This is a series of four case studies illustrating a number of key financial issues facing many small to medium sized companies. The setting is Hong Kong, but the concerns of the company's management are universal: financing growth, measuring performance, deciding whether or not to invest in a new product, valuation of the company for a possible sale, dealing with currency risk. Company Situation In late July 1998, the senior management of Great Eastern Toys, a medium-sized, family-owned company with annual sales of over HK$245 millions (US$31 million) from designing and distributing children's toys, books, and games was reviewing recent performance and future operations. The company exported about 50% of its products to North American markets, close to 50% to major department stores and distributors in Europe, and less than 5% in the local market. Its principal suppliers were in Hong Kong; it financed its operations mainly with the local currency, Hong Kong dollars, but also with Yen loans. Great Eastern Toys (A) The company had enjoyed substantial growth following management changes in 1996, Management's attention had been focused on expanding sales, leading them to ignore a large increase in working capital needs. These had been financed mainly with short term bank borrowing. The economic crisis in Hong Kong in 1998 led the company's banks to ask that loans be substantially reduced with potentially serious liquidity consequences for the firm. The "A" case focuses on how to deal with these developments. Students are asked to evaluate the company's situation using standard tools of financial analysis: ratio, cash flow, and profitability analysis. Two class sessions are normally needed for adequate discussion of the various issues arising in the case.
Swot Analysis of "Great Eastern Toys (A)" written by Gabriel Hawawini, Lee Remmers includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Toys Kong facing as an external strategic factors. Some of the topics covered in Great Eastern Toys (A) case study are - Strategic Management Strategies, Financial management, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Great Eastern Toys (A) casestudy better are - – challanges to central banks by blockchain based private currencies, wage bills are increasing, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google,
increasing household debt because of falling income levels, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Great Eastern Toys (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Great Eastern Toys (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Toys Kong, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Toys Kong operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Great Eastern Toys (A) can be done for the following purposes –
1. Strategic planning using facts provided in Great Eastern Toys (A) case study
2. Improving business portfolio management of Toys Kong
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Toys Kong
Strengths Great Eastern Toys (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Toys Kong in Great Eastern Toys (A) Harvard Business Review case study are -
Organizational Resilience of Toys Kong
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Toys Kong does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Toys Kong has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Toys Kong to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Toys Kong is one of the leading recruiters in the industry. Managers in the Great Eastern Toys (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Toys Kong is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Toys Kong is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Great Eastern Toys (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Toys Kong is present in almost all the verticals within the industry. This has provided firm in Great Eastern Toys (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– Toys Kong is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Toys Kong are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Toys Kong in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Toys Kong has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Toys Kong is one of the most innovative firm in sector. Manager in Great Eastern Toys (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Toys Kong is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Gabriel Hawawini, Lee Remmers can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Toys Kong in the sector have low bargaining power. Great Eastern Toys (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Toys Kong to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Great Eastern Toys (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Great Eastern Toys (A) are -
High cash cycle compare to competitors
Toys Kong has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Toys Kong is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Great Eastern Toys (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, firm in the HBR case study Great Eastern Toys (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Toys Kong 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Great Eastern Toys (A), it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Toys Kong has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Great Eastern Toys (A), is just above the industry average. Toys Kong needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Products dominated business model
– Even though Toys Kong has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Great Eastern Toys (A) should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Great Eastern Toys (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Toys Kong has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Gabriel Hawawini, Lee Remmers suggests that, Toys Kong is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Great Eastern Toys (A), it seems that the employees of Toys Kong don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Toys Kong is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Toys Kong needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Toys Kong to focus more on services rather than just following the product oriented approach.
Opportunities Great Eastern Toys (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Great Eastern Toys (A) are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Toys Kong can use these opportunities to build new business models that can help the communities that Toys Kong operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Developing new processes and practices
– Toys Kong can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Building a culture of innovation
– managers at Toys Kong can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Toys Kong can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Toys Kong to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Toys Kong to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Toys Kong can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Toys Kong can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Great Eastern Toys (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Toys Kong can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Toys Kong has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Great Eastern Toys (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Toys Kong to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Toys Kong is facing challenges because of the dominance of functional experts in the organization. Great Eastern Toys (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Toys Kong to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Toys Kong can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Toys Kong can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Toys Kong can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Great Eastern Toys (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Great Eastern Toys (A) are -
Consumer confidence and its impact on Toys Kong demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Toys Kong is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Toys Kong
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Toys Kong.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Toys Kong can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Great Eastern Toys (A) .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Toys Kong business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Toys Kong can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Toys Kong can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Toys Kong will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Toys Kong with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Toys Kong needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Toys Kong in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Toys Kong high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Regulatory challenges
– Toys Kong needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Weighted SWOT Analysis of Great Eastern Toys (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Great Eastern Toys (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Great Eastern Toys (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Great Eastern Toys (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Great Eastern Toys (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Toys Kong needs to make to build a sustainable competitive advantage.
