TROUBLED TIMES FOR THE CHINESE TOY INDUSTRY

PRESENTED TO: PROF. K.K .Jain Date-8 Aug2011 Click to edit Master subtitle style BY: Akshay Handa Amit Thakran Monika Jain Neha Bhatia Rahul Gupta

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Introduction & Background to Case Study Trouble times for the Chinese Toy Industry

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Background
Toys have a prime place since Chinese ancient times. 1900s the start, 1910s the first tin toy was made. 1919s the growth took a major speed. Shanghai became the hub. Germans always offered better quality. Japanese with modern technology but with efficient logistics, established industries, low labor cost & Economies of Scale China became the largest exporter 5/6/12

Troubled Times for Chinese Toy Industries

Its quite urgent that we re-construct the Chinese toy industry or else we will not only loose the domestic market but also the global market. As quoted by president of China Toy Association 2002. As Chinas share of the U.S. toy market has grown, so have the number toys that have had to have been recalled for safety hazards New York Times June 18th 2007. This is the last warning, if there is an unsatisfactory report, we will impose next layer ban on products. by EU commissioner of Consumer Protection. A lot of products being recalled is because it violates the law such as use of excessive levels of Lead Paint Loose Magnets CPSC. India Bans import of Chinese products for 6 months this year in January. 5/6/12

Consumer Perception
What do we associate China Products with??

LOWEST POSSIBLE PRIZE CHEAP QUALITY

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Reasons for decline in Chinese Toy Industry

2007 The Year of Recalls.

Perception of the consumers. Global competition. High quality standards of competitors. Price rise of raw material, labor wages also additional R&D cost. Decreasing margin of profits.

Also,

Use of harm full chemicals. Bad finishing, being hazardous to health & life. Defected products.
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WHAT IS FUELLING THE DOMESTIC TOY MARKET?

The disposable income of people has grown very fast in the last three-four years - led to several changes in the shopping pattern. Gifting stuffed toys has caught on in a big way. Mushrooming of shopping malls has also worked in our favor. The increase in foreign trips undertaken by a large number of 5/6/12

Growth of Chinese toy industry

Benefited from the reforms initiated in China in 1979. Special economic zones attracted several international toy makers. Scale Economies and cheap labor. Efficient network of supporting industries.

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Cont

The Pearl River region of Guangdong Province, owing to its open industrial policy, got new toy factories.

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Cont
In 1987, countrys first toy design institute was set up at Tianjin Science and Technology University. Accession into World Trade Organisation. Organised its first international toy exposition in October 2002. With more than 9,000 plants, the toy industry is now one of the country's major industries employing almost 3 5/6/12 million people.

Cont

Export value and growth rate of toys made in china, 2001-10.

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SOME ANCIENT CHINESE TOYS

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Repeated inspections caused lower productivity. 2005

THE PROBLEMS

International toy producers demanded International Council of Toy Industries (ICTI) Code certification by January 1, 2006

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SOME ACTION TAKEN BY ACTION

2006

Chinese government imposed the China Compulsory Certification (CCC) scheme on toy makers Chinas General Administration of Quality Supervision and the EUs Health and Consumer Protection agency signed a draft guide for strengthening the Sino-EU cooperative Action for Toy Safety

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Childrens Day Guangdong quality inspection authority found 45% of toys did not meet quality and safety standards Michael Araten, President of KNex Industries and Tom Debrowski, Executive Vice President of Mattel have positive image.

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THE SPATE OF RECALLS

Dec 2006

Warning issued by CPSC in USA regarding some Chinese toys. Reasons include:
High lead content Battery leakage Inflammable parts Some products could be easily separated, and held the risk of choking among children Several retail outlets in US issued warnings and recalled Chinese products

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EU issued safety warnings for 15 made-inChina toys which includes -Christmas lights -Decorative string lights -Fruit shaped erasers -Toy telescopes -Toy air guns -Toy riffles

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2007 THE YEAR OF RECALLS

Feb 2007

CPSC and Hasbro recalled 985,000 China-made Easy bake ovens. The reasons were:

Door of the toy oven could trap childrens fingers and cause burns

June 2007

1.5 million Thomas & Friends wooden toys were recalled. The reasons were:

Surface paint contained high content of lead Under US regulations, childrens products containing more than .06% of lead were subject to recalls

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RECALLS CONTD. AND WHOLE LOT OF NEGATIVE PUBLICITY FOLLOWED

July 2007

CPSC and Hasbro again recalled about 1 million ovens citing the same reasons

Along with it, more instances of burn were cited. They were:

249 fresh cases of children getting their hands caught in ovens and getting burnt 77 cases of burn Out of these, 16 cases of second and third degree burns One report of a 5 year old girl suffering from a serious burn that required amputating her fingers

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THE MATTLE FIASCO AND THE EVENTUAL U-TURN

August 2007

Mattel twice recalled toys (1 million) owing to higher than permissible levels of lead

September 2007

Again recalled 844,000 toys for the same reason

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THE IMAPCT OF RECALLS

Consumers in US started looking for alternatives to Chinese toys This lead to higher demand, and consequently higher sales of US toys US toy manufacturers even hired new people 2007

EU introduced new environmental safety rules, including those that banned the sale of toys containing over 1% phthalate

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Contd

US producers able to compete against low-cost Chinese toys. MADE IN USA labels Bring photos of manufacturing facilities to toy fairs Drive the point that their quality standards were much higher.

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Other Issues

Threat from Vietnam and Eastern Europe Appreciation of YUAN. Lack of brand power. Weak market knowledge and product promotion. Lack of designers. Low level of technology. Changing trends in toy industry.

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Government Measures

Training Lecturers from multi-national companies Measures to deal with high lead levels Suspension of export license Conspiracy against Chinese toy industry

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Obstacles Faced

Adverse effect of Recession Rise of Crude Oil Chinese toys still sold Future Outlook

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Thank You!!!

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