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Small domestic market

The domestic toy industry is a stable, low-growth industry that is also mature and subject to a highly
fragmented retail channel of distribution. The industry is highly competitive with low barriers to entry,
and traditional toy manufacturers are seeing increasing competition from digital gaming products,
digital media and products that combine traditional analog products with digital play. Competitors
include large and small manufacturers, as well as marketers with strong capabilities with respect to
recognizing shifting consumer interests and bringing new products to market

Retail Market
The domestic retail toy market is highly competitive. Competition from online retailers is driving down
prices, which has led to lower gross profit margins. The squeeze is especially painful because toy
sales are seasonal.

Switching costs

Given the brand names of the products themselves and

the unique nature of the products offered, the consumer will find difficulty in
switching from one product to the other because of the diverse nature of the
industry. In other words you can only get Monopoly from Hasbro and Barbie from
Mattel which makes switching costs for the consumer high. Differentiation, clever

marketing, and the must have attitude of many young children contribute to a
high switching cost phenomena present in the industry

Five force
Five Force Analysis of Toy Industry
Michael E. Porter has given The Five Competitive Forces That Shape Strategy. The five forces
allow companies to distinguish economic features as well as issue a broad overview of the
pleasant appearance of the industry. The forces provide strategically relevant components of a
companys macro-environment, which have ensued influences outside the companys boundaries.
Porter states that in an industry the competitive rivalry exists within the various organizations
because of bargaining power of the suppliers, the bargaining power of the buyers, new entrants
and the threat of substitute products (Porter, 2009). Rivalry is stronger in industries where
competitors are equal in size and capability.
Newcomers can expect to earn attractive profits a market that is a high profit yielding tends
to attract more and more entries; these new entrants bring along with them a certain degree of
threat to existing industry. New entrants may affect the industry because of factors like existing
patent rights, government policies, the cost of differentiation of a product, economies of scale
and profitability in the industry. Simultaneously, buyers bargaining power and the switching
abilities along with the number of available substitutes for an industry affect the industry as
well.
The purchasing power of the buyers affects the industry, as there might be change in
income, customer price sensitivity as well as the customer depends on the product.
The suppliers bargaining power also has an impact on the industry as a whole. The cost of inputs
has an effect overall manufacturing cost of the industry; therefore it affects the industry.
Along with these factors, there always exists a rivalry among the competitors based on
innovativeness, costs, marketing strategies etc. in the industry.
The toy industrys annual total economic impact in the U.S. is more than $79 Billion. The average
price of a toy is around...