Analysis of the Toy Manufacturing Industry

Abstract

Factors such as economic conditions, sociocultural factors and technological aspects influence industries to a varying extent. This paper evaluates the macroeconomic factors and competitiveness in the toy industry to determine the attractiveness of the industry and its key success factors. Macroeconomic factors represented in the PESTEL framework influence the toy manufacturing industry to a varying extent with competitiveness in the market being determined largely by substitutes, buyers bargaining power and competitive rivalry between existing firms. To compete effectively in the market, entities require high innovation potential (due to short product lifecycles), strong distribution channels (to ensure widespread reach) and a well-outlined marketing strategy (to promote products and develop customer loyalty).

Introduction

Factors such as technology advancement, changing sociocultural trends, legislation and increased competition influence survival of firms operating in the toy manufacturing industry. For instance, technological advancements have seen the industry evolve from one composed of simple, physical toys to one embodying hardware and software technology that provides interactive content (Babitch, Fort, Kim, Nyberg & Wang, 2006). Sociocultural trends such as dual income families that contribute to reduced (human) playmates for the children in the household have also contributed to the shift of children’s toys to interactive media (Babitch, et al., 2006). Accompanying such changes has been an increase in the value of the toy industry. According to Datamonitor reports, the global toy industry for instance grew to by more than 3 percent compounded annual growth rate from the year 2005 to 2009, to reach a value of $66,301.3 million in 2009 (2010a, p. 8).

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