Company overview – Jingle Bell a new toy company
In an attempt to maintain the effective and efficient outcome, Jingle Bell always keeps a highly efficient flat structure. Until the end of 2004, the number of employees is 94, excluding three senior managers, with 80 employees and 8 supervisors working in the manufactory. Since the start of Jingle Bell, we have clearly made our final objective as providing highly quality and environmentally friendly toys to meet customers’ needs with the reasonable return profit and the benefits of shareholder.
In order to achieve this, Jingle Bell has made a range of strategies and objectives in terms of production, personnel and marketing areas. Before the beginning of the business, Jingle Bell has made the specific market research. It shows that due to the low cost of the materiel there is a great profit margin in this new toy market. In the existing market, nearly all the companies which provided similar products focused on the middle or cheap price market. The average price of the market was around 1. 35 (AJAX) and 1. 90(ZORO).
Based on a range of survey and research in customers and competitors, Jingle Bell identified there was a potential demand for a niche market that can provide good quality products
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This situation was far away from the previous expectation and caused great amount of finish goods stock. After the analysis of wide feedback information from market, the main reason has been identified as heavy pricing competition in current market. Due to the attraction of large profit margin, there were lots of new competitors entering into this market during those two months. Thus some previous competitors reduced their price sharply in a short time in an attempt to repel the new ones. The extremely low price has impacted on the sales of Jingle Bell.
Also there was no advertising and any promotion package associated with the launch of the products. It made rather difficult for Jingle Bell’s products attracting the attention of customers. Concluding all the reasons above, it is clearly that the target of 15% market share was unrealistic during the current situation. However, because the extremely low price policy (some of them were under the product cost) was considered to be more likely existing in a short period, Jingle Bell decided that merely around 5% cut in price through next period in order to maintain profit and consistency in product image.
In addition, the target of market share was adjusted to 8% to 10%. The following performance has proved the new strategy was reasonable. Other competitors prices have gradually gone up to the original level, and Jingle Bell’s market share stabilized around 6% to 8%. (See chart 1) After this adjustment, there were several increases in price of products due to the rise of average labour costs and overheads. Especially, AJAX had two major increases in its price by 7% and 6% respectively. The first increase was made in period 8 after AJAX has lasted for a very good sales performance (all selling out).
On the other hand, the profit margin in AJAX was very limited comparing with ZORO. During the period 4 and 5, in order to reduce the finish goods stock, its price was even below the cost. (See chart 1). Thus to increase the price in a reasonable range was necessary. At the end of the 2004, due to the threat of the potential war, the lacks of sufficient material caused lots of competitor shrinking in their operation capacity. The high demand in toy markets made its more elastic to accept the higher price. Thus to increase the price in a reasonable range could increase Jingle Bell’s profit.