Strategy Memorandum - Essay Example

Hornby is not going to make a profit this year due to lower-than-expected sales before and during the Olympic game this year (BBC News, 2012). The market is tight due to continued economic downslides and consumer spending is not likely to improve in the near future. Hornby’s stock value has gone down by 40 percent in the month of September this year (Yahoo Finance, 2012). The retailers are losing confidence in the company of the fear that their orders will be fulfilled in time. One of the suppliers in China has some production issues and is unable to supply the goods in time. The supplier caters to almost 35% of the requirements of the company which is huge and might put the company in jeopardy (Thompson, 2012).  

In the given circumstances, the company needs to take into account the adverse economic environment and formulate a successful corporate strategy to cope with the business complexities (Johnson et al 2011). Haberberg and Rieple (2008) demonstrate that a well-planned corporate strategy provides means to renew competitive advantage in line with the changing environment. Accordingly, it will be most appropriate to delve deeper into the existing toy market scenario.

Italy, France, Germany, Spain, and the UK constitute almost 73% of the total European toy market. Most of the supply of toys in Europe comes from China. The infant and preschool toy segments constitute almost 20 percent of the market – the largest segment in total toy sales. Toy shops in the five major countries of Europe sell almost 40% of the total sales of toys (The Toy Sector in Europe, 2010).  

Furrer (2011) argues that the ultimate purpose of any corporate strategy is value creation. In order to sail through difficult times, the company needs to adopt a positioning strategy to earn higher revenues by using scarce and limited resources at its disposal (Besanko, 2010). Accordingly, the company will be benefitted by positioning itself as the fastest-growing infant/preschool segment of toys and expanding by capturing the imagination of this class of children.  Porter (1985) argues that it is important to differentiate the product from its competitors so that it is valued by buyers and the uniqueness of the product is eventually rewarded through a higher price.  Moreover, innovation is a must to make products distinct and unique Grant, 2010).

In order to ensure uninterrupted supply, suppliers’ evaluation and selection process needs to be done meticulously (Sollish & Semanik, 2011), and therefore an effective and flawless sourcing strategy needs to be in place. The company needs to have at least 5-6 suppliers so that no single supplier caters to more than 20 percent requirements of the company.  All the suppliers should not hail from a single location or region so that geographical risks are widely distributed. For each product, there have to be at least two suppliers that will even out the supply in case one of the suppliers fails in their commitment. This is crucial to maintain the retailers’ confidence in the company as a reliable toy producer and marketer (Waters, 2011).

In case, the board needs any further information, I will be glad to furnish that promptly.