WKinetics: Reinventing with Next Generation Leadership Founded in 1978 by George Baker, WKinetics has successfully established a niche position in the kinetic (involving motion) toy industry. Competitive pressures, though, have made it tough for the firm in recent years and growth in revenues and prots have been disappointing. In 2017, George handed over top management to his daughter Beth who had been with the company since completing her MBA in 2010. Starting as an accounts receivable clerk, Beth rose to be the rm's controller, chief nancial ofcer, and then chief operating ofcer. With nearly two years of transitioning into the top leadership position, Beth is now executing her plan to reposition W for greater long-tent] performance in a much more competitive Won a handful ofitems George designed and built for his own young children, George started Wwith a small line of wooden blocks and aluminum building sets. The brand evolved in the 19905 to emphasize a broad portfolio of plastic snap-together building sets designed to stimulate curiosity, creativity, and manual dexterity in toddlers aged 3-5. Product and packaging design is performed inhouse at their Baltimore headquarters. Manufacturing and packaging iperformed through strategic alliances with two factories in Monterrey, Mexico. The core products are made ofa mix of recycled plastic resins i_n_ grdeg tq keep costs, and prices, low. This supported W historic market position as an affordable option for parents and educators with solid prot margins for specialty retailers who must compete with mass merchants such as Amazon and Walmart. Bulk-packaged products ship from the Monterrey factories directly to the company's six regional distributors located across the continental United States (and one in Ontario, Canada). These distributors account for virtually al_1_o_fl$,1ai;,revenues, with a small portion coming from the rm's direct sales of slightly damaged and discontinued items which are sold through inventory liquidators (who re-sell such items to retail outlets such as Big Lots). The distributors, who handle multiple specialty product lines in the toy market, sell and supply Wproducts to roughly 300 specialty educational and preschool toy and supply retailers throughout North America. My}, relationships with and service to the distributor accounts are handled by three regional sales managers. Support to the retailers is provided by the distributors. Due to the severe competition in the toy industry, from intense price competition at the retail level and pressures from low-cost producers competing directly from Asia, Beth's plan to jump-start the rm's performance involves a great deal of change. She and her father know the risks, but they have decided the rm must change a great deal to survive and succeed. The first move Beth made was to expand the company's product breadth by acquiring HF Games, a small but innovative French manufacturer and distributor of premium quality battery-driven experiential toys for children (toy phones, computers, science kits, etc.). Mnow imported these products from the factory in France and slod them in the US and Canada through the existing sales force and retail accounts. Reversing that, Beth expanded the old HF warehouse in France to take on a signicant portion ofmproduct line which would now be sold throughout Europe by HF '5 sales and distribution network. The design and manufacturing specications for W; core plastic products were revised to improve the quality of the materials to support positioning (and pricing) the products for a higher quality and more attractive aesthetic level than the major mass market competitive brands. Manufacturing was transitioning from the Mexican factories to agreements with state-of-the-art contract molding, assembly, and warehousing/shipping operations in Taiwan. With these material and production changes, W core products would incur an average 14% net price increase to retailers but the changes would improve retailers list retail margins by over 25%. Although near-term unit sales were expected to drop slightly with this premium quality positioning, protability would be much higher for W5}, Market share and unit volume were expected to increase over time as the attractive margins gained attention of the channel resellers. To further support the prot margins for both mm; and their retailers, Beth dissolved the firm's agreements with the regional distributors and began building an in-house, direct sales organization. She recruited two of the leading salespeople from the top distributor thus bringing the W sales team to five experienced professionals. This team was now responsible for direct sales to the top 80 specialty retailers (who accounted for over 70% of 2018 Wbrand retail sales). Furthermore, Beth charged the team with gaining distribution through mass merchant retailers with specic attention to Target, Amazon, and Michaels Stores. Mass retail accounts were to be offered a program involving a custom (store) brand and packaging design to differentiate the products sold in mass retail from the core