Toy World

1. What is the case Name?

Toy World Inc

2. What is the area of the case?

This area of the case is in the Toy manufacturing world. Like most toy businesses they have down seasons and peak seasons with their peek seasons being around the major holidays. The president of the company would like to minimize down time and maximize profits year round for toys. This is the norm for toy businesses and they know that several months out of the year are going to be tough on them. Like the president says in the article his peak months are August though December and relatively flat the rest of the months. A business cannot stay up and running with only 4 months of sales and 8 months of down time.

3. Who are the major players, and what is their background and bias?

Jack McClintock is President and partial owner of Toy World. His new production manager, Dan Hoffman, has been on the job through one business cycle (about one year).

4. What are the major facts in the case?

The company studied in the case is Toy World, a manufacturer of plastic toys for children. More than 80% of the sale was generated between Aug to Nov. Toy World Inc.’s practice was to produce in response to customer orders. Therefore, the production was highly seasonal, and not more than 25%-30% of manufacturing capacity was used for the first seven months. They produce a wide range of designs, colors and sizes for most of its product categories. Dollar sales of a particular product would sometimes vary by 30%-35% from one year to the next.

5. What type of case is this? (Problem, Decision, Evaluation, Rules) How do you know?

I believe this is a decision type case, because that have to decide whether or not they want to implement a new business plan to increase profit or stick to the seasonal plan they currently have. Along with changing their plan they are going to need more credit and a few other things as necessary.

6. Attach a spreadsheet with the given data organized into a “standard” format, checking for errors in the presented numbers.

7. Discuss possible directions to take in solving the case.

Financing

As discussed above, the company would need to finance as much as $3.7 MM working-capital loans if it adopted level production, while the bank might only be willing to lend $2.0MM. Possible solutions are: Raise more equity (common or preferred stocks), Issue more bonds/ convertible bonds, Renegotiate with the bank,

Finance its accounts receivables by giving up a small percentage of them. (This will only partially mitigate the problem), Persuade its customers (mostly stores) to purchase earlier, by providing some incentives. In this way, inventory level will drop and thus reducing financing needs.

Forecasting