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«Carolina Coelho Advisor: Prof. Nuno Guedes Dissertation submitted in partial fulfillment of requirements for the degree of MSc in Business ...»

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widespread in this market which translated into the possibility of buying the toy online and then picking it up in the shop. Online retailers continued to grow their share in the toys and games market and consumers increasingly preferred to download games and order toys online instead of purchasing them in physical stores. English consumers were very demanding with the final product from the point of view of packaging and content. This was due to the ease of comparison with competitor brands on the different toy distribution channels. They did not look for cheap toys, instead they gave preference to the quality of the products over other features like price. Hence, in 2012 the top selling toy in UK was the LeapPad Explorer tablet costing 67, 65 pounds. Comparing with the top 5 toy markets in Europe, the top selling toy in France and Germany cost in average 10 pounds, in Spain cost 21, 11 pounds and in Italy 39, 46 pounds (Exhibit 16). It can also be seen in Exhibit 15 that the country saving rate of the UK (6.0) is the lowest, compared with Portugal (9.8) and Spain (18.1). In legal terms, there was a lot more bureaucracy in the UK and Science4you experienced huge difficulties in opening a bank account or having telephone and internet installed in the company, since there were a lot more rules compared to Portugal. Also, on the 20th of July 2011, a new Toy Safety Directive (2009/48/EC)11 was applied in the EU with the aim of reinforcing the safety standards, achieving long-term health benefits and improving the toy’s marketing rules. In the technological field there was a greater trend for online purchases, a greater trust from the consumer on the payment methods and a higher penetration rate of smartphones in the market. Economic and socially, it was a multicultural country, especially London, the city that ended up influencing most of the country trends. People had an open mind when it came to trying new things and experiences and they were more pragmatic in their evaluations as consumers (value for money) and in their professional relationships (straight to the point).

In January 2013, Science4you opened in London its second subsidiary with an investment of €500.000. The company initiated its activity with just one person in the UK office - one of the vicepresidents of Science4you, Nuno Gato - located in Knowledge Dock Business Center of East London University, which was considered to be the international center of the toy business. Science4you established a partnership with the University of Oxford with the goal of developing a set of scientific toys and got its logo in the packaging assuring the quality and reliability of the products. Through this agreement the company managed to start selling 14 toys in the UK catalog (Exhibit 17), including 7 new toys that were adapted to the English market and previously approved by the University of Oxford along with 7 more that were already commercialized in Portugal but with the packaging and the booklets translated to English. It was also agreed that in the following years new toys would join the catalog with the assistance of the Oxford scientists in terms of new product development and 11 Source: European Commission (ec.europa.eu)

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improvement of the scientific information provided in the booklets. Miguel stated that given the importance of the English market, where the growth forecast was the highest, at the early stage he wanted to gain credibility among large distributors and reach the big names of the market.

Science4you managed to sign a partnership with the big retailer Aldi which allowed having the products in more than 600 shops in the UK and Ireland. The company also signed with the specialized toy network Toymaster. Moreover, the toys could be purchased in the company’s UK website, Staples, independent shops such as Toy Galaxy and Chelsea Toys, Amazon and in science centers located in London, Manchester and Norwich. For the future Miguel wanted to go further and try to reach other big retail chains like John Lewis and Toys r’ us. The toy prices were not considered expensive given the quality of the product and the great number of experiences that each kit provided. The prices were around 10 pounds (about €12) where the most expensive toy was the Microscope costing 14, 99 pounds and the cheapest one was the Ecological Clock costing 8, 60 pounds12. All the toys in the company were produced in Portugal, whether to be sold in Spain or in the UK.

In the UK, making the toys a visible product among all the competitors with similar products already commercialized by local and international companies was a daily challenge. Thus, the constant communication with the target market had been a great bet of Science4you. This communication was made through bloggers, reviews about the products and contests using the toys as rewards.

1.7. Competitors in UK The UK was the largest toy market in Europe and as such it attracted several companies that wanted to grow and gain market share in the EU. For that reason, Science4you faced a huge number of competitors. The company needed to worry about not only the direct competition, operating in the niche of educational and scientific toys, but also the indirect competition, operating in the traditional toys and games market. The British reality was totally different compared with the scenario in Portugal or Spain; Science4you faced the presence of the major international players as well as the several British companies that produced scientific and educational toys. Compared to the 2 competitors in Portugal, in the UK it faced 9 direct competitors such as Thames and Kosmos, 4M, John Adams, Ravensburger, Clementoni, Wild! Science, Grafix, Trends UK and Galt EDU-Science.

See Exhibit 18, 19 and 20 for more information about Science4you competitors.

1.8. The Future For 2014, Science4you wanted to reach the target of a € 5 million turnover. Accordingly, the company built its business strategy based on the current internationalization processes, with especial 12 Source: www.Science4youtoys.com

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attention to the English market, which Miguel considered to be crucial given the market potential in the UK, despite the strong competition. And, after one year in this market Miguel and the president of the UK subsidiary, Nuno Gato, considered it a good decision, believing it was the right path for the future of the company.

In the national market, in spite of the economic crisis that Portugal continued to face during 2014, Science4you wanted to continue developing the consolidation of its internal structure and continue innovating, in order to achieve the growth projected for the next years. Plus, on the external market, Miguel wanted to enter new markets in addition to those where it had subsidiaries. The company had an order for the USA, the Netherlands and Lithuania. Moreover, the company was also preparing to enter the digital market with a project called MicroDinos that would consist of a game for tablets and smartphones, and a product line called Tech4you that would offer products related to technologies.

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Exhibit 10 – Detailed information about S4Y competitors in Portugal Clementoni was an Italian company founded in 1963 by Mario Clementoni offering several product lines such as educative games, creative games, scientific games, puzzles, first constructions, family games and early childhood. Clementoni games were translated in sixteen languages and distributed in 56 countries. Its operations were based in Germany, Spain, France and Hong Kong where the company relied on a qualified network of agents and distributors. Similarly to Science4you, Clementoni had always been dedicated to research and innovation. The founder stated: “Play is a serious thing. We should never stop playing, especially when we grow up”, and by saying serious he meant that all the games and technologies were developed with the help and advice of experts, technicians, psychologists and educationalists from all over the world. It also used to participate in the main international fairs such as the toys fairs of Nuremberg, Paris and Hong Kong. In Portugal, besides the official Portuguese website13, we could find Clementoni’s products in other online retailers and shops like Fnac, Toys R Us, El Corte Inglés and Pré-Natal.

4M Industrial Development Limited was a Chinese company located in Hong Kong and founded in

1993. It specialized in producing and designing creative and educational toys as well as exporting them worldwide. The major export markets were Eastern Europe, Western Europe, North America, Central/South America, Middle East, Africa, Asia and Australasia. It aimed to make education and learning fun offering a range of science toys and different lines of crafts. 4M also participated in important fairs such as the Hong Kong Gifts & Premium Fair and Hong Kong Toys & Games Fair, where they exhibited their toys and developed their contact network. Since 2003 4M won more than 40 local and international awards, among them Innovation and Creativity Award, Best Toys for Kids 13 www.clementoni.com/pt

21Science4you in the UK: a toy story

Award from USA and The Best Hobby Toy Award from UK. Several of its science products were endorsed by the University of Cambridge in the UK, the product bearing the trademark of the university on either the packaging or the product itself. In Portugal, 4M was present in several online retailers and physical retailers like Fnac and Toys R Us.

Exhibit 11 – Science4you source of revenues

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Exhibit 16 – The European toy market in 2012 – Estimated market size and top selling toys Source: The NDP Group (“Lackluste toy sales linked to lack of new product launches”), 2012 Exhibit 17 – First toys in the UK

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Exhibit 19 – Detailed information about the 9 S4Y direct competitors, in the UK Wild!Science: one of the world’s leading educational science toy makers was distributed in the UK by Interplay. Around the world, those toys could be founded in Russia, Australia, New Zealand, all over Europe, South Africa, the Middle East, Canada and the USA. Wild!Science offered toys for children over 6 years old, boys and girls, with medium/high prices, divided into 8 product lines: science, chemistry, physics, biology ecology, geology, meteorology, cosmetic science and magic spy science.

Its best sellers included the award winning Perfume Laboratory, Bath Boom Factory and Magic Nail Lab. The company was a usual presence in the major international toy fairs and won several awards such as Best Learning Toys14 and Top Ten Toys for Teens15.

Thames and Kosmos: it was founded in 2001 with the goal of improving the level of scientific education in an informal way. It offered more than 120 science and experiment kits in 13 product lines: sophisticated science, chemistry, biology, physics, little labs, astronomy, classic science, alternative energy & environmental science, earth science & natural history, ignition series, construction series, technology & electronics and fun & fundamentals. The products could be found worldwide in retail stores, museums stores, online stores and specialized toy stores. Furthermore, it had collected several awards throughout the years since 2004, including Best Green Award from 14 Given by Great Schools’ Golden Apple Award 15 Given by Good Toy Awards

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Dr.Toy in 2013 and Parents’ Choice Gold Award in 2012. Thames and Kosmos had also some partnerships which added value to their mission such as the partnership with the Toy Industry Association, the Museum Store Association, the National School Supply and Equipment Association and the American Specialty Toy Retailing Association.

John Adams Toys: with a more than 40 year long history, John Adams was not specialized in the niche of educational scientific toys, offering different product lines like Dolls & Role Play, Traditional Games & Puzzles, Outdoor Toys & Games and Swimming aids. The categories where this company became a threat to Science4you were Science & Discovery, Construction Sets, Art Craft and Activity and Magic & Tricks. The strongest points of this well-respected player of the toy industry were the development and marketing of innovative products for children of all ages and the focus on a great quality. The products could be found in online retailers like Amazon and in big retailers like Toys’ r us.

Ravensburger: it was a German company known by its variety of puzzles and games which exported its toys for more than fifty countries. Although it didn’t compete directly with the scientific toys from Science4you, the products had a strong educational component and could work as perfect substitutes.

EDU-Science: it was a Chinese company from Hong Kong that designed, developed and produced educational and experimental toys. EDU-Science offered a huge range of product categories such as Telescope, Microscope, Binoculars, Science kit, Space Science, Electronic, Globe, Magnifier, Nature Science, Eco Science, Cool Science, Education, Games, Da Vinci (construction toys related with Leonardo Da Vinci inventions), Animal Planet, Jr. Scientist, Tree of Knowledge, Dinosaurs (Puzzle 3D) and Jr. Chef (Toys and experiments related with cooking). The aim was to provide a higher level of children’s education ensuring high levels of safety and quality. The production was made in China and the products were distributed worldwide. Along with many toys, science guides were provided to explain the toys and the science behind each experiment. There was no distinction between girls or boys since most of the toys were unisex and only some of them were more focused on boys.

Regarding prices, it had a wide variety of choices, from really cheap toys to expensive ones (more than €130).

Grafix: was an award winning brand owned by RMS International. The company offered a wide range of toys for boys and girls, making it available for wholesale and focused on 3 main activities: design & innovation, operation & logistics and quality control. The product lines included categories such as Weird Science, Arts & Craft activities, Licensed Products, Glow in the Dark, Outdoor Games, Puzzles, Science Experiment, Artist Range, Plush and BlockTech MetalTech (building toys). It was headquartered in the UK and had subsidiaries in Hong Kong, the USA, the Netherlands and Shanghai.

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