Business Level Strategy - Mega Toys Company - Case Study Example

Mega Toys Mega Toys Company is a toys and gaming company started by woo brothers. The company is based in the US. Over the years, the company has grown into a market leader that sets the pace for other competitors in the market. To achieve this, the company has used a business level strategy and a corporate level strategy. One of the strategies includes forming alliances with other market retailors such as Wal-Mart, and Kmart to sell its product in the market. Mega Toys products are however, mostly affected by seasons. The company has special products for various seasons such as Easter holidays, Halloween festivals and Christmas holidays. The main issue in the case of Mega Toys Company is to identify the business level strategy that would propel the company to new financial heights despite the rising competition in the market. This paper looks at possible strategies that the company uses and some indirect strategies that the company has used. Business Level Strategy Mega Toys main objective is to focus on satisfying the customers’ requirements and preferences so that the business can achieve above average returns. The main question underlying in the customers context is to identify the customer, their needs, and how those needs will be met. The senior management determines these strategies. Understanding the customers is a multivariate concept demanding understanding of demographics, geographical location, life styles and choices, personality traits, consumption patterns, industry characteristics as well as organizational size. To achieve this, the business has to understand and answer to the question “what are the potential goods and services that are needed by these customers?” This helps in gaining the competitive advantage, which is the main objective of business level strategies. Mega Toys Company main business strategy is to achieve long run growth of the company and to manage seasonal production primarily through cost leadership. Fundamental costs include labor costs, inventory, and delivery on time, and creating unique products. The most important resource for Mega Toys Company is to get seasonal employees in the low cost countries. According to this case, competitors can gain access to the low cost countries but cannot compete with Mega Toys in terms of quality of its products. Its products are of high quality, which are coupled with intellectual properties rights. Additionally their products have a unique design. The company also ensures that the deliveries they make are timely. This makes the Mega Toys products stand out uniquely among the many companies that manufacture similar products. Therefore, other competitors find it hard to compete successfully with Mega Toys. By reducing costs, Mega Toys Company competes favorably with rival companies. This is because rival companies usually avoid price wars since Mega Toys will continue to earn profits after the rivals have exhausted their profits. Mega Toys enjoys powerful buyers who make it possible for the company to produce goods and services at relatively lower prices. Mega Toys Company has an undue advantage since the powerful buyers order their low cost products in large quantities. This enables the company to make profits while their competitors make losses. In the bargaining power of suppliers, Mega Toys Company is able to absorb greater price increase before for toys before it can raise prices to its customers. Mega Toys Company creates barriers of market entry to competitors since it has the advantage of producing and selling products at a lower cost. This creates strong market barriers to competitors especially when competitors consider returns on investment. Mega Toys Company, being a cost leader, sells its products at a lower price. Implementing this strategy makes it difficult for competitors to make substitutes to Mega Toys Company since they will not compete favorably in the same market. Ideally, this is a wise and articulate business strategy, which has interestingly, enabled Mega Toys to remain the market leader for an appreciable time. It also enables Mega Toys to develop substitutes of their own, and has enabled Mega Toys Company to acquire intellectual rights for its products. Corporate Level Strategy Mega Toy’s main aim is to ensure that value is being added to every product in the company’s portfolio. The value should always exceed the cost of the product. Mega Toys Company has identified ways in which the company can be improved. Various methods are available in corporate level strategies. Among them are product development, innovation, horizontal integration, vertical integration, concentric diversification, conglomerate diversification, turnaround, divestiture, liquidation, bankruptcy, joint ventures, and strategic alliances. Mega Toys Company has achieved corporate strategies by identifying the opportunities that are available and agreeing through managerial dialogue and setting up of business planning systems. Mega Toy Company primarily employs cooperative strategy as the main corporate level strategy. This is done through cooperating with other companies and forming alliances in retailing their products. The reason why Mega Toys Company cooperates with these retail outlets is to create value for the customer’s goods, and establish a favorable position that is relative to competition. This has enabled the business to speed up the development of its new products and speed up new market entry. Consequently, it has enabled Mega Toys gain market leadership and form industry technology standard. An example is the cooperation with Wal-Mart, KMART, and CVS. This has enabled Mega Toys Company to achieve a high customer level and attained loyalties from these companies. The second applicable strategy to Mega Toys Company is Competitive Rivalry and Competitive dynamics. Competitive rivalry is defined as the ongoing set competitive actions and responses that occur between competitors. Mega Toys Company can use this strategy to influence the individual firm’s ability to gain and sustain competitive advantage over others. In addition, Mega Toys Company can use competitive dynamics. This is defined as the total set of actions and responses that can be used by all the firms competing within the market (McGuire et al web). In conclusion, the principle factors for Mega Toys Company is low costs of production, timely delivery, acquisition of intellectual property rights and aiming at obtaining high quality products for its customers. Mega Toys gets the privilege of reducing the cost of production through outsourcing various productions jobs in low cost countries. The company can also benefit through hiring seasonal employees and manufacturing products near ports. This will enable reduce delivery cost to the retail outlets. In addition, Mega Toys Company delivers its products in time and has the products licensed, which reduces the cost of advertisement. However, in order to increase its profit capabilities, Mega Toys have to improve on its logistics. Works Cited McGuire, Stephen et al. “Mega Toys Woos Wal-Mart” Volume 7, Issue 1Fall 2010, Web. 22 March 2012. Read More