Return to Previous Page

Imagician’s Competitive Strategy: Building a Challenger Brand in Indian Toy Industry

CASE STUDY, STRATEGY
ET Cases, 21 Pages
AUTHOR(S) : Syed Abdul Samad and Dr. Nagendra V. Chowdary

Case Preview

Imagician’s Competitive Strategy: Building a Challenger Brand in Indian Toy Industry

While no one would dispute the importance of toys for children, the companies manufacturing them would be scrutinized for their financial prudence, market share, ROIs, etc. Having worked in toy Industry for about 2 decades and convinced with its imminent business potential, Adnan Chara (Adnan), CEO and MD, established Imagician Playthings LLP (Imagician) in 2016 and clocked in a revenue of INR10 crore within a year. While the organized players command 30% of the Indian toy market, it is the small and local players that have 70% of the Indian toy market.1 Buoyed by the initial success and the growth potential Adnan set out for himself the target of clocking in revenues of INR100 crore by 2022. However, with both domestic and global players charting aggressive market penetration strategies and being present for more than a decade, and with the ever-changing kids’ toy requirements, would Adnan be able to succeed in making Imagician a challenger brand in Indian toy industry?

Indian Toy Industry

History of Toys in India

India had a glorious tradition of toys since the days of Harappa and Mohenjadaro civilizations (5000 years ago). Toys were designed on the basis of how a child would react to them. They were not just meant for a child’s entertainment but also to develop their minds, social development, impart learning, and its application to real life. Indian traditional toys and games were simple, easy to use, colourful and took inspiration from nature, the surrounding environment and people’s lifestyles, prevalent tradition and culture of the region (toys of gods & goddesses, puppets, dolls, miniatures of various items like carts, utensils, pots, cups, fruits, animals, birds, vehicles, etc.).

There was huge diversity in the style of traditional toy making across India because of its varied cultural and traditional practices. Toy making was majorly a cottage industry, where toys were produced by local artisans and craftsmen communities spread across India. These communities worked with many materials, including terracotta, wood, clay, reeds, glass, pith, bamboo and paper-mâché.

Every state or region produced different kind of toys. While many art forms of toy making got lost in history, some regions still carry on the tradition of manufacturing ethnic toys and keeping the tradition alive (Annexure I)..............

The Toy Industry in India

As of 2017, the global toy market was pegged at around $85 billion-$90 billion – dominated by five major players namely Mattel, Namco Bandai, Lego, Hasbro and Jakks Pacific – and was projected to reach $166.2 billion by 2024, driven by innovation, technological developments and launch of smart toys and educative games. However, India’s share in the global toy market was just about $400-$425 million i.e., only 0.5% of the overall market. The Indian toy market, as of 2017, was valued at INR8,000 crore – with market share owned in the ratio of 3:7 by the organized and unorganized sectors respectively. However, the industry was expected to grow at a CAGR of 20% and be valued at INR24,883 crore by the year 2020.8 Quite a few reasons are often cited for the potential growth of Indian toy industry................

The China Factor

D S Rawat (Rawat), Secretary General, ASSOCHAM, said, “Only 20 per cent of the Indian market is served by Indian manufacturers and rest by import of toys from different countries mainly from China and Italy.” Between 2001-2012, Import of toys from both China and Italy expanded at a Compound Annual Growth Rate (CAGR) of over 30%..........

Competition

The organized toy sector in India was dominated by only a few home-grown and MNC brands, with Funskool (established in 1987) being the market leader with revenue of INR220 crore in 2017 (Exhibit IV). Apart from its own brands, Funskool also manufactures and distributes products in the Indian market under license from foreign toy brands including Hasbro, Lego, Disney, Warner Bros., Takara Tomy, and Ravensburger.

However, some of the MNC brands that entered India through joint ventures (JVs) and marketing arrangements with the Indian companies earlier (as they lacked knowledge of Indian market and had no distribution network), have now either established their own subsidiaries or have taken up to local sourcing and manufacturing...........

Imagician Playthings LLP

The germination of Imagician took place when Adnan participated at a B2B Toys Fair in Mumbai, in 2014, where all organized players of toy industry had put up their product offerings. There were 130 booths of MNCs, importers and domestic manufacturers put together. Upon further research Adnan found that all of them represented just INR650 crore of organized toy industry with top 5 players grabbing INR300 crore, and the remaining 125 players just making an average annual turnover of INR3 crore...............

Imagician’s Business Model

Imagician operated as a distributor for various global toy brands (B.K. Balloons, Kiddy Mat, Mookie, Safsof, RenArt, Tekno, Tosy, Wedgits, WavePlay, Welly, etc.) as well as manufactured its own labels (Craftival, Imagi Builder, KidsVilla, Kratos, ThrillPort and Wepon) across various toy segments, each fulfilling a special edutainment need of the kids (Exhibit VI)...........

Building a Challenger Brand

Kids and their playing needs have changed rapidly over the years. Traditional toys (toys made out of wood, clay, metal, glass, etc.) were replaced by colourful and cheap plastic toys, which were again replaced by electronic and remote-controlled toys.......

Changing Consumer Preferences

One of the biggest challenges for the toy industry is the emergence of video/mobile games that have eaten into the market shares of traditional and modern toy manufacturers like Mattel, Funskool, Lego, etc. However, Imagician stayed away from the mobile gaming products and says that rest of the categories/segments would continue to have large market.............

Increasing Competition

In 2018, Sony Pictures Networks India (SPN) had decided to enter the Indian merchandising business – pegged at INR2,200-2,500 crore37 – like its rivals Walt Disney (Hungama, Disney Channel, Disney Junior), Turner International (Cartoon Network and Pogo) and Viacom18 (Nick, Nick Junior and Sonic). SPN had signed a multiyear licencing deal with Mumbai-based brand licensing company Black White Orange Brands (BWO) to exploit the portfolio of its kids’ channel: ..............

Increasing Government Support for Indian Toy Industry

High import duty on the raw materials and low import duty on finished toys was affecting the small and medium manufacturers of toys in India. However, in September 2017, the Government of India had come heavily on the quality norms/criteria and mandated to have a ‘certification of compliance’ by accredited agencies. With this, the industry had witnessed a drop in the imports..........

Market Opportunity for Imagician

Adnan supported the government’s move and had his hopes high that the recently-rolled out GST (in 2017) would massively increase the size of the organized industry. He reckoned, “Unorganized players thriving on importing with under valuation and evading taxes will get hit hard.”

Adnan said, “In Imagician’s blue-print, GST implementation by the current government was always a critical milestone by way of which the unorganized players (thriving on importing with under valuation and evading taxes of the land) would have a substantially weakened base and our carefully sourced own labels give the first option to the retail channels across India to replace their unbranded and unsafe consumer offerings with the legit, synergistic looking, laced with global packaging standards, child-safe toy labels with aggressive consumer prices and with mouth-watering variety...............

Assignment Questions

I. Discuss the nature and business dynamics of Indian toy industry using Michael E. Porter’s Five Forces Model.

II. What is a business model? What is Imagician’s Business Model? Would this business model help Adnan achieve his target of INR100 crore by 2022?

III. ............

Exhibits

Exhibit I: Toy Industry Value Chain

Exhibit II: Large Toy Manufacturing Units and Clusters in India

Exhibit III: Import of Toys in India

Exhibit IV: Share of Various Brands in the Indian Toy Market

Exhibit V: India’s Competencies as a Toy Manufacturing Hub

Exhibit VI: Toy Segments and Brands – Imagician’s Brands (in Bold)

Exhibit VII: Imagician’s Operating Model

Exhibit VIII: Indian Toy Standards Prescribed by BIS

Exhibit IX: Market Opportunity for Organized Players

Annexures

Annexure I: Traditional Toy Clusters in India and product categories

Teaching Note Preview

Imagician’s Competitive Strategy: Building a Challenger Brand in Indian Toy Industry

Synopsis

After completing the first year of operations in the Indian toy industry and clocking a turnover of INR10 crore, during 2016-2017, Imagician Playthings LLP’s (Imagician) CEO and MD, Adnan Chara (Adnan), had nurtured an ambitious goal of reaching INR100 crore revenue by 2022. While the Indian toy market promised tremendous potential of around INR8,000 crore, the glaring fact was that 70% of the market was captured by unorganized players and only 30% was pocketed by organized/branded players. Even in this miniature share, a significant portion (of around 50%) was owned by foreign players like Mattel and Hasbro. In such scenario, would Adnan be able to fulfil his goals? What should be his competitive strategies for the same? This case helps the participants in analysing the challenges that Adnan could probably face in the Indian toy industry.

Prerequisite Conceptual Understanding/Before the Classroom Discussion

Students should be encouraged to read the following two seminal articles as the frameworks given in these two articles would be used during the classroom discussion of this case study.

• Michael E. Porter, “The Five Competitive Forces that Shape Strategy”, Harvard Business Review, January 2008 [Ref. R0801E] – To understand how the five competitive forces affect and define the nature of any industry
• Mark W. Johnson, et al, “Reinventing Your Business Model”, Harvard Business Review, December 2008 [Ref. R0812C] – To understand the elements of structuring a business model and use the same to construct Imagician’s business model

Case Positioning and Setting

This case can be used in the MBA/MDP for either of the following:

a) Strategy Course – Industry Analysis Module: To analyse the Indian toy industry with the help of Michael E. Porter’s Five Forces Model and understand the industry dynamics
b) Strategy Course – Competitive Strategy Module: To analyse Imagician’s competitive strategies and debate whether Imagician can be a challenger brand in Indian toys market

Assignment Questions

I. Discuss the nature and business dynamics of Indian toy industry using Michael E. Porter’s Five Forces Model.
II...........

Exhibits

Exhibit (TN)-I: Suggested Classroom Orchestration

Exhibit (TN)-II: Influencers for Toy Purchase

Exhibit (TN)-III: Nature of the Indian Toy Industry

Exhibit (TN)-IV: Types of Toy Consumption

Exhibit (TN)-V: Indian Toy Industry and Business Dynamics

Exhibit (TN)-VI: Why Chinese Toy Imports?

Exhibit (TN)-VII (A): Porter’s Five Forces Analysis of the Indian Toy Industry

Exhibit (TN)-VII (B): Porter’s Five Forces Analysis of the Indian Toy Industry

Exhibit (TN)-VIII: Imagician – Elements of Successful Business Model

Exhibit (TN)-IX: Efficacy of Imagician’s Business Model

Exhibit (TN)-X: SWOT Analysis of Imagician

$7.31
Rs 0
Product code: STG-1-0063, STG-1-0063A

Abstract

This case study can be used to discuss a new entrant's challenges in fighting for a competitive position in an established industry with entrenched global players and unorganized sector commanding a lion's share of the market. In the backdrop of Indian Toy Industry's competitive landscape, this case study chronicles the beginnings of a fledgling Indian start-up, Imagician Playthings LLP's (Imagician) foray into the toy industry. With a size of INR8,000 crore, Indian toy industry is dominated by unorganized/local players with about 70% market share. The organized sector - with the top branded players like Mattel, Lego, Funskool, Reliance's Learners Play, Shinsei Industries' Mintoy Pvt. Ltd., etc. - commands around 30% market share. With close to 400 million kids (0-14 years) and with an abysmal average spend of about INR250 (compared to UK kids' average spend of INR14,000), Imagician’s Adnan Chara (Adnan) seemed to have found a sweet spot. With INR10 crore of revenue over the first year of operation, Adnan is confident of achieving INR100 crore turnover by 2022. Can he? With several challenges ' especially from that of video/mobile games, brand building and last-mile facilitation - what would it take Adnan to position Imagician as a successful challenger brand in Indian toy industry? What should be the road map for Imagician to cross the INR100 crore milestone? With Imagician's business model - a mix of importing, selling licensed labels of foreign brands and making own brands - can Adnan's venture be a game changer for Indian toy industry?

Pedagogical Objectives

  • To understand the nature and business dynamics of Indian toy industry using Michael E. Porter’s Five Forces Model
  • To analyze Imagician's business model and debate on its efficacy for achieving Adnan's goal of reaching INR100 crore by 2022
  • To design an appropriate road map, given the inherent threats and challenges, for Adnan to build a successful challenger brand in the Indian toy industry with the help of SWOT analysis

Case Positioning and Setting

This case can be used in the MBA/MDP for either of the following:

a) Strategy Course – Industry Analysis Module: To analyse the Indian toy industry with the help of Michael E. Porter’s Five Forces Model and understand the industry dynamics

b) Strategy Course – Competitive Strategy Module: To analyse Imagician’s competitive strategies and debate whether Imagician can be a challenger brand in Indian toys market



This Case Pack Includes:
- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
$7.31
Rs 0

Related products




Request for an Inspection Copy

(Strictly for Review Purpose, Not to be Used for Classroom Discussion/Trainings)