Gg Toys

9-105-005

R E V : A P R I L 1 8 , 2 0 0 5  

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Professors Dennis Campbell and Susan Kulp prepared this case. HBS cases are developed solely as the basis for class discussion. The company mentioned in this case is fictional. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.  

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D E N N I S C A M P B E L L

S U S A N K U L P

G.G. Toys  

The decline in margins on our popular Geoffrey doll product has become intolerable. Increasing production costs have dropped our pretax margin to less than 10%, far below our historical 25% margins. If we are going to increase our margins, we need to consider drastically shifting our production towards specialty dolls that are earning a large premium in price over our standard doll line. —Robert Parker, President, G.G. Toys

Background

Robert Parker, president of G.G. Toys, was discussing last month's operating results with Audrey Hausner, G.G.'s controller, and David Morehouse, G.G.'s manufacturing manager.   The meeting was taking place in an atmosphere tinged with apprehension because margins on their most popular product, the “Geoffrey doll,” had been declining rapidly in the last few years due to rising production costs (summary operating results for the previous month, March 2000, are shown in Exhibits 1 and 2).... [continues]

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