Rev. November 1, 1993
Play Time Toy Company
Early in January 1991, Jonathan King, president and part owner of Play Time Toy Company, was considering a proposal to adopt level monthly production for the coming year. In the past, the company’s production schedules had always been highly seasonal, reflecting the seasonality of sales. Mr. King was aware that a marked improvement in production efficiency could result from level production, but he was uncertain what the impact on other phases of the business might be. Play Time Toy Company was a manufacturer of plastic toys for children. Its product groups included military toys, toy cars, trucks, construction equipment, guns, rockets, spaceships and satellites, musical instruments, animals, robots, and action figures. In most of these product categories the company produced a wide range of designs, colors, and sizes. Dollar sales of a particular product had sometimes varied by 30%-35% from one year to the next. The manufacture of plastic toys was a highly competitive business. The industry was populated by a large number of companies, many of which were short on capital and management talent. Since capital requirements were not large and the technology was relatively simple, it was easy for new competitors to enter the industry. On the other hand, design and price competition was fierce, resulting in short product lives and a relatively high rate of company failures. A company was sometimes able to steal a march on the competition by designing a popular new toy, often of the fad variety. Such items generally commanded very high margins until competitors were able to offer a similar product. For example, Play Time’s introduction of rock musician action figures in 1988 had contributed importantly to that year’s profits. In 1989, however, 11 competitors marketed a similar product, and the factory price of the Play Time offering plummeted. In recent years, competitive pressures on smaller firms had also intensified with the rise of a number of large foreign toy manufacturers with low labor costs.
Play Time Toy Company was founded in 1973 by Henry Richards after his release from naval service. Before his military service, he had been employed as production manager by a large manufacturer of plastic toys. Mr. Richards and his former assistant, Jonathan King, established Play Time Toy Company with their savings in 1973. Originally a partnership, the firm was incorporated in 1974, with Mr. Richards taking 75% of the capital stock and Mr. King taking 25%. The latter served as production manager, and Mr. Richards as president was responsible for overall direction of the company’s affairs. After a series of illnesses, Mr. Richards’s health deteriorated, and he was forced to retire from active participation in the business in 1987. Mr. King assumed the presidency at that time. In 1989 he hired Thomas Lindop, a recent graduate of a prominent eastern technical institute, as This case was prepared as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1991 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
Play Time Toy Company
production manager. Mr. Lindop had worked during summers in the plastics plant of a large diversified chemical company and thus had a basic familiarity with plastics production processes.
Play Time Toy Company had experienced relatively rapid growth since its founding and had enjoyed...