Mattel Toys India Ltd.

Group 7 Abhijeet Parekh (12P090) Soham Vaghela (12P113) Chirayu Gandhi (12P135) Manav Gupta (12P146) Rajiv Gupta (12P159)

Toy Market in India

Dominated by unorganized manufacturers Market size of around Rs. 700 crores in 1999 Organized manufacturers were facing huge competition

from imported Chinese toys in terms of both price and quality Toy market thrives on new product but organized sector faces the problem of imitation due to lack of proper legal provisions Indian toy market segmented in following manner
Infant Toys

Pre School Toys

Board Games Dolls Battery operated and electronics toys Soft Toys

1987-1996: Blow Plast initial Distribution System

Sales officers(SO) responsible for target achievement of specific territory

assigned to them Followed a 4 level distribution structure

Manufacturing Plant
C&F Agent Distributors Retailers

Company focused only on primary sales; Pushed slow moving products

to distributors, hence distributor's stock exceeded norm of 4 week Trade promotion to push certain slow moving items. Different discount schemes to distributors in different territory Distributors not allowed to carry competitors product but allowed to carry products of a different category Retailers
Gift shops, toy shops, card shops, sports good shops, department stores etc Margins to retailers: 20 % by MTIL and Funskool,30-35% by unorganised

sector, 35-40% by imported brands

1997-98: Blow Plasts New Distribution System

Dual distribution policy

10% Large retailers contributing to 60% sales, serviced

directly by the company through its own sales officers and CFA Distributors serviced the small retailers Estimated saving to the company: 18 lakhs per annum from Delhi; Rs 1 crores per annum from 10 major cities if implemented Consequences Lot of dissatisfaction among its distributors and dealers as large accounts were taken away from distributors Confusion in the distribution system: Number of direct dealers were making purchases from distributors rather directly from the company

1999-2000: Mattel takes control

Mattels Sales & Distribution replaces Blow Plasts Toy Division Discontinued its direct dealer policy New Role of SO Redesignated as Territory sales executive (TSE) Focus on territory management rather

than achieving sales

target Focus on managing relationship, distributors stock management, supervising ISOs,handling chain stores, large retailers, merchandising, educating retailers etc. Sales generation handled by ISO Expansion: Distributors increased to six and number of outlets increased from 500 to 700 Distributors: Margin reduced to 8% from 8.5%, but cost of ISO to be shared between distributor and MTIL on 50:50 basis

Issues & Recommendations

Possibility of a Channel Conflict:
The new channel of wholesaler, with added discounts for low price product,

may lead to dissatisfaction among the existing channel member. Also the added benefit to wholesalers by new incentive system, may result in cannibalization of the market of others channel members

Recommendations
Try to divide the products in such a way, so as to create minimum impact on

other members. Also an analysis of impact on distributors share by this move, and incremental analysis of low cost product sales impact can give a better picture
Gaps in Coverage
Proper analysis of channel needed to understand viability of wholesalers, for

low price goods Wrong product through a wrong channel may result in bigger problems May be serving to a different category of retailers

Recommendations
Analyze the customer buying behavior, to assess various channels for

different product Direct through adequate channels, so as to cover the complete plethora of

Issues & Recommendations

Deterioration in System Economics:
Introduction of new system for distributor, reduced margin from 10.5% to 8.5% and

then 8%
Sale by 5 Distributors 40% of 4 crore = 1.6cr Sale by 1 Distributor = 3200000 Margin Distributor Margin: Total Margin per annum

Total Saving on ISO per annum 0 0

Incremental Gain/Loss 0 -64000

10.5% 8.5%

336000 272000

8%

256000

24000

8000/-56000

Added incentive to wholesalers, with additional discounts ranging from 5%-25%, thus

increasing channel cost Increase in retailer margin from 20% to 25%, thus decreasing distributor share at cost of retail

Recommendations
Focus on incentive for retailer through promotion rather than permanent

margin

increase, as difficult to rollback Control the wholesaler incentive, in line with other channel, so as to increase both profitability and sales rather than just sales Give Distributors better incentives, so as to not antagonize them. Incentive can be in

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