Toy manufacturing industry – industry outlook and prospects

The toy industry market is recovering following the 2008 financial crisis that reduced disposable incomes for households. Economic conditions thus are a core issue determining the industry prospects. Such a case is for instance noted by the growth experienced in regions where the economic crisis was curtailed as compared to the U.S where the industry experienced negative growth during the recent financial crisis (Datamonitor, 2010a). However, the future prospects of the industry seem positive with forecasts estimating that the U.S industry will have grown by 4.8 % in 2014 from its value in 2009 (Datamonitor, 2010b, p. 27).

Despite the favorable forecasts, other factors could influence the toy manufacturing industry. Among these online gaming and other computer games will persist as challenges to the growth of the industry. For instance, such games have increasingly constituted the core activities that children engage in indoors in recent years (Datamonitor, 2011a; 2011b). Changing lifestyles and increased access to information means that children continue to “get older younger” thus presenting a challenge for entities to develop new products within a short period. On the positive end, an increasing baby boomer population capable of purchasing for their grandchildren (Datamonitor, 2011b) provides a potential for continued growth of the industry.

The competitiveness in the industry also remains high due to the influence of various factors. For instance, low switching costs and low brand loyalty increase buyers’ power whereas availability of close substitutes such as video games increases the threat of substitutes. Although low barriers to entry facilitate the entry of new firms, aspects such as government regulation on safety standards and patents held by the existing entities may prevent such entry. A low supplier power helps the industry players to adopt competitive pricing policies but the presence of multiple firms targeting the same market segments reduce the competitive advantage of any particular firm.

Overall, the industry offers a chance for profitability by establishing good distribution channels, well-outlined marketing strategy and licensing partnerships. Good distribution channels are essential in ensuring availability of the entity’s products in the market. Whereas retailers such as Wal-Mart, and Target continue to be critical distribution points for entities in the industry, forward integration through online sales and efficiency of such a strategy may prove a source of competitive advantage for firms in the industry (Datamonitor, 2011b). A well-outlined marketing strategy is essential for industry players especially in promoting their products and helping the entities to develop brand loyalty. Such marketing approaches could for instance involve collecting customer feedback to facilitate new product development and having rewards for customer loyalty. Licensing partnerships also present a core strategy through which players can achieve growth. Although the American market remains the dominant customer segment for toys, the fastest growing segment is the Asia-Pacific that comprises emerging economies such as China and India (Datamonitor, 2010b). Licensing partnerships could serve as a way through which industry players expand to these emerging markets thus reduce their susceptibility to region-specific macroeconomic shocks. Go to the conclusion here.

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