Toy Industry Whats your China Strategy Tabitha Mui

Toy Industry: “What’s your China Strategy? ” Tabitha Mui October 20, 2006 Center of Cyber Logistics

Statistics on Export in China • Over 8000 manufacturing facilities • Over 30, 000 kinds sold in over 100 different countries and regions • 75% of toys in the world from China • Export Performance – 2005: $15. 18 billion U. S – 2004: $11. 96 billion U. S. (increase of 26. 9%) October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Statistics on Export in China • Export Goods – Video Games ($3. 488 billion U. S. ) – Stuffed Toys ($1. 728 billion U. S. ) – Festive decorations, dolls, models, music boxes, bicycles, strollers, and other toys and accessories • Export Destinations – USA ($4. 944 billion U. S. ) – Hong Kong ($2. 504 billion U. S. ) – Japan ($739 million U. S. ) – Germany, France, UK, Italy, Spain October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Map of Main Production Areas • Guangdong – Export in value (2004): $8. 980 billion (U. S. ) • Jiangsu – Export in value (2004): $781 million (U. S. ) • Zhejiang – Export in value (2004): $701 million (U. S. ) October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Why China? • Benefits – Key to business models • Low price where labor is cheaper and lower level of technology is needed – Strategic locations • Most productions located along coast October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Why not China? • Issues – Raw material price increase • Plastics, metal – “Low quality in goods produced” – External barriers to import • Hinder free trade access to other countries October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Statistics on Export in PRD October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Statistics on Export in PRD • Guangdong – 70% of national total in toy exports – Approximately 4500 toy companies – 80% of exports go to U. S. , EU, HK, & Japan – Mainly in Shenzhen, Dongguan, and Guangzhou owned by HK investors and China operated October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Manufacturing facilities in PRD • Hong Kong/Foreign Owned facilities – Higher profit margin – Sophisticated management • Indicates usage of current business practices – E. g. Supply Chain Management – Just-In-Time – Material Requirements Planning & Electronic Data Interchange – Vertical integration • R&D Prototype Manufacture QA Shipping • Edu-Science HK Ltd. October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Manufacturing Facilities in PRD • Mainland China Owned facilities – OEM focused • Small to medium sized factories • Limited staffing levels and financial capital • Low profit rate – Usually only earn processing fees and work on a contract basis – Outlook: ODM • Starting to incorporate research and design elements • Difficult to compete with international firms • Pengcheng Toy Ind. Co. , Ltd October 20, 2006 Toy Industry: “What’s your China Strategy? ”

Research Issues • Limited access to key articles – 2004 -2005 Annual Report on China's Toy Manufacturing Industry – Analysis & Forecast Report on The Toy Manufacturing Industry – China Toy Industry Report, 2004 October 20, 2006 Toy Industry: “What’s your China Strategy? ”

References • • “Chinese Domestic Toy Market - ASIA-INTERPRISE Co-operation Toy Manufacturing and Industry” website – http: //www. toysshanghai. cn/sector. htm “Foreign Economic Cooperation” website – http: //fec 2. mofcom. gov. cn/ “Hong Kong Toys Council” website – http: //www. toyshk. org/ “Challenges of Hong Kong toy manufacturers operating plants in the Pearl River Delta” – International Journal of Asian Management, Dec 2004, Volume 3 • “China: Top Global Supply Chain Partner” – The China Business Review, Sept/Oct 2006 • “China Toy Association” website – http: //www. toy-cta. org/en/index. ASP October 20, 2006 Toy Industry: “What’s your China Strategy? ”