Executive Summary

1


The Ambers

Overview
The global toy industry is highly fragmented and fiercely competitive. Jot is an
independent successful toy brand which designs and markets toys for kids of various age
groups. At present, it faces a number of financial, strategic and ethical issues that have
to be cautiously dealt with. These issues have been prioritized, analysed and evaluated.

Fault in new flying spaceship toy
Scenario: A hazardous technical fault reported in a newly launched flying spaceship
toy is the most pressing issue being faced by Jot.
Potential Impacts: It poses an immediate threat to the brand name of Jot. Since
this is the peak-sales season, the far reaching reputational impact can result in
significant decline in sales. Moreover, this issue can lead to serious legal implications.
Recommendations: Jot must recall the 1200 units in market with complete refund to
the consumers. It must launch a free warrantee campaign, deliver letters of apology
and a complimentary toy to them for restoring customer confidence. Remaining 4800
units should be repaired, repackaged and launched back in the market, incurring a
loss of 67200 as customer acquisition cost. It must seek compensation from the
certification agency. Also, Jot should implement a robust NPIP mechanism.

Late delivery of Christmas product
Scenario: Gull, a manufacturer, has announced only 3 days before the delivery date
that it can deliver only 75 % units of a product on time. This issue calls for an
immediate attention for precluding the losses.
Potential Impacts: Though the immediate revenue loss would not be very significant
but subsequent decline in sales due to customer diversion and poor brand positioning
can be substantial. Breach of contracts with the retailers would lead to loss of
credibility and hence lesser orders in future.
Recommendations: Jot must communicate the current supply problem to its retailers.
Based on our estimation of sales for the next 40 days, Jot should distribute the 1800
units on a pro-rata basis in the ratio 4:1 to the large (1440 units) and small retailers
(360 units). Discount (10%) must be offered on late-delivered units, thus, incurring a
loss of 630. Suitable compensation must be sought from Gull.

Near-shoring to Voldania
Scenario: Owing to recent developments such as high distribution costs and inflating
labour rates in China, Jot has been considering the proposal of near-shoring a part of
its manufacturing to Voldania.
Potential Impacts: Near-shoring at Voldania would lead to a 13.5% reduction in the
cost per unit by the end of fifth year of production, owing to significantly lower
distribution cost. The gradual shift to Voldania would also increase operating profit by
0.6 % than the forecasted level.
Additionally, it also offers key strategic and operational advantages. Proximity to the
manufacturer would help Jot establish trust, foster long-term relationships and allow
better alignment of organizations due to cultural similarities. Bringing Jots
manufacturing closer to the end market for toys would help Jot develop a more flexible
Executive Summary



2


The Ambers

and just-in-time supply chain. Similar time zones would promote better coordination.
Recommendations: The demand of bribe by the Voldanian bureaucrat is highly
unethical and reflects potency for further demands in future. Hence, only when the
demand recedes, should Jot shift to Voldania. In case of failure of mitigation of the
bribe issue, it should must consider near-shoring to other eastern European countries
such as Poland, Hungary or Czech Republic instead of Voldania.

Launch of new range of toys
Scenario: There has been a paradigm shift towards electronic toys and computer
assisted learning. Hence, Jot is considering the proposal of entry into 9-11 year old
segment with launch of new range of products. Due to lack of urgency and
uncertainty, this proposal has been ranked last.
SAF Analysis: This business diversification would be a completely new working
space for Jot and thus involves in-depth planning and analysis. It should reallocate a
fraction of its R&D resources towards smart device applications. A comprehensive
market sizing and cost analysis indicates breakeven within 2 years and increase in
operating profit by nearly 11.8% by 2016.
Recommendations: This proposal must be accepted by Jot. The recommended plan
of action comprises of connecting with the users and shaping the product as per their
likeability as well as strategizing a step wise marketing plan. Establishing itself in the
smart phone application market would provide Jot with a platform to diversify into
sophisticated products and spread out globally.

Ethical Issues
For a business, ethics must come first.
The demand of 25,000 by the Voldanian bureaucrat is highly unethical and Jot must
not succumb to such unfair business practices.
The presence of a faulty product in the market is a grave ethical concern and it is
imperative that Jot recalls these faulty units back.
Hasty launch of flying spaceship could have possibly led to neglecting the safety
checks and hence the technical fault in the product. Jot should ensure stricter safety
checks for future.
Jot must not violate any IPR regulations while entering into a new product segment.

Corporate Social Responsibility
Jot should step into the CSR arena by launching special toys for blind children and
donating toys to orphanages on Christmas.

Secondary Issues
Debt factoring has been recommended to generate immediate cash-in-hand. It could
also consider invoice discounting.
Jot needs to review its IT infrastructure; Implement a pay per use model.
Jot should establish online/offline CRM units for better demand speculation and brand
positioning.
Jot should step into e-commerce by partnering with existing online retailers.