Hasbro Strategy

In 1923, two brothers who migrated from Poland started a small business by selling textile remnants. In 1926, the Hassenfeld’s officially organized what is known today as Hasbro Inc.

In the 1940’s, the brother duo expanded by offering pencil boxes and school supplies. By 1950, they were ready to leap into another market by introducing its novelty toy, “Mr. Potato Head”.GI Joe was introduced in 1963 producing revenue sells in excess of 28 million dollars the next two years after Hasbro spent nearly 2 million in TV ads (Miller 1998). In addition to toys, Hasbro develops games most notably Monopoly which was first introduced in 1935. Decades later, Hasbro continues to be innovative with product design, introduction of new products, developing brand recognition to maintain being a leader in the game and toy industry.

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Ownership Characteristics Hasbro Inc is a publicly traded company in the NYSE. Alan Hassenfeld, Chairman of the Board of Hasbro Inc. owns about 4% in shares of the company; while other corporations such as The State Street Corporation and Barkley’s Global Investors UK Holding LTD are the major institutional stockholders and each own approximately 6% of the company. While there are other private stockholders owning significant amount of shares in the company, most of the ownership is comprised by institutional and mutual fun holders. Financial Condition i.

Financial Statements (Appendix) ii. Level of Performance Hasbro Inc. has been able to increase its net revenues consistently from 2002 through 2006.Its net revenues rose from $ 2,816,230 in 2002 to $ 3,151,481 while Hasbro Inc. produced Net Earnings starting 2003 of $ 158,000 which are now up to $ 230,000 in 2006. Additionally, Shareholder’s Equity was increased over the last 4 years by almost $3 and the debt ratio reduced by 23%, which indicates a financially sound and stable company.

iii. Soundness As mentioned above, Hasbro Inc. has been performing well in terms of company growth and profit maximization over its business units, however also substantially improved its debt ratio by continuously decreasing long term debt and increasing shareholders equity and return on investment.Hence, Hasbro Inc. is a financially sound organization that strives to become more profitable each year and was able to perform great throughout the last four year period.

Industry Identification/Segmentation The gaming and toy industry is a conglomerate of companies who have various brands and products in an environment that is competitive and retail market driven. Major players, such as Hasbro, Mattel, Jakks, and other manufactures have controlled the industry eliminating smaller firms due to relationships with major retailers such as Wal-Mart, Target and Toy R’ Us.However, competition among the larger firms is very intense and has required firms to build alliances with outside firms like Disney, Star Wars and others.

These strategic alliances along with requirement to perform in the areas of product innovation, manufacturing, marketing and sales are vital to each company survival when products are primarily consumed in large retail box environments. Company Corporate Culture Hasbro Inc. emphasizes innovation and professionalism within its company.Because of the nature of the business and its operating field which requires constant innovation in order to compete in the market and maintain leadership among its rivals, Hasbro Inc. has created a work environment that fosters innovative and creative minds to function accordingly. Additionally, the company values community involvement and creating opportunities for underprivileged children.

Alan Hassenfeld has been a leader in rallying corporate executives to work with elected officials to end childhood hunger. He is involved in issues impacting underserved communities in the state ofRhode Island by serving on advisory boards for Refugees International and Big Brothers of Rhode Island. He is also a board member of the company’s two philanthropic divisions, the Hasbro Charitable Trust and the Hasbro Children’s Foundation. Hassenfeld is active in many charitable and social causes, serving as Chairman of the World Scholar Athlete Games, Chairman of Families First and Chairman of the Right Now! Coalition, an effort created to foster ethics and campaign reform and enlighten the state government to its constituent’s concerns.Organizational Structure External ; Internal Analysis Macro Environment Stakeholders Social/demographic trends a. The toy and game business is characterized by customer order patterns which vary from year to year largely because of differences each year in the degree of consumer acceptance of product lines, product availability, marketing strategies and inventory policies of retailers, the dates of theatrical releases of major motion pictures for which the companies have product licenses, and changes in overall economic conditions.

Issues b. olatility of consumer preferences, combined with the high level of competition and low barriers to entry in the family entertainment industry make it difficult to maintain the success of existing product lines or consistently introduce successful new products. c. The business is seasonal and therefore, the annual operating result depends on the sales during the brief holiday season.d.

Continuing consolidation of the retail customer base means that economic difficulties or changes in the purchasing policies of the major customers could have a significant impact on them. . Market conditions, including commodity and fuel prices, public health conditions and other 3rd party conduct f. International/global issues g. The substantial sales and manufacturing operations outside the US subject Hasbro to risks associated with international operations including: currency conversion risks, political instability, difficulty enforcing intellectual property rights, complications in complying with different laws in varying jurisdictions, natural disasters, imposition of tariffs, etc. Governmental/legal issues .

The toy and game products sold in the US are subject to the provisions of The Consumer Product Safety Act (CPSA), The Federal Hazardous Substances Act (FHSA), The Flammable Fabrics Act (FFA), and for some of the mixes for the EASY BAKE ovens, the Food and Drug Administration. Industry Environment ; Strategic Groups Competitors i. Hasbro competes with several large toy and game companies in various product categories as well as many smaller US and international toy and game designers, manufacturers and marketers.Competition is based primarily on meeting consumer entertainment preferences and on the quality and play value of the products. j. JAKKS Pacific Inc.

, Lego Holding (privately held), Mattel Inc. Entry Barriers k. The volatility in consumer preferences with respect to family entertainment and low barriers to entry continually create new opportunities for existing competitors and start-ups to develop products which compete with Hasbro’s toy and game offerings. Substitutes Suppliers l.

Most of Hasbro’s products are manufactured from basic raw materials such as plastic, paper, and cardboard. All of these materials are available but are subject to significant fluctuations in price. As a result, Hasbro generally enters into agreements with suppliers at the beginning of a fiscal year that establish prices for that year. For this reason, Hasbro is generally insulated, in the short-term, from increases in the prices of raw material. m.

However, severe increases in the prices of any of these materials may require renegotiation with their suppliers during the year. Buyers n.Hasbro’s products are sold nationally and internationally to a broad spectrum of customers, including wholesalers, distributors, chain stores, discount stores, mail order houses, catalog stores, department stores and other traditional retailers, large and small, as well as internet-based “e-tailers. ” During 2006, sales to the 3 largest customers, Wal-Mart Stores, Inc. , Target Corporation and Toys ‘R Us, Inc.

, represented 24%, 13%, and 11% respectively. During 2006, 90% of the net revenues from our top 5 customers related to the North American segment. Internal Strategic Evaluation Strategic Condition of the FirmHasbro’s strategy is to continue growing core brands, developing new toys and games, and maximizing efficiency. This focused differentiation approach allows Hasbro to meet the demands of several segments, most notably a wide age group. The focus on efficiency provides Hasbro the opportunity to maximize profits through manufacturing competencies and importing from China.

Hasbro is arguably the most innovative toy company in the industry today. Its strategy has been for several years and continues to be focused on innovation. The key to Hasbro’s success has been its ability to develop new toy technologies.These technologies are conducive to growing brands and providing an array of different products for all age groups. Mission Statement ; Corporate Strategy Hasbro’s mission statement is as follows: “The heart of Hasbro’s business is making great games, toys, lifestyle and entertainment products that are enjoyed by people of all ages worldwide. Hasbro intends to be the number-one company in the toy and game industry; the leading provider of play; and the number-one marketer, pioneer and partner in all channels and all customers.

” This mission clearly supports Hasbro’s focused differentiation.The organization is focused on meeting the needs of all age groups, and being a leading entertainment provider. Also, this mission demonstrates the need to truly be an innovative company. Without the innovation of new toy technologies it would be impossible for Hasbro to achieve its mission goals. Current Business Level Strategy Hasbro’s business level strategy revolves around developing new toys and games to maintain demand of its products and to grow its core brands.

This includes creating new products, as well as constantly updating current toy lines, such as GI Joe.Hasbro has some of the most recognizable brands in the toy industry. A major part of Hasbro’s business strategy is to utilize and grow its core brands to their fullest potential. Hasbro’s domestic business level strategy is relatively the same as its international business level strategy except for its expansion plans. Hasbro’s international business strategy is to expand into Eastern European markets and emerging markets in Asia and Latin and South America.

Another facet of the business strategy is to align with Hollywood through exclusive licensing agreements.Intellectual property is crucial to Hasbro maintaining market share, as it gives the firm rights to popular characters and motion pictures. For example, Hasbro has signed a multi-year license with Star Wars and Marvel. The Star Wars and Marvel merchandise are expected to contribute to Hasbro’s total revenues in the years to come. Finally, Hasbro focuses on operating profits through manufacturing and importing toys from China.

This is an important aspect of Hasbro’s strategy, because operational profits are used to develop more toys and maintain licensing agreements.All of this is in support of the firm’s mission to be the “leading provider of play. ” Current Functional Level Strategy Hasbro’s functional strategy is fairly simple. First, its toys and games are sold in major retail outlets, such as Wal-Mart. This places Hasbro products in easy and convenient locations for customers. However, there is great competition within these retailers as many competitors have the same outlet.

Hasbro sells its products directly to its retailers and in many cases these products are imported directly to the retailer from the Far East. An additional aspect of Hasbro’s functional strategy is to import toys from China.Hasbro is focused on keeping costs low and maximizing efficiency. Hasbro’s working capital needs are financed through cash generation from operations. Therefore, low manufacturing costs and efficiency are crucial to enhancing operating profits and financing new product development. Current Corporate Level Strategy Hasbro’s corporate strategy is to maximize shareholder value by maintaining its competitive advantage through focusing its business on family leisure time and entertainment products and services.

Hasbro has an array of diversified products and services but all its products are related to the above focused segment.For example, in the fiscal years of 2004 and 2006 no one single product line generate more than 10% of consolidated net revenues for those years. In 2005 the selling of Star Wars products generated 16% of revenues for that year. All other products lines generated less than 10% of revenues. Hasbro’s corporate strategy is vertically integrated through the designing, manufacturing, and marketing of its products. However, Hasbro does not produce the raw materials for its products neither does it do any direct selling to the consumer.

Also, Hasbro utilizes strategic alliances with the movie industry through licensing to make movie themed toys and games. Another aspect of the corporate strategy is giving something back to the community. This is why the Hasbro’s Children Fund was established. In 2006 six million kids were helped by charitable grants, product donations, and the Team Hasbro employee volunteer program. Resources and Capabilities The most important resource Hasbro maintains is its intellectual property rights. Alliances with Hollywood provide Hasbro with tremendous product potential, and the firm benefits from the popularity of the characters.

This helps alleviate marketing expenses while supporting demand for Hasbro products. Another resource that is vital to maintaining success of the company is the development and growth of its core brands. Consumers have come to know and trust brands such as: PLAYSKOOL, MILTON BRADLEY, PARKER BROTHERS, and TONKA. By owning these well know brands, Hasbro has the capability to develop and grow them in any manner they deem necessary that will increase revenues. Competitive Evaluation ; Recommendations Key Strategic Issues Under-Utilization of Overseas Occupancy US $584 earned per square foot 377 overseas Future Domestic Market Potential Relatively Limited 4th Quarter Dominance/ Seasonality of Sales Rarely win Toy of the Year Must Gain a Greater Return on Intellectual Property/ Licensing Recommendations ; Implementation Expand in Global Markets Continue to Innovate License Video Games ; other products : (apparel, cereal) Focus on Winning Toy of the Year: Alleviate Seasonal Impact on Sales Pursue Promotions Through Out the Year Integrate Products to Gain Better Return on Summer Movies Enhance Hollywood Alliances (This intellectual resourse is huge Competitive Advantage)