarding the operations .and the safety procedures associated with the manufacturing of the toys led to the proper establishment of the organisation’s capability in complying with the standards of the country. In the year of 2000, the company made a voluntary compliance with the BIS norms for the toy industry, even after knowing that it is not mandatory for every toy company to comply with. This way the company managed to establish a proper and healthy relationship with the government. However, the government policies also encouraged the import of the Chinese toys indicating that there was a tough competition for the domestic toy manufacturing companies.

The toy industry of the country was considered highly fragmented. The ability of the CEO to foresee the possible threats that the company might encounter led to the further understanding of the proper customer segmentation that allowed them to embrace the possibilities of the organisation to earn substantial amount of profit. The company embraced the attention of the lower economic levels while maintaining the interests of the higher segment as well. It can be said that with the customer’s disposable income at rise, there was not much spending from the side of the customers in terms of toys. For the purchase of toys, the families were only willing to spend about 10 dollars annually.

The rapid changes in the socio-economic and the demographic features of the country allowed the company to gain subsequent amount of interest from the customers. Funskool remained a sole exception in terms of competition with the Chinese manufacturers as they are the only company who managed to withstand the blow. The rapid scaled of urbanization led to the changing of thoughts among the couples about having a nuclear family that would allow them to function as a family in a more effective way. Lower dependency ratios and parents spending more money on video games than toys posed as a threat to the organisation.

Reflection on Decisions Taken

The manufacturing of varieties of toys was considered as a complex process but the association of the company with the MRF since the initial stage of their operations allowed them to gain a competitive dominance over the other companies. MRF had substantial amount of access to the world-class design and technology that permitted the company to gain dominance over their manufacturing style and produce as much quantity anticipated.

The company managed to differentiate themselves from the other manufacturers by voluntary complying with the BIS norms set by the government. The BIS norms were mainly aimed at ensuring the quality and the safety of toys. This strategy initiated by the company allowed them to establish their products higher than the already existing low priced toys. At the same time the governmental policies allowed the Chinese, manufacturers to effectively function in the market but they did not manage to gain substantial amount of attention with Funskool being one of the leading competitors here. The company managed to overshadow the toys initiated by the Chinese companies and continues the gain the attention of the customers. The BIS standards allowed the company to enhance their market share.

For a toy company like Funskool, it is essential that they are able to comply with the environmental standards initiated by the government. The company has also managed to comply with the safety and security norms initiated with the manufacturing of the toys. Thus, it can be said that the organisation has been able to reduce the use of plastics at an extensive rate and at the same time, have also taken the initiative to encourage the others regarding proper compliance with The Environment (Protection) Act of 1986.

The attractiveness of the toy industry and the nature of the competition can be determined with the help of the use of the model named Porter’s five forces. The current industry structure has showcased promising returns for the company. However, many toy manufacturing companies were crushed by the performance of the Chinese companies but they managed to withstand the blow and the recent governmental policies mandating BIS compliance for the imported toys have made it difficult for the international companies to encounter some difficulty in their operations. Since, the initial stage Funskool’s ability to comply with the standards have allowed them to maintain their proficiency in the market. The five forces analysis mentioned below would lead to the better understanding to the competitive nature of the market.

The bargaining power of the suppliers in the toy industry is low. The company mainly uses moulds to manufacture their toys and they have a joint venture with the company MRF. MRF is one of the prestigious and sought after companies in the world that makes them consider the idea of bargaining the prices of the materials as the suppliers might end up losing an opportunity to be associated with such a reputed organisation.

The bargaining power of the buyers is high in this industry. This is because most of the parents and families are content towards the purchase of cheap and attractive toys. In terms of making a purchase of toys no customer would make an expensive decision as they know the extent of availability of alternatives.

Limitations of the Frameworks Used

The threat of the new entrants is low in this industry because are there are extensive amount of governmental policies and regulations that an organisation needs to comply and make sure that they are able to conduct their operations in an effective manner. The new entries would also require substantial amount of capital to compete with the existing companies. Thus, they would have a marginal opportunity to gain profit.

The threat of the substitute products is high in this industry as there are multiple companies that have been operating in the industry for years and have managed to establish themselves as tycoons. At the same time, the international companies have also managed to gain a subsequent dominance in the industry. It is mainly the Chinese products and toy companies that are being substituted with the domestic products due to the price sensitivity aspect of the Indian consumers.

The competition has always been intense in the toy industry and continues to grow difficult and concentrated as time passes by. The competition in the toy market is considered intense due to the involvement of both organised and unorganised companies to gain market dominance and ensure that they are able to maintain their competitive status in the industry. Also, the Chinese manufacturers continue to dominate the market to some extent. Thus, it can be said that the extent of competitive rivalry is high in the industry.

Conclusion

The report provided above focused on the strategic successes and failure incurred by the organisation Funskool and conducted a proper analysis of the macro-environmental factors that could impact the functioning of the organisation. In addition, the report also led to the identification of competitive status of the industry.

The discussion provided below is an accountable personal reflection aimed at providing viable insights on the decisions that have been undertaken to finish the first task. The first task comprised the use of various tools and models that would contribute in the enhanced understanding of the factors that contributed in conducting a better analysis of the factors that lead to appropriate functioning of the organisation. The discussion provided below would provide valid reasons behind the choices that have been made for the better understanding of the module concepts.

The first task led to the understanding of the strategic decisions made by the organisation Funskool. It also led to the identification that the company encountered many obstacles before finalising on the drastic decisions that have been made for their long term functioning in the Indian market. The association of the company with some of the prominent companies led to the generation of the fact that the company would be successful incurring the idea of maintaining their competitive dominance in the market. For identifying the attractiveness of the toy industry and the influence of the macro environmental factors. I initiated the use of PESTLE analysis as it is the most appropriate framework that is being used to determine the performance of the external factors and their contribution in influencing the decision-making process of an organisation. The use of the PESTLE framework allowed me to gain an understanding of the strategies that had been undertaken by the organisation to cope with the macro environmental factors. It also led to the understanding of the various contexts that would be considered applicable for the better performance of the company.

However, the framework has sufficient amount of benefits and flaws that makes it incompatible to use sometimes. Meanwhile, the benefits of using this framework led to the identification of various current and possible future market trends in the industry that would be considered applicable for the study. The use of this framework allows in the detailed understanding of each external factor that could possibly influence the decisions of the company. The use of this framework also instigated the inclusion of the possible actions that are being undertaken by the organisation to make sure that they are able to conduct their operations in an effective manner. There is also a possibility that the use of this framework also shed light on the policies and regulatory framework that the company needs to rely on. Apart from the use of the PESTLE framework, I initiated the use of the Porter’s five forces model as well to determine the competitive nature of the toy industry. The five forces model is being considered as the most compatible model to identify the true extent of competition in the market. Thus, it can be said that the use of this model allowed me in conducting a proper analysis of the market. One of the prominent reasons why I consider this model appropriate because it analyses the performance of the company and then based on their performance determines their competitive nature.

I hoped to cultivate the idea that Funskool would be able to maintain their market dominance for a substantial amount of time and the use of these frameworks allowed me confirm that idea with proper facts and figures. However, at the same time I encountered quite a few obstacles to make the implementation of the structure a successful one. For instance, there were not enough relevant information available for certain factors that could be used to understand the influence of the factor and conduct a proper analysis of it. In addition, the case study also lacked certain amount of data regarding the legal and environmental factors that could possibly influence the decision making process of the company. By conducting external research, the obstacles were overcome and substantial amount of information were being generated regarding the environmental and legal concern of the company and the policies and frameworks mad mandatory by the government. The data available in the case study were being thoroughly studied and it was being identified that the use of this data led to the identification of various viable concerns surrounding the evidences of the company’s performance.

Also, it can be said that the available data were fully utilised along with the application of various frameworks to understand the complete concept of the organisational performance and the extent of the competitive nature in the toy industry. When sufficient information was not found available in the case study then the use of external sources assured access to relevant information that could help in finishing the task in a convenient manner. Thus, it can be addressed that the use of various frameworks in the task was considered appropriate for the enhanced understanding of the project. Further, in some cases the use of various module concepts was being avoided because of the irrelevant nature they showcased with the study. The requirements of the case study did not often match with the ones identified mentioned in the tasks or the ones that are being subsequently used. This is one of the reasons why the use of certain module concepts was being avoided. As a result of the unavailability of the data the completion of the tasks had been delayed and were not being completed based on my schedule.

Conclusion:

The discussion presented above can be counted as a personal reflection of the possible beneficiaries or drawbacks encountered during the completion of the project. It can be said that the use of multiple frameworks allowed in conducting the task in an effective manner.

Conclusion: 

The report provided above was completely based on the case study associated with the functioning of the toy industry of India. The case study also led to the identification of the factors that contributed in enhancing or decreasing the likelihood of the nature of the competitiveness nature of the market. Funskool is one of the prominent and leading toy company of the country. The company has managed to maintain its market dominance by making sure that they are able to comply with the extensive amount of governmental policies and regulations voluntarily. Further, the company also managed to comply with the environmental standards and the safety procedures initiated by the government as well. It has always been identified that the Chinese manufacturing companies dominated the toy industry and attracted the attention of the customers. The competition in the industry was intense and the rivalry among the giant companies are still concentrated as well.

Reference:

Gupta, R., Sebastian, V., Puri, S., Narayanan, S., (2018) Funskool India: Defend, Lead, and Counter Rivals, Ontario, Canada, Ivey Publishing (9B18M066). Available at www.iveycases.com (Accessed 7 December 2018).