1. Toy World, Inc. k Analysis of the Case Study Friedrich Roeper Matthias Lohmann
26th of September, 2017

2. Contents Toy World, Inc. Financial Implementation Conclusion
History
Plastic Toys Industry (1994)
Financial Profile
Problem
Solutions
Seasonal vs. Level Production
Financial Implementation
Conclusion
Digression: Aggregate Planning
Sources
26th of September, 2017
VU Faculty of Economics

3. Contents Toy World, Inc. Financial Implementation Conclusion
History
Plastic Toys Industry (1994)
Financial Profile
Problem
Solutions
Seasonal vs. Level Production
Financial Implementation
Conclusion
Digression: Aggregate Planning
Sources
26th of September, 2017
VU Faculty of Economics

4. Toy World, Inc. History
Plastic toys manufacturing company founded in 1973 by David Dunton and Jack McClintock
Originally a partnership, incorporated in 1974 with Mr. Dunton holding 75% and Mr. McClintock holding 25% of stock
In 1991 Mr. McClintock assumed presidency due to the health conditions of Mr. Dunton
26th of September, 2017
VU Faculty of Economics

5. Toy World, Inc. Plastic Toys Industry (1994)
Highly competitive market
Low entry barriers
Simple production process and low capital requirements
Many competitors
Design and price fights
Short lived products due to changing popularity and similar products offered by competitors
Strong dependence on the invention of the next popular toy
Trend: Import of cheaper plastic toys by foreign manufacturers with lower labor costs
26th of September, 2017
VU Faculty of Economics

6. Toy World, Inc. Financial Profile
Since 1973 rapid growth and profitable operations
1993: Net sales around 8 million dollars
Net profit dollars
Loan outstanding dollars
1994: Projected net sales around 10 million dollars
Net profit of dollars
26th of September, 2017
VU Faculty of Economics

7. Toy World, Inc. Problem
(thousands of dollars)
Sales 1993
January
$64
February 88
March 96
April
May 87
June 95
July
August
1.251
September
1.474
October
1.723
November
1.965
December
940
Pull production (start of production after order)
 Highly seasonal production
Around 8 % of annual sales
 only % capacity use
Around 92% of annual sales
 total capacity utilisation
 Add.: Overtime, recruiting difficulties, high quality control and training costs
 reduce profits
26th of September, 2017
VU Faculty of Economics

8. Toy World, Inc. Solution Level production
Elimination of overtime premiums
dollars
Direct labour savings
dollars
Higher storage costs
dollars
dollars (savings)
Costs of goods sold (70%  65,1% of sales)
New credit line negotiations
26th of September, 2017
VU Faculty of Economics

9. Toy World, Inc. Seasonal vs. Level Production
Seasonal Production
Producing the equal amount each month
Inventory costs are higher 
Operating costs are lower
Better customer service 
Improved quality control
Better cashflow
Producing different amounts each month (dependent on season and orders)
Inventory costs are lower 
Operating costs are higher
Recruiting difficulties
Inefficient
26th of September, 2017
VU Faculty of Economics

10. Contents Toy World, Inc. Financial Implementation Conclusion
History
Plastic Toys Industry (1994)
Financial Profile
Problem
Solutions
Seasonal vs. Level Production
Financial Implementation
Conclusion
Digression: Aggregate Planning
Sources
26th of September, 2017
VU Faculty of Economics

11. Financial Implementation
Excel
26th of September, 2017
VU Faculty of Economics

12. Contents Toy World, Inc. Financial Implementation Conclusion
History
Plastic Toys Industry (1994)
Financial Profile
Problem
Solutions
Seasonal vs. Level Production
Financial Implementation
Conclusion
Digression: Aggregate Planning
Sources
26th of September, 2017
VU Faculty of Economics

13. Conclusion Implementation of level production
 Level clearly prevails in net profit over seasonal strategy
Due to the competitive market situation a company has to strive for efficiency
Advantages over competitors
Present example: Toy "R“ Us
Filed for bankruptcy on 18th of September, 2017
26th of September, 2017
VU Faculty of Economics

14. Contents Toy World, Inc. Financial Implementation Conclusion
History
Plastic Toys Industry (1994)
Financial Profile
Problem
Solutions
Seasonal vs. Level Production
Financial Implementation
Conclusion
Digression: Aggregate Planning
Sources
26th of September, 2017
VU Faculty of Economics

15. Digression Aggregate Planning
Definition: Process for determination of necessary capacities in production, contractors, inventories, underages and pricing in a planning period (3 to 18 months).
Aim: Maximize Profits
Toy World Inc.: Detailed planning horizon, competitive advantage (e. g. against foreign manufacturers with lower labor costs), lower cumulative costs, maximize profits
26th of September, 2017
VU Faculty of Economics

16. Sources
Case Studies in Finance, 7th edition, Bruner, R. F., Eades, K. M., Schill, M. J. (2014).
Corporate Finance, 2th edition, Ross, S. A., Westerfield, R. A., Jaffe, J. F. (1990).
Fundamentals of Corporate Finance, 10th edition, Ross, S. A. (2010).
Principles of supply chain management, 2th edition, Crandall, R. E., Crandall, W. R., Chen, C. C. (2015).
26th of September, 2017
VU Faculty of Economics