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, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing commodity prices, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google,
geopolitical disruptions, central banks are concerned over increasing inflation, 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 -
Highly skilled collaborators
– Toys Kong has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Great Eastern Toys (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Great Eastern Toys (A) firm has clearly differentiated products in the market place. This has enabled Toys Kong to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Toys Kong to invest into research and development (R&D) and innovation.
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.
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.
Operational resilience
– The operational resilience strategy in the Great Eastern Toys (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Toys Kong digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Toys Kong has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
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.
Successful track record of launching new products
– Toys Kong has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Toys Kong has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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 -
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.
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.
Lack of clear differentiation of Toys Kong products
– To increase the profitability and margins on the products, Toys Kong needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Aligning sales with marketing
– It come across in the case study Great Eastern Toys (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Great Eastern Toys (A) can leverage the sales team experience to cultivate customer relationships as Toys Kong is planning to shift buying processes online.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Toys Kong supply chain. Even after few cautionary changes mentioned in the HBR case study - Great Eastern Toys (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Toys Kong vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Great Eastern Toys (A), in the dynamic environment Toys Kong has struggled to respond to the nimble upstart competition. Toys Kong has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Slow decision making process
– As mentioned earlier in the report, Toys Kong has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Toys Kong even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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 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.
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 -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Toys Kong in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Buying journey improvements
– Toys Kong can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Great Eastern Toys (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– Toys Kong can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Toys Kong to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
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.
Leveraging digital technologies
– Toys Kong can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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 -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Great Eastern Toys (A), Toys Kong may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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.
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.
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.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Toys Kong.
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.
Environmental challenges
– Toys Kong needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Toys Kong can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Toys Kong in the Finance & Accounting sector and impact the bottomline of the organization.
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.