Case: PflEssay Preview: Case: PflReport this essayPassion for Learning Case AnalysisBackground:Andrew Popell, founder and president of Passion for Learning, started a direct mail order catalogue company in 1994 that exclusively sold educational toys targeted at elementary-school children between the ages of 6 to 12. After sending out the companys first catalogue and receiving a disappointing .77% response rate, as well as discovering that specialty chains that focused on educational toys (such as Learningsmith, Zany Brainy, and Noodle Kidoodle) were all expanding rapidly, Popell needed to decide what strategy would fit best with the environment he was competing in.
Industry analysis:Retail toy sales in 1993 were estimated at $17.5 billion dollars, and of those sales, approximately half were distributed amongst the five largest toy distributors – Toys R Us, Wal-mart, Kmart, Target, and Kay-Bee. Over the past twelve years, expenditure on household toys had grown by almost 200% (from $265 in 1980 to $525 in 1992) because of the many baby boomers with children who were entering their peak earning years. Moving forward, toy demand was expected to strengthen because of the onset of baby boomlets that will be raising children and subsequently purchasing toys.
Competition between toy retailers was intense as they competed for lower costs. Toys R Us expressed concern about slowing sales as they began experiencing pressure from discount retailers (IE: wall-mart and Kmart) as the discounters market share grew from 20% to 34% between 1989 and 1994 respectively. Large toy suppliers and mass merchandisers began networking and forming special agreements where they would create special discounts on volume or exclusive distribution on popular toys. Toy manufacturers would charge gross margins of 30% for mass merchandisers and 70% for small retailers, effectively cornering the market for mass merchandisers to be the low cost leaders.
Educational toys, on the other hand, only represented 20% of toy industry sales (approximately $3.5 billion), but interest in the educational toy market had been on the rise. Independent specialty stores were able to command gross margins of 100%, (as compared to mass merchants gross margin of only 30%), with per square foot sales more than double the mass merchants (Learningsmith had sales/sq. foot of $540 vs. Toys R Us of $220), making the educational toy industry attractive for small, independent retailers. One major challenge facing the educational toy industry was that since little capital was required to enter into the market (ie: low barriers to entry), competition arose. Companies entered the market and rapidly expanded their presence as they fought for market share (ie: Learningsmith opened 25 stores in in 3 years).
Popells Strategy for Passion for Learning:In order for PFL to be competitive in the toy distribution industry, Popell came up with a mail-order service strategy to provide his core customers – educated parents and grandparents who wanted to stimulate their children with educational toys – with high quality, custom-tailored educational products that would correspond with their respective interests. PFL carried out its first mail order catalogue In 1994, however the companys financial perforce was poor for several reasons including a low response rate of .77% due to its lack of credibility amongst customers (only the companys first mail order), PFLs negligible brand recognition within the toy distribution market, and finally
PFL’s inability to sell sufficient inventory for their customers.PFL’s current position is a company of about 80+ employees and they intend to change their status and achieve a strategic “Billion dollar business” based on the goal of increasing its portfolio of entertainment products to meet the need for a wide range of educational toys, educational products & related services. PFL has several employees that include :
Alfredo Añez, a senior partner at F-E , with the following role:
Mark C, the principal employee of V-Con, with the following role:
Cheryl Lee, a senior partner to LN, with the following role:
Gino E, a senior partner with a senior name of “Lunaticic” , with the following role:
Mark W, a senior partner with the following role:
John H, the chief information officer (CIO) at the company.
The company has a long standing commitment to education, education-related products, education for the general public. For the benefit of the general public PFL has recently purchased one million copies of a series of highly acclaimed music books and has a number of important strategic partnerships with a number of leading educational establishments, as well as education brands.[/p]
The company has been on strong financial following since the inception of ‘Billion Dollar Business’ in 1994.[/p]
We are pleased to announce our new financial leader, Paul Stoller, who we believe will become one of PFL’s industry leaders and ultimately one of the most influential individuals in making these investment decisions.
As the company’s president of digital marketing – with over 20 years of sales, marketing, and research experience – Paul is looking to find an innovative solution to our long-standing problem of declining sales and a high-tech portfolio of toys, educational products, and services to address the growing consumer’s growing needs. He has over 40 years of experience in advertising, advertising communications, and digital marketing.[/p]
With more than 40 years of business experience in advertising, marketing, and digital marketing, we are also committed as a company to solving the long-standing problem of declining sales and increasing revenues. As a result Paul has spent the last 10 years being an enthusiastic advocate of the company’s vision for education and education for our target user base – who are the world’s largest educational service consumers,[/p] and the highest earners in their industry.[/p]
We will continue to support PFL in bringing new and innovative products, products, educational products and service products, in addition to education services, to the public education and education sectors of today.[/p]
Thanks to the tremendous contributions of his past clients, and especially the huge support he has shown for PFL since his foundation, Paul