1. According to you what were the critical success factors required in order to survive in this industry? Ans: 1.

cheap labour 2. Less salary to workers. 3. over time done by poor workers 2. Describe the competitive scenario of this industry

Ans: Mattel (MAT) has the largest market share for both action figures and dolls and is

the world’s largest manufacturer of traditional toys, with a 2007 revenue of $5.97 billion. Mattel sells products under a host of well-known brand names such as Barbie, Matchbox, Fischer Price, and Hot Wheels. However, because Mattel focuses so much on traditional toys, its business faces pressure from the fast-growing video game industry, an industry it entered in 2006.

Hasbro (HAS) is the United States' second largest toy company, with a 2007,2008,2009 revenue of $3.84B, $4.022B and $4.068B respectively. Hasbro owns the largest market share in the board game industry as of 2007, producing popular board games such as Clue, Monopoly, and Scrabble. Its other products include the Transformers, Mr. Potato Head, Play Doh, Milton Bradley, and Parker Brothers brands, as well as licensing agreements with brands such as Star Wars and Marvel. JAKKS Pacific (JAKK) is the United States' third largest toy manufacturer, obtaining $857 million in 2007 revenue. JAKKS Pacific produces traditional toys under licenses for brands such as Cabbage Patch Kids, Care Bears, and Hannah Montana, a particularly big earner for JAKKS in 2007. Furthermore, JAKKS Pacific produces video games under the World Wrestling Entertainment (WWE) name through a joint venture with THQ. Russ Berrie and Company (RUS) designs and distributes gift consumer products for the infant and juvenile demographic. Russ Berrie's products include infant bedding, bath toys, feeding items, baby comforting products, and stuffed animals, under brands such as Sassy, KidsLine, and CoCaLo, Inc.. In 2006, its revenue was $294.8 million, which increased by 11% to $331.2 million in 2007. RC2 (RCRC) has grown significantly during the new millennium through a host of important acquisitions, and has, as a result, become an influential company in the toy industry. It is perhaps best known for its products under licenses with the Thomas & Friends, Bob The Builder, and John Deere brands. In 2007, RC2's revenue was approximately $489 million. Action Products International (APII) designs, manufactures and distributes educational and non-violent toys, children's books, stationery, and souvenirs. Its products include names under brand names such as Space Voyagers, Play and Store, and Kidz Workshop.

In 2007, Action Products' revenue was $6.1 million, down from the $7.4 million it made in 2006.

3. List down the major mergers and acquisitions in the industry

Corgi International (CRGI) is a manufacturer of die-cast model vehicles whose 2007 revenue was $35.5 million, a 53.5% decrease from the $76.4 million it obtained from 2006 revenue. In May of 2008, British toymaker Hornby acquired Corgi for 7.5 million pounds.

Ans: 1997: Mattel buys out Tyco Toys, Inc., the third largest U.S. toy maker. 1999: The Learning Co., a major player in computer games and educational software, is acquired for $3.5 billion. 1998: Pleasant Company, maker of the American Girl brand, is acquired. 4. What are the basic reasons behind the consolidation drive in this

industry? Ans: According to Playthings magazine, the toy industry has had to go 'back to the drawing board." Joe Diaz, president of the Learning Express since 1987, agreed in an interview that if independent retailers 'cannot find a way to cooperate, they will not survive." Long time toy retailers KB Toys, FAO Schwarz, Inc., Zany Brainy, and The Right Start filed for Chapter 11 bankruptcy protection following the 2003 Christmas season. The five top leaders in the toy industry controlled almost 60 percent of the overall market share. According to the Market Share Reporter, WalMart accounted for 20 percent of the market, Toys 'R' Us claimed 17 percent, Target generated 8 percent, while Kmart had 6 percent, and KB Toys had 5 percent. In addition, Wal-Mart dominated as the top toy and game retailer in 2001 with 28.04 percent. Toys 'R'Us followed with 22.79 percent, KB Toys with 6.76 percent, Kmart with 6.75 percent, and Target with 6.74 percent. Craft items continued to be a favorite among consumers. According to the Market Share Reporter, "Americans were spending more time at home." Michaels Stores were the leaders with $2.5 billion, followed by Jo Ann Stores with $1.6 billion; Hobby Lobby had $1 billion, followed by a distant fourth, Frank's Nursery& Crafts with $371 million. Among the leaders in this industry at the end of the 1990s were Ben Franklin Crafts Inc., with more than $350 million in annual sales and more than 200 workers, and Applause, LLC (formally Applause Enterprises Inc.) —makers of the popular Beanie Babies—with $300 million in sales and more than 1,700 employees in 1999.

Ben Franklin Retail Stores Inc. had franchised variety and crafts stores throughout the U.S. by the end of the 1990s. The company also owned and operated a chain of Ben Franklin superstores. The parent company was the wholesale distributor for both the variety and craft franchises. Applause, LLC is best known for its plush toys, including characters from Sesame Street and Disney. It was created in 1995 when Dakin, a plush toy manufacturer, merged with a company founded by Wallace Berrie, brother of rival novelty manufacturer Russ Berrie. In addition to plush toys it produces items such as magnets, keychains, and tableware decorated with its licensed characters (such as Looney Tunes and the Muppets). 5. Describe the Porters five forces model with respect to this industry Ans: Rivalry from existing firms – Toy Library

Threat from new entrants – foreign toy stores that’s able to offer toys at similar prices and qualities and existing retailers shifting strategy to near new and end of line toys that are 40% below price. Bargaining power of suppliers – fund raising organizations. Here bargain power of supplier is very high because almost 11 manufacturers are in this industry at present and all are big and medium manufacturer and also new farms also coming in this market. Bargaining power of customers – parents and groups that purchase lots during X-mas. Here bargaining power of buyers is also very high. 80 percent of toys are sold in USA market. So it can easily understand bargain power of buyer are so much and lots of competition in this sector. Threat of substitutes – electronic shopping, mail order catalogs, door to door sales and purchasing clubs. Here huge substitute of products are abaviable –like- dolls, eletronice toys, stffed toys, toys for adult etc.

1. What are sweatshops? Enumerate the factors responsible for the worldwide growth of sweatshops.

that

are

Ans: Sweatshop (or sweat factory) is a negatively connoted term for any working environment considered to be unacceptably difficult or dangerous. Sweatshop workers often work long hours for very low pay, regardless of laws mandating overtime pay or a minimum wage. Child labour laws may be violated. Sweatshops may have hazardous materials and situations. Employees may be subject to employer abuse without an easy way to protect themselves.

In a report issued in 1994, the United States Government Accountability Office found that there were still thousands of sweatshops in the United States, using a definition of a sweatshop as any "employer that violates more than one federal or state labour law governing minimum wage and overtime, child labour, industrial homework, occupational safety and health, workers' compensation, or industry registration". This recent definition eliminates any historical distinction about the role of a middleman or the items produced, and focuses on the legal standards of developed country workplaces. An area of controversy between supporters of outsourcing production to the Third World and the anti-sweatshop movement is whether such standards can or should be applied to the workplaces of the developing world.

The other factors are:
1) Over population Asian countries.

2) Globalization and liberalization across the world 3) Limited education and high employment growth 4) Increase child labour developed and un developing countries like- india, china, Kenya 5) Scarcity of skilled and high skilled labour in different countries 6) Increase poverty and over flow of human resource

2. Highlight the industries and economies where the growth of sweetshop has become rampant. Organizations are Walt Disney Company, The Gap, and Nike etc. Industries: Shoe, Garments, Toys etc Economics: Chinese, Indian, London, Vietnam, Bangladesh and Honduras, England and New York City's garment district.

3. How were the US companies responsible for the increasing growth of sweatshops in the Chinese toy industry? In 21st century china is the world largest toy manufactures destination in the world. The Chinese toy industry mainly acted as the supplier for some of the leading American toy manufacturing companies like Wal-Mart and Mattel. 80 percent American toys are manufacturing in china so anybody can easily understand why sweatshop increase in china toy industry. There are several reasons likeA) American companies continually demand lower prices from their Chinese suppliers, allowing American consumers to enjoy inexpensive toys. B) U.S. price pressure creates a powerful incentive to cheat on labor standards that American companies promote as a badge of responsible capitalism. C) Most Chinese toy manufactures are owned by a foreign company’s like- USA D) Normally Chinese toy manufactures companies are purchased raw material from usa so their charges of raw material is very high so factory owners are try to make a profit to abused own countries labor and ignorance own countries labor policy. E) China has cheap labour so mainly us toy companies are liked to prefer purchasing toys from Chinese factories so pressure of Chinese factory workers are very high and some us base toy manufacturing companies are entering in china toy manufacturing market and they are try to disobey the Chinese labour law. F) From various us base company also like Nike, coca cola and other companies are coming g in the Chinese manufacturing industries so these MNCs companies are are mainly profit driven companies indirectly they are also responsible to increase sweatshop in china industry. G) Hidden cost most popular in case of Chinese toy industry especially like – world-famous toys –harry porter, star wars, pokemon

H) in us based fast food companies like Mack Donald they are try to abusing they corporation power and it will be directly affected Chinese toy industry and also increase sweatshop. I) Us base big retail chain like- wall- mart, k-mart , target are try to pressure on chine’s toy manufactories to provide more and more good and cheap quality of toys . so sweatshop is more increase Chinese toys industry. 4. Sketch the picture of labour exploitation in the Chinese toy industry. Ans: China is the world leader in labor-intensive manufacturing. It produces almost half of the world's shoes as well as clothes, household gadgets, toys, appliances, furniture, Christmas ornaments, utensils, sunglasses, and other stuff. China went from not producing any of this stuff to dominating entire industrial sectors in a very short period of time. • The average wage at a Chinese factory in 2009 was around $200 a month, 17 percent more than the year before. Even so the goods that are made are sold so cheaply profit margins can be dangerously thin. Bloomberg reported of an exporter of car covers and seat cushion, Zhejiang Mingfeng Car Accessories, whose profit margin in 2009 was only 2.5 percent. By one estimate, cheap Chinese labor has added $1,000 a year to American household thanks to cheap goods. Ironically the goods that Chinese workers make are considerably more expensive in China than the U.S. An Apple computer sells for $2,750 in Beijing, about $500 more than in the U.S. Shoes purchased at an official Nike Store can cost $190. Sony large screen televisions cost 30 percent more in China than they do in Japan. The list goes on and includes everything from baby strollers to golf clubs. In China, factories are erected with remarkable speed and retooled for new products with equally impressive speed — both important element of China’s rapid manufacturing rise. According to the consulting firm IHS Global Insight, China accounted for 18.6 percent of the world’s gross manufactured output in 2009. In 2010 it is expected to surpass the U.S., which

had a 19.9 percent of the output in 2009. As of 2008, about 89 percent China’s high-tech exports came from non-Chinese-owned companies. • The primary pieces of machinery in many Chinese factories are injection-molding machines. At one end they have large funnels in which rice-grain-size plastic pellets are poured. These are melted and forced by tons of pressure into carbon-steel molds that form the products being made. The molded plastic is very hot. Often the excess material, known as flash has to be cut off by hand with a very sharp tool. The machines cost anywhere from $3 million to $10 million new and is ideally put to work around the clock, seven days a week, 365 days a year.

5. How the Chinese toy manufacturers were manipulating the wage and

bonus payment? What are the remedies available for the labors in this regard? Ans: Method of manipulating wage and bonus payment-

The methods of wage payment in these factories differed largely with no uniformity in standards. Majority of these factories had adopted three methods of disbursing wages primarily concentrating on time-rate (in hours) and piece-rate of payment or framing a unique wage standard by mixing the two methods of payment. It had been found that majority of these factories adopted time-rate of payment for unproductive work, such as packaging. On the other hand, the piecerate system was used to pay the handcraft laborers, who performed their entire work with the help of their hands without using any type of machines. Moreover, wages were cheated by deliberately counting less number of pieces than the actual number of units produced. This clearly signified that the wage structure in these factories was designed to deprive the workers of their actual pay. Moreover, the piece-rate workers were not given their basic wages and were only paid on the basis of the number of units produced by them, totally a

manipulated figure concealing the actual number of units produced, in any given hour. Deductions and Fines from Wages Imposed on the Workers
Reasons Late by 10 minutes Forgot Factory ID Absent for one day Smoking on the Shop Floor Fighting on work Unclean Room Excessive Use of Water and Electricity Dormitory Cleaning Fines Imposed 2 Yuan 5 Yuan 20 Yuan 200 Yuan 200 Yuan 5 Yuan 30 Yuan 1 Yuan

Organizations working on the issue

Clean Clothes Campaign international alliance of labor unions and nongovernmental organizations International Labor Rights Fund International Labour Organization a specialized agency of the United Nations National Labor Committee founded to combat sweatshop labor and US government policy in El Salvador and Central America. Green America membership organization based in the United States United Students against Sweatshops a student organization in the United States and Canada Free the Children A Canadian organization that helps raise awareness and put a stop to Child Labour – Also helps other children in need. Reason Foundation Founded in 1968, Reason Foundation is a nonprofit organization advancing "free minds and free markets."

NAME- SRIDEB SAHA SECTATION- SS/ FIN/2010-12 SUBJECT- MERGER AND ACQUISITION ROLL NO- 29

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