CWS Business Plan (2)

ENCOURAGING STEM ENGAGEMENT
Kerrie Noble 5th Year Product Design Engineering (MEng) 200948192 DM500: Individual Project 2
Email: kerrie.noble.2013@uni.strath.ac.uk Supervisor: Professor Yi Qin
DM500 - INDIVIDUAL PROJECT 2 (UG)
Business Plan
Kerrie Noble
5th Year (MEng)
Product Design Engineering
Student Number: 200948192
Supervisor: Professor Yi Qin
DESIGN FOR

CWS – CONNECT.WITH.STEM
A Business Plan for the Educational Toy Market in the Retail Sector

Figure 1- A graph showing sales versus net profit for the first 5 years of trading.....................................................9
Figure 2 - A graph showing the sales of traditional toys and games which are target for use by the adult section
of the market........................................................................................................................................................... 19
Figure 3 - A graph showing the increase in sales of laptops compared to tablets and other portable computer
devices..................................................................................................................................................................... 20
Figure 4 - A graph comparing the sales figures of feature phones to smartphones............................................... 21
Figure 5 - A graph showing the growth of the traditional toy market across developed and emerging economies.
................................................................................................................................................................................. 22
Figure 6 - A diagram showing the retail value sales of tradition toys and games by license across the globe. ..... 23
Figure 7 - A diagram showing the varying sales of different categories of traditional toys and the comparison
between developed and emerging economies....................................................................................................... 24
Figure 8 - A diagram illustrating the company strategy to be implemented within CWS....................................... 27
Figure 9 - A diagram showing elements of the sales strategy to be implemented by CWS. .................................. 31
Figure 10 - The functional organisational structure to be adopted by CWS........................................................... 33
Figure 11 - A graph showing the projected break-even point for the company..................................................... 41
Table 1- A table highlighting some major competitors in the traditional toy market. ........................................... 15
BUSINESS PLAN – EDUCATIONAL TOY MARKET
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Contents
• Objectives 4
• Mission statement 4
• Business opportunity 4
Purpose..................................................................................................................................................................4
Background...........................................................................................................................................................4
Conclusion.............................................................................................................................................................5
• Keys to Success 6
Advertising............................................................................................................................................................6
Stakeholder buy-in...............................................................................................................................................6
Funding .................................................................................................................................................................7
Sales Channels......................................................................................................................................................7
Extra-Curricular Groups................................................................................................................................7
Leisure Product Retail.....................................................................................................................................8
User Relevance .....................................................................................................................................................8
Ease of Use............................................................................................................................................................8
• Financial projections 8
• Overview of the industry 10
Key Industry Statistics (*based on UK toy manufacturing companies) .......................................................10
• Industry Analysis and Trends 10
Industry SWOT Analysis ..................................................................................................................................10
The European Toy Market................................................................................................................................11
Trends in the Market.........................................................................................................................................11
Top Toy Sellers...................................................................................................................................................12
• Projected position for the future 12
• Potential customers 13
The Group Buyer ...............................................................................................................................................13
The Individual Buyer.........................................................................................................................................14
Other Potential Customers................................................................................................................................14
• Direct competitors 14
Fiscal Year 2015 .................................................................................................................................................15
• Company Locations and Facilities 15
• Sourcing and Fulfilment 16
Distributor ..........................................................................................................................................................16
Manufacturer .....................................................................................................................................................16
• Technology 17
Physical Technology...........................................................................................................................................17
Virtual Technology.............................................................................................................................................17
STEM Application .............................................................................................................................................17
Online Community Site .....................................................................................................................................17
• Future Products and Services 18
• Market Segmentation 19
Segmentation by Age Range..............................................................................................................................19
Segmentation by Category ................................................................................................................................20
Segmentation by Country..................................................................................................................................22
• Market Needs, Trends and Growth 24
• Product Profile 25
Currently Developed Solutions.........................................................................................................................26
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Future Development in the Product Range .....................................................................................................26
• Company impact 26
• Company strategy 26
• Benefits matrix 27
• Value Proposition 30
• Competitive Edge 30
• Marketing Strategy 30
• Sales Strategy 31
Customer Segmentation.....................................................................................................................................32
Customer Prioritisation and Targeting............................................................................................................32
Relationship Objectives and Selling Modules..................................................................................................32
Use of Multiple Sales Channels.........................................................................................................................33
• Organizational structure 33
• Material Cost – Assembly Option 1 35
• 5 Year Profit and Loss Projections 39
• References 42
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Executive Summary
Objectives
The company’s objectives are defined in the following section.
• Develop a profitable company
• Introduce and develop a range of innovative, educational kits which represent STEM
• Improve the learning curve for users of the kits through use of interactive and thought provoking learning
• Develop a community of sharing, experimenting and learning through the use of an interactive APP and
online community development
Mission statement
Improving STEM engagement in the local community by inspiring and involving young people through extra-
curricular groups, one activity at a time.
Business opportunity
Purpose
A major, government-led campaign has seen the enhancement of science, technology, engineering and mathematics
(STEM) teaching throughout the UK. As demand for STEM skills continues to grow, encouraging young people
to actively engage in this area of education is becoming more of a concern and the focus placed on the frameworks
and strategies employed to encourage young people to participate in STEM related activities is becoming more
intense. To add to the pressure of encouraging these STEM participation activities, schools throughout the UK are
currently facing a shortage of highly qualified science and mathematics teachers and as a result this severely reduces
their ability to provide the government required STEM teaching at an acceptable level. (Sainsbury, 2007) In order
to continue to promote and encourage STEM participation amongst young learners and reduce the pressure currently
felt by teaching staff and schools there is a need to develop a STEM-based educational kit which can be used in
extra-curricular environments such as Young Engineer’s clubs, Scouts, Guides and other youth organisations.
Background
Lord Sainsbury’s Government Review of Science and Innovation Policies (A Race to The Top, 2007), outlines the
UK’s objective of moving into high-value goods, services and industries in order to compete within an era of
globalisation. He states that the only way to achieve this is to fulfil a campaign to enhance the teaching of science
and technology in response to the demand for science, technology, engineering and maths skills. In this reference,
Lord Sainsbury is referring to the Ten-Year Framework and Next Steps documents (2004 and 2006 respectively)
which announced measures to address the UK’s STEM skills challenge. These documents led to the creation of
STEMNet, Science Connects and many other charitable organisations who aim to encourage participation in STEM
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related education by providing fun and interesting activities for school children. However, Lord Sainsbury’s report,
and many other government and organisational reports from recent years have highlighted the potential problems
that still exist with providing resources to support the STEM frameworks which are in place.
Many of the research papers considered indicate the future of STEM as a concern. The Russell Group of
Universities Report, 2009, states that school students are avoiding A-Level subjects that they perceive to be ‘harder’,
which includes STEM. The report also found evidence to suggest that state school pupils are significantly less
likely to take separate science and other STEM subjects despite knowing that taking these subjects could increase
their future options. In 2006, 70% of the 6th
-form students surveyed believed it was harder to get an ‘A’ grade in
science subjects rather than the perceived ‘softer’ options. It is this train of thought which the STEM framework
and initiatives aim to change, however, this is a train of thought which is entrenched from a young age and is
influenced by many factors. The report titled, ‘Subject Choice in STEM: Factors Influencing Young People (14 –
19) in Education’, (2010), outlines many of these factors.
The issues discussed above, and others, including areas such as the number of people involved within the STEM
sector, some results and outcomes following current initiatives to improve the number of people taking part in
STEM, some suggested reasons as to situational contexts dictating the low participation in STEM subjects, recent
implemented curriculum changes which may be affecting young people and suggested improvements and changes
in the way young people engage in STEM have been summarised from other government and organisational reports.
Conclusion
The many reports which cover the effectiveness of government implemented STEM schemes have illustrated the
attempt to engage and encourage the participation of young people in the area of STEM in order to fulfil the high
demand for creativity, innovation and high-quality services and goods within the UK. The reports have shown that
the majority of 14 – 19 year young learners are still feeling disengaged from science, technology, engineering and
maths for many reasons, including their perception of how difficult it is to attain good grades in these subjects, their
lack of knowledge on where a career in STEM can lead and other personal and contextual influences such as gender,
ability, ethnicity and the type of school they attend. The frameworks and programmes which have been put in place
by successive governments is beginning to work with more interest being created in STEM and the opportunities it
provides, however the shortage of teachers with expert subject knowledge in these areas is still a major concern as
these young learners are still not receiving the correct support in order to obtain significant achievement within the
STEM subject areas. There is still much more that can be done to encourage STEM participation within this age
group, as was highlighted in Lord Sainsbury’s report, ‘A Race to the Top,’ (2007) where it states, ‘Extra-curricular
activities can play an important role in enthusing young people and demonstrating the exciting opportunities that
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studying science can open-up.’ The current programmes in place, STEMNet, the National Science and Engineering
Competition and the Big-Bang Fair, do not extend to having a presence within extra-curricular groups as they are
run mainly on a voluntary basis and receive limited funding and therefore cannot provide the equipment which
would be needed to run activities within these settings. Set within this context there is an expressed need for a re-
useable kit which can portray key scientific ideas, and so demonstrate the benefits and basis of STEM, while also
being interesting and informative for the 14 – 19 years age group.
The aim of the project is to conduct some research into the types of STEM kits available for use in this context, i.e.
extra-curricular clubs such as Young Engineer’s, Scouts, Guides and many others, in order to identify the key
problems with existing products which are available in order to produce a more fitting solution which can further
STEM engagement within this age group. This will continue to encourage STEM participation while eliminating
the teacher shortage issue which has been outlined, and reduces the issue surrounding funding for the STEMNet
programmes.
Design and develop a scientific-based kit, for the 14-19 years age group, which is suitable for use in an extra-
curricular environment to encourage more participation in STEM subjects.
Keys to Success
Advertising
As suggested through the outcome of user surveys shown on pages 8 - 15 of the stage 1 supporting portfolio
advertising is a key factor when considering the use of this type of resource. With current resources which are
available advertising is poor, resulting in extra-curricular groups not utilising the resources available as they are
unaware of their existence. Advertising should be placed in targeted publications such as regular publications issued
by the governing body of each organisations, within the context of scouting this is publications such as the Scouting
Magazine, Scout Shop’s Catalogue (yearly issue), Instant Scouting which provides fresh ideas for activities to
undertake within all scout troops and Get Active, a booklet outlining skilled activities which are based on building
exercises.
Stakeholder buy-in
The support of stakeholders is key to the success of the product. Support of key stakeholders often encourages
extra—curricular groups to become involved in the use of the product and creates opportunity for country-wide
activity days or competitions surrounding the product which can further expand on the principles and key points
being demonstrated by the product. This was demonstrated through successful testing of the product with Glasgow
Science Centre and Glasgow City of Science where an area-wide initiative led to participation in an all-day science-
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based event where the use of the product became part of the activity schedule for the day. Through use of the
activity base leaders became aware of simple science-based experiments which were achievable within a group
setting and awareness of the product and its benefits were increased.
Funding
Further development and refining of the remainder of the kit and exploration of new ideas within each of the
difficulty levels specified as part of the final solution is required. This will help ensure the effectiveness of STEM
engagement and participation and will help to achieve further integration of the undertaking of STEM activities
within extra-curricular groups as a wider range of activities and options is something which appeals to the groups
due to their need to provide a varied programme of activities. As STEM involvement and participation is a large
area under consideration by government and professional institutions funding should be sought to further develop
the product idea as the incorporation of this idea into extra-curricular groups demonstrates a new framework for
increasing STEM engagement in an area which is currently under-utilised.
Sales Channels
This product has been specifically developed as a resource for extra-curricular groups, however upon testing the
product through several iterations it has become apparent that the kit also has the potential to be sold through the
typical retail market as a leisure product. This introduces the possibility of considering two possible sales channels
in order to target different users in the most appropriate manner.
Extra-Curricular Groups
As the advertising strategy, outlined above, already suggests, the best sales channel to target retail of this resource
within extra-curricular groups is through organisation specific retail outlets. Within the Scout Association and Girl
Guiding UK, this sales channel would be provided through the use of Scout and Guide shops. This utilises a typical,
existing sales channel which is currently widely used throughout the organisations and simplifies the process of
resource identification and purchasing as leaders within the groups are already used to sourcing and purchasing
resources from these retailers.
For extra-curricular groups which do not have access to organisation specific retailers, another retailer outlet is
required. As extra-curricular groups typically purchase resources from educational firms, the STEM kit will also
be sold and advertised through educational catalogues and retailers such as TTS, Hope Education, Consortium
Education, GLS Education, WESCO and many more. Extra-curricular groups usually source educational resources
for use within their group and therefore are comfortable with the use of these catalogues for identifying and
purchasing equipment. With advertising and purchasing available through this channel, a by-product will be the
possible generation of a new user which was not a focus or consideration within the development of the kit until
this point. Educational catalogues further open the market and target user to include schools. The use of the kit as
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an educational resource which can be linked to use in school lessons may need further consideration and
involvement if this market is to be explored to its full potential, however this was not the initial target of the kit
development.
Leisure Product Retail
Through testing and development of the kit, it was apparent that the kit could be sold for leisure purposes for use at
home on an individual basis. This again introduces a larger potential market and retail opportunity for the product
to increase the market potential to include all 11 – 19 year olds throughout the country. This is something which
current products also utilise, as shown through observation of products currently available within a major toy
retailer, as shown on pages 19 - 30 of the stage one supporting portfolio. Therefore this kit will also be introduced
to the toy and leisure educational market through toy retailers such as Hamleys, Argos, Toymaster, Toy R Us and
all major supermarkets.
User Relevance
As demonstrated through target user survey responses, shown on pages 8 - 15 of the stage one supporting portfolio,
relevance is a key issue for the target user group. The user group stated that current products often fail to be utilised
after 1 use due to the nature of construction, use of disposable elements, the simplicity of the product or the failure
of the product to adapt and increase the number of possibilities of user learning. The STEM kit will aim to address
these issues by ensuring the kit teaches relevant subject matter which is either linked to school subject learning or
STEM related current affairs while also utilising the difficulty level system to ensure learning is initiated and then
developed by increasing the complexity of the assembly and activity.
Ease of Use
The STEM kit, as previously identified, will aim to use a difficulty level system to ensure the user is guided through
the simple to complex tasks available within many of the STEM fields. This will be achieved through modular
construction and the opportunities for learning and experimentation this provides. This will be made available to
the user through adoption of a kit APP which can be downloaded and used upon purchase of the kit. The APP will
provide access to an online community to provide opportunity and channels for sharing, learning and
communicating about STEM activities and provide visual and interactive learning through APP based user
instructions which will prompt responses from the user as well as provide suggestions for alternative activities,
therefore introducing greater possibilities within the use of the product.
Financial projections
The financial projections relating to CWS and the release of the product into the market within the first 5 years of
trading will be discussed in detail in the financial projections section of the business plan, however, the graph below
shows the total sales and profit projections for the first five years of trading.
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-1000000
0
1000000
2000000
3000000
4000000
5000000
6000000
2015 2016 2017 2018 2019
Sales
Net Profit
Figure 1- A graph showing sales versus net profit for the first 5 years of trading.
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Industry Environment
Overview of the industry
Educational toys form part of a niche market within the larger industry of toy manufacture. This niche is an
underutilised development within the toy industry as the convergence of toys and educational tools is becoming
more prominent and legitimised as companies within the sector realise the need and benefit of releasing products
which create a link between learning and playing. Previously, this link did not exist and many companies assumed
toy production was a tool for occupying a child’s mind and attention, with no obvious benefit. However, this
thought process within the industry was rapidly redeveloped on the publication of several studies showing the
benefits of toy design which teaches different cognitive skills while also capturing the child’s attention. (ToyLearn,
2014) However, this industry has suffered with the global economic decline, as shown by the industry analysis and
trends.
Key Industry Statistics (*based on UK toy manufacturing companies)
Market share of companies – no companies have a dominant market share in the industry.
Revenue - £472m
Annual growth 09-14 - -5.9%
Employment – 5,246
Businesses – 483 (IBIS, 2014)
Industry Analysis and Trends
Due to difficult economic circumstances surrounding the industry in recent years the revenue is facing a decline of
5.9% at a compound annual rate over five years through to 2013-2014. This is partly in response to foreign toy
manufacturers flooding the domestic market and ensuring tough conditions for UK-based toy/games manufacturers.
In relation to the customers’ ability to buy, the overview of available disposable income showed that during the
stated time period real disposable income either grew weakly or declined. When this is coupled with rising
unemployment and high household debt levels it is apparent that customers’ have a significantly reduced amount
of money to spend on UK-based products emerging in the industry and this has resulted in them looking towards
cheaper alternatives. (IBIS, 2014)
Industry SWOT Analysis
The life cycle of the toy and manufacturing industry is currently on a down-turn and requires fresh input to embark
on a new positive trend within the industry. However, through to 2019 the industry value added is expected to
decline at an annual rate of 6.5%. The UK economy, over the same period, is expected to grow at around 1.3%,
therefore indicating that the toy and manufacturing industry accounts for a declining share of the UK economy.
(IBIS, 2014)
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The European Toy Market
Recent UK toy market reports suggest a period of decline across the industry, however, placed in context with
competitive markets across Europe, the UK toy market is topping the European market with a 3% growth overall.
The loss of sales, from £235 million to £227 million in October 2011, is an experience shared across all toy markets
in various economies across Europe.
The UK market tends to experience, and benefit, from a surge of sales in December, during Christmas week, which
accounts for 5.7% of the total annual toy sales within the UK. Overall Christmas spending accounts for 35% of all
toy spending within the UK on an annual basis. The value of sales for Christmas is a value which appears to increase
yearly and in 2011 the total sales for Christmas reached £131 million.
Although sales figures seem good, the UK dominance within the European toy market is reducing. In 2011 the
French toy market was ranked second, after the UK, but experienced a growth of 5% and Germany finished the
2011 year with a growth of 7%. In 2011 the UK Toy Director for the NPD Group report ‘surprisingly negative’
trends during summer months but accepted the achievement of the 3% overall growth obtained within the market
by the end of the year. The market is undergoing challenges but there is potential for the market to grow. (NPD
Group, 2012)
Trends in the Market
Research in the industry has concluded that, despite economic difficulties, consumers are not turning to the purchase
of cheaper products, instead they are researching their purchase to obtain what they want at the best price.
Promotions are becoming the norm within the market and are emanating primarily from online channels. The EU
has released figures showing the volume of sales generated via online promotions increased by 34% in the first 9
months to September 2011. In comparison, sales figures relating to offline promotional sales had shown no
difference across the same time period.
NPD Group suggests that promotional sales will continue to grow within the European market and outlined the
dependency the UK market has on promotional sales. The overall trend shows that consumers are purchasing more
but they are becoming more considered about their purchases and opportunistic sales are becoming stronger with
sales continually increasing in this area.
In relation to customer purchase trends, the industry is indicating that consumers are more likely to purchase toys
for close family, children and grandchildren instead of friends. This is a development namely brought about by the
economic down-turn.
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NPD Group state that in the first nine months of 2011, neighbours and friends reduced the amount of spending in
the market by 22% in total compared to the previous year. However, in contrast to neighbour and friend purchasing,
grandparents increased their spending within the market by 3% over the same time period.
Top Toy Sellers
The NPD Group report outlines the fastest paced growth in toy categories is occurring in;
- Building sets - +20%
- Outdoor - +12%
- Dolls - +8%
- Vehicles - +7% (NPD Group, 2012)
The top toy sellers by value in 2011 (UK) were listed as;
Manufacturer Toy
1 LEGO LEGO MINIFIGURES
2 VTECH
VTECH KIDIZOOM TWIST
DIGITAL
3 LEAPFROG LEAPPAD EXPLORER TABLET
4 VTECH INNOTAB LEARNING TABLET
5 LEGO STAR WARS 2011
6 VTECH FIRST STEPS BABYWALKER
7 BANDAI BEN 10 FIGURES 10 CM
8 MATTEL CARS 2 CHARACTER ASST
9 HASBRO NERF- N-STRIKE MAVERICK
10 HASBRO
NERF N-STRIKE BARRICADE
RV-10
Projected position for the future
CWS will remain a small business serving the needs of the UK STEM sector in the foreseeable future, following
one of the current business trends emerging as a result of the economic downturn. This trend is known as the
‘barbell economy’. It is noted that industries are moving into a ‘barbell-like’ structure where the industry will have
a few global corporations on one side and numerous smaller niche businesses on the other. The number medium
enterprises in the middle are declining and will continue to do so however, small businesses will continue to grow
and flourish while increasing their ability to serve the needs of the niche market. This approach to entering niche
markets requires little to no business capitol and partnering with giant entities will help the company gain a global
reach.
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The predictions stating that almost 60% of the world’s population will live in cities and suburbs by 2020 will also
positively impact CWS. The introduction of this new ‘localised’ way of living will provide inhabitants with reasons
for reinvesting in their local community. This furthers predictions that people will develop stronger family ties also
extending to stronger community relations. This will in turn develop new ways of generating local economic
development which will see people investing in the local community and local business. As CWS products are
aimed at strengthening participation in STEM subjects in the local community, through involvement in extra-
curricular groups, this approach should suit the objectives and aim of the company, developing strong consumer-
business relationships.
The final trend in business outlining the future projections for CWS, which has already been briefly mentioned in
the review of the industry, is the pricing frenzy sweeping through retail. Research concludes that the phenomenon
of price discounting and special offers will continue to increase, primarily due to the ‘mobile device’ culture.
Consumers are now more connected through mobile devices than ever before and this constant internet connection
is allowing way for greater opportunities in relation to promotional offers. This also incorporates several other
buying trends such as mobility, group buying, localisation, flash sales, review sites, price comparison engines and
dynamic pricing. This illustrates the need for a large online community presence for CWS, not only for purchasing
of products and advertising and discounts etc., but also inherently incorporated as part of the overall use of the
product. CWS intends to utilise these newest trends to develop social and online interaction between the consumer
and STEM subjects. (Lieber, B., 2011)
Potential customers
CWS has recognised that the company and provided products will have two, distinct, main groups of potential
customers, the individual leisure-based customer and the group buyer who will utilise the product as intended, for
educational purposes within extra-curricular groups.
The Group Buyer
The group buyer will be the customer purchasing the product on behalf of the end user, the 11 – 19 year old student.
This customer will have different concerns to the end user and the individual buyer and will look for value for
money, longevity, relevance and ease of use in comparison to enjoyment, excitement and the ability to do something
different. This customer is likely to purchase bulk orders, i.e. three or more products, in one transaction and will
be limited in cash resources in relation to the group funds available at that particular time for purchase of resources.
This potential customer is also likely to be purchasing the product through funding provided internally by the
respective organisation or externally through other means, e.g. local councils or funding committees. To increase
access to the product it may be desirable to offer the product on a promotional basis, with agreement from various
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funding authorities, offering product offers to encourage groups to purchase the product without the initial worry
of gaining funding or affordability.
The Individual Buyer
The individual buyer is representative of the type of consumer who will source the product through one of the major
retailers, as previously listed, and will utilise the product within a home setting as part of a hobby or for leisure
purposes. This is not the main group of consumers outlined within the product design brief or requirements,
however it is a viable retail channel. The typical individual buyer will remain between the ages of 11 and 19 and
will be attracted to the product for educational purposes, possibly reinforcing taught elements within the school
curriculum, using the product to experiment and further their own meaning to help with exam requirements etc. It
is anticipated that although the product is not primarily targeted towards this group of potential customers that this
group may represent the majority of total sales and revenue if sold through major retailing channels.
Other Potential Customers
As a result of offering this product through specific sales channels, especially educational catalogues, this increases
the range of potential customers for consideration by CWS. This introduces the possibility of school purchase of
the product for incorporation with teaching material and learning resources to be used alongside the curriculum.
This may be most appropriate and applicable to the APP and online based resources provided with main kit and
therefore on request the APP and access to the online learning community, which will accompany the product, will
be offered to this customer base separately as a special offer. This will generate more income for the company and
allow further development and expansion of the online and APP based learning resources as well as increasing the
reach of the product and further improve STEM engagement by widening the potential envelope of product-based
impact.
Direct competitors
Companies providing current products which can be used within this area have been outlined on pages 19 - 30 of
the supporting portfolio and will provide the main competitors to CWS. The three main competitors have been
outlined, along with market share values, profit/loss indication and compared to CWS based on the first year of
trading. This comparison is shown in the table outlined below;
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Fiscal Year 2015
CWS LEGO K’Nex Arduino
Sales
£2181 million
http://aboutus.lego.
com/en-gb/news-
room/2012/march/a
nnual-result-2011
Revenue - $34
million
http://www.insidevi
ew.com/directory/k
-nex-brands-l-p
(total) 700,000
http://medea.mah.s
e/2013/04/arduino-
faq/
Net Profit
(Loss)
£673 million
http://www.bbc.co.
uk/news/business-
26374473
Unknown Unknown
Employees
1,355
http://www.bbc.co.
uk/news/business-
26374473
437
http://www.insidevi
ew.com/directory/k
-nex-brands-l-p
SME – Flexible
network of people
http://www.pill-
a.com/wp/arduino-
a-visit-to-the-
factories/
Market Share
Majority share of
market
http://www.bbc.co.
uk/news/business-
26374473
One of the world’s
leading suppliers
http://www.knex.co
m/info/careers/KN
EX-Sales-
Ecommerce/
Top three markets,
in terms of share –
1. USA
2. Germany
3. UK
http://www.pill-
a.com/wp/arduino-
a-visit-to-the-
factories/
Table 1- A table highlighting some major competitors in the traditional toy market.
Company Locations and Facilities
CWS, as a start-up company, will be based in Glasgow and legal status will record this as the company’s main
office. Government and local council funding is also available to enable the payment of business rents for the first
4 years of trading, starting at a maximum of £15,000 and reducing to 10% of this value by the final year. The main
Glasgow facility will require rent for an office from which operations will be directed and research and further
product portfolio development will take place. (Business Scotland, 2014)
As the company expands and sales and revenue increase, CWS will expand UK-based operations and open small
offices in other UK locations, such as Birmingham and London, to ensure service and product provision is available
throughout the country. These locations have been chosen based on their relative position and centrality to
suppliers, distributers and retailers.
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In relation to facilities, manufacture and packaging of the product will be outsourced to a manufacturer in China.
This allows the product to remain low in price and therefore compete within a tight market where price is key. The
finished product will be shipped into the UK and will require a central warehouse for storage purposes, however,
this can be established in later years when sales and revenue warrant the need for a central warehouse distribution
unit. Research and product development are also a main focus of the company and therefore user testing and product
prototyping must also be considered. As this typically occurs on a small-scale production basis, a UK-based
company will be used to supply product prototypes when required.
Sourcing and Fulfilment
The key costs associated with fulfilment of product manufacture and business setup are fully outlined within the
appropriate financial predictions outlined in various other sections included in this plan.
There are several key external agencies to be sourced including a manufacturer and a distributor. Each of the
sourced service providers have been discussed and detailed below;
Distributor
The distributor for the product will be Education Essentials. Education Essentials import and distribute high-quality
educational products throughout the UK to leading catalogues and education equipment retailers. The product range
starts from early years and continues to the final years of secondary school education and also includes some
products for special educational needs. The company also offers members access to their new product development
area and also export opportunities to various locations throughout the world. (Education Essentials, 2013)
Manufacturer
As sourcing a specific supplier in China may be problematic without any previous experience of requirements and
this type of business relationship, the decision was to utilise Arcadia Concepts to help source the overseas
manufacture of the product. Arcadia concepts is a full-service China sourcing agent with significant experience
which can provide people who speak fluent English, Cantonese and Mandarin to ensure the company can meet with
the right Chinese connections.
The company’s strengths lie in the ability to help with contract manufacturing of custom toy/educational product
manufacturing in China and can help with expertise throughout any stage of the process, from the creation of
blueprints to turn the original product idea into drawings for manufacture to design, manufacturing, packaging and
shipping of the product. This company offers an extensive range of services and having one point of contact for all
overseas operations will reduce confusion and possibility of failure and risk associated with overseas sourcing and
manufacture. (Arcadia Concepts, 2014)
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Technology
The company will develop products and expertise in two specific technological areas, physical technology
surrounding the STEM kit, including developments in relation to constructive electronics, and virtual technology
associated with the use and development of both APP technology and the online community access for the user.
Physical Technology
The physical technology revolves around the modular design of the physical STEM kit which has been designed to
optimise the number of assembly configurations available for the user. As part of the research and development
requirement for CWS is to develop the number of key components within the kit to expand the capabilities and
potential for more configurations and therefore allowing more experimentation from the user.
Virtual Technology
There are two pieces of computer or virtual based software technology which are used as part of the product range,
a product-based STEM Application and an online networking community site.
STEM Application
The STEM Application will be provided in versions suitable for the latest Android and iOS software compatible
devices. The App will guide the user through the construction of the kit, prompting cognition and learning as they
progress through the given steps with use of questioning and animations throughout the ‘instructional steps’
provided within the App. The types of questions to be asked have been highlighted throughout the accompany
project documentation for each developed concept. The App will also provide lessons based on each of the STEM
subject areas covered by the product, including hints and tips from experts. The App will also have a section
dedicated to STEM careers and will profile available careers options related to the STEM subjects in general, and
specifically in relation to each topic area covered through use of the product. A list of appropriate STEM-related
institutions and visitor attractions throughout the UK will also be provided.
Online Community Site
The online community site will act like a social network for CWS product users. The site will be more secure than
using a group space on social networking site such as Facebook, requiring a password which will be supplied with
each product and can also be generated or stored on the STEM App once downloaded. This space will act as a large
sharing space so each user can share how they are using their products, share ideas of experimental activities they
have developed as a result of using the product and also act as a help platform so users can provided hints and tips
with one another. This will help develop the sharing process required for STEM participation to increase and will
actively get users talking about STEM in a new, more positive, manner.
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Future Products and Services
Future product development will utilise the same basic idea of expanding the key base components available within
the kit to allow experimentation and learning related to other STEM subjects and areas, eventually covering topics
in all areas; Science, Technology, Engineering and Maths.
Future services provided by CWS will include the option for a volunteer to run activities, based around the product,
within the extra-curricular groups to aid the engagement and learning process. This service could have potential
links with the existing STEM Ambassador Programme and Glasgow City of Science public engagement drives.
This service will require booking forms and clearly outlined user options included on the company website to ensure
the user is aware of this available option and has access to the service.
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Marketing
Market Segmentation
The toy market throughout the world is segmented into several different categories, video games, online video
games, apps and traditional toys. Within each of these categories the market is further segmented into age categories
and segmented by total sales within countries. Each of these market segmentations and the effects they have on
current growth and trends within the market have been fully considered and are summarised briefly below;
Segmentation by Age Range
Within the traditional toys category, the most likely category in which the STEM kit would be placed, Education
Essentials outlines the key market is segmented into 4 main age ranges; toddlers (under 3s), early years (3-5),
primary (5-7), and juniors (7-11). Another key age group consideration within this market segment is the adult, or
the population over 20. The traditional toys targeting adult users in selected markets in 2011is shown in the diagram
below;
The diagram outlines that less than 10% of total tradition toy sales are targeted at the adult population within the
given countries. This outlines the broad picture of most toy markets throughout the world and noticeably absent is
Figure 2 - A graph showing the sales of traditional toys and games which are target for use by the adult section of the market.
Source - http://www.globaltoynews.com/posts-by-utku-tansel/
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the key teenage market between the ages of 11 and 19, which is not widely targeted or explored by most of the
available data on traditional toy sales. This may be due to other market segmentations, such as segmentation by
category which shows the rise of smart applications and video games and how this is affecting the growth of the
rest of the toy market.
Segmentation by Category
Segmentation by category analyses the effects of the surge in purchase of portable smart devices such as smart-
phones and tablets and how this corresponds to a rise in sale of online games and smart applications. In contrast
the sales within the traditional toy sector have been declining however construction toys still remain popular,
especially in countries with developing markets, such as Brazil. This are of segmentation is explored through data
in the following section.
The diagram above shows data relating to the total number of units sold for both laptops and portable devices,
including tablets. The diagram shows a steep rise in the number of these products being sold from 2009 onwards
and projections show that this trend is set to continue into the future. It is therefore no coincidence that the growth
in portable devices also co-insides with an increase in the purchase of smartphones, with both of these products
giving constant internet connectivity and the ability to access online gaming and entertainment while on the move.
The rise in smartphone sales and projections for the growth of this part of the market are illustrated in the diagram
below;
Figure 3 - A graph showing the increase in sales of laptops compared to tablets and other portable computer
devices.
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Comparing the increased sales of portable devices and smart phones with the growth trends within the traditional
toy market segment clearly identifies the market trend which is tending towards smart applications and online
gaming as opposed to the traditional toys and retail outlets which were more familiar within the market
approximately 10 years ago. This is clearly highlighting the need to capture online markets and attention to achieve
a successful toy product in the 21st
century, therefore providing reasoning for including such aspects to accompany
the STEM kit. It was also proven through research aimed at identifying key interests within this age group, that
online accessibility, the need to share with friends, the need for a challenge and different levels are key inclusion
points for successful product integration within this age group.
The traditional toy market may be declining, however, construction toys are leading the way and are proving to be
the most profitable sub-category of toy products within the market. The top performing countries, in relation to the
sales of construction toys, are a wide range of developing and developed countries across the globe, suggesting that
retailing of this sub-category of product is widely positive. This information is supported by the data presented in
the diagram below and outlines Brazil as a case study where the sales of this type of product are growing rapidly.
Figure 4 - A graph comparing the sales figures of feature phones to smartphones.
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Source - http://blog.euromonitor.com/toys-and-games/page/3/
The information presented throughout this section suggests that construction based products, with the inclusion and
integration of smart technology and online accessibility are two product sectors where growth is ongoing and
combining these two sectors may be the way to optimise profitability in regards to releasing a new product,
especially within an age range which is poorly catered for and is not currently a large market sector.
Segmentation by Country
The market segmentation, in relation to category, suggested that developing economies were experiencing the
greatest growth within the market and developed economies, like the UK, were experience stagnation or decrease
of sales. However, market research, with focus on the toy sector and the strength of this market across the globe
suggests that this may be misleading as the UK still has a strong tradition toy market sector in which innovation is
required.
Figure 5 - A graph showing the growth of the traditional toy market across developed and emerging economies.
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The diagram above shows the divide, in global terms, in relation to the retail value share in the traditional toy market
in 2011. This proves that most of the major economic powers, such as the UK and the USA have medium strength
retail value shares in the market, at 20.1 – 30.0%. In relation to the other countries illustrated on the diagram, this
is a relatively large value share and therefore suggests a strong market for the sale of traditional toys.
Figure 6 - A diagram showing the retail value sales of tradition toys and games by license across
the globe.
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Source - http://blog.euromonitor.com/2013/05/despite-higher-demand-for-toys-global-toymakers-yet-to-convert-
market-growth-into-actual-sales-in-em.html
The above diagram gives a more detailed overview of the traditional toy market across several emerging and
developed markets globally. The overall picture of the state of the market which can be taken from the above
diagram is the overall growth of both emerging and developed markets. Between 2006 and 2011 the growth of
developed markets for traditional toys was 1%, however, total growth, across the same time period, for emerging
markets in this sector was 13%. This clearly shows the potential which exists for this product in both developed
and emerging markets and focus should be placed on developing the product to expand and gain advantage from
the introduction of such products in emerging markets. (Tansel, U., 2013)
Market Needs, Trends and Growth
As illustrated throughout the overview of the market segmentation in the previous section, there is continued growth
within the traditional toy retailing sector. The main driver behind this continued growth is deemed to be rising
incomes in emerging markets, this is the same in developed markets however, the recent economic climate has
evidently had an impact on the growth in these countries, as shown in the diagram above. A key issue demonstrated
Figure 7 - A diagram showing the varying sales of different categories of traditional toys and the comparison
between developed and emerging economies.
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by the sale of goods in emerging markets is that of price sensitivity. Emerging markets may be experiencing large
growth in this area but price sensitivity tends to see unbranded toys gain a large percentage share of the overall
market in comparison to the main competitors, such as LEGO and Mattel. This needs to be a key consideration if
considering venturing into these markets with CWS products as retail price is the determining factor for success in
the first instance.
The retail channel for traditional toys is undergoing consolidation and therefore making expansion for toymakers
easier, hence why certain competitors can control large shares of the market. This is an unfortunate reality of this
market sector and differentiating the product from the main competitors will be key to ensuring the product achieves
the targeted sales figures and growth outlined in the financial sector of this business plan. However, the
consolidation has also resulted in the difference between emerging and developed markets narrowing, meaning if
expansion of the business was to occur, this could be done utilising the same business model and therefore reducing
complexity and costs associated with more difficult expansion routes where reorganisation is required.
As illustrated by the market segmentation by age range, pre-school and plush toys are the most popular toys on the
market, combining to control large market percentages between them. This leaves the age group of 11 – 19
unknown in terms of introducing this type of product as this age range is rarely catered for in this segment, however
in relation to video and online games sales this age group is dominant. Therefore the introduction of this type of
product into any market does come with risk factors as it is an unknown quantity in terms of success and failure
rates, however extensive product testing and the sales channel and use occurring through extra-curricular groups
significantly reduces this risk as it relies on adults running the group purchasing the product rather than the target
user group directly purchasing the product through appropriate sales channels, although that option is available.
(Tansel, U., 2013)
Product Profile
The product is based on a modular kit design covering all 6 of the STEM areas; biology, physics, chemistry,
technology, maths and engineering. Each of the 6 areas will be separate entities, however they will all be based on
the same initial design basis. The kit for each of the 6 STEM areas will allow the user to construct different assembly
options across 6 different difficulty levels, each getting progressively harder in relation to the construction and the
topics covered and learning and knowledge required for completion and learning outcomes. The kits will be
accompanied by a smart application, containing all relevant instructional advice and other advice such as careers
guidance, along with access to an online community to promote sharing and support across all users of the kit. 6
assembly options, falling within the physics/engineering categories, have been illustrated throughout the stage 2
supporting portfolio. Three of these options have been developed in more detail on a CAD system and two of these
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options have been produced as fully functioning prototypes and tested by potential end users and customers. The
currently developed solutions are discussed further below.
Currently Developed Solutions
The currently developed solutions, as illustrated throughout the stage 2 supporting portfolio, have been detailed
through use of CAD systems, rough prototyping and functional prototyping and user testing. These solutions
demonstrate the first 2 difficulty levels within the kits range of 6 difficulty levels. The more advanced levels would
require the kit to be used in conjunction with other programming equipment, such as Arduino, and each level also
requires more construction than the previous level. The modular design of the kit has been widely considered
throughout the project and future kits for the remaining STEM areas will be based on this initial modular design,
with additional changes where required.
Future Development in the Product Range
Future development for the product range includes development of the STEM smart application and the online
community space to accompany each of the kits. Future development will also look at developing kits themed on
all of the previously mentioned STEM areas as well as further refinement of the current solutions presented
throughout the project.
Company impact
CWS, with successful launch of the product, will have a significant impact on the market segmentation within this
retail sector. The 11-19 year old age range is not widely catered for within the traditional toy segment of this market
and this product aims to change this, therefore moving into a market segment which could promote overall growth
of the total sales value of the traditional toy market within the UK.
Along with the market and segment impact, the aim of the product is also to provide a social impact. This will
develop over time through the change of attitudes and the increased participation in STEM subject areas within
secondary and tertiary education and beyond. The product also aims to encourage communication channels and
support for users in the target market in relation to learning and understanding of key principles as a support material
for school-based learning, however this will be achieved through an informal learning environment within extra-
curricular groups. The social impact of the product should outweigh the market impact to consider the product a
success.
Company strategy
The CWS strategy will be based on a relevant version of the strategy presented by AVK, as shown in the diagram
below;
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The business strategy will be kept simple in nature to ensure the business operates within its means. The main focus
will be on innovation, driving development of the STEM kit and exploring potential avenues which can be used for
further product integration within the community. This involves building a strong and lasting relationship with the
customer and the market, enabling the company to remain knowledgeable about the customers’ requirements and
the climate of the market, highlighting risk factors within the market as well as potential for growth. Financial
strengths will be another key consideration. Competitors within the market are large, multi-national companies,
such as LEGO, and it would be detrimental to try and compete with these companies. The benefit of remaining as
an SME, with local connections, has already been fully discussed within a previous section of the business plan and
CWS foresee the company remaining in this form for the foreseeable future unless finances and market changes
dictate otherwise. This will provide the product with a sound footing within the UK economy and growth and
interest will build from the initial product release in a manageable form. As the product is also addressing a major
government and industry concern, large external organisations will wish to have a stakehold within the company.
The concerns and requirements of these stakeholders must be dully addressed and considered, this will also provide
direction and focus for the development of the product.
Benefits matrix
The benefits matrix below highlights some of the main customer pain points obtained from extensive user
observation and competitor product research and testing. To highlight how this product is addressing those points,
the matrix below has been developed to state how this issues are being addressed.
Figure 8 - A diagram illustrating the company strategy to be implemented
within CWS.
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Customer Pain Points Benefits
Current available resources are suitable for
ages 7 – 11 or 19 and over, I cannot find
suitable resources for young people between
the ages of 11 and 19.
The new product has different difficulty levels which
users can complete progressively. Starting at the simple,
introductory level and finishing with a complex level
requiring a large amount of construction, programming
and learning through practical application. This is similar
to the way in which video games are constructed, popular
with this age group, so this structure would provide
significant challenge and relevance to this group to
encourage purchase and use of the kit.
The available resources always include the
use of perishable items, rendering the product
useless once those items have been used as it
is impossible to find a replacement supply of
specialist chemicals.
The kit uses standard components provided as part of the
kit design. Some external components may be required,
however any additional components required will be
widely available products which are sold within a local
supermarket or are in good supply within a typical
kitchen cupboard.
Available resources generally require expert
knowledge or previous knowledge of the use
of the product so someone can act as a
mentor to guide the young person through the
construction and the use of the resource. This
knowledge is not available to us.
The kit is provided with access codes for a smart
application and an online community. Additional codes
may be purchased for a small price. This aims to provide
all information relevant to the construction and use of the
product therefore eliminating the need for external
knowledge or input. The online community also opens
communication channels with other users of the product
so support and sharing of ideas is primarily developed
through user-to-user interaction.
The instructions are confusing.
The instructions will be interactive, providing
information and asking questions at appropriate intervals
to promote thinking and problem solving. These will be
available through the smart application and will help
reduce the confusion experienced by the user.
I do not feel as though the young people are
learning through the process of using the
current resources. They are based on step-
by-step guidelines which tell the young
person what they should do, it does not
promote thinking or problem solving.
The questioning throughout the instructions provided by
the smart application and the other activities and
information available within the app and the online
community will promote deeper learning through the use
of this product.
I cannot use on product with a group of 3 or 4
young people as the components in the kit are
too small to allow a group of young people to
construct or use the kit.
The kit has utilised modular design and includes enough
components to construct more than one assembly at a
time. The construction also requires teamwork, as proven
through prototype testing, to ensure that the product is
suitable for use in groups.
I have an issue with storage and the current
resources require a large amount of storage
room.
The modular 6, spanning 6 difficulty levels, provides
many assembly options, therefore effectively providing
several products within 1. This product should therefore
require less storage space than 6 individual products all
packaged and stored separately. This is primarily due to
the modular design and construction of the product which
allows space-saving packing.
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Customer Pain Points Benefits
I don’t know where to purchase or order this
type of resource from.
The retail and sales channels have been specified to
ensure the channels are already widely used by the target
extra-curricular groups to maximise the visual appearance
and perception of the product.
I am not very good at science or STEM-
related subjects so I normally wouldn’t use
that type of product because I would get
stuck or confused.
The product will be advertised as offering similar
challenge and excitement as that offered by video games
and the sharing ability provided through the online
community and the app will be optimised in advertising
to illustrate how easy it will be to get advice or support if
required.
Current products are not robust enough and
do not stand-up to repetitive use, or they are
not robust enough to allow the user to
experiment with them as they wish.
The product has undergone extensive rounds of detailed
design, with specific attention to design engineering to
ensure the product is robust and has been designed for
functionality, see the design for function section in the
stage 2 project report.
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Operations
Value Proposition
Value proposition has been clearly identified throughout the business plan with detailed discussion on the market
needs trends and growth, market segmentation, product range, customer pain points and how all of these link to the
product and company mechanisms to address the customer issues and successfully target the correct user group and
exploit the market potential. The company strategy on value proposition is to impact the perception of STEM in
the community and positively impact the number of young people choosing to follow careers in this area and
therefore addressing a considerable need as identified by the government throughout a large period of time. The
value is in the benefit provided to society and the perception of value received by the customer and end user creating
social value rather than economic value.
Competitive Edge
The main competitive edge which is being developed with the introduction of this product, is the combination of
learning and traditional educational toys with key characteristics demonstrated within video games which are widely
popular throughout the 11 – 19 year old age group, thus generating more interest in the target user market. This is
being developed through the use of smart applications and online communities, entities which are utilised by this
age group on a daily basis and therefore ensuring the product can be included without maximum disruption of the
typical activities normally undertaken by the user, the product can fit seamlessly into their current hobbies, interests
and daily activities.
The other main competitive edge is the reduction in the use of perishable components within the kit. Any external
components required for the use of the product will involve acquiring resources such as water which is relatively
easy for the main customer.
All other competitive edges demonstrated by the development of this product have been outlined previously within
the benefits matrix, outlining the customer pain points with current solutions and identifying how this design helps
to address and eliminate those problems.
Marketing Strategy
The main marketing aim for the product is to develop a new customer and end user base for STEM related products,
namely the 11 – 19 year old age range, as users have identified issues with current products which affect their
suitability for use with this age group. The product will also introduce a new market sector by directly targeting
marketing and advertising towards extra-curricular groups, a sales channel which has not been exploited by current
businesses or products however this market has significant potential in terms of sales and customer satisfaction.
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It was previously established that advertising and awareness of STEM products for use in the outlined areas is low
or non-existent. To ensure a successful market introduction an advertising campaign will be launched, consisting
of initial workshops organised within a range of extra-curricular groups with the aim of showcasing the options
available through the purchase of the product and increase interest and awareness simultaneously. Channels for
advertising and retail have also been identified for maximum suitability and access to extra-curricular groups to
maximise the advertising benefit for the product.
To increase the market share and maximise the potential impact from the product, access codes for the use of the
smart application and the online community will also be sold separately. This will increase the customer base and
market share and add an innovation to this type of product which is not currently available within any existing
competitor product. Research and development will also take priority to ensure the company continue to product
innovative and fresh ideas into a stagnant, small growing market sector.
Sales Strategy
The customer and user-based focus taken throughout the development of the product range will continue within the
identified company sales strategy. The customer focus and sales strategy elements have been illustrated in the
diagram below. Each element will be detailed to provide further information on the contents and business operations
required for each element.
Source - http://www.ibdservices.com/blog/sales-strategy-revisited/
Figure 9 - A diagram showing elements of the sales strategy to be implemented by
CWS.
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Customer Segmentation
The customer segmentation within this retail market has already been defined by current sales trends and growth
figures. The current customer segmentation within the market is;
• Toddlers (under 3s)
• Early years (3 – 5)
• Primary (5 – 7)
• Juniors (7 – 11)
• Adults (19+) (Education Essentials, 2014)
It is clear that the teenage (11 – 19) age range is not currently catered for with suitable provision of STEM products
retailing within the current traditional toy sector of the market. The sales strategy must therefore target this age
range and be innovative in this region to ensure competition from online gaming and video games is met to
encourage this particular user group and increase product sales in this sector.
Customer Prioritisation and Targeting
The potential customers have been prioritised into the following categories;
• Extra-curricular groups
• Educational customers
• General retail – whole kit
• General retail – app and online community access codes
As previously stated the main advertising and PR campaign will target the first two groups of customers, with the
largest advertising finance share given to generating appropriate advertising for these consumer groups. A smaller
percentage of the total finance budget will be given to general retail advertising, such as shop and retailer advertising
and billboards, with little money spent on the advertising of general retail concerning the sale of app and online
community access codes as this is not the main business focus or aim.
Relationship Objectives and Selling Modules
The company aim to create lasting customer relationships by offering support and workshops surrounding the use
of the STEM kit and introducing innovative ways of using the product which are not necessarily detailed in the
instructions included on the smart application and provide a little expert guidance for first-time users. This will
also help to maintain the customer-centred focus and will ensure that the company remain clear on the trends,
requirements and developments within the market sector providing a way of ensuring the company remain at the
forefront of STEM educational provision.
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Use of Multiple Sales Channels
The company will utilise multiple sales channels in order to maximise sales and generate revenue. There are four
key sales channels identified as appropriate sales channels for this type of product;
• Extra-curricular group specific sales outlets
• Educational catalogues and retailers
• Multi-national toy retailers
• Online
As the main focus has been placed on sales to the extra-curricular group market, the main sales channel will be
through organisation specific retailers and educational catalogues.
Organizational structure
Original Diagram Source - http://catalog.flatworldknowledge.com/bookhub/reader/7?e=collins-ch06_s03
The company organisational structure will be based on the functional organisation approach which is common
within small-to-medium sized enterprises. This structure groups employees with the same interests, skills and
business function to perform related tasks, e.g. accountants are grouped to perform tasks relating to company
finances and product developers are grouped to develop new products and services. As demonstrated by the diagram
Product
Manager
Research and
Development
Supervisor
Innovation and
Implementation
Supervisor
Research and
Development
Staff
Product
Implementation and
Community Relations
Staff
Figure 10 - The functional organisational structure to be adopted by CWS.
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above, each department is headed by a supervisor who undertakes the role of manager, controlling the department
and the employees within the department to meet with business requirements.
This structure has been chosen due to its simplicity and the ability to generate passion and interest by placing like-
minded employees in the same department. Inter-departmental communication can be an issue with this
organisational structure and consideration will be given to implementing a communication structure within the
company to ensure this does not hinder progress and development. (Collins, K., 2014)
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Financial Projections
The company will begin by developing, finalising and producing the three assembly options which form the basis
of the first STEM kit as depicted in the supporting project documentation. This kit will have a primary focus on
specific physics and engineering principals. Each of the three initial assembly options have been analysed in terms
of component requirements and a Bill of Materials has been produced for each assembly option detailed. The Bill
of Material for each assembly is shown in the following section and includes material cost and retail sources for the
required materials for production.
Material Cost – Assembly Option 1
ITEM
NO.
PART
NUMBER
DESCRIPTION QT
Y.
MATERIAL COST Source
1 model base ABS sheet material 1 $3.58 per kg http://www.alibaba.com/product
-detail/abs-granules-abs-plastic-
raw-material_1447035889.html
2 corner-backet-1 ABS injection
moulded part
4 $3.58 per kg
3 model mid-
support
ABS sheet material 1 $3.58 per kg
4 kit side wall ABS sheet material 4 $3.58 per kg
5 Acrylic upright 6mm Acrylic rod 4 £2.75 per 300mm
length
http://hobbyplastic.co.uk/index.
php?main_page=index&cPath=
52_55_56
6 Newton's Cradle
Platform
ABS sheet material 1 $3.58 per kg
7 acrylic rod cap ABS injection
moulded part
4 $3.58 per kg
8 newton's cradle
upright
10mm aluminium rod 4 £3.14 per 900mm
length
http://stores.ebay.co.uk/ALUMI
NIUM-2-BUY/10mm-
Aluminium-Round-Bar-
/_i.html?_fsub=16938185
9 Newton's cradle
supports
ABS injection
moulded part
4 $3.58 per kg
10 newton's cradle
length
10mm aluminium rod 2 £3.14 per 900mm
length
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ITEM
NO.
PART
NUMBER
DESCRIPTION QT
Y.
MATERIAL COST Source
Total mass of
assembly option
(kg)
2.3
956
Total material
cost for ABS (£)
£5.03
Total material
cost for
aluminium (£)
£6.28
Total material
cost for acrylic
£8.25
Total
manufacturing
cost for
assembly option
1
£19.56 *All material cost calculations
based on current currency
conversion rates.
ITEM NO. PART NUMBER DESCRIPTION QTY. Material Cost Source
1 corner-backet-2 ABS Injection moulded
part
4 $3.58 per kg http://www.alibaba.com/pro
duct-detail/abs-granules-abs-
plastic-raw-
material_1447035889.html
2 model base ABS sheet 1 $3.58 per kg
3 model mid-support ABS sheet 1 $3.58 per kg
4 Side Design -
Option 2
ABS sheet 3 $3.58 per kg
5 Side Design -
magnets
6 mechanism
assembly
ABS Injection moulded
part
1 $3.58 per kg
6.1 mechanism holder ABS Injection moulded
part
1 $3.58 per kg
6.2 mechanism base ABS Injection moulded
part
1 $3.58 per kg
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15/04/2014
KERRIE NOBLE 36

6.3 mechanism central
support 2
part
1 $3.58 per kg
6.4 mechanism top
support
part
1 $3.58 per kg
7 Model top - Option
2
8 Restraint ABS sheet 4 $3.58 per kg
9 M6 washer Fastener 24 £4.59 http://www.maplin.co.uk/p/r
olson-180-piece-nut-and-
bolt-set-n32cg
10 M6 bolt Fastener 6 See item 9
11 M6 bolt 20mm Fastener 8 See item 9
12 M6 Nut Fastener 10 See item 9
13 magnet 8 £0.46 each http://www.first4magnets.co
m/circular-disc-rod-
magnets-c34/15mm-dia-x-
1mm-thick-n42-neodymium-
magnet-1kg-pull-p2829
14 motor 1 £7.49 http://www.maplin.co.uk/p/
motors-n72ch
15 M4 bolt 20mm Fastener 1 See item 9
16 fan blade 1 £6.99 http://www.maplin.co.uk/p/p
ropellers-and-fans-n69ch
17 bowl ABS Injection moulded
part
1 $3.58 per kg
18 battery pack 1 See item 14
Total mass of
assembly option
(kg)
2.058
9
Total material cost
of ABS
£4.33
Total material cost
for fasteners
£4.59
Total material cost -
other
£18.16
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KERRIE NOBLE 37

Total
manufacturing cost
for assembly option
3
£27.08 *All material cost
calculations based on current
currency conversion rates.
1 model base ABS sheet 1 $3.58 per kg http://www.alibaba.com/pro
duct-detail/abs-granules-abs-
plastic-raw-
material_1447035889.html
2 corner-backet-1 ABS Injection moulded
part
4 $3.58 per kg
3 model mid-
support
4 kit side wall ABS sheet 4 $3.58 per kg
5 Acrylic upright 6mm Acrylic rod 4 £2.75 per
300mm length
http://hobbyplastic.co.uk/ind
ex.php?main_page=index&c
Path=52_55_56
6 Newton's Cradle
Platform
7 acrylic rod cap ABS Injection moulded
part
4 $3.58 per kg
8 newton's cradle
upright
10mm aluminium rod 8 £3.14 per
900mm length
http://stores.ebay.co.uk/ALU
MINIUM-2-BUY/10mm-
Aluminium-Round-Bar-
/_i.html?_fsub=16938185
9 building
connector
part
4 $3.58 per kg
10 newton's cradle
length
10mm aluminium rod 4 £3.14 per
900mm length
Total mass of
assmebly option
(kg)
3.041
7
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15/04/2014
KERRIE NOBLE 38

Total material
cost for ABS (£)
£6.39
Total material
cost for
aluminium (£)
£6.28
Total material
cost for acrylic
£8.25
Total
manufacturing
cost for assembly
option 1
£20.92 *All material cost
calculations based on current
currency conversion rates.
The cost associated with parts, material and manufacturing requirements have now been identified for the initial
products which will be produced by the company. This information was used in conjunction with data on the
number of 11 – 19 year olds within the population of the UK. Based on this figure a value of 8% was used as a
target sales figure into this market sector and this formed the basis for the 5 yearly profit and loss projections which
are detailed below.
5 Year Profit and Loss Projections
5 Year Plan - Profit and Loss
Projections
CWS
Fiscal Year Begins
Apr-15
Apr-
15 %
Jan-
16 % Jan-17 % Jan-18 % Jan-19
Total
5yrs
Revenue (Sales)
Quantity Sold - Extra-
curricular group 500 0.5 1,200 0.3 10,000 0.5 17,000 0.4 28,000 56,700
Quantity Sold - Educational
Purposes 600 0.6 1,100 0.3 13,000 0.6 24,000 0.5 33,000 71,700
Quantity Sold - General
Retail 700 0.8 5,000 1.3 20,000 0.9 50,000 1.1
120,00
0
53,928,
000
APP and Online Access
Codes - Total Sales 180 0.2 600 0.2 1,200 0.1 3,000 0.1 5,000
12,906,
000
Sales Price - Full Kit 50 50 0.0 50 0.0 50 0.0 50
Sales Price - Access codes 15 0.0 15 0.0 15 0.0 15 0.0 15 850,500
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KERRIE NOBLE 39

Total Revenue (Sales)
92,70
0 2.2
374,0
00 2.1
2,168,
000 2.0
4,595,
000 2.0
9,125,
000
16,354,
700
Cost of Sales
Parts 23 0.1 23 0.0 23 0.0 23 0.0 23 115
Manufacture 400 1.0 700 0.4 1,000 0.1 1,500 0.1 2,200 5,800
Total Cost of Sales
41,80
0 1.0
168,6
00 0.4
990,00
0 0.1
2,094,
500 0.1
4,165,
200
7,460,1
00
Gross Profit
50,90
0
54.
9
205,4
00
54.
9
1,178,
000
54.
3
2,500,
500
54.
4
4,959,
800
8,894,6
00
Expenses
Salary Managing Director
30,00
0
16.
8
30,00
0 8.9 34,000 2.9 36,000 1.5 40,000 170,000
Salary Marketing Assistant
25,00
0
14.
0
25,00
0 7.4 25,000 2.1 27,000 1.2 30,000 132,000
Salary Accountant
10,00
0 5.6
15,00
0 4.5 17,000 1.4 22,000 0.9 24,000 88,000
Salary Service
40,00
0
22.
3
60,00
0
17.
8 60,000 5.1 65,000 2.8 72,000 297,000
Repairs and Maintenance 0 0.0 0 0.0 0 0.0 0 0.0 0 0
Car, delivery and travel
15,00
0 8.4
18,00
0 5.3 22,000 1.9 23,000 1.0 28,000 106,000
Office Rent 1,000 0.6 3,000 0.9 7,200 0.6 14,400 0.6 16,000 41,600
Telephone 400 0.2 400 0.1 400 0.0 400 0.0 400 2,000
Website 300 0.2 350 0.1 1,000 0.1 2,000 0.1 4,000 7,650
Insurance
10,00
0 5.6
10,00
0 3.0 15,000 1.3 25,000 1.1 40,000 100,000
Supplies
41,40
0
23.
1
167,9
00
49.
9
989,00
0
83.
9
2,093,
000
89.
9
4,163,
000
7,454,3
00
Warehouse Rent 2,000 1.1 2,800 0.8 3,400 0.3 15,000 0.6 18,000 41,200
Electricity 4,000 2.2 4,000 1.2 4,800 0.4 5,300 0.2 6,100 24,200
Total Expenses
179,1
00
100
.0
336,4
50
100
.0
1,178,
800
100
.0
2,328,
100
100
.0
4,441,
500
8,439,7
50
Net Profit
-
128,2
00
-
138
.3
-
131,0
50
-
35.
0 -800 0.0
172,40
0 3.8
518,30
0 454,850
The projections have clearly shown that in the first 3 years of trading the company will make a loss, however the
break-even point will be reached in the middle of this 5 year period and this is illustrated in the graph below.
(RETAIL)
15/04/2014
KERRIE NOBLE 40

0
1000000
2000000
3000000
4000000
5000000
6000000
2015 2016 2017 2018 2019
Break Even Analysis
Revenues
Costs
Figure 11 - A graph showing the projected break-even point for the company.
(RETAIL)
15/04/2014
KERRIE NOBLE 41

References
Arcadia Concepts, 2014, Wholesale China Toys and Toy Products Manufacturing, [ONLINE] Available at;
http://www.arcadiaconcepts.com/toy-products-manufacturing.htm, accessed 15th
April 2014
Business Scotland, 2014, Glasgow New Business Fund; Overview, [ONLINE] Available at;
http://business.scotland.gov.uk/view/funding/glasgow-new-business-fund#funding-overview, accessed 15th
April
2014
Collins, K., 2014, Exploring Business; Organising, [ONLINE] Available at;
http://catalog.flatworldknowledge.com/bookhub/reader/7?e=collins-ch06_s03, accessed 15th
April 2014
Education Essentials, 2013, Welcome to Education Essentials, [ONLINE] Available at;
http://www.educationessentials.co.uk/index.php, accessed 15th
April 2014
IBIS, 2014, Game and Toy Manufacturing in the UK; Market Research Report, [ONLINE] Available at;
http://www.ibisworld.co.uk/market-research/game-toy-manufacturing.html, accessed 15th
April 2014
Lieber, B., 2011, Five Big Picture Trends to Consider as You Position Your Business For the Future, [ONLINE]
Available at; http://whattheythink.com/articles/50582-five-big-picture-trends-consider-you-position-your-
business-future/, accessed 15th
April 2014
NPD Group, 2012, UK Tops European Toy Market with 3% Growth, [ONLINE] Available at;
https://www.npdgroup.co.uk/wps/portal/npd/uk/news/press-releases/uk-tops-european-toy-market-with-3-precent-
growth/, accessed 15th
April 2014
Tansel, U., 2013, Despite Higher Demand for Toys, Global Toymakers Yet to Convert Market Growth into Actual
Sales in Emerging Markets, [ONLINE] Available at; http://blog.euromonitor.com/2013/05/despite-higher-demand-
for-toys-global-toymakers-yet-to-convert-market-growth-into-actual-sales-in-em.html, accessed 15th
April 2014
Toy Learn, 2014, Children’s Educational Toy Business Plan; Toy Learn, [ONLINE] Available at;
http://www.bplans.com/childrens_educational_toys_business_plan/market_analysis_summary_fc.php#4.3_Indust
ry_Analysis, accessed 15th
April 2014
(RETAIL)
15/04/2014
KERRIE NOBLE 42

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