Toy Industry Analysis

Team 1- PM 107 (440) 799-2324
Ohio University College of Business ka074912@ohio.edu
Copeland Hall
Athens, Ohio 45701
Date: February 14, 2016
To: Hossein Javadi Asl, John Keifer, Nadage Levallet, Tom Marchese, and Catherine Penrod
From: Team 1- Kaylee Anchulis, Oliviah Cook, Kelsey McKinley, Jacob Stankiewicz, and Jiang Zenhui
Dear Senior Partners:
Subject: Analysis of the Toy Industry
As requested by the Copeland & Associates Senior Partners on January 11, 2016, we are pleased to
submit our report on the toy industry. Attached you will find A Look into the Global Toy Industry:
External Analysis, Company Analysis, and Key Success Factors of the Toy Industry. This report
contains details about the current state of the industry and defines key success factors focusing on
Mattel, Hasbro, and Jakks Pacific.
The key success factors that we have selected to be most essential to the industry are:
• Successful penetration into Asia-Pacific’s emerging markets
• Expansion to global markets and creation of strong brand recognition through licensing
• Ability to innovate “around-the-box” and engage consumers through customer feedback and
crossover toys
This report provides research consisting of graphs, appendices, and an analysis of the industry's
strengths, weaknesses, opportunities, and threats (SWOT). These items were used to identify key
success factors relating to the development of Hasbro, Jakks, and especially Mattel. In conclusion,
we will provide strategic recommendations for our company of focus, Mattel.
Thank you to our senior partners and peer mentor for providing us with insight on the report and
assisting us outside of class. We would like to personally thank Hossein Javadi, John Keifer, Nadage
Levallet, Tom Marchese, Catherine Penrod, and Marie Strasbaugh for setting aside time to provide
and contribute to the development of our report. We appreciate the opportunity to analyze the toy
industry and slowly progress as a team. If you need further assistance with the information in this
analysis please do not hesitate to ask. We can be reached by phone at (440) 799 2324 or by email at
ka074912@ohio.edu.
Sincerely,
Team 1- PM 107
Kaylee Anchulis, Oliviah Cook, Kelsey McKinley, Jacob Stankiewicz, and Jiang Zenhui

Prepared for:
Dr. Hossein Javadi Asl
Professor Tom Marchese
Professor John Keifer
Dr. Nadege Levallet
Prepared by:
PM 107 – Team 1
Kaylee Anchulis
Oliviah Cook
Kelsey McKinley
Jacob Stankiewicz
Jiang Zenhui
A Look into the Global
Toy Industry
External Analysis, Company Analysis, and Key Success
Factors of the Toy Industry

Executive Summary
Purpose and Preview
The purpose of this report is to identify key success factors of the toy industry and provide an in-depth
analysis of one of the biggest toy companies in the world, Mattel, Inc. The toy industry is growing at an
annual rate of 5-7% and is worth $84 billion (Statista, 2014). The largest portion of global market share is
held by the US, Europe, China, and Japan, being held responsible for 65% of total market share (Study of
the Competitiveness). In this report, strategic recommendations for future success of Mattel are provided
as well as current financials and financial impacts of these recommendations.
Problems in the Toy Industry
Due to the fact that consumers are fairly price sensitive and there are low barriers to enter the toy
market, this industry is very highly competitive. Because of this, companies tend to outsource
manufacturing to third party facilities, thus loosing some control over product safety and regulation.
Although improving, toy safety and recalls are still a big issue in the industry.
Also a problem for the toy industry is the strengthening of the U.S. dollar. Because the dollar is currently
stronger than most foreign currencies, many U.S. corporations are losing money by operating overseas.
This makes exports more expensive and causes toy companies to lose millions of dollars in translation.
Mattel vs. Hasbro and Jakks Pacific
Hasbro is in a more favorable position than Mattel and Jakks Pacific. Although Mattel has made progress
towards emerging into Asia-Pacific, they lost one of their biggest license deals to Hasbro and are lacking
innovation, especially in the cross-over toy market. Jakks has virtually no international presence and only
has a few small license deals in their portfolio. Hasbro is gaining momentum as they form new
relationships with the entertainment industry along with successfully focusing on emerging markets,
resulting in growth that surpasses both Mattel, Inc. and Jakks Pacific, Inc.
Conclusion
After determining that Mattel needs to improve to keep up with competitors, recommendations for
improvement include
• Localize toy design, adjust prices in emerging markets temporarily to deal with currency issue, and
form relationships with retailers in the region
• Regain and form new relationships with the entertainment industry, contemplate merger with another
company to reduce competition
• Invest in more R&D to look at the needs and wants of consumers, take time to get back to the basics
This report analyzes the key success factors in the toy industry and relates them to current markets of
Mattel, Hasbro, and Jakks Pacific.

Introduction
By the request of Copeland Associates, we
have completed an extensive research on the
toy industry and have determined both the
current and future state, trends that will
directly affect business, and multiple
environmental analysis of the toy industry as
a whole. By doing this research, we have
determined three key factors that will lead to
success in this industry. Based on these three
factors, we constructed careful
recommendations for our company of focus,
Mattel, that will ultimately result in maximum
profit for both companies and shareholders.
The table below shows the three key success
factors shown with a number. Number one
meaning the most important while three
meaning the least. The raw score is how well
each company used their abilities towards
each key success factor. This raw score is out
of five possible points. The weighted score
puts the company into proportion with the
weight of the success factor, with emerging
markets having the most weight and
innovation having the least. The raw score of
each company is multiplied with the weight
of each key success factor to arrive at the
final weighted score . After all of this was
taken into account, Hasbro emerged with the
highest weighted score of 2.8, followed by
Mattel at 2.25, and finally Jakks Pacific at
1.35.
Introduction
Purpose and PreviewPurpose and Preview
Introduction Companies Key Factors Conclusion
Scoring Breakdown
Key Success Factors Weight
Mattel
Raw Score
Mattel
Weighted Score
Hasbro
Raw Score
Hasbro
Weighted
Score
Jakks
Raw Score
Jakks
Weighted Score
1. Emerging Markets 45% 2 0.9 2 0.9 1 0.45
2. Licensing 35% 3 1.05 4 1.4 2 0.7
3. Innovation 20% 1.5 0.3 2.5 0.5 1 0.2
Total 100% 6 2.25 8.5 2.8 4 1.35
1

Mattel Company Analysis
Mattel is a major toy firm based out of the
U.S that designs, manufactures and markets
toys worldwide. The company is divided into
four major brands including Mattel Brands,
Fisher-Price Brands, American Girl Brands
U.S Canada and Mexico, and Construction
and Arts and Crafts Brands. Mattel’s strengths
come from the brand recognition of their
popular brand names that make them a
global market leader as well as the diverse
line of products in their portfolio.
Mattel has significant segments geographically
and in items of product diversity in the market.
The North American segment, which consists of
the US and Canada, the International segment,
and American Girl. The North American and
International segments sell products in the
Mattel Girls and Boys Brands, Fisher-Price
brands, and construction and Arts and craft
brands.
As of 2014, Mattel earned 54% of revenues
from North America which is their highest
market segment. Mattel earned 25% from
Europe, 13% from Latin America, and 6%
from Asia Pacific (Mattel, 2015Mattel, 2015).
Mattel’s international markets develop and
market through the North America segment.
Mattel has a very solid international presence
with some of their products and segments,
especially the American Girl segment. It’s a
big international market for their historical
dolls, books, and accessories (Mattel, 2015).
Source; (Statista, 2016)
Overview
Market Assessment
Figure #1
Figure #2
Global Toy Market Share
Datasource;
(Study of the
Competitiveness, 2013)
2
Compared to the other two companies,
Mattel is the largest toy company. While
comparing the past six years, it showed that
revenues increased since 2009 to 2013 from
5.43 billion to 6.49 billion, and decreasing to
6.02 billion in 2014. Mattel has an advantage
in revenue compared to the other two.
Mattel's financial debt equity ratio is quite
lower than Hasbro and Jakk’s; at .71
compared to Hasbro 1.24 and Jakks at 1.49.
This shows that Mattel is in good financial
standings.

Mattel’s most popular global brand is the
children’s doll, Barbie. Barbie is meant to
inspire girls and remind them anything is
possible. Recently, however, the five decade
popular Barbie doll has diminished her
popular brand name. Mattel developed
“Hello Barbie” which uses technology similar
to Apple’s Siri. This new Barbie had many
concerns that involved privacy and security
and caused parents to stray away from
purchasing it (Komando, 2015). Mattel
actually expected this new product would
reverse their 16% decrease of sales they had
in the first half of the year, however they got
a lot of backlash on it and there were even
campaigns started against it (Fickenscher,
2015). Things are starting to look up it
seems, as Mattel released news of their new
Barbie project, offering a diverse reflection
in the 21st century. (Time, 2016). The Barbie
includes different shapes, hair colors, and
heights that girls can relate to better. This is
great opportunity for Mattel in bringing
Barbie back in the global market.
In 2014, Mattel bought out one of the trusted
leading global brands, MEGA Brands. This
brand creates building blocks and construction
toys. MEGA brands is the No. 2 player in the $4
billion construction building sets category. This
acquisition represents one of the key avenues
for achieving Mattel’s global growth strategy to
help them enter strategic categories that can
benefit their popular brands. Mattel expects
this will help them create even higher brand
recognition by being the main competitor to
Lego . They plan to keep the manufacturing
location in Montreal and Tennessee and also
plan to maintain the headquarters in Montreal,
Canada (Mattel, 2015). Another brand, Fisher-
Price, includes toys such as little people,
BabyGear & Learn, Imaginext, Thomas the
Train, and Dora the Explorer.
Lastly, the American Girl segment is a direct
marketer that publishes books, known for their
historic dolls, and their award winning
American Girl Magazine (Mattel, 2015).
(Datasource: CSIMarket, 2014)
(Datasource, Statista, 2016)
Brand Segments
Figure #3
Figure #4
3

There are some key issues with obtaining loyal
customers with Mattel, as many products
recently introduced do not meet satisfaction to
children and parents. These recent failures
explain the profit loss of Mattel throughout the
last few years. An example is when their Hello
Barbie did not meet the standards of parents
needs. Lastly, the last problem with their
consumer market is not meeting the quality
needed in products that consumers are
expecting. In 2007, Mattel had an outrageous
recall count of 19 million items that were sent
and manufactured from China. Although
improving, memories of this recall haunts
parents and may cause them to chose other
companies when buying products for their
children.
Mattel’s business relies on consumers investing
in their products. Mattel must be able to adjust
to consumer wants and needs now and in the
future. Consumer preferences change all the
time based on social and cultural changes..
Kid’s are maturing faster and moving past
playing with traditional toys at a younger age to
digital products. Today in the US, 59% of
children from the ages of 2-12 own a tablet and
71% own a smartphone (Shaftoe). Mattel is
forced to adapt to the new trends that are
attracting kids attention. They recently started
Apptivity, where they combined technology
with a physical toy to try and meet consumers
expectations. This was not carried out in the
best way and Mattel was forced to toss many of
the games and features of this product due to
lack of sales and interest.
Mattel’s partners with many stores to expand
their brand name. During 2014, Mattel’s
largest customers were Walmart, Toys “R” Us
and Target. Walmart was number one with 1.1
billion dollars worth of sales , Toys “R” Us
second at $0.6 billion and Target third at 0.5
billion dollars (Mattel, 2015). Mattel is a global
company that sells products to a large variety
of stores. In North America, they sell mainly to
department stores, retail store outlets, and
wholesalers. Partnering with these partners
helps Mattel to be a competitive firm in the
market. A firm must connect with these
popular store names in order to form good
relationships and expand in the industry.
Mattel also has independent stores that sell
their American Girl brand which amounts to
about 18 current stores. Although most of
Mattel’s products are sold in toy stores, they
also sell some of their products online through
websites.
Another important key factor in the toy
industry is licensing. A 20-year-old partnership
has recently broken apart as Hasbro took the
rights of Disney from Mattel. The princess line
from Disney brought in more than $4 billion a
year, accounting for around 7% of Mattel’s
sales Mattel’s recent weakness in licensing has
forced them to lose one of their main products
they are known for, dolls. The princess doll line
generates 1 billion dollars worldwide
(Beckman, 2014). Mattel relies heavily on dolls,
the category alone made up 40% of its total
revenues.
Partners and Consumers
4

Competitor Analysis: Hasbro
Hasbro is a major toy firm based out of the U.S.
that uses their brand blueprint to focus on
reinforcing storylines associated with several
outlets including television, motion pictures
and digital media. The brands are broken down
into franchised brands, challenger brands,
gaming mega brands, and key partner brands.
They market their brands under four
categories: boys, girls, games, and preschool
toys. This gives Hasbro the advantage of
marketing to consumers easier, as they have
something to appeal to everyone. Over the
past few years, Hasbro has had increased
success in the franchised brand segment of the
market and has made this their primary focus
because it provides global potential. In 2014
alone, franchise brands grew 31% and
represented 55% of Hasbro’s total revenue
(Hasbro, 2015). In order for Hasbro to generate
more revenue and profit in future years, they
need to focus on making their brands bigger
and more global.
Overview
Overall Hasbro is broken down into segments.
The three main sections they break their
company down into is U.S and Canada,
International and entertainment and
licensing. The international market consists of
Europe, Asia Pacific, and Latin and South
America. Hasbro focuses on re-creating its
existing brands in order to ignite new brands to
help draw the attention of the consumer. Due
to Hasbro’s strong strategy of licensing with
strong brand names like Star Wars and Jurassic
World, their boy category rose 28 percent in
sales (Das, 2015). Hasbro reported that an 8
percent quarterly revenue based on consumers
was for their toys based on Transformers. In
the second quarter, international sales rose 17
percent; driving double digit growth in Europe,
Latin America and Asia Pacific (International
Sales, 2014).
Market Assessment
The toy industry overall is a very competitive
industry because it is very cost sensitive and
has very low barriers of entry. Mattel is
Hasbro’s biggest competitor in the toy
market. Mattel generates more revenue and
has a bigger company base than Hasbro, but
over recent years Hasbro has been closing
the gap (Sharma, 2015). Hasbro has a great
international segment in the eastern
markets. The entertainment and licensing
segment includes lifestyle licensing, digital
licensing and gaming and movies and
television. Although the entertainment and
licensing segment only accounts for 5% of
the revenue compared to the U.S. and
Canada and International represent each
around 47% of total revenue. While this
looks like a small
5
Hasbro Net Revenue 2006-2014 (in millions)
Figure # 5

Competitor Analysis: Hasbro
Brand Segment
percentage of Hasbro’s supposedly strength of
licensees, this number will most likely go up in
2015. Hasbro has secured a merchandise license
with Star Wars through 2020. Due to kids
shifting to gadgets and other technological toys,
Hasbro as well as Mattel has seen declining
sales. Revenues in Hasbro’s game fell 8 percent
in the third quarter. Their franchised brands like
My Little Pony also fell at 28 percent. This
decline shows a huge decrease in their sales
because girls and games account for half of
Hasbro’s total revenue. However, over the past
years Hasbro has had increased success in the
franchised brand segment of the market and has
made this their primary focus. Since Hasbro is
divided up into gender segments by their toys,
they can focus on a variety of consumers more
consistently. Hasbro has continued to address
girls’ wants and needs in the market. and has
focused on consumer insights and storytelling to
sell products.
Hasbro’s main focus in brand products is their
franchised brands. Franchised brands represent
brands that are not entirely owned by the
company but mostly controlled by the
company. These franchised brands are My Little
Pony, Monopoly, Transformers, Magic: The
Gathering, NERF, PLAY-DOH, and Littlest Pet
Shop. In 2014, 6 out of 7 of Hasbro’s franchise
brands grew in the international segment. The
only brand that saw a decrease in sales was The
Littlest Pet Shop. They then made changes to it
and launched it in second half of 2014. After
the relauch, the product was back off to being a
success for the second half of the year. Licenses
Hasbro owned, not entirely, but developed
under partners and licenses
Hasbro makes efforts to put the consumer first
in every aspect. A lot of consumer engagement
is happening outside of developed countries. In
2014, the international segment of the toy
industry grew 8%. “As we are focused on re-
imagining, re-inventing and re-igniting our many
brands and imagining, inventing and igniting
new brands, we have a global marketing
function which establishes brand direction and
messaging, as well as assists the selling entities
in establishing certain local marketing
programs” (Hasbro 10k, 2014). This shows that
Hasbro is taking traditional toys and games and
coming out with new innovative idea’s and
recreating these toys in order to keep
consumers engaged. Another main focus of
Hasbro is to build a strong brand among
consumer groups. A strong brand name gives a
company the potential to engage consumers on
a global level.
Consumers Partners
Category Breakdown (2014 Revenue)
6
Figure # 6 Source;
(Hasbro is Set, 2015)
Hasbro economics differences may have a huge
impact on their customer segment. Walmart,
Toy’s “R” Us inc and Target are their main retail
customers. Walmart being number one with
16%. Hasbro is heavenly reliant on these stores
in order to be successful (Hasbro 10k, 2014).

Competitor Analysis: Jakks Pacific
Jakks is aim to appeal has been committed to
helping children smile, play and succeed
through their products. Jakks is also
committed to being successful for the
community by volunteering their products to
schools, hospitals and large non-profit
organizations. With supporting local
communities by volunteering their time and
toys, Jakks introduced their philanthropy
called Jakks Cares. Jakks Cares focuses on
helping the greatest number of children who
are under-privileged and to aid families
(Company Overview, 2015). In order to help
the greatest number of children, they
distribute products through their strategic
philanthropic partners which include Big
Brothers Big Sisters, Ronald McDonald, Feed
the Children, Toys for Tots and many more
(Company Overview, 2015). With expanding
opportunities internationally, Jakks is now
focusing on being more cost efficient by
optimizing product lines and placing strict
guidelines on new products. Jakks manages
their existing and new brands through
including new products, modifying existing
products and extending product lines
(Company Overview, 2015). Jakks believes
that foreign markets such as Europe and
Asian can offer opportunity growth for a
global standpoint.
Market Assessment
Brand Segment
Jakk’s has two brand segments, traditional toys
and novelty/seasonal toys. Traditional toys
include action figures, playsets, dolls with
accessories, electronics products and
construction sets. Traditional toys include
licensed characters from Batman, Star Wars,
Nintendo, Disney Princess and Fairies and
Cabbage Patch Kids.
Figure #7
Figure #8
Overview
Jakks Pacific is a multi-line and multi-brand
leading toy company that focuses on having a
diverse range of products that incorporate
classic and popular brands that appeals to
today’s sophisticated consumers. This toy
company designs, produces and markets it’s
products including toys and toy related
products, electronics, kids indoor and
outdoor furniture and many other products.
Net Sales of Jakks Pacific by Geographic Area
2008-2014 (in millions)
7

Competitor Analysis: Jakks Pacific
Novelty/seasonal toys include dress up
products, seasonal or outdoor products, indoor
and outdoor kids furniture and everyday
costume play. Novelty/seasonal toys also
include products for boys and girls based on
well-known brands such as Disney Frozen, Black
7 Decker, McDonald’s and Dora the Explorer. The
company offers everyday costumers for all ages
from licensed brands including Spiderman, Iron
Man, Power Rangers and Disney Princess (Jakks
Company Profile, 2015).
Trendy toy designs are expanding and
broadening Jakks consumer market. Jakks is
expanding and building strong brand awareness
by continuing to grow licensed deals with their
key franchises. Jakks have two main focuses
when it comes to having the upper hand on
other toy companies. Those are, knowing how
to acquire licensees cheaply and getting fast
distribution to retail stores, and having
productive supply chains that do not have
recalls because of the strict safety standards put
in place.
Partners and Consumers
Jakks Pacific target market is aimed at children
between the ages of 4 through 16 and
operates through two segments: traditional
toys and novelty/seasonal toys. Jakks main
merchandiser companies are Target, Toys R Us
and Walmart. Walmart accounts for 20.5%,
Target accounts for 15.3% and Toys R Us
accounts for 11.6% of net sales for Jakks (Jakks
Announces Results, 2015). Jakks has licenses
from internationally known trademarks like
Star Wars, Hello Kitty and Nickelodeon. By
engaging in popular licensing trademarks, it
creates a high rate of products being
purchased.
Jakks renews a multi-category license
agreements with DC Comics Brands which
includes Batman, Superman, Justice League,
Green Lantern, Wonder Woman, The Flash and
many more (Jakks Announces Results, 2015).
Jakks has recently reached a new license
agreement around the release of Batman v
Superman and is projected to deliver strong
sales for Jakks in the next year. This new
license agreement includes new products like
action figures with accessories, games, wagons
and vehicles (Kalogeropoulos, 2015). This new
agreement also includes domestic and
international opportunities for the full DC
Comics and will yield a number of great
products for kids and collectors. Jakks is
planning to launch its new Batman v Superman
product line around when the movie is
released on March 25, 2016 (Kalogeropoulos,
2015).
Figure #9
Source; (Buck, 2014).
8

Key Success Factors Summary and Criteria
Ability to successfully penetrate Asia-
Pacific’s emerging markets
Ability to innovate around the box and
engage consumers through customer
feedback and cross-over toys
Engage to global markets and create
strong brand recognition through
licensing
Factor 1:
Factor 2:
Factor 3:
• Focus on expansion to China
• Focus on expansion to India
• Problems dealing with expansion
• Improving the basics
• Listening to customers
• Adapt to technology and create
successful cross-over toys
• Driving global sales and building
customer loyalty
• Advertising
• Global perspective
Key Success Factors and Criteria
9

Introduction
Middle Class Population by 2030
(In Billions)
Although the age of traditional toy sales are
diminishing in the Western hemisphere and
more people are adapting to technology, the
rise in traditional sales are soaring in
developing countries. The fast paced economic
growth in the Asia-Pacific region including
South Korea, Thailand, Indonesia, and
especially China and India have seen a drastic
growth in sales of traditional toys from 2007 to
2015 (Timms, 2014). According to Euromonitor,
Asia is expected to have the largest toy market
and will pass North America in 2017 reaching
20.4 billion in annual sales. While the toy
industry in Asia-Pacific grew 31% as a whole,
China and India alone were responsible for
most of the growth (Iyer, 2015).
Prophesied to be “the biggest seismic shift in
history”, emerging markets in Asia-Pacific are
expected to take the lead in middle class
expansion over the next 20 years. In 2009, the
region was home to 28% of the world’s middle
class. That percentage is expected to increase to
54% in 2020 and increase again to 66% by 2030
(Bourque, 2014). This means in just 20 years,
Asia will go from holding under one-third of the
global middle class to over two-thirds, reducing
the share of both North America and Europe
drastically. The 525 million people in Asia’s
current middle class already surpasses the
European Union’s total population (Hitting,
2013). There are multiple reasons why the
region is seeing huge successes. Rising
disposable incomes is a huge factor, increasing
by 17,084 CNY (China Yuan Renminbi) from 2006
to 2014- the equivalent of nearly $2600 per
capita (National Bureau of Statistics of
China).Not only is the middle class growing at an
unprecedented rate, it’s comprised of a younger
crowd that’s seeing a cultural shift in parenting
from traditional studies to educational playtime,
which provides the toy industry with a huge
opportunity (Iyer, 2015). One of the problems
with toys in this region, however, is the presence
of counterfeit toys. According to Euromonitor’s
research analyst, Matthew Hudak, in order to
succeed, companies have to build and maintain
strong relationships with retailers in these
countries and try their best to keep their designs
as secret as possible.
Traditional Toys and Games Value Sales
Source: Euromonitor International
Factor 1: Ability to successfully penetrate Asia-Pacific’s
emerging markets
Introduction
Growth of Middle Class
Datasource;
(Ernst and Young, 2013)
Figure #10
Figure #11
10

Over the past 10 years, the toy industry in
China has seen a dramatic growth rate,
recording a 90% increase from 2008-2013.
They prospered even in the global financial
crisis of 2008-2009. China alone now accounts
for 43.8% of Asia-Pacific’s toy market
(Emerging Markets, 2014). China’s increase of
their middle class provides explanation of the
extreme rising of annual sales in the market.
Their disposable incomes have been growing
faster than their GDP which expands their
middle class and allows more people to be able
to afford toys and games (Gordon, 2013).
Within ten years, the middle class is expected
to grow by 430 million (The Wild, Wile East,
2015).
Four years ago, China was only third in sales of
traditional toys. Today, however, this
developing market is dominating in sales and is
rising to the top, growing at an annual rate of
7-8%. By 2017, China is expected to have a
27% global market share in traditional toys
(Timms, 2014).
China also has a large percentage of children in
their population, with 16.5% coming from kids
15 years old or younger. This number continues
to increase due to the end of the 35-year law
stating that families could only have one child
(World of Toys, 2015). This factor is expected
to contribute to the growth of retail sales as
well. According to the World Economic Forum,
retail sales in China are expected to be around
$6.5 trillion in 2020, showing a 50 percent
growth rate in just five years. Their main retail
channels are specialty children shops,
supermarkets, and shopping centers, but they
don’t have as many mass merchants as
countries like the US does. Although Walmart
and Toys-R-Us exist in China, small toy shops
are much more prevalent. This could be a
tough hurdle while discussing distribution from
major toy companies like Mattel and Hasbro
due to the lack of relationships with retailers in
Asia. However, online retail is on the rise and
young Chinese citizens are spending not only
more money in a year, but are shopping with
much more frequency because of this. Sales
are on trend to grow from $600 billion to $1.6
trillion in 2020, creating yet another
opportunity for toy companies to generate
profits by expanding their websites and online
presence in Asia.
China: total income by band 2010-2020
(annual income, thousands of people)
A Focus on Expansion to China
The graph above explains the projected increase
of Chinese people with incomes in the upper-
middle class throughout the next five years. It
shows that the number of people with incomes
of $15-30 and $30-50 a day will increase
dramatically in the span of 10 years, creating
the middle class that is talked about on this page.
emerging markets
Focus In China
Source; (Ernst and Young, 2013)Figure #12
11

India is considered to be the second most
populated country in the world. Like China, their
rising middle class is helping them significantly
in the future of the toy industry. Since the
number of people in their middle class is
increasing, it’s providing toy companies with
benefits in this developing market. India’s small
organized toy market shows they have a large
opportunity for growth in the future.
Similar to China, India’s population contains a
large portion of children. 20% of the global
population is in the age group of 1 to 12 years
old (site). India’s market is growing at a steady
rate of 7% and expects inflation to remain low,
showing a strong growth rate overtime.
Although India’s middle class is not as big as
China’s, it consists of around 50 million people,
totaling 5% of their entire population. This is
expected to grow steadily over the next decade,
reaching 200 million in 2020 (“China and India”).
India’s expected household income is also
expected to increase, multiplying four times in
two decades between 2005 and 2025 (McKinsey
Global Institute). Because of the increase in
annual household income, the percentage of
those in the middle class will rise, increasing
purchasing power overtime. India’s consumer
markets have the potential to be strong driven
by the middle class and the rise of income
levels. India’s consumer market is expected to
be the fifth largest consumer market in the
world by 2030 (Singh, 2015).
One major shortcoming for the two
companies expanding to emerging markets is
the currency problem. For example, according
to Hasbro 2015 investment day presentation,
the 2014 revenues of Hasbro were $369
million lower at current rates as the U.S
currency continues to strengthen against
multiple counties, such as the Euro, the
Canadian Dollar, RNB, Russian Ruble, etc.
Comparing with the average in 2014, the
current spot is decreasing 17% for Euro, and
36% of Russian Ruble.
A Focus on Expansion to India
Potential Problems with Expansion
emerging markets
Focus In India Problems Expanding
Rating Factor
Emerging Markets received a 45 percent
because it was the most important key
success factor. A company that can expand
into developing countries and with efficient
strategies can benefit their overall sales
globally. A company can also build strong
relationships and benefit from this in the
future.
China and India’s Dramatic Rise
The graph above shows the average increase in
percentage point share of global GDP per decade
Datasource; (Fisher, 2012)
Figure #13
12

Progress on Expansion to India
Factor 1: Evaluate The Companies
China
According to Mattel’s 2014 annual report, their international revenue accounted for 46% of
global sales. Of that 46%, Asia-Pacific represented 15% and amounted to over $465 million in
revenue. Asia-Pacific is an important emerging market for Mattel, with China accounting for
nearly 5% of their current total sales with an expected growth rate of 80%. Mattel’s 2014
transcript shows they were speeding up the pace of growth in China by doubling their size of
investment in China during 2016. Mattel also decided to expand its retail sales as the distribution
infrastructure in China is extended deep into the hall country. One recently successful global
project of Mattel focused on Hot Wheels. Hot Hot Wheels is now growing at an exceptional rate
as they have gotten half of school age children in their market by moving into shops nearby
schools.
India
Mattel has moved part of their product from China to Brazil and India. As manufacturescontinue
to shift more to the east and away from the west, Companies like Mattel are reliant on their
customers and retailers. In India, Barbie’s are being assembled and packaged on a small scale. An
example of these packages is a pack of Uno Cards with Mattel’s name on the back. Mattel has a
production facility in India which helps contribute to the localized market and its needs. Localized
Barbie’s that are manufactured in India are also transported to the rest of the world. Mattel is
taking globally-known products like Fisher-Price and Hot Wheels and alternating them to fit the
local Indian market. Mattel is present at 80 to 90 towns in India while the work with wholesalers
and business partners take them to different cities.
Mattel
Hasbro
China
Hasbro also realizes the great importance of the emerging market. Hasbro’s 2014 annual report
shows that net revenues of Asia Pacific have increased 10% from the previous year.
Recent data from Hasbro’s 2015 annual report shows a 16% increase from 2014. The annual
report also shows that the net revenue of Russia, Brazil and China have increased 20% from 2013,
making China a major part of Hasbro’s emerging market. According to Hasbro’s 2014 full
presentation, the revenue of emerging markets is 16% of total revenue. Hasbro has made a retail
expansion plan in emerging markets, especially China, as the disposable income in China is
rapidly increasing-indicating that the Chinese will be able to afford to increase their consumption
of toys.
13

Progress on Expansion to India
Factor 1: Evaluation of Companies
India
Hasbro is now moving some of their manufacturing to India. For example their transformer line,
one of their most popular products, is now being produced in India instead of China. They have
invested in several different factories in India. Hasbro has contracts in Indonesia, Turkey, Vietnam,
and China and now have big plans to expand to India due to the growth of their middle class and
increase of household income .
China and India
Because Jakks main distributors are Walmart, Target and Toys R Us, stores in Europe and Latin
America are creating new pricing structures and centralized shipping. These stores are saving on
shipping costs by opening more production facilities that ship from central warehouses located in
China. Based on current market trends and conditions today, expanding to Europe and Latin
America are subject to certain risks and uncertainties. With all of these factors in place, Jakks
expanding into these emerging markets allows for the advancement of the company globally and
reduces variable costs that connect with production.
Jakks Pacific
Hasbro (Continued)
Mattel
Raw Score: 2
Weighted Score: .09
Jakk’s Pacific
Raw Score:1
Weighted Score: .45
Hasbro
Raw Score:2
Weighted
Score:.09
14

Factor 2: Expand to global markets and create strong
brand recognition through licensing
% Growth of Licensing
Licensing has a major impact on the toy
market and drives the global sales on toys.
Year after year we continue to see growth in
the market penetration for license toy sales
globally. Over the past year, about 31% ($5.7
billion) of toys sold on the market were from
licensing agreements. Sales in the toy
industry also grew 7% overall in 11 different
global markets (Riley, 2015). The US is the
birthplace of current entertainment trends
that has expanded to the global market.
American made movies and have a big effect
on the sales of licensed toys throughout the
world. The United States has the highest
market penetration for licensed toys in the
world, but half of the top 10 most heavily
penetrated markets are from Pacific
Asia(Tansel, 2015). From 2009-2014 every
country in Asia Pacific gained an increase in
percent sales of licensed toys sold, thus
showing how important licensing is for
success in the toy industry. Another reason
that licensing is projected to keep growing
steady globally is because countries in the
Asia pacific are expected to have an increase
in disposable income. (Tansel, 2016). This
means that people in Asia pacific countries
should have more money to spend and there
is going to be an increase the middle class.
Licensing a brand is very essential in order to
expand brand recognition in current markets.
A strong brand name is essential because it’s
the way customers view your company. A
brand name has the potential to make or
break a business. (The Power of Brands, April
2015). Licensing is crucial to brand recognition
because it demonstrates value and helps build
a company’s reputation. In order to create a
strong brand, it needs to be memorable (Why
License?, 2016). In todays society social media
can have a big impact on a companies
reputation. As a result, companies must make
sure that they satisfy the customer now more
than ever.
Driving Global Sales Building Customer Loyalty
Datasource; (NPD Group, 2015)
Figure #15
Figure #14
15

Factor 2: Expand to global markets and create strong
brand recognition through licensing
Advertisement has a major impact on the
number of licensed toys sold each year.
Advertising enhances the awareness of the
consumers about the products on the market
because they’re based off movies and TV
shows that are currently popular. Creating
this exposure, licensed toys are in high
demand among children. The advertisements
catch the eyes of the children and then
parents are having trouble saying no because
they want to avoid guilt and want their
children to fit in with others. With the impact
of an economy crisis in past years, parents
are now faced with buying toys for their
children that they cannot afford otherwise.
Asia-Pacific is one of the fastest growing regions
in the world for licensed toy sales. The two
countries in this region that make up for most of
the sales are China and Japan. Japan leads the
world in global licensed toy sales making about
1.7 billion in 2014. China didn’t fall far behind
with about 1.4 billion in sales. Another reason
that the Asia-Pacific region is on the rise is
because many countries, including South Korea,
Singapore and Indonesia, have over a 40% market
penetration for licensed toy sales. This means
that over 40% of the toys sold in these countries
are licensed. On the other hand, China and Japan
have very low percentage of penetration in the
licensed toy market, falling below 20%. Even
though the penetration percentage is low in
Japan, they still make up 35% of the licensed toy
sales among Asia Pacific countries. The US market
has the highest penetration in toy sales in the
world.
The licensed toy industry has been on the rise
over the past few years in the US. Last year the
US experienced about a 7% growth in the sales of
licensed toys. This is more than two times quicker
than the growth of the rest of the toy market.
The US is making tremendous growth in licensed
toys, but so are many other countries. As of last
year, the US was the sixth fastest growing country
in terms of licensed toy sales. In the future the
US expects to still see growth in licensed toy
sales.
Western Europe is currently the second largest
licensed toy market in the world. From 2013-2014,
four out of the 5 leading countries in licensed toy
sales in Western Europe have had growth. Italy is
has leading country for percent penetration in
licensed toy sales in Western Europe. In 2014,
about 31.8% of the toy sales in Italy were on
licensed toys.
Advertising
Global Persepctive
Rating Factor
Licensing received a 35 percent, being the
second most important key success factor. A
company that connects with licenses can have
a competitive advantage in the toy industry. As
a company builds relationships with partners,
this helps them to be recognized globally and
expand their brand name.
Source; (Euromoniter, 2015)
Asia-Pacific Penetration of Licensed Toys
vs. Annual Disposable Income
Figure #16
16

Mattel has a tendency to maintain strong relationships with existing licensors. Mattel tends to be patient
and sit back in the market of licensing because Hasbro has already established dominance in this segment
of the toy industry. Over the past several years, Mattel has been decreasing in the number of licensed toy
sales. (Global Licensing Trends, 2013). Mattel has instead been looking to capitalize on its global
opportunities by growing their key brands like Barbie, Hot Wheels and American Girl. Mattel’s main source
of licensing agreements is with third party companies . Mattel just lost current ties with the licensing of the
Disney princess doll to their leading competitor, Hasbro. This will have a big impact on Mattel, decreasing
the amount of sales and revenue Mattel will have over the next year.
Hasbro is the top licensor in the world and achieves success by maintaining a strong brand value (Prezi,
2012).They have put efforts towards expanding its media and licensing efforts. (Global Licensing Trends,
2013). Hasbro has been making consistent growth since 2013 and have been leading in the sales of licensed
toys over the past decade (Hasbro, 2015). They remain at the top by scanning the market looking for new
trends among kids. Hasbro has been focusing more on the entertainment aspect of toys to capture the
younger generations. Over the years, Hasbro has been taking over the production of licensed toys. Hasbro
has recently made licensing agreements with Disney to start selling princess dolls, this includes the
production of the doll from the movie “frozen”, which has had the most sales in the US and Globally. Hasbro
has experienced tremendous growth in the expansion of licensed toy sales annually.
Factor 2: Company Comparison
Mattel
Hasbro
Jakks Pacific
Jakks is expanding and building strong brand awareness by continuing to grow licensed deals with their key
franchises. Jakks knows how to acquire licensees cheaply and getting fast distribution to retail stores and
have productive supply chains that do not have recalls. Jakks has award winning licenses from
internationally known trademarks like Star Wars, Hello Kitty and Nickelodeon. Their traditional toys include
licensed characters from Batman, Star Wars, Nintendo, Disney Princess and Fairies and Cabbage Patch
Kids(Jakks Company Profile, 2015). Jakks has recently reached a new license agreement around the release
of Batman v Superman and is projected to deliver strong sales for Jakks in the next year. This new
agreements includes domestic and international opportunities for the full DC Comics and will yield a
number of great products for kids and collectors.
Hasbro
Raw Score:4
Weighted
Score:1.4
Mattel
Raw Score: 3
Weighted Score: 1.05
Jakk’s Pacific
Raw Score:2
Weighted Score: .7
17

When asked about Lego’s success over the past
20 years, CEO Jorgen Vig Knudstorp explains,
“It’s about discovering what’s obviously Lego,
but has never been seen before.” Just 20 years
ago, in the late 1990’s, Lego Group was on the
verge of bankruptcy as Legos were becoming
old fashioned and overshadowed by the fast
growing popularity of the internet and
electronics. They began to panic and tried
everything they could to save Lego, even
though they knew little about many of their
ventures, like the Legoland theme parks. When
dramatically increasing their product depth
and creating theme parks all over the world
didn’t seem to work, they knew it was time to
step back and think for a minute. They had to
look at the history of Lego and figure out
where to go in the future, or what a modern
Lego should look like. They began by investing
in trend and ethnographic research to figure
out what kids played with and what they
actually wanted. Twenty years later, claiming
the spot of the number one toy company in
the world, Lego has innovation down to a
science. By focusing on what they’re good at
and looking at the research done by the Future
Lab, Legos secretive R&D team, they’ve been
able to pay more attention to customer
relationships and focus on incorporating
technologically advanced play experiences
resulting in global success. Innovation can
come in many different forms. It doesn’t have
to involve high-risk, high-reward projects- in
fact, Lego’s low-risk, high-reward method of
innovating original ideas has been more
successful than the industry has ever seen.
Lego’s innovation strategies led to global
success
The problem with innovation is the difficulty of
finding a happy medium between “inside-the-
box” and “outside-the-box”. Mattel, for
example, has tried both extremes and has seen
profits decrease due to the failure of their
attempts. For years, Mattel was caught up on
the traditional image of Barbie and American
Girl, and perhaps still is to some extent. They
never really tried to change the image or ideals
of their historically successful products and
began to become overshadowed by substitutes
that were successfully innovating. They also
tried the other extreme, innovating outside-
the-box. They opened a standalone store in
Shanghai that offered Barbie wedding dresses,
designer jeans, furniture, and expensive
handbags in hope of gaining popularity in
China. However, the store was shut down in just
two years due to lack of interest and sales. The
problem with this store was the lack of historic
presence of Barbie in the culture. No one saw
value in $150 Barbie jeans when there was no
brand context or value.
Net Profit of the Lego Group
from 2010-2014 (in millions)
Lego's Innovation Strategy
Factor 3: Ability to innovate around the box and engage
consumers through customer feedback and cross-over toys
Datasource; (Statista, 2014)Figure #17
18

In the past 5-10 years, there has been an
obvious shift from traditional toys to handheld
technology and wireless communication. In
the US alone, 59% of children from the ages of
2-12 own a tablet and 71% own a smartphone
(Tomorrow’s Toys, 2014). In the past, the toy
industry has suffered because of this new
innovative technology sparking the interest of
millions of kids worldwide. However, there is
now an entirely different market opportunity
where toys and technology combine.
In the past, toy companies tried to fight and
compete with the electronic industry, but the
growth and development of technology is hard to
beat. Companies are realizing the impact these
toys can have due to the fact that kids are growing
up with technology and have already learned
different technological skills at a very early age
(Goldman, 2014). This is one of the fastest growing
markets in the US, Asia, and Europe as companies
are coming up with new ideas to succeed in this
field (Study on the Competitiveness, 2013).
Adapting to this new market early will allow huge
successes in the industry. The recent success story,
Lego, credits its comeback largely to a product
called Lego Mindstorms. The concept behind this
product is incorporating technology by equipping
Lego bricks with sensors that allow movement and
provide interaction. Not only did this work for kids,
it sparked the interest of millions of adults wanting
to design and interact with their own moveable
robot or creation.
Growth of the Global Smart Toy Market
Figure 18 above shows the rapid global incline of a new
“smart toy” market. The estimated growth from 2013
to 2018 is around $7 billion showing no slowing or
maturing in the near future.
Datasource: (Smart Toys, 2014)
New “Smart Toy” Market Emerging
The Shift to Electronics
The industry is calling this new category “cross-
over” toys. It incorporates traditional toys like
building blocks and board games, but now
includes the element of interactive technology.
These cross-over toys create an entirely new
interaction between the toy and the consumer,
encouraging the collaboration between these
two mediums.
They have, thankfully, seen a recent increase
in value and support from consumers after
releasing a viral video introducing three new
body types for Barbie. After trying to defend
her classic image for so many years, Mattel
finally listened to consumers and created a
line with seven different skin tones, 22 eye
colors, and 24 unique hairstyles, representing
many different ethnicities and cultures. Only
then did they see an increase in stock and
positive press for the first time in years- all
because they decided it was time to listen to
what people wanted and innovate a classic.
Shift to Electronics
New "Smart" Toy Emerging
Figure #18
19

Datasource; (Gottlieb, 2014)
Even in a global context, as middle classes
grow and disposable income rises, the
demand for traditional toys will decrease as
they look towards innovative electronic toys
that provide collaboration and interaction
with the consumer. Companies should look to
Lego for inspiration in innovation and
recognize that before they could become a
global success again, they had to take it back
to the basics and listen to the needs of
consumers around the world.
Lego also discovered that kids aren’t making
distinctions between digital and physical play
anymore. Their R&D department is calling it
“One Reality”, and are focusing on creating
physical play experiences that correlate with
technological aspects on a phone or tablet. Lego
already has over 20 apps on Apple’s app store
and expects to add a few more in the coming
years that allow physical blocks and technology
to come together. Although Mattel’s stock has
been disappointing throughout the last few
years, they recently saw a 14% increase and hit a
14-month high. This is credited largely to the
unexpected success of their fourth quarter
earnings. A big part of Mattel’s Christmas sales
this season came from “Hello Barbie”, a talking
Siri-like doll that interacts with kids. Mattel can’t
even be credited with coming up with the idea,
however. It was their customers that had to beg
for years to be able to talk to Barbie that finally
inspired Mattel to make the doll. Although there
was security speculation, Hello Barbie pulled
through and saw amazing sales- showing that
kids want their favorite, classic toys in a new way
that incorporates interaction and technology.
This theory also proves true while looking at the
list of “Top 10 Toys for Christmas 2015”. Products
like the LeapPad Platinum, a responsive Siri-like
Elmo doll, and Vtech’s kids smartwatch topped
the charts. Eight out of ten products
incorporated technology and are considered
cross-over toys (Top Toys for Christmas, 2015).
By innovating “around-the-box” and recognizing
the needs of consumers, toy companies can
become successful again without the high risk,
creating new adaptations of classic toys and and
experimenting in the field of cross-over toys.
Rating Factor
Innovation received a 30 percent, being the
third most important. A company that
adapts to social changes can take the lead in
the market and be number one company.
Research shown that innovation is a need for
a company in order to strive. Innovating is a
need, so therefore this was the final key
success factor, although innovating products
is important to a firm because it helps them
keep their popular brand names alive.
Figure #19
20

Mattel’s decrease of sales in the past few years is credited to many things, one being lack of
innovation and success in the cross-over toy industry. Mattel has a hard time getting away from its
classic brands like Barbie and Fisher-Price to adapt to a new market of kids that want apps and
electronics. In 1999, they purchased The Learning Company for $3.6 billion in hopes to keep up with
technology, but it failed horribly and they sold it for just $27 million the next year. In 2012, Mattel
released “Apptivity”, a series of apps and physical toys that could interact with each other. Although it
has seen some success, they had to get rid of many of the different games due to lack of sales. Mattel
has a very connected distributor network but there seems to be a lack of inspiration and innovation
within the company, there is hope to turn this around in coming years with the recent hiring of a new
executive team.
Mattel
Hasbro
Jakks Pacific
In the past few years Hasbro has produced many new toys that adapt to the new trends. One
being cross-over toys. Hasbro was successful when they brought back their retro toy, Furby. In
2013, it was many countries most popular toy. Mattel has not fully mastered thinking around the
box with innovation. They are doing significantly better than Mattel though. As they continue to
innovate many of their well known products like monopoly, My Little Pony, and Nerf, they have
not mastered it like Lego. They are thought around the box, but it has not got them as far as Lego.
Jakks has always been focused on having technology driven products and many other companies are
following suit. Jakks was the first company to provide plug-and-play TV games. Simply plug the game
into the TV, turn on the sensor bar and begin playing. Such as games like Pac-Man or Class Arcade
Pinball TV games (Jakks TV Games, 2004). By coming out with the ‘throwback games,’ Jakks target
market for this segment of products was for middle aged gamers because they grew up playing those
games. Jakks plans to introduce a product line that will combine the ID recognition technology to
make TV games with exciting new content, leaving consumers with a memorable and entertaining
experience and having a creative blend of the physical world and the virtual world.
Hasbro
Raw Score: 2.5
Weighted Score: 1
Mattel
Raw Score: 1.5
Weighted Score: .3
Jakk’s Pacific
Raw Score: 1
Weighted Score: .2
21

Recommendations
Mattel has held the spot of the number one toy
company in the world for years, however that
position is starting to slip away from them as
they fall behind in major key categories.
Although they have made some progress with
emerging markets and cross-over toys, they must
advance their innovation strategies as well as
their licensing strategies to remain competitive
in this industry. Therefore, three suggestions for
Mattel at this point are as follows:
In order to explore emerging markets, Mattel
should focus on the three areas. The first one is
actively building domestic sales channels
because it’s not enough for Mattel to just
outsource their manufacturing to China. They
also need to continue to cooperation with
traditional retailers and the e-commerce
platform. According to Mattel’s 2014 annual
report, the three largest customers for Mattel
are Wal-Mart at $1 billion, Toy “R” Us at $0.6
billion, and Target at $0.5 billion. These retailers
are gaining global traction and are expanding
rapidly, with Wal-Mart now owning 433 physical
stores in China (Wal-Mart China Factsheet,
2016). Toys “R” Us is experiencing similar
growth, according to their press release on
January 16, 2016. Last month, they opened their
100th successful store in China. Another major
sales channel that Mattel needs to explore is the
growing E-commerce platform. From 2010 to
2016, online trade revenue for toys in China
increased over $2 billion. The leading B2C e-
commerce platforms companies in China in 2014
are Tmall.com at 61.4%, JD.com at 18.6% and
Sunning.com at 3.2%. The gross merchandise
volume of China’s online shopping market is
estimated to grow to $682 billion in 2018 which
should enable Mattel to dramatically increase
their sales if they form relationships and
cooperate with those major Chinese B2C e-
commerce companies.
The second issue Mattel needs to address deals
with currency. With the U.S Federal raising
interest rates, the currency issue is going to get
more serious (I. Talley, 2015). The issue is that
the U.S dollar is facing appreciation but other
countries are facing currency devaluation. To
deal with it, Mattel could raise the retail price of
their products they sell in emerging markets. By
doing this, revenue might increase with the rise
in sales price, which could potentially alleviate
some currency issues.
The last issue Mattel needs to think about is the
localization of their products, or in other words,
designing a toy that meets with the traditional
Chinese culture. Two examples of companies
that successfully localized are McDonald's and
Kentucky Fried Chicken. KFC’s menu is much
different in China, offering some traditional food
in their restaurant like the Chinese gruel.
Creating localized toys that flatter Chinese
traditional culture should attract local
consumption of toys and and help to increase
their brand recognition and sales.
1. Emerging Markets
Introduction
22

Recommendations
3. Innovation2. Licensing
23
Over the past several years, Mattel has been
losing the battle for licensing in the toy
industry. Just recently Mattel lost the
licensing of the Disney princess doll, that
made them about $500 million annually.
This was able to give Hasbro even more of a
competitive advantage than they already
had, in the licensed toy segment of the
market. Even though Mattel still makes
more revenue than Hasbro it is
recommended that Mattel merge with
Hasbro because in 2014, Mattel’s revenue
decreased by 7%, and Hasbro’s went up by
4.8%. This shows that licensed toy sales
have a huge impact on the toy market
today. By merging, it would also eliminate
the competition and make the toy industry
have even higher barriers of entry.
In order for Mattel to remain competitive,
they must invest in more R&D to look at the
needs and wants of consumers as well as take
time to get back to what they’re good at.
They have seen some recent success with the
launch of their new Barbie line, consisting of
seven different skin types, four different body
types, and dozens of different hair types and
eye colors. They also gained some positive
feedback from kids with their Hello Barbie
doll, an interactive Barbie that could talk back
and forth to children. However, there were
security speculations and controversy over
the Siri-like doll and many parents were
turned away. Mattel needs to invest in more
R&D to look at the needs and wants of
consumers and needs to step back and
determine what brands to focus on, taking
them back to the basics in in innovative way.
Emerging
Markets
Licensing
Innovation

Introduction
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Appendix A: Industry Analysis
Industry Overview
The toy industry is defined as a series of
categories that include building sets, arts and
crafts, action figures, dolls, puzzles, outdoor and
sports toys, vehicles, preschool toys, plush toys,
and action role play toys. Youth electronics is
also a rapidly growing category (Toys Market
Research, n.d.). The toy industry has a substantial
amount of impact on the global economy,
amounting to over $84 billion in revenue in 2014
(Toy Industry, n.d.). The industry is largely
concentrated in the United States, China, Japan,
and Europe with the United States currently
holding around 24% of the world’s toy market
and together with Japan, is home to over 50% of
the top 100 toy companies in the world (Study of
the Competitiveness, 2013).
Global Toy Market Share
This is due mainly to the rising middle class in
China and the increase of the growth rate per
capita in annual disposable income (Tansel,
2016). According to studies done by Ernst and
Young, Europe’s share of the middle class is
projected to decrease by almost 15% and two-
thirds of the global middle class will be from
the Asia-Pacific region by 2030. This will have a
huge impact on the toy industry and
companies will have to restructure their global
market plans to accommodate to Asia’s
growing consumer base.
When discussing International growth and
revenue, the toy industry has an average
growth rate from 5-8%, well above the global
rate of inflation. (Positive Mid-Year, n.d.). It’s
interesting because as a global market,
research proves the toy industry to be virtually
“recession-proof”, or “crises-proof”. Even
through the stock crash and the peak of the
recession in 2009-2010, global toy sales rose
2.4% from 2008-2009 and rose even more,
3.7%, during 2009-2010 proving the industry’s
ability to remain steady in times of turmoil and
economic depression (Toy Industry, n.d.).
Datasource;
(Study of the Competitiveness, 2013)
In Europe and the US, the traditional toys
and games market has a slow to moderate
growth rate. However, in China and other
countries around the world, growth rates
are strong and show a large potential
increase. The Asia-Pacific region is the only
location that provided Mattel with steady
growth from 2009-2014 (Mattel, 2015).
Total revenue of the global toy market from
2007 to 2012
Datasource; (Statista, 2016)
Industry Overview
Industry Breakdown
Figure #20
Figure #21
30
Global Market Share

Retail Channel Segments
Top Retail Channels- U.S.Top Retail Channels- Europe
The channels in which toys are sold throughout
the world differ greatly from country to country.
For example, in the United States, the largest
retail channel category is “Mass Merchants”.
This includes stores like Walmart, Toys-R-Us,
and Target. However, in Europe, that category is
minimal. Their biggest retail channel is “Toy
Specialists”, which includes small specialty
stores usually owned by families or small
companies. Asia is much like Europe in the fact
that big box stores are not nearly as popular as
they are in the U.S. Large companies like Mattel
and Hasbro rely on mass merchants for an
average of 35-45% of worldwide sales,
something they must take into consideration
when looking at expanding to new emerging
markets (Mattel, 2015).
The two graphs below show percentages of
retail channels in both the US and Europe.
Because consumers in the toy industry are
relatively cost sensitive and there are low
barriers to entry, competition is high and cost
reduction plays a big part in the financial
success of a company. The biggest reason why
so many companies outsource production and
manufacturing is to save on cost. Figure ???
above shows the process of the toy value chain
from raw materials to retail stores. Most larger
companies like Mattel, Hasbro, and Jakks use
different third-party manufacturing facilities in
Canada, China, Indonesia, Malaysia, Mexico,
and Thailand, with the majority of their
facilities still located in China (Mattel, 2015). By
spreading out their facilities to different
countries, they reduce the risk of problems
arising from political, civil, and economic
changes in certain areas that would affect their
manufacturing capabilities (Refer to PESTLE
Analysis).
Oil Refining Chemicals
Plastics
Paints and
coatings
Plastic Toys
Chemicals
Textiles and
fabrics
Plush Toys Transport Wholesale Toy Retail
Paints and
coatings
Wood and wood
products
Wooden
Toys
Toy Industry Value Chain
Datasource;
(Study on the Competitiveness, 2013)
Retail Channel Segments
Figure #22
Figure #23 Figure #24
31

The toy industry is largely dominated by a
few key players: Mattel, Hasbro, Lego,
JAKKS, and Bandai Namco all have a strong
global presence and are known for
international success.
Lego is a private Danish-based company
that focuses on building blocks. Their
recent block buster movie, “The Lego
Movie” helped them become the market
leader for the very first time. Mattel and
Hasbro are worth over $9 billion in the
stock market, yet they don’t begin to
compare to Lego’s profitability. Although
they struggled in the past and were on the
verge of bankruptcy in 2004, Lego now
generates more EBITDA (Earnings Before
Interest, Tax, Depreciation, and
Amortization) than Mattel and Hasbro
combined (Ro, 2015).
Mattel is a U.S. based company that prides
itself on focusing in a variety of different
areas including dolls, vehicles and track
sets, building blocks, and infant toys
(Mattel, 2015). Due to the recent loss of
the Disney Princess line and the declining
sales of Barbie, Mattel is struggling to keep
up with competitors.
Hasbro is also a U.S based company that focuses
on toys through storytelling, including television
and movies, digital gaming, and licensing
(Hasbro, 2014). Their recent licensing deal with
Star Wars and the taking over of the Disney
Princess line from Mattel has led to large profit
increases and success.
Bandai Namco is a Japanese company that
focuses on entertainment products including
toys, network content, home video games
software, and arcade games (Bandai Namco,
2015). They have a strong International presence
with most of their successes coming from the
Asia-Pacific region.
Lastly, Jakks focuses mainly on traditional toys,
electronics, role play toys, and seasonal toys
(Jakks’s Pacific, 2015). Although much smaller
than the others, they have successful license
deals with WWE and sell many action figure-
based toys. The toy industry is highly
competitive due to its low barriers to entry and
ability to easily outsource manufacturing (Refer
to PESTLE Analysis). With a small amount of
start-up and a good idea, anyone can break into
the industry and become a large competitor.
Industry Competition
Industry Competition
Figure #25
32
Figure #26 Figure #27
Source; (Study on the Competitiveness, 2013)

The toy industry has seen a strong
performance recently, generating $19.4 billion
in the US alone. According to recent reports by
the NPD Group, toy sales grew an astounding
6.7% in 2015 (Content-Related Toy Sales,
2016).
Companies are now taking into consideration
the growth of the middle class in emerging
markets and are drawing up plans to penetrate
these regions. Europe and the US will no longer
be the biggest economic target for revenue,
but rather China, India, and other Asia-Pacific
regions. By 2030, they will become the biggest
middle class in the world (Bourque, 2014).
As for needs and trends in the industry, two big
consumer needs right now are satisfying tech
savvy kids and a more mature generation, and
incorporating educational toys that inspire
creativity in kids. In 2014, both construction
toys and arts and crafts categories grew by 13%
and 3% respectively, showing that kids are now
interested in designing, building, and inventing
toys of their own (Top Toy Trends of 2015,
2015).
To summarize, the global toy industry has
recently been on the rise and is expected to
have big international growth rates in the
coming years, mainly due to emerging markets.
There are a few trends within the industry that
a firm must recognize including the shift of
traditional toys to a traditional-technological
mix, named cross over toys, and the
importance of licensing to increase sales
globally. In order for a company to be
successful they must optimize these trends.
According to Wohlers Associates, the 3-D
printing market is expected to quadruple in size
over the next five years on a global scale and
will have a big impact on the toy industry
(Allen, 2015). This connects with
advancements in technology and will force
companies to start thinking out of the box.
Traditional toys may become a thing of the past
and a new target market of tech-savvy kids is
on the rise.
The last big trend to discuss is licensing
relationships with large entertainment
companies like Disney. Licensing is worth
Global Power Index
Source; (Fisher, 2012)
Current and Future Market
Overview of Analysis
Figure #28
33

Appendix B: PESTLE Analysis
Political
Social
Technology
Legal
Environment
Currently, around 75% of the toys in the
world are made in China. However,
many countries have started putting
regulations and safety guidelines on
toys. If countries were to put import
barriers on Chinese toys, it would have a
big political impact on the toy industry.
Another political/economic factor is the
currency rate. The USD is continuing to
strengthen against multiple countries
including Europe, Canada, Russia, etc.
which creates a loss of revenue when
converting profits across global borders.
One of the biggest variables of the
social segment in the toy industry is
licensing. Companies license over one
third of toys sold on the market. The
toys that are being licensed are based
on new popular movies, TV shows and
apps amongst kids. Licensing has been
popular since the early 2000’s and is
still growing. The Asia pacific region of
the world is the leader in licensing of
toys. 5 out of the top 10 leading
countries in licensing are from the Asia
pacific region of the map showing that
they have the most power in the toy
industry.
The toy industry had approximately $84
billion total annual economic impact on
the economy in 2015. Oil prices have one
of the biggest economic impacts on the
toy industry and are constantly changing,
making the price of producing a toy
change very often. There are many
factors that can have an influence on the
price of oil, like natural disasters or the
stability of the Asia Pacific countries. If
countries in the Asia Pacific are unstable,
the price of oil will be increased because
they have the power in the market.
Technology is a key variable when
talking about the toy industry. Since the
release of computers and the Internet,
technology has nearly doubled in
growth about every other year. With
this, toy manufacturers must be able to
adapt to change quickly. In today’s day
and age, children move on from
traditional toys and start using
electronics at about the age of 10.
Many toy companies are trying to
recreate old games and develop them
with new technology to grasp the
attention of children.
Political Economic
Social Technological
34

Introduction
Appendix B: (Continued)
Social
Technology
Legal
Environment
There are many laws and regulations that
must be followed before a new toy can be
introduced to the market. Specifically, the
United States currently has the strictest
laws and safety guidelines on toys in the
world. Weather it’s a toy is being imported
or exported, it must follow all safety
regulations and standards. In order for a
toy to be allowed on the market and sold in
the US, the product must go through over
100 safety tests. The ASTM F963 is the
safety requirement other countries must
abide to before exporting a toy into the US
market.
The toy industry association is a group that
acts on environmental issues in the toy
industry. TIA has recently been stressing that
toys become more ”green” or eco-friendly
for the safety of children. Even though eco-
friendly toys only makes up a small portion
of the market, young children are being
taught to think more eco-friendly at a young
age, thus making them consume more eco-
friendly toys. People are also willing to spend
a more money on toys if they are ecofriendly
in order to keep their child safe and healthy.
Toy
Industry
Political
Economic
Social
Technology
Legal
Environmental
EnvironmentalLegal
35

Appendix C: Porters Five Forces
Political
Threat of New Entry
Threat of Substitution
Buyer Power
Competitive Rivalry
The toy industry is a consolidated industry
with very high brand recognition. It also has
multiple barriers to entry like economies of
scale, slow market growth, and the price of
fixed costs. However there are many
opportunities for people to break in to cater
to some unmet needs in the industry.
Anyone can start a toy company and
outsource manufacturing, it would just be
more costly due to the small amount of
product being made.
Threat of Entry Threat of Substitution
Kid’s don’t usually have a brand
preference, they want specific toys
popular at the current time. Since
switching brands does not have many
repercussions, the threat is fairly high.
Technology can also be considered a
substitution threat right now. Research
shows in the future, the lines will be
blurred between toys and technology but
many people in the industry still consider it
a threat.
Since the toy industry is mostly dominated by a few key players,
competition can be intense. In Mattel’s most recent 10-K, management
states, “Competition among the above companies is intensifying due to
recent trends towards shorter life cycles for individual toy products and an
increasing use of high technology in toys. In addition, as a result of the
phenomenon of “children getting older younger” resulting from children
outgrowing toys at younger ages”. There is a growing rivalry due to many
outside economic factors.
Supplier Power
During the past few years, there has been an
increase in the use of plastic resin in the toy
manufacturing process. A key chemical
component of plastic resin is petroleum,
therefore oil prices have a direct impact on
profits. The current oil prices low, so firms
could either lower their prices or make
bigger profit. They should buy as much raw
material as possible right now if they can
afford and handle it.
Buyer Power
Depending on the individual store, buyer
power can range. For example, Walmart,
Target, and Toys R Us accounted for over
40% of Mattel’s sales, so losing one of
these stores would have a significant
impact on the sale of the product.
However, when demand for a certain
product is high, toy companies can charge
higher prices and can turn down certain
stores if they refuse to pay a certain price.
Competition
36

Appendix D: SWOT Analysis
Political
Threat of New Entry
Buyer Power
Competitive Rivalry
• Strong brand recognition: Brands
are globally known.
• Strong work force: Around 30,000
employees employed.
• Variety: Provide a variety of number
of brands and have a lot to offer and
meet a wide range of age for
customers
Strengths Weaknesses
• Toy Recalls: Mattel has had 19 million
recalls from China
• Losing Partnerships: Specifically
licensing, due to other companies
expanding quicker
• Gender age products: Target
consumers based on one gender.
Opportunities
• Expand internationally into developing
countries: As middle class is growing
this is an opportunity to emerge into
developing countries like Asia Pacific
• Innovation: Due to a higher percentage
of kids using technology this is an
opportunity to innovate products. This is
necessity for companies
• Form relationships: Help Mattel
compete against Hasbro. Could lead to
globally expanding even more
Threats
• Technology: Customers drift to other
products that involved electronics.
Shifting kids to mature at a quicker rate
and drift away from traditional toys
• Competition: As technology progresses
and other companies continue to think
around of the box creates a greater
amount of competition
• Counterfeit products: Fake products
similar to the strong brand can
decrease sales due to this black market
S.W.O.T Analysis: Mattel
37

Appendix E: Business Model Canvas
Political
Threat of New Entry
Buyer Power
Competitive Rivalry
Walmart,
Target, and
Toy’s “R” Us,
licenses
companies like
Disney. Acquire
shelf space in
big box stores
by connecting
with these retail
stores
Manufacturing,
marketing,
targeting specific
target group
through age.
Brand recognition is
highly concerning
for Mattel. They
also value brand
recognition, as well
they value
entertainment.
Workforce,
Manufactures,
Customers, and
Retail stores,
kids specifically,
and logo
Performance, quality, employee expenses,
Material expenses, License partners, and realities
Popular brands like
Mattel Brands, American
Girl, and Fisher Price.
Along with. Customers
are willing to pay based
on current needs of tech
savvy kids
Customers of all
ranges; Kids to
adults.
Developing
countries, and
retail stores
Loyalty and
Communication
with key
partners, and
quality customer
Advertising, mass
marketing, and
online, and in
store.
38
Mattel

Appendix F: Common Size Balance Sheet
Common size
2014 Balance sheet Mattel Hasbro JAKKS
Cash and equivalents 14.45% 19.71% 12.73%
Marketable securities - - 0.04%
Account receivable 16.26% 24.15% 41.75%
Inventory, net - - 14.03%
Income tax receivable - - 4.27%
Deferred income tax - - 0.60%
Investments 8.36% 7.49% -
Prepaid expenses 8.32% 8.64% 4.47%
Total current assets 47.40% 60.00% 77.89%
Office furniture and equipment - - 2.57%
Molds and tooling - - 15.55%
Lease hold improvement - - 0.94%
Total - - 19.06%
Less accumulated depreciation and amortization - - 17.09%
Property, plant and equipment 10.98% 5.24% 1.98%
Intangiables - - 8.71%
Other long-term assest - - 1.85%
Investment in DreamPlay LLC - - 1.25%
Investment in joint venture - - -
Goodwill 20.74% 13.09% 7.92%
Trademarks, net - - 0.41%
Other noncurrent assets 20.89% 7.16% -
Other - 14.51% -
Total other asset - 34.76% -
Short-term borrowings - 5.57% -
Current potion of long-term debt - - -
Account payable 6.40% 4.69% 9.99%
Account liabilities 9.52% 13.46% 15.48%
Reserve for sales returns and allowances - - 4.35%
Income tax payable 0.28% - 4.23%
Total current libilities 16.20% 23.72% 34.06%
Convertible senior notes, net - - 34.06%
Long-term debt 31.24% 34.42% -
Other noncurrent liabilities 8.69% 8.58% 38.27%
Income taxpable 0.44%
Deferred income tax 1.06%
Total noncurrent libilities 39.93% 66.72% 74.17%
Redeemable noncontrolling interests - 0.94% -
Preference stock - - -
Common stock 6.57% 2.31% 0.0041%
Additional paid-in capital 26.29% 17.79% 35.97%
Treasury stock -37.69% -65.75% -4.27%
Retained earnings 57.96% 80.10%
Accumulated deficit - - -4.74%
Accumulated other comprehensive loss -9.25% -2.13% -1.22%
Total JAKKS Pacific, Inc's stockholders' equity - - 25.74%
Non-controllling interests - - 0.09%
Total stockholders' equity 43.87% 32.34% 25.83%
39

Appendix F (Continued)
40
Common size
Total - - 21.64%
Property,plant and equipment 10.24% 5.37% 2.47%
Investment in joint venture - - 0.004%
Goodwill 16.82% 13.50% 9.98%
Other noncurrent assests 20.48% 8.54% -
Other - 16.25% -
Short-term borrowings 0.07% 0.19% -
Current potion of long-term debt - 9.73% -
Conbertible senior notes, net - - 22.23%
Other noncurrent libilities 8.40% 7.98% 1.56%
Income taxpable - - 0.58%
Redeemable noncontrolling interests - 1.03% -
Common stock 6.85% 2.38% 0.0051%
Treasury stock -38.03% -58.03% -4.27%
Retained earnings 60.84% 77.96% 10.70%
Accumulated deficit - - -4.74%
Accumulated other comprehensive loss -6.89% -0.78% -0.86%
Total JAKKS Pacific, Inc's stockholders' equity - - -
Non-controllling interests - - -

Appendix F (Continued)
41
Common size
Total - - 17.09%
Property,plant and equipment 9.09% 5.33% 2.85%
Investment in joint venture - - 0.570%
Goodwill 16.56% 10.98% 8.80%
Other noncurrent assests 19.86% 9.63% -
Other - 16.07% -
Short-term borrowings 0.15% 5.19% -
Current potion of long-term debt 6.13% - -
Conbertible senior notes, net - - 17.11%
Other noncurrent libilities 9.86% 10.66% 3.31%
Income taxpable - - 0.84%
Redeemable noncontrolling interests - - -
Common stock 6.76% 2.42% 0.0040%
Treasury stock -32.98% -58.62% -
Retained earnings 53.86% 77.55% 1.59%
Accumulated deficit - - -
Accumulated other comprehensive loss -7.12% -1.67% 0.76%
Total JAKKS Pacific, Inc's stockholders' equity - - -
Non-controllling interests - - -

Appendix G: Common Size Income Statement
Common size
2014 Income statement
Mattel Hasbro JAKKS
Cost of sales 50.18% 40.18% 70.89%
Royalties - 7.22% -
Product development - 5.26% -
Advertising - 9.94% -
Amortization of intangibles - 1.25% -
Program production cost amortization - 1.11% -
Selling, distribution and administration - 20.62% -
Total expenses - 86.15% -
Gross profit 49.82% - 29.11%
Advertising and promotion expenses 12.17% - 25.24%
Other selling and administrative expense 26.79% - -
Operating income 10.85% 15.03% 3.87%
Change in fair value of business combination liability 0.73%
Equity in net income (loss) of joint venture 0.04%
Interest expense 1.32% 2.20% -1.54%
Interest (income) -0.12% -0.09% 0.01%
Other non-operating (income), net -0.08% 0.14% -
Total non-opearating (income), net - 2.26% -
Income before tax 9.74% 12.77% 3.11%
Income tax - 3.00% -
Provision for income taxes 1.46% - 0.46%
Net income 8.28% 9.78% 2.66%
Net loss attributable to noncontrolling interests - -0.06% -
Net earnings attributable to Hasbro, Inc - 9.84% -
Net income per common share-basic 0.000024% - -
Basic - 0.000077% 0.00013%
Diluted - 0.000076% 0.00009%
Weighted average number of common shares 5.63% - 2.59%
Net income per common share-diluted 0.000024% - -
Weighted average number of common shares and potential common
shares
5.66% - 5.13%
Dividends decalared per common share 0.000025% 0.000040% -
42

Appendix G (Continued)
43
Common size 2013 Income statement
Cost of sales 46.35% 40.98% 75.39%
Royalties - 8.30% -
Product development - 5.09% -
Advertising - 9.75% -
Amortization of intangibles - 1.92% -
Program production cost amortization - 1.17% -
Selling, distributionand administration - 21.35% -
Total expenses - 88.56% -
Gross profit 53.65% - 24.61%
Advertising and promotion exoenses 11.57% - 31.65%
Other selling and administrative expense 24.06% - -
Operating income 18.01% 11.44% -7.04%
Change in fair balue of business combination liability - - -
Equity in net income (loss) of joint venture - - -0.50%
Interest expense 1.21% 2.59% -1.57%
Interest (income) -0.09% -0.12% 0.05%
Other non-operating (income), net -0.06% 0.36% -
Total non-opearating (income), net - 2.82% -
Income before tax 16.95% 8.62% 0.41%
Income tax - 1.66% -
Provision for income taxes 3.01% - -8.52%
Net income 13.94% 6.96% 2.66%
Net loss attributable to noncontrolling interests - -0.06% -
Net earnings attributable to Hasbro, Inc - 7.01% -
Net income per common share-basic 0.000040% - -
Basic - 0.000054% -0.00038%
Diluted - 0.000053% -0.00038%
Weighted average number of common shares 5.30% - 3.51%
Net income per common share-diluted 0.000040% - -
Weighted average number of common shares and potential common
shares
5.36% - 3.51%
Dividends decalared per common share 0.000022% 0.000039% -

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