Spin Master Companys Analysis

Executive Summary

Spin Master is a widely recognized multinational company that specializes in manufacturing toys of different types and interactive games, as well as entertaining digital content for children. The company is based in Canada, and it operates in the Americas, Europe, Asia, Australia, and some African countries. Spin Master holds one of the leading positions in the global market, and it is characterized by financial stability associated with its focus on producing high-quality innovative products. Consequently, the companys major strategy is an investment in research and development and the application of innovative technologies. Spin Master follows a traditional advertising strategy to promote its products and content, and it is represented in countries other than Canada in several ways: direct sales, distribution markets, and research, design, and innovation centers. The companys management approach and the organization of employees work need improvement, however. It is recommended that Spin Master not expand into a developing country because of limited potential for contributing to the countrys economy and social life.

Company Description

Background

Spin Master is a multinational company that operates in the entertainment industry for children while producing a variety of toys and games. This company was established by Anton Rabie, Ben Varadi, and Ronnen Harary in 1994. Today, the company is headquartered in Toronto, Canada, and is one of the global leaders in the industry. The companys offices and products are represented not only in Canada but also in the United States, China, Japan, Mexico, the United Kingdom, France, Germany, Australia, and other countries. The workforce of Spin Master includes more than 1,600 employees (Spin Master acquires plush toy brand GUND, 2018). According to the latest annual report, the companys revenue for 2017 is $1.657 billion, in comparison to $1.255 billion in 2016 (Spin Master Corp., 2017). These data indicate that the company is still approaching the point of occupying one of the major positions in the market.

Products

Spin Master specializes in designing and manufacturing toys and games that are popular among children because of the innovative features they have. The companys well-known brands include Bakugan, Erector, Zoomer, Air Hogs, and Etch A Sketch, among others. The companys high-quality products have been recognized several times as toys of the year. Spin Master has won the nomination for the best toy of the year 28 times since 2000, including the nomination for the most innovative products (Spin Master acquires plush toy brand GUND, 2018). Thus, Hatchimals won the Toy of the Year award in 2017, and Aquadoodle won the Property of the Year award in 2018. In addition, the company produces several TV series popular among children, including the famous Bakugan Battle Brawlers and PAW Patrol (Spin Master acquires plush toy brand GUND, 2018). The popularity of the companys products and its focus on innovation contribute to the firms financial stability.

Financial Performance and Success

Currently, the company is focused on investing more in its research and development (R&D) department to develop more innovative and interactive toys and games. In comparison to 2016, the companys revenue for 2017 increased by 32%, indicating Spin Masters expansion and financial growth (Spin Master Corp., 2017). Referring to the data for the past ten years, Spin Master improved its compound annual growth by 13%, increasing sales and the free cash flow. Thus, the companys cash flow changed from more than $118 million in 2016 to over $190 million in 2017 (Spin Master Corp., 2017). The financial success of Spin Master depends on the quality of its products, as well as on a capital-light business model. Thus, the company does not invest in material manufacturing assets, which increases the availability of cash and flexibility (Spin Master Corp.: Investor presentation, 2017). The launch of Luvabella and Soggy Doggy during recent years has also improved the companys financial state.

News Stories

In 2018, Spin Master Corp. purchased GUND, which is one of the oldest and most popular toy brands in the United States. This purchase from Enesco LLC allowed the company to expand its product lines and attract more loyal consumers in the United States (Spin Master acquires plush toy brand GUND, 2018). According to the latest news, GUND has become one of the licensing partners for Netflixs Hilda, a new animated TV series for the young audience (Silvergate Media and GUND announce first license partner, 2019). These activities will contribute to the spread of Spin Masters popularity among potential consumers.

Community Involvement

In order to support the community, Spin Master is involved in charitable activities. In addition, in several developing countries, the company has organized the Toy Movement for which Spin Master donates toys to hospitals, schools, and orphanages (The Toy Movement, 2017). Different local charity organizations actively cooperate with Spin Master to receive free toys. Furthermore, the company is working to make the Toy Movement a worldwide initiative to support more children in need.

Companys International Strategy

Current Strategy

Spin Master is oriented toward expanding globally and increasing sales in markets outside of North American. Currently, Spin Master sells products directly in the Americas and Australia. Additionally, the company has offices in Italy, France, the United Kingdom, the Netherlands, Germany, and Poland, among other European countries, where the company organizes direct marketing and sales. Distribution markets also cover some countries in Latin America, Africa, and Asia. The focus is also on developing centers for R&D, innovation, and design in China, Japan, and Sweden. The company has chosen to develop and produce toys there in addition to the Canadian and US centers in Toronto, New York, and Los Angeles (Spin Master Corp.: Investor presentation, 2017). The company has selected these countries and centers for designing and manufacturing products because of the quality of potential employees and relatively low costs.

In 2018, the company stated its focus on expanding to Switzerland, Greece, Austria, and Russia as the plan for 2019. Spin Masters current orientation to these countries is associated with the fact that consumers are interested in Spin Masters products there, but they purchase them using alternative distribution channels (Spin Master continues international expansion, 2018). Additionally, the company is developing a strategy for increasing sales outside of the North American region.

Competitors and Competitive Advantage

Spin Master competes locally and globally with many Canadian, US, and multinational companies operating in the entertainment industry for children. The major competitors in this area include LEGO, Tech 4 Kids, Mattel, Jazwares, and Hasbro among others. The companys competitive advantage is based on developing innovative products with a focus on producing interactive toys and games that are currently popular among parents and their children (Spin Master Corp., 2017). Therefore, considerable resources are invested in R&D and design units. The companys strategy is based on the constant review of potential opportunities for innovation.

Thus, the companys strategic strengths are associated with its focus on innovation, but there are also weaknesses. The problem is that the industry has low barriers for entry, and the number of actual rivals in the global market is extremely high. Many competitors have long histories and high customer loyalty, and others produce a limited number of highly popular products, which contributes to their growth. Additionally, developments in consumer electronics also create risks for the company (Spin Master Corp., 2017). To address these strategic issues and weaknesses, Spin Master has entered new markets associated with digital media and broadcasting. More attention could be paid to improving the companys product diversification strategy.

Critique of the Strategy

The companys strategy seems to be effective in relation to both short- and long-term goals. The reason is that short-term goals are oriented toward improving the quality of current products, as well as their distribution to consumers. Spin Master is also interested in building various entertainment franchises. Long-term goals are gradually realized through expanding its markets geographically and entering new ones (Spin Master Corp., 2017). Thus, the company aims to increase international sales and use specific TV and digital platforms for spreading its products to achieve intense and widespread distribution.

Companys Marketing Approach

Sale Territory

Spin Master sells its products mainly in North America, European countries, Australia, Asia, Latin America, and some African countries (Appendix A). Thus, 32.5% of sales come from markets other than North America (Spin Master Corp.: Investor presentation, 2017). It is important to note that the companys products are not distributed in all European countries. For example, Belarus is not covered, and they are not represented in the Middle Eastern market. The countries are selected depending on trade and tax laws and potential consumers interest in innovative products.

Customization

Spin Masters products are oriented toward modern children who are interested in using various entertainment platforms and technologies. Therefore, Spin Masters toys are more innovative in comparison to traditional ones in most cases. They offer toys and games for preschoolers, girls, and boys. Products for both boys and girls include toys for construction, puzzles, indoor and outdoor games, as well as toys and games requiring remote control. The prices for products are higher than the market average (Spin Master Corp., 2017). As a result, the company develops products to address consumers needs for high-quality physical and digital toys. Spin Master also offers games developed for different ages that are based on the use of smart technologies and devices to enhance childrens knowledge, skills, and creativity.

Distribution Channels

Spin Master distributes its products directly through offices and stores in Canada, the United States, Mexico, some European countries, and Australia. The distribution of toys and games in other markets is realized through third-party partners and distributors (Appendix B). In the United States, the most active partner of Spin Master is Toysmith, which allows Spin Master to access consumers using its network. Toys and games are distributed with the help of retail chains like Walmart and online, for example through Amazon and Alibaba (Spin Master Corp., 2017). Content is distributed by licensing to broadcasters and third parties.

Communication Method

To communicate with consumers in different countries, Spin Master uses traditional and online channels. Thus, advertising campaigns include advertisements on TV channels and in magazines for women and children, through social media platforms, websites, and search engines, and using mobile applications. Annually, the company spends about $100 million on marketing and advertising to reach the target audience (Spin Master Corp., 2017). Every year, the company launches several products that are promoted using different channels.

Companys Logistics Approach

Production Location and Country Factors

Spin Master produces toys and games in the United States, Canada, China, and Japan. This is due to the location of the companys R&D centers and the availability of a skilled workforce. Furthermore, much attention is paid to the costs of production and the quality of manufactured toys and games (Spin Master Corp.: Investor presentation, 2017). The companys digital content and TV shows are mainly produced in the United States because Spin Masters partners are located there and they have access to required technologies.

Technological and Product Factors

Specific technological factors that impact the design and development of Spin Masters products are associated with the appearance of new technologies and innovations in the sphere of entertainment. Spin Master has selected centers for their R&D and production units depending on the possibility of developing and using only the most innovative toys and games (Spin Master Corp.: Investor presentation, 2017). After acquiring new brands belonging to other companies, Spin Master has also received access to additional facilities in the United States, Western Europe, and China.

Companys Human Resource Management (HRM) Approach

International Employees, Staffing Policy, and Incentive Policy

Spin Master employs more than 1,000 employees in countries other than Canada. Local professionals are actively recruited to join international teams at Spin Master offices. An important feature of the staffing policy is that managers who work in international offices and distribution centers are mainly selected from among the local population. Employees in Canada and abroad receive competitive salaries and bonuses in accordance with the incentive policy that has been developed (Spin Master Corp., 2017). A share option plan is included in the incentive compensation program for the key employees in the company.

HR Philosophy and Impact on Host Country

According to the companys HR philosophy, much attention is paid to employee retention and developing positive collaborative relationships between them. HR managers hire a skilled labor force and focus on training. Employees have opportunities to develop their knowledge and skills while participating in training programs to contribute to the companys focus on innovation (Spin Master Corp., 2017). However, according to independent reviews posted online, employees at Spin Master also suffer from high workloads, a lack of work-life balance, and poor management. A problem is that the company always has many tasks to complete that are associated with strict deadlines. The impact of this management issue on employees in the host country can be negative because of the risk of exploitation and the lack of support.

Analysis

Benefits

When opening distribution centers and offices in a developing country, Spin Master will create additional job positions for locals. The main sphere of development will be marketing and promotion, which will contribute to increasing the development of these spheres in a developing country. Additionally, employees of Spin Master receive training, regular bonuses, and competitive salaries in comparison to global trends (Spin Master Corp., 2017). Thus, the well-being of local employees may improve due to these factors. Furthermore, the presence of Spin Master in the local entertainment market will open opportunities for the companys partners to enter new areas.

Costs and Risks

Specific risks associated with expanding Spin Masters activities to a developing country are related to the companys management approach. The problem is that, despite the HR philosophy and values that have been developed, overwork and intense workloads typical of the company may potentially be observed during the first months of Spin Masters activity in a new country. Employees work-life balance will be affected negatively, influencing the well-being of the larger communities. In addition, there is also a risk of employee exploitation associated with weak management policies (Spin Master Corp.: Investor presentation, 2017). The company is primarily oriented toward increasing sales and revenues, and its approach to employees is open to critique.

Recommendation and Conclusion

As Spin Master is not planning to move its R&D and production operations to develop countries, the focus is only on opening distribution centers, offices, and stores. In this context, it is not possible to recommend opening Spin Masters centers in a developing country if there is not enough of a customer base for Spin Master to address potential buyers needs. The reason is that the opening of the companys offices in a developing country will not have significant benefits for the development of local communities. The overall number of international employees working in the company is relatively low, and the creation of new job positions will potentially have a relatively insignificant effect on the material well-being of local residents. There is a risk that talented employees will be exploited, and moreover, the improved distribution of the companys products in a developing country will not directly affect the countrys economy. Therefore, it should be concluded that, at the current stage, the expansion of Spin Master to a developing country is not beneficial for local residents or communities because of limited opportunities for the improvement of social and economic conditions.