THE CIMA 2013

GLOBAL BUSINESS CHALLENGE GBC

JUNE 2013

ISSUES AND

RECOMMENDATIONS

TEAM: GOLD DIGGERS

HONG GAM TRAN – 1-L3T4OF

QUOC BAO NGUYEN – 1-L3T4MN

THANH VAN TRINH – 1-L3T4PB

THI THUC UYEN DO – 1-L3T4NJ

JAMES COOK UNIVERSITY

BRISBANE

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EXECUTIVE SUMMARY

The toy market has never been so dynamic and competitive.

Jot is an independent toy company started in 1998 by Jon and TaniGrun. With the

development and popularity of Jot products in Europe countries, Jot decided to

outsource all of its manufacturing to China. So far, Jot has a reasonably steady growth

in sales with 16% in year ended 2010 and 18% in year ended 2011. However, Jot is

currently unable to provide any additional long-term finance and is now facing with

problems in other areas as well.

The aim of this report is to prioritize the current issues that Jot has to deal with. All the

issues are considered from a financial, strategic and operational viewpoint. The report

provides the board with professional advices, recommendations and solutions.

This report is provided with a brief introduction, indicated the purpose, scope,

methodology and limitation of the report. Following the introduction and the overview of

the company is the list of prioritized issues and the solutions as shown below:

1. The first issue is the late delivery of Christmas where only 75% of orders can

be delivered on time. It is suggested that Jot shall share out the 75% the product

delivered on 4th November 2012 to all distributors and retailers.

2. The second issue is the fault in new flying spaceship toy with 12 reported

incidents. It is recommended that Jot should recall the product to repair it to act

ethically. This can help Jot avoid the cost of losing customers and also, it can be a

chance for Jot to build a better brand image.

3. The third issue is the near-shoring proposal – To choose or not to choose

Voldania? The solution provided suggested that Jot accept the proposal – making

Voldania a replacement to the current out-sourced manufacturer - China. However, Jot

shall reject the personal donation of €25,000 for Grot since this bribery is a criminal

action has greatly negative effects on the company’s reputation and may incur heavy

penalties for Jot in Voldania.

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4. The forth issue is the launch of new range of toys for 9-11 age group. Alana

convinced that this proposal is very promising since it brings Jot into a whole new

market. It is recommended that Jot accept the proposal but with careful considerations

and operations.

Out of these 4 issues, the first two are considered most important and urgent –

Jot needs to act immediately.

Finally, the report is concluded with an overall comment from the consultancy group and

suggested directions for long term activities which Jot should take into consideration.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ............................................................................................................. i

TABLE OF CONTENTS ............................................................................................................. iii

TABLE OF FIGURES .................................................................................................................. v

1.0 INTRODUCTION ............................................................................................................. 1

1.1 Purpose ....................................................................................................................... 1

1.2 Scope .......................................................................................................................... 1

1.3 Methodology ................................................................................................................ 1

1.4 Limitation ..................................................................................................................... 1

2.0 OVERVIEW OF THE COMPANY .................................................................................... 2

3.0 ISSUES AND RECOMMENDATIONS ............................................................................. 3

3.1 Late delivery of Christmas product ............................................................................... 4

3.1.1 Impact ........................................................................................................................ 4

3.1.2 Potential solutions ...................................................................................................... 5

3.1.3 Recommendations ..................................................................................................... 5

3.2 Fault in new flying spaceship toy .................................................................................. 5

3.2.1 Impact ................................................................................................................... 5

3.2.2 Potential solutions ................................................................................................. 6

3.2.3 Ethical dilemma .................................................................................................... 7

3.2.4 Recommendations ................................................................................................ 8

3.3 Near-shoring proposal in Voldania .................................................................................... 8

3.3.1 Issue analysis ............................................................................................................ 8

3.3.2 Ethical dilemma .......................................................................................................... 9

3.3.3 Recommendations ..................................................................................................... 9

3.4 Launch of new range of toys for 9 -11 age group .............................................................10

3.4.1 A brief situation analysis ............................................................................................10

3.4.2 Potential Solutions ....................................................................................................12

3.4.3 Recommendations ....................................................................................................13

4.0 CONCLUSION ...............................................................................................................15

5.0 REFERENCES ...................................................................................................................16

6.0 APPENDIX .....................................................................................................................17

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6.1 Financial analysis .......................................................................................................17

6.2 PEST analysis ............................................................................................................18

6.3 SWOT analysis ...........................................................................................................19

6.4 Covey’s time management matrix ...............................................................................20

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TABLE OF FIGURES

Figure 1: Total app market revenue and average revenue per paid app 2011 – 2012 .. 11

Table 1: Total recall and fixing costs of faulty products ................................................... 6

Table 2: Costs of production in China and Voldania ....................................................... 9

Table 3: Financial ratios of Jot ...................................................................................... 17

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1.0 INTRODUCTION

1.1 Purpose

The purpose of this report is to provide the overview of Jot – a toy brand and to collect,

integrate and generate a set of facts and discussions about key issues faced by Jot.

The report will prioritise, analyse and give recommendations on each of the issues in

detail to enhance the company’s tactical and strategic performance.

1.2 Scope

This report mainly gathers information from “case study material” and “scenario”. The

report is also based on secondary information from the other sources, especially the

internet. Financial data is analysed through a set of formulas and calculations.

1.3 Methodology

The report does not cover every of the areas within Jot’s business such as marketing,

accounting, human resource management and so on. Instead, it focuses on particular

issues which are identified in the scenario, including solving two problems and critiquing

two proposals.

This report is intended for the board of directors of Jot. Any personnel under that level

are not considered.

1.4 Limitation

A lack of primary data is a limitation of this report.

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2.0 OVERVIEW OF THE COMPANY

The Jot Company is an independent toy company started in 1998 by Jon and TaniGrun.

Over five-year period, the annual sales increased to 2 million. With the development

and popularity of Jot products in Europe countries, Jot decided to outsource all of its

manufacturing to China to get more competitive advantages.

Jot has a small scale of 34 products targeting at two main age groups: 3-5 and 5-8

years old. Most of Jot products are designed with simple sound and movement or

simple software programs like educational learning, maths and reading skills…

Jot’s production goes through two main stages. Jot in-house design team develops a

new product and after that, the operations team contracts an outsourced manufacturer

for mass production.

Jot is reported to have a considerable sales revenue growth each year, with 16% in

year ended 2010 and 18% in year ended 2011 respectively. Additionally, profit margin

increased from 5.41% in 2010 to 5.58% in 2011. This can mean a safe financial position

for Jot. However, currently, Jot is unable to provide any additional long-term finance

partly because it has to pay a bank loan of €500,000 in January 2014 and it already

overdrew €960,000.

An analysis of Jot in terms of finance, PEST and SWOT is provided in Appendix.

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3.0 ISSUES AND RECOMMENDATIONS

Based on “Time management matrix” (Appendix 6.4), the four issues are categorised as

below:

The delivery of Christmas product should be addressed in the first place as the delivery

is just three days ahead and therefore needs immediate monitoring. Additionally, the

late delivery has a direct impact on the fulfillment of customer’s demand - which is a

core business activity. More importantly, Christmas is the peak season when a majority

of sales and the profit is generated, the late delivery of Christmas product will affect the

company’s profitability and financial position - given that profitability is the most critical

to any business. On the other hand, Jot has to take into account the problem of faulty

product as soon as possible. Jot has to minimise hazards for its vulnerable consumers.

Jot must take an action to actively solve the problem in accordance with toy safety law.

Besides, product with flaws will create a bad image for the brand. Jot stands a chance

of losing customers of not only new spaceship toy but also of other existing and future

products.

The other two issues are considered important as they are related to production

strategy and market expansion, which are essential to the long-term development of

any business. However, the company is not under time pressure to solve those issues.

It suggests that Jot should consider near-shoring in Voldania before assessing the

proposal of launching new range of product. The first reason is because at the moment,

Jot is in financial hardship and a cost-involved activity is too risky. The near-shoring

decision can be an opportunity to reduce the cost of production. Another point is that

Important, Urgent

Late delivery of Christmas product

Fault in new flying spaceship toy

Important, not Urgent

Near-shoring proposal in Voldania

New launch of range of toys for 9 - 11 age group

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information about near-shoring practices is already collected but the plan is just a brief

based on personal estimate. Therefore, it takes more time to research on the proposal.

3.1 Late delivery of Christmas product

Gull, one of the Jot’s outsourced manufactures in China cannot deliver the 2400 units

which are supposed to arrive on 4 November 2012. However, Gull can only provide

75% of the order on time and the other 25% will be delivered on 15 December.

It is certain that pre-Christmas is high sales season in the year for toy market. In 2011,

51 % of the annual sales of Jot are derived from this period. Therefore, this order plays

an important role for the sale revenue of Jot. In other words, the late delivery this time

may not meet all the demand of the customers including toy retailers and distributors all

around the world, especially the Europe market. Jot does not want to create any

opportunity for its competitors in this highly profitable season.

3.1.1 Impact

That Gull misses the delivery deadline may lead to many negative impacts on Jot

company development now and in the future.

Firstly, because of the high demand of customers in this season, it is the great

opportunity for Jot to maximise revenue from the sale of its product in the year.

However, Jot cannot provide enough products to its customer in time means the

company’s revenue and profit will go down due to the big loss of sales. In addition, there

are a great number of toy companies struggling outside to be the toy providers in the

competitive market. It is easily for them to take the place of Jot.

Secondly, Jot reputation start to decrease in its stakeholders’ mind. In most of

companies and organisations, reputation or goodwill is the greatest asset that they want

to maintain and develop. This lateness will make the company suddenly drop their

reputation in the market.

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3.1.2 Potential solutions

Option 1: Send all 75% of the order to only Jot’s major customers to maintain the good

relationship with this group

Option 2: Share out 75% of the order to all Jot’s customers to ensure equality

3.1.3 Recommendations

The company should conduct the option 2 which is sharing out 75% the product

delivered on 4th November 2012 to all distributors and retailers for two reasons:

First, Christmas is peak season in the year, so every distributor or retailer needs to

satisfy the customer’s huge demand. In this season, the revenue and profit is planned to

boost not only Jot or important customers but all types of Jot’s wholesaler and retailer.

Next, only 75% of the whole product range will be delivered before 15 December while

the second part of the order will be delivered on 15 December, 10 days prior to

Christmas. Therefore, the 75% can be purchased before 15 December and the rest can

be purchased after that. If all the 75% is purchased before that date, Jot’s major

customers and other independent retailers can hold orders for end customers till 15

December. It is still not too late for people to buy Christmas presents for their children.

In the longer-term, Jot should proceed to get the compensation by Gull because Gull

breaks the contract rules and requirements. Besides, it is recommended that Jot should

not use Gull again as an outsourced manufacture in China.

3.2 Fault in new flying spaceship toy

3.2.1 Impact

Financial impact

Facing the fault in new flying spaceship toy issue which can damage the reputation of

the company, Jot needs to fix this issue as soon as possible. This is considered as the

prior mission of the company. Obviously, it will cost Jot a big amount of money. The

table below shows the costs of the recall of faulty products as well as the cost of fixing

them.

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Units € €

Total cost of units in inventory 3,200 x 20.6 = 65,920

Total cost of units in initial order 6,000 x 24 = 144,000

Total improvement cost 9,2000 x 10 = 104,000

Total costs 313,920

Table 1: Total recall and fixing costs of faulty products

€313,920 will be covered by the net profit for the year ended 2011 and one part of

retained earnings in 2010. In this case, another issue may be raised which is the ability

to pay debts of Jot will be influenced.

Reputational impact

Jot suffers brand image deterioration as a result of faulty flying spaceship toy. The

situation even gets worse as the flaw insulation comes from design but not

manufacturing. In other words, the company is solely responsible for this issue.

Customers may lose trust in the brand, which in turn affects a variety of areas,

especially sales and customer relationship management

3.2.2 Potential solutions

Option 1: Ignore complaints and try to quickly sell product in stock to save money as

much as possible.

Option 2: Recall the product and provide replacement vouchers with equal value for the

customer and write the product off.

Option 3: Recall the product to fix it and give it back to the customer.

Option 1 seems to breach the ethical standards as well as laws. Though Jot can save

some amount of money by not recalling the product, the reputation will be severely

damaged. Option 2 and 3 can save the brand image. If Jot undertakes option 2, Jot has

to pay for recall and offset process without making any financial improvement. Jot

€

Production Cost 24

Avergage Distribution Cost 3.4

Manufactured Cost 20.6

Improvement Cost 10

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should keep in mind that the new flying spaceship toy has gained popularity. By

recalling and repairing the product, Jot can save the product and enhance its image as

a trustworthy and responsible company.

3.2.3 Ethical dilemma

The toy industry is prone to ethical dilemma as children are particularly vulnerable as

consumers (Paine 1996; Mazis et al 1992). Any activity of toy industry from product

features to advertising should be ethical and comply with the law. In this particular case,

Jot is facing ethical dilemma. If Jot wants to minimise the damage of the faulty product,

it may ignore the complaints and not disclose information about the possible hazards to

the customers so as to prevent negative media. However, Jot may endanger the

children’s and this also breaks the toy safety rules.In addition, Jot can also disclose

wrong information as to who made the mistake. Jot may blame on its outsourced

manufacturers. Once again, this will affect the reputation of the manufacturer in a

negative way.

To solve this ethical dilemma, five principles are applied as below:

Integrity Jot needs to uphold integrity by telling the truth about the product

defect. Jot should admit that the fault is from Jot itself

Objectivity Firstly, Jot needs to understand the end customer view. Their

expectations must be high when buying a €84 toy.

Secondly, as the fault is not from manufacturing side. Jot has to think

of their disadvantages when blaming it for the defect.

Professional

competence

and due care

The brand will be asked to solve the hazard problem under legislation.

Also, it is a duty of toy company to protect the safety of children under

EU safety regulation.

Confidentiality Jot may be required to disclose information as it is an essential part of

recall process

Professional

behaviour

Jot is a well-known brand and should be responsible for its mistake.

Ignoring complaints or disclosing wrong information is unprofessional.

(CIMA, 2010)

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3.2.4 Recommendations

It suggests that Jot should recall the product to repair it to act ethically. Sonja Rosk will

be appointed to control the recall process as well as manage feedback from customers

while Michael Werner will be responsible for repairing process by providing exact

financial data and checking the process regularly. More importantly, by fixing the

product, Jot still stands a good chance of saving the product and maintaining the

company image. This will not only contribute to Jot’s short-term strategy but also long-

term development as customer relationship management is a very important part of

business.

3.3 Near-shoring proposal in Voldania

3.3.1 Issue analysis

Recall that Jot had very risky debts ratios which penetrated more than 80% out of total

capital of the company. Moreover, Jot must pay large amount of administrative

expenses which was equivalent 65% of Gross Profit in 2011. Besides, distribution costs

were also a problem that Jot needs to consider which penetrated nearly 17.54% of the

gross profit. (Refer to Appendix 6.1). Therefore, due to high administrative expenses

and distribution costs, they caused the company to generate less profit while based on

the long list of orders the company has enough ability to gain more. Thus, in order to

resolve two issues, Jot needs to have another solution which is move its production

from China to Voldania.

Costs Year 1 Year 2 Year 3 Year 4 Year 5

€ € € € €

Labour Cost (per hour) 1.75 1.96 2.20 2.46 2.75

Labour Cost (per unit) 1.05 1.18 1.32 1.48 1.65

Machinery Cost (per unit) 1.40 1.40 1.40 1.40 1.40

Distribution Cost (per unit) 3.00 3.18 3.37 3.57 3.79

Total Cost (per unit) 5.45 5.76 6.09 6.45 6.84

China

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Table 2: Costs of production in China and Voldania

According to Table 3, if Jot moves its production from China to Voldania, it will save

approximately €550,487 in 5-year period. The company may use this saving not only to

compensate the lost amount for fixing faulty products but also to pay interests and from

that the company will progressively less depend on creditors.

3.3.2 Ethical dilemma

The second ethical problem is that Jot should give Grot €25,000 as a personal donation

to smooth the application in Voldania bureaucracy or not. Due to the difficulties in

financial situation, that Jot outsources part of its manufacturing to Voldania needs to be

implemented as soon as possible. However, Grot, an official of Voldania government

requires a personal donation of €25,000to ensure that there is no delay in legal

procedures. This is considered as bribery and under no circumstances, will Jot act

unethically to achieve its business goals.

3.3.3 Recommendations

It is recommended that Jot should reject the personal donation of €25,000 for Grot

because this bribery is a criminal action which not only has greatly negative effects on

the company reputation but also maybe incur heavy penalties for Jot in Voldania.

Costs Year 1 Year 2 Year 3 Year 4 Year 5

€ € € € €

Labour Cost (per hour) 5 5.10 5.20 5.31 5.41

Labour Cost (per unit) 2.25 2.30 2.34 2.39 2.44

Machinery Cost (per unit) 1.96 1.96 1.96 1.96 1.96

Distribution Cost (per unit) 1.20 1.20 1.20 1.20 1.20

Total Cost (per unit) 5.41 5.46 5.50 5.55 5.60

Voldania

Year 1 Year 2 Year 3 Year 4 Year 5

Production in units 60,000 100,000 140,000 180,000 220,000

Savings (€) 2,400 30,100 82,183 162,091 273,714

Total Save in 5 years (€) 550,487

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It is suggested that Tani can contact with Voldania government again and find the

opportunity to talk with other people in the investment division. To convince Voldania

government to accept and quickly conduct all the administrative formalities, Jot can

send a detailed plan which shows what the company can contribute to the development

of Voldania in the future like donating to the environmental funding or popularise

Voldania image in the world market.

However, the movement of production to Voldania is a core concern. Hence, Tani and

all the assistant should move on this plan as soon as possible.

3.4 Launch of new range of toys for 9 -11 age group

3.4.1 A brief situation analysis

Toy trends

Being proactive is always better than reactive. As Alana Lotz is proposing to launch a

new range of toys for 9 -11 age group, it is highly suggested to do research in the toy

trends. Knowing what customers want and need - Alana, as well as the management

team - may finalise their decision.

According to Toy Industry Association’s (TIA) expert – Adrienne Appell: “Toymakers

continue to innovate at the speed of light to keep up with trends in other areas – from

pop culture to technology – because they know that kids want to be a part of the mix

and mimic what's happening in the world around them”. The top six trends for toys in

2012 include:

Generation app: Products that work with an app or smart devices and products

that are based upon an app or web property but have no digital tie-in.

Glowing wild: Toys that rely on a glow component to drive the play experience

and toys that are equally enjoyable in the light of day as they are in the dark

Little learners: Infant to pre-school toys and games that educate and challenge

and educational toys targeted to children of all ages.

Many ways to play: toys that combine multiple-play patterns and customizable

toys

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Save N’ Splurge: “The Big Ask” / impressive toys and collectibles / expanded

lines

Young maestros: Toys for young kids that teach music basics and toys for older

kids that let them emulate their favorite pop stars.

From the TIA’s experts’ predictions and evaluations, we can see a huge potential in

Alana Lotz’s proposal. Already being an emerging trend identified since 2011,

“generation app” is also expected to be an on-going trend for the next coming years.

“Generation app” and “Little learners” trends indicate using technology to enhance

classic play patterns, as well as creating traditional toys that interact with popular mobile

devices, while fulfilling educational purposes. Jot can “take advantage” of the mobile

app as a complimentary product to the new physical toys for age group 9 - 11.

Toys that are designed to associate with mobile apps and online platforms are

becoming more popular. In the case of which Alana’s proposal is approved, Jot can

open up a new chapter in designing high-tech toys. On the downside, there are also a

big number of risks that Jot has to face when entering a whole new market.

Smartphone apps market

Figure 1: Total app market revenue and average revenue per paid app 2011 – 2012

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Despite the global slowdown of the economy, demand for paid mobile applications

keeps on growing. The main driver is still the non-stop raising number of smartphone

users. The majority of paid apps are being dominated by 5 app stores: Apple App Store,

Google Play, BlackBerry App World, Nokia Ovi Store and Windows Phone Store. The

growing demand indirectly boosted the growth of apps market. In the end, there are too

many apps available that exceed the demand. As a result, the average revenue of paid

apps in 2012 is 27% - which is lower than in 2011. There are significant differences in

the average revenue earned per application between the top 5 app stores. However, the

trend remains the same for all platforms.

On the bright side, the market for paid application downloads has reached US$ 8 billion

in 2012 in the top 5 app platforms. This represents an increase of 27% compared to

2011 figures. There is no easy money, but with an advantage of low starting cost,

developers with a good vision can still earn millions of dollars. Therefore, investing in

the app market can still be profitable. Only “how” – is the question needed to be

answered.

3.4.2 Potential Solutions

Option 1: Develop the new range of toys for the 9 – 11 age group without the

smart phone application

Advantages Disadvantages

+Experiences in producing toys

+Avoiding risks and costs of entering a

brand new market

-Limited to one field of making toys

-Missing the potentials of a very

promising market of smartphone apps

Option 2: Develop the smart phone application as a start; then develop a new

range of toys for the 9 – 11 age group

Advantages Disadvantages

+Expand Jot’s product range

+Opportunities in new market

+Too little knowledge about the

smartphone apps market

+Costs of hiring new IT experts to

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+Developing high-tech toys

+Build stronger relationships with the

customers

develop the apps

+Costs of research and development for

the new market and product

+Risks of failing in the smartphone app

market

Option 3: Develop the new range of toys for 9 – 11 age group; then develop a

smart phone application as an associated app

Advantages Disadvantages

+Expand Jot’s product range

+New market potential

+Developing high-tech toys beyond

traditional range of toys

+Building stronger customer relationship

+Having more time for research on new

market

+Better knowledge of the new market

and products

+Better decision making

+Costs of hiring Apps developers

+Costs of research and development on

products and apps

+Risks of failing in the smartphone app

market

+Risks of losing customers due to

smartphone app failure

3.4.3 Recommendations

It is suggested that Jon Grun accept Alana’s proposal, but with modifications and

consideration. Instead of starting with the app, Jot shall start with developing the

physical toys for the targeted age group of 9 – 11. After that, a new range of toys for this

age group can be develop and innovated. In addition, a specific product can be sent out

first to “test” the market. After receiving positive feedbacks from the targeted market, Jot

can confidently develop the full range of products.

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Only from here, when the success of the new range of products are seen and

measured, Jot can consider moving on to the mobile app market. This step must be

done with careful and critical market research and product development. Mobile apps

market brings about a lot of potentials. In details, the app is expected to be developed in

a way that compliments the physical products. This way, the app does not stand alone

but associate with the products already loved by customers. The success from the

mobile app can in turn give a halo effect on other product ranges of Jot, as well as the

brand name itself. In the end, Jot can have the best of both worlds.

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4.0 CONCLUSION

Over a period of 15 years, Jot toy Company established in 1998 has achieved many

successes in the global toy market. The increase in number of international markets, toy

retailers and distributors as well as the development of new product every year prove

that Jot has a strong position in the industry, especially in Europe countries.

However, recently Jot has faced many internal and external problems like fault in

electronic toys, late delivery in seasonal sale period, finding a new manufacturer in

Europe region and widening the target market. Owing to the financial ability, it’s

impossible for Jot to solve all the issue at the same time. Therefore, the company needs

to analyse the urgency of each problem to decide which one should be considered first

as well as finding out the best solution among a variety of available options. Besides the

short-term issues, Jot also should develop a long-term plan to compete well with

potential and new competitors in the market like doing market research to clearly

understand the customer taste or looking for more near-shoring manufacturing.

Another worth discussion is that Jot Company has to take interested in the ethic and

social responsibility in every aspect of operation so that the company can continue to

build strong reputation, enhance brand image in the customer mind and have a

sustainable development in the long-term future.

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5.0 REFERENCES

Adriene Apell. (febuary 13, 2012). 2012 TOY TRENDS UNVEILED BY INDUSTRY

EXPERTS AT AMERICAN INTERNATIONAL TOY FAIR. In Toy Association.

Retrieved May 15, 2013, from

http://www.toyassociation.org/PressRoom2/News/2012News/2012_Toy_Trends_

Unve.aspx#.UZiM_7WLDHQ

CIMA CODE OF ETHICS. (2010).Retrieved May 2013, from CIMA Global:

http://www.cimaglobal.com/Documents/Professional%20ethics%20docs/annex%

20FINAL.pdf

In N.C. Smith and J. Quelch (eds.), Ethics in Marketing. New York: Primis Custom

Publishing (McGraw Hill): 672-686.

Paine, L.S. (1996). ‘Children as consumers: the ethics of children’s television

advertising’.

Statistics and facts on the toy industry. (n.d.). Retrieved May 2013, from Statista:

http://www.statista.com/topics/1108/toy-industry/

TIE. (2011). 2010 Facs and Figures: Toy industries of Europe (TIE). Brussels. Retrieved

May 2013, from

http://www.tietoy.org/spip.php?action=acceder_document&arg=374&cle=404349

d9413b3778b618fb5c6eb48fb1c715b498&file=pdf%2Ftie_facts_and_figures_201

0_-_final-3.pdf

Toy makers. (n.d.). Retrieved May 2013, from Wikinvest:

http://www.wikinvest.com/industry/Toy_Makers

Vincenzo Serricchio. (January 22, 2013). In 2012 Smartphone Users Spent US$ 8

billion for Paid Apps in the Top 5 App Platforms. In Research2Guidance.

Retrieved May 15, 2013, from http://www.research2guidance.com/in-2012-

smartphone-users-spent-us-8-billion-for-paid-apps-in-the-top-5-app-platforms/.

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6.0 APPENDIX

6.1 Financial analysis

Table 3: Financial ratios of Jot

Based on the table above, the profitability ratios of Jot are quite stable. The gross profit

margin ratio in 2011 was lower than in 2010 due to higher cost of sales. The reasons

were because labour rates in China were expected to increase by 12% each year

together with distribution costs also went up by 6% per annum. Thus, it cost Jot more

money to produce one product. In addition, although liquidity ratios of Jot also

decreased in 2011 in comparison with 2010 but it did not affect too much to the liquidity

of Jot. Because in 2011, Jot acquired more funds from €790,000 to €960,000 and trade

payables went up from €1,238,000 to €1,781,000 in the same period. As a result, it

slightly pulled down the liquidity of Jot. Consequently, larger amount of borrowings led

Jot to the dangerous zone when its total debts penetrated 84.38% and 82.67% out of its

total capital in 2010 and 2011 respectively. In general, the company’s overall financial

performance was positive and it had a sign to grow up excluding debt ratios. The higher

those ratios are, the more risky the company is.

2011 2010

Profitability Ratios

Gross Profit Margin (%) 31.90 32.92

Net Profit Margin (%) 2.49 2.21

Return on Capital Employed (%) 9.72 8.09

Liquidity Ratios

Current Ratio 1.63 1.74

Quick Ratio 1.44 1.52

Gearing Ratios

Debt Ratio 0.83 0.84

Debt to Capital Ratio (%) 82.67 84.38

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6.2 PEST analysis

Political

Complaints from customers about new flying spaceship toy

Product safety is strictly required according to European Union (EU) law

The infringement of Intellectual Property Rights (IPR’s) and the threat of copied

products in the global market

Economic

Jot has three bank loaning accounting for €1,600,00

Seasonal sale periods: the biggest number of annual sales is in quarters 3 and 4

Rise in outsourced manufacture’s cost due to the increase in wage rate in China

Social

Difficulties in predicting the product trend and sale volumes of new products after

launching as well as controlling the inventory value.

Corporate social responsibility report will be published next year

Technological

Some IT systems need to be upgraded to solve problems about data analysis

Practice the intelligent and sustainable supply chain

Faults on electronic toy

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6.3 SWOT analysis

Strengths Weaknesses

Growth in revenue and profit margin

Unique, innovative, “fun to play with”

product design

New product development every six months

Good brand image

Committed and experienced management

team

Good supplier-customer relationship with

outsourced manufacturers.

Licensed products are potentially highly

profitable.

Poor total quality management

Lack of varieties of products

Dependent on sales to large retailers -

yet having little influences over them

Little knowledge in smartphone app

Poor cash-flow management

Reached the overdraft limit

Ineffective IT system

CSR has not been published

Opportunities Threats

Huge sales potentials found in toy fairs

Near-shoring opportunities

Improved cash-flow management

Promising market segment of children from

9 to 11 years of age

Expanding the brand into a whole new field /

Entering a new market

IT solutions for better communication and

decision making

Building a better brand image by publishing

CSR.

Highly seasonal industry

Increasing cost (labour, machine,

materials…)

Poor-quality products made by

outsourced manufacturers

Cannot delegate the responsibility on EU

safety regulations

Decrease in net profit due to costs of

discontinued operation

Smartphone application is a highly

competitive market

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6.4 Covey’s time management matrix

Source: http://michaelhyatt.com/is-that-task-important-or-merely-urgent.html