Toy Industry: “What’s your China Strategy?” Tabitha Mui October 20, 2006 Center of Cyber Logistics

October 20, 2006Toy Industry: “What’s your China Strategy?” Statistics on Export in China Over 8000 manufacturing facilities Over 30,000 kinds sold in over 100 different countries and regions 75% of toys in the world from China Export Performance –2005: $15.18 billion U.S –2004: $11.96 billion U.S. (increase of 26.9%)

October 20, 2006Toy Industry: “What’s your China Strategy?” Statistics on Export in China Export Goods –Video Games ($3.488 billion U.S.) –Stuffed Toys ($1.728 billion U.S.) –Festive decorations, dolls, models, music boxes, bicycles, strollers, and other toys and accessories Export Destinations –USA ($4.944 billion U.S.) –Hong Kong ($2.504 billion U.S.) –Japan ($739 million U.S.) –Germany, France, UK, Italy, Spain

October 20, 2006Toy Industry: “What’s your China Strategy?” Map of Main Production Areas Guangdong –Export in value (2004): $8.980 billion (U.S.) Jiangsu –Export in value (2004): $781 million (U.S.) Zhejiang –Export in value (2004): $701 million (U.S.)

October 20, 2006Toy Industry: “What’s your China Strategy?” Why China? Benefits –Key to business models Low price where labor is cheaper and lower level of technology is needed –Strategic locations Most productions located along coast

October 20, 2006Toy Industry: “What’s your China Strategy?” Why not China? Issues –Raw material price increase Plastics, metal –“Low quality in goods produced” –External barriers to import Hinder free trade access to other countries

October 20, 2006Toy Industry: “What’s your China Strategy?” Statistics on Export in PRD

October 20, 2006Toy Industry: “What’s your China Strategy?” Statistics on Export in PRD Guangdong –70% of national total in toy exports –Approximately 4500 toy companies –80% of exports go to U.S., EU, HK, & Japan –Mainly in Shenzhen, Dongguan, and Guangzhou owned by HK investors and China operated

October 20, 2006Toy Industry: “What’s your China Strategy?” Manufacturing facilities in PRD Hong Kong/Foreign Owned facilities –Higher profit margin –Sophisticated management Indicates usage of current business practices –E.g. Supply Chain Management – Just-In-Time –Material Requirements Planning & Electronic Data Interchange –Vertical integration R&D  Prototype  Manufacture  QA  Shipping Edu-Science HK Ltd.

October 20, 2006Toy Industry: “What’s your China Strategy?” Manufacturing Facilities in PRD Mainland China Owned facilities –OEM focused Small to medium sized factories Limited staffing levels and financial capital Low profit rate –Usually only earn processing fees and work on a contract basis –Outlook: ODM Starting to incorporate research and design elements Difficult to compete with international firms Pengcheng Toy Ind. Co.,Ltd

October 20, 2006Toy Industry: “What’s your China Strategy?” Research Issues Limited access to key articles – Annual Report on China's Toy Manufacturing Industry Annual Report on China's Toy Manufacturing Industry –Analysis & Forecast Report on The Toy Manufacturing IndustryAnalysis & Forecast Report on The Toy Manufacturing Industry –China Toy Industry Report, 2004China Toy Industry Report, 2004

October 20, 2006Toy Industry: “What’s your China Strategy?” References “Chinese Domestic Toy Market - ASIA-INTERPRISE Co-operation Toy Manufacturing and Industry” website – “Foreign Economic Cooperation” website – “Hong Kong Toys Council” website – “Challenges of Hong Kong toy manufacturers operating plants in the Pearl River Delta” –International Journal of Asian Management, Dec 2004, Volume 3 “China: Top Global Supply Chain Partner” –The China Business Review, Sept/Oct 2006 “China Toy Association” website –