Case Study: Megatoys Woos Wal-Mart
Organizational Design and Management, Prof. Steve McGuire
May 16, 2014
In 1989 in California the Woo brothers established the Megatoys Inc. Company an importer and wholesaler of children's toys. Today the company has two business models: design and subcontract to China the manufacturing of traditional toys that are sold the whole year and a second model-manufacturing in US seasonal products like Valentine day gifts and Easter Baskets. The later became the biggest source of profit for the company, distributed in huge retail stores like Wal-Mart and Kmarts. Over the years thanks to its capability, infrastructure and on time delivery of orders Megatoys became the preferred supplier for Easter Baskets by Wal-Mart. In the year 2007 the CEO of Megatoys arranged a meeting with the decision makers in Wal-Mart hoping to get its biggest order for Easter Baskets for the last years. As every company Megatoys had an ambition to grow year after year and they knew that this could be easily achieved if they were able to satisfy Wal-Mart's need. But is this the best way to grow? Are there any other options for sustainable growth? Mindful of the cost sensitivity of Wal-Mart what will happen if someone with better prices comes to the market? Isn't Megatoys too dependent on Wal-Mart? There could be many options for the Woo's brothers company to grow besides supplying only Wal-Mart. First, the company can try to expand its operations to other Christian regions where Easter is celebrated like Europe, Latin America or Asia which has a 4.8 billion $ market potential for buying Easter chocolate compared to 3.5 billion $ in US (exhibit 9). Moreover, there is always a small time difference between the Orthodox and Catholic Easter and mindful of the seasonality of the Easter Baskets the company can take advantage by switching the products from one market to the other. Another option for Megatoys to gain advantage over its...
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