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CONTENTS Introduction Case Overview Background Growth Problems Spate Of Recalls Other Problems SWOT Analysis Outlook Conclusion
INTRODUCTION The Consumer Product Safety Commission in the U.S. recalled more than 500,000 toys made in China on 4th October, 2007 The reason being toys contained dangerous levels of lead Apart the reason of excessive lead paint, the toys had loose magnets which could be swallowed by children The toys included in the withdrawal were the „Pirates of the Caribbean‟ series, „Baby Einstein‟ , „Totally Me!‟ & „Funky Room Décor Set‟
BACKGROUND Toys had a prime place in Chinese society Folk toys made of wood, clay & paper were very popular with the Chinese children Masks, in the shape of animals were found in the ruins of Chinese Habitation Modern toys in China started in the 1900‟s Initially the toys were made of tin The industry picked up in 1919, with many factories set up near Shanghai From 1930s Germany dominated the toy market After the WWII, China took over as most industries in Germany were producing ammunition The Japanese toy industry gained popularity in 1950s
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 labour. Efficient network of supporting industries. Province, owing to its open industrial policy, got new toy factories. In 1987, country‟s first toy design institute was set up at Tianjin Science and Technology University.
CONT… 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 countrys major industries employing almost 3million people. Export value and growth rate of toys made in china, 2001-10. According to China Chambers of Commerce for Import and Export of Light Industrial Products and Arts-Crafts(CCCLA), China toys constituted 75% of world toy outputs.
PROBLEMS Faced with dual pressure of rising costs and declining prices. Raw material and labor costs were increasing. They forced to raise wages sometimes by digit double rates. Accused of denying workers their legal rights. Violation include forced overtime, wage payment below the minimum standard, failure to provide social insurance, restriction of workers personal freedom
OTHER PROBLEMS Shift the blame into western retailers and toy companies saying they were squeezing their margins leaving them with little money . Prices are too low so there are more serious problems in industry. Prices of many exported Chinese toys were a fraction of prices of similar toys manufactured in developed countries. Limited inspection and evaluation of factories caused lower productivity.
International toy producers cancel the orders placed with Chinese toy manufacturers unless secure the international council of toy industries. Chinese government attempt to improve the quality of Chinese toys imposed the scheme on toy makers. Only toys are exported or sold in domestic market. Chinese suffered a loss when a EU Report state 25% of problematic imported goods recognized by union‟s rapid alert system.
Children day in china, the quality inspection authority checked boys produced in the province and 45% of them did not meet quality and safety standards. There are the places in the world where you can get lower labor costs but china has a very well labeled infrastructure, well educated engineers, excellent transport and a business friendly government.
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
STRENGHTS Initiatives taken by the old market players in setting up the industries. Efficient network of supporting industries. Local entrepreneurs also started setting up the industries. Adoption of the industrial policy. Setting up of special economic zones. Product design & production planning was well taken care of.
WEAKNESSES Pressure of rising Cost & Declining prices. Demand of keeping the prices low from the clients kept increasing. Toy factories were branded as “sweatshops” Workers were forced to work overtime, less payment of wages. Comparative cost of the toys manufactured was very low. Chinese manufactures were weak in market knowledge & product promotion and merely acted as OEM‟s.
OPPORTUNITIES & THREATS Improvement of quality of toys. Hiring good designers for better designing. Adoption of high quality standards to meet the market needs. Foreign market players who produced good quality products comparatively. Recall of many of the toys produced with complaints such as choking, High lead content, battery leakage, and other customers saftey issues.
OUTLOOK Training sessions organized by the Chinese government for quality control for the people of the industry. The sessions also gave a brief about how to deal with the design flaws and reduction in the lead content of the toys. Suspension of the licenses of 764 factories. 690 other factories were told to renovate their plants. Expectation of the growth of the industry by nearly 40% to $12.5 billion by 2010.
CONCLUSION The Chinese toy industry had to go through tough times but with the interest taken by the Chinese government and the various initiatives taken by the industry players the toy industry was able to create a sustainable amount of image in the minds of the people. A huge number of people were emotionally attached to what they were doing, as Chinese toys were the most famous in the world. The industry bounced back by correcting what they were doing wrong and showed the world, what it is capable of.