Glifford is a global toy company and owns one of the strongest portfolios of childrens and family entertainment franchises in the world. Consumers are engaged through a portfolio of Gliffords iconic brands such as Barbie, Hot Wheels, Fisher-Price, American Girl, Thomas & Friends, UNO, Masters of the Universe, Monster High and MEGA. Its offerings include film and television content, gaming and digital experiences, music, and live events. The entity operates in more than 35 locations and its products are sold in more than 150 countries in collaboration with the worlds leading retail and e-commerce companies.

Glifford aims to create innovative products and experiences that inspire, entertain and develop children through play. Glifford is an American multinational toy manufacturing company that was founded in 1945 in California. The company operates the facilities and sells products in numerous countries outside the United States. Glifford is the second largest toy manufacturer in the world in terms of revenue after The Lego Group. The company is most famous for the Barbie doll. The production of Barbie doll commenced in 1959 and the doll became the companys best-selling toy in history.

Glifford manufactures different toy products both in its own facilities and through third-party manufacturers. Glifford cooperates with unrelated entities that design, develop and manufacture products. As a part of the continuous effort to reduce manufacturing costs, Glifford produces its core products in the company-owned facilities. The principal manufacturing facilities are located in Canada, China, Indonesia, Thailand, Mexico and Malaysia.

Gliffords operating segments are separately managed business units that comprise of 1) North America (US and Canada), 2) International and 3) American Girl. The North America segment sells toys in the US and Canada including Barbie fashion dolls, vehicles and play sets, games, puzzles, building bricks, etc. The toys are designed for kids of different ages. Products in the International Segment are generally the same as those developed for the North American segment but sometimes products are adapted for international markets. Glifford sells its products in more than 150 nations. American Girl segment is a direct marketer and publisher of books and magazines for kids sold in the US only.

Mikki was recently hired by Glifford as a Graduate Intern. Mikki has just finished a bachelors degree in accounting and is eager to apply her knowledge and skills in practice and learn more about multinational corporations. Her first task was to assist the Account Manager in writing a report about Gliffords management accounting systems and to suggest ideas for improvement. To complete this task, Mikki started to collect information about the company: researching newspapers, reports, attending meetings and communicating with other employees. The following sections present the summary of information provided by Mikki to her manager.

Organisational strategy

I have attended several board meetings of Glifford. Generally, board members envision Glifford a recognized leader in play, learning and development worldwide. Based on these meetings and informal chats with the board members, I can outline the following strategic priorities:

- Growing sales and expanding into new international markets

- Exploiting the franchise strength of core brands (the need to focus on brand management, and new partnerships)

- Improving productivity and efficiency of core operations

- Strengthening global supply chain (strong connections with key suppliers and negotiating decreases in raw material costs)

- Improving commercial excellence (focus on customer satisfaction and repeat purchase)

- Continuous cost improvement

- Building market leadership (increasing market share, increasing scale and scope of operations)

- Improving employee competencies in key business areas

Performance and incentive compensation plans

Due to the decline in operating profits over the last year, Gliffords management increased its focus on performance management. Currently Gliffords management is focusing on putting Glifford back on track and improving its profitability. In the following years management will put a premium on speed and personal accountability. To reflect this vision, a new incentive compensation plan is developed. Officers and key employees of Glifford may earn incentive compensation based on Gliffords performance. These annual compensation plans are subject to approval of the Compensation Committee of the Board of Directors. These performance programs should aim to reflect individual responsibilities and accountabilities.

Risks

- Competition in the industry. Competition in the toy industry is based on quality, brand recognition and price. Glifford competes with several large toy companies in North America including Hasbro, Jakks Pacific, Just Play products, Lego, MGA Entertainment, Moose Toys, Spin Master and VTech. Internationally Glifford competes with more companies. In the recent years competition with these companies becomes more intense due to shorter life cycles for individual products and increasing technology use. Additionally, Glifford products compete with electronic consumer products and video games. Competition is intensifying because online only retailers can offer lower prices. The barriers of entry for new companies in the toy products industry are low. New competitors are constantly entering the market and develop new innovative products.

- Seasonality. The consumers purchase most products during the traditional holiday season. Disruption of business during its peak demand times could significantly affect the business. Thus, Glifford risks overproduction of less popular toys and underproduction of popular ones. The main goal is to match consumer demand with production volumes. Due to these factors,

Glifford may not be able to meet the consumer demand at peak times and may need to increase inventory levels. Glifford is using forecasting and budgeting to plan for increases in production in advance of peak periods. Additionally, the company can be critically affected by unforeseen events happening during the holiday season such as terrorist attacks, economic shocks, severe weather and other catastrophic events.

- The demands for products and consumer tastes are constantly changing. Significant sudden shifts in demand are common in the toy industry. The main trends in the industry are driven by fashion and technology. Glifford has to meet these challenges in a timely and cost-effective manner.

- Financial position of key customers. Gliffords sales are typically made on credit without collateral. There is a risk that customers wont be able to pay or delay their payments. Thus, Glifford is exposed to losses from bad debts. If Gliffords key customers stop their operations, it could have a significant adverse effect on Gliffords financial situation.

- Compliance with laws and regulations. Glifford is subject to various government policies, laws and regulations. Toy industry is a highly regulated environment in the US and internationally. Glifford has to comply with accounting standards, taxation requirements, product safety guidelines, employee health and safety regulations, trade regulations, anticorruption standards, environmental standards and privacy and data protection regulation. Failure to comply with any of these standards can lead to monetary liabilities and reputational losses. To comply with all these regulations, Glifford incurs significant costs and changes in these regulations can lead to increased costs. Additionally, Glifford operates in a number of countries, thus it has to comply with laws in varying jurisdictions.

- Exchange rates fluctuations. Glifford sells its products to a number of foreign countries thus facing the risk of exchange rate fluctuations. High inflation, economic instability and government interventions can lead to exchange rate fluctuations and negatively impact profitability of Glifford. Glifford attempts to mitigate the exchange rate exposure by aligning prices with local currencies and hedging forward contracts. Gliffords 2017 financial performance was negatively impacted by foreign exchange headwinds. In particular, the International operating segment experienced a 40% decline in operating profits due to the foreign exchange fluctuations of Venezuelan bolivar fuerte and Chinese yuan.

- Interest rates and credit. Glifford relies on external funding such as commercial paper and borrowings. If interest rates increase, this can increase the cost of financing. If credit ranking of Glifford decreases, this leads to increase in the cost of obtaining financing. Glifford has to focus on maintaining certain financial ratios to ensure adequate cost of financing.

I have also investigated press coverage of Glifford and discovered the following incident that resulted in a number of publications in the outlets such as The New York Times, The Guardian, The Australian, BBC, Bloomberg, etc.

Lead paint prompts Glifford to recall 967,000 toys, Glifford recalls millions more toys, China toy scares our fault, Why Glifford apologized to China, How the Glifford fiasco really happened are the headlines of newspaper articles in 2007. On August 2007 Glifford recalled over 18 million products manufactured in China. These recalls happened because many of the products exceeded the US legal limits on surface coatings for toys. In 2009 Glifford was charged $2.3 million in civil penalties in violating a federal lead paint ban to the Consumer Product safety Commission.

Note this case has been adapted from the Glifford website and newspaper articles for illustrative purposes.

How do you understand competitive advantage from a business perspective? Provide researched examples to support your understanding

From the case study, identify the competitive advantage(s) of Glifford. Explain why you think that it is (or are) a competitive advantage of Glifford

What are the key types of risk faced by Glifford? For each type of risk provide relevant examples from the case.

Provide suggestions to manage identified risks at Glifford.