JAKKS Pacific Nadler Trushman Congruence Model

JAKKS Pacific’s Strategy

JAKKS has largely been seeking to expand and further consolidate its position in the market via strategic acquisitions and offering of numerous classes of products that appeal to a wide client base. As a matter of fact, from the company’s internal analysis, one of its key strengths is the production and marketing of a wide array of products. This the company accomplishes via the numerous licensing agreements it has in place with well-known toy character trademarks. In essence, JAKKS Pacific “designs, produces, markets and distributes toys and related products, pet toys, consumables and related products, electronics and related products, kids indoor and outdoor furniture, and other consumer products” (Reuters, 2018). However, the company spends little on R&D efforts, unlike is the case with some of its key competitors such as Mattel. The differentiation strategy would not fit too well with JAKKS Pacific’s strategy as it calls for excellent research, innovation, and development. This is more so the case given that as Schermerhorn (2009) points out, “a differentiation strategy seeks competitive advantage through uniqueness” (p. 147).

On the basis of an informed review of JAKKS’s current strategy, I am convinced that the competitive strategy most likely to fit with JAKKS’s approach is the cost leadership strategy. In essence, the cost leadership strategy is a generic strategy demanding that at a specified level of quality, an entity becomes the industry’s low cost producer and offers its products and/or services at the prevailing prices in the industry or below the industry’s average prices so as to rake in more profits than competitors. This particular strategy would fit with JAKKS’s current approach for a number of reasons. The fact that JAKKS offers for sale a wide range of products means its revenue streams are largely diversified. From its mission, i.e. the engagement of “children in creative play with products that encourage learning and interaction, and most importantly – fun!”, it is clear that the company is keen on the provision of a broad array of products that are likely to have market-wide appeal. Given its wide array of products it designs and produces, including kids’ outdoor and indoor furniture and pet toys, price wars initiated by competitors in response to JAKKS adoption of the low cost strategy would not, therefore, cripple the company’s operations. Further, the market in which JAKKSs operates is broad enough to further enhance the strategy’s implementation. JAKKS could successfully adopt the strategy by way of accessing lower cost materials, outsourcing some of its processes, etc.

Inputs
In basic terms, Nadler-Tushman Congruence Model postulates that an organization ought to be understood as a system made up of a number of elements. It is via this understanding that an organization’s performance can be fully understood. The input category identified in this model includes the environment, resources, and history. These are the factors and realities with which JAKKS has to work with and which affect it in one way or another.

a. The environment
Just like is the case with its peers, JAKKS is impacted upon by various factors within its larger environment. These include, but they are not limited to, the government and various regulatory bodies, and competitors. With regard to the government and regulatory bodies, it is important to note that the toy industry is one of the most closely regulated industries due to the risks toxic, dangerous, or poor quality toys could occasion on their end user, i.e. babies. The key body that highlights safety standards in this case is the United States Consumer Product Safety Commission, with some of the regulations it oversees being the small parts regulation. This particular regulation “prevents deaths and injuries to children under three from choking on, inhaling, or swallowing small objects they may ‘mouth’” (United States Consumer Product Safety Commission, 2017).

Competitors, yet another key input, are inclusive of all the firms in the toy industry with which JAKKS has to compete. It is important to note that the actions and moves by the competition could impact upon JAKKS bottom line and market share. These actions and moves could include new product offerings, price reductions, aggressive marketing campaigns, mergers and acquisitions, etc.

b. Resources
Another key input in this case is JAKKS resources. These include, but they are not limited to the employees of the company, the capital at the company’s disposal, technology, as well as the company’s reputation. Two of these will be discussed herein, i.e. the company’s employees and technology. Employees are in most cases deemed to be one of the key resources of an organization. This is more so the case given their contribution to the company’s overall direction and strategy. The company’s top executives are Stephen G. Berman – C.E.O. and Jack McGrath – Chief Operating Officer (JAKKS, 2017). While Berman has been with the company for the last two decades and therefore has perfect understanding of the company’s corporate culture and structure, McGrath is a toy industry veteran who has worked in with other toy makers in various capacities. Recent data indicates that the company has in its employ approximately 850 employees spread across the world, with half of these being located in the U.S. (Statista, 2017). When it comes to technology, it should be noted that although JAKKS is not at par with its peers on the R&D front, the company has in the recent past embraced several technological innovations with its flagship innovation on this front being DreamPlay technology. This particular technology “enhances and extends the play of toys by instantly linking a physical toy to video content, animation, and interactive game play” (JAKKS, 2017).

c. History
The various events JAKKS has initiated or encountered in the past have an impact on its performance as well as functioning today. Some of the events that have, in the past, shaped JAKKS to what it is today include its acquisition of a number of companies, including Kids Only Toys, Creative Designs International, and Play Along Toys in the years 2008, 2006, and 2004 respectively. These acquisitions allowed the company to further enhance its product range. Other crucial developments have included key licensure negotiations, bringing fourth The Amazing Spider-Man and The Dark Knight Rises. These helped the company consolidate its position in the market and enhance its market share.

As I have already pointed out elsewhere in this text, JAKKS has largely been seeking to expand and further consolidate its position in the market via strategic acquisitions and partnerships, as well as via the offering of numerous classes of products that appeal to a wide client base. In essence, the inputs at JAKKS consisting of Organizational Environment factors, Internal Resource factors, and Historical Tradition factors are highly congruent/compatible with the company’s strategy.

With regard to the environment, it should be noted that in seeking to appeal to a wide client base, JAKKS ought to ensure that its products meet the relevant regulatory standards. Otherwise, the company would find itself in trouble with such agencies as the United States Consumer Product Safety Commission. When it comes to the competition, the long-term survival of the company could be largely dependent upon how it responds to opportunities in the market – before they can be exploited by the competition. In pursuing strategic partnerships, particularly the one with Meisheng Culture and Creative Corp of China in 2016, the company attempts to outpace its competitors by exploiting new markets.

On resources, it is important to note that having a stellar cast of employees enables JAKKS to seamlessly execute its strategy in the long-term while making the relevant changes to match new realities. The experienced team the company has at the helm would enable the company further consolidate its position in the market via strategic acquisitions and partnerships. The adoption of new technology is also critical as the company seeks to appeal to a wide client base through new, engaging, and unique product offerings.

Lastly, we have history. As I have already pointed out elsewhere in this text, JAKKS has in the past actively made strategic mergers and acquisitions. The company also continues to seek new partnerships and engage in various licensure negotiations so as to further enhance its competitiveness. This is consistent with the company’s strategy to expand and further consolidate its position in the market via strategic acquisitions and partnerships.

Outputs
To make a profit, business enterprises have an overall goal of producing some output. It is no different at JAKKS. In discussing output, I will be looking into how JAKKS performs at various levels namely the Organizational Level, the Group Level, and the
Individual Level.

a. Organizational Level
As it has already been pointed out elsewhere in this text, JAKKS Pacific “designs, produces, markets and distributes toys and related products, pet toys, consumables and related products, electronics and related products, kids indoor and outdoor furniture, and other consumer products” (Reuters, 2018). Towards this end, the company offers for sale a wide range of toy and related products including, but not limited to, infant and preschool toys, kids play objects and furniture, kits for art-related activities, Halloween costumes, dolls, etc. The company’s performance for a given level of output is measured using annual revenues and net profit. How effective the company is in operational terms and how well it makes use of capital at its disposal could be analyzed using such ratios as return on assets and return on equity. The table below compares JAKKS’s organizational performance within a two year period.

Year 2015
Year 2016

Total Sales (in ‘000’)
$745,741
$706,603

Net Income (in ‘000’)
$23,170
$1,249

ROA
0.05
0.003

ROE
0.15
0.009


Table 1.1
b. Group Level
The company is made up of various divisions. The most prominent divisions have got to do with the regions in which the company makes its sales. Currently, the company has six primary sales regions. These include the United States, Asia, Latin America, Canada, Australia, and Europe. As per the most recent financial statement disclosures, the United States contributes the lion’s share of net sales, i.e. 77% of net sales in 2016 and 72.7% in 2015 (JAKKS Pacific, 2018).

c. Individual Level
This has got to do with not only the activities, but also the performance of persons within JAKKS. Five of the key jobs that ought to be highlighted here include the Chief Executive Officer, The Chief Financial Officer, The Chief Operating Officer, Senior Vice President – Digital Marketing and Studio, and Senior Vice President – International Sales. While the Chief Executive Officer is charged with the overall management of JAKKS resources and operations, the Chief Financial Officer is charged with the planning and directing of the financial affairs of the company. The Chief Operating Officer, on the other hand, is responsible for overseeing as well as directing JAKKS’s business operations. Lastly, while the Senior Vice President (International Sales) is responsible for the promotion of overseas sales and distribution, the Senior Vice President (Digital Marketing and Studio) is responsible for the development, launching, expansion, and management of “JAKKS Pacific’s portfolio of properties digital footprint, as well as spearheading studio JP” (Business Wire, 2018).

The activities as well as behaviors of the people within JAKKS Pacific (individuals) do impact the total system’s output in terms of not only the shareholder return and profits, but also in terms of service and policy results and perhaps at the community level. Poor showing at the individual level therefore equals suboptimal performance at the organizational level. It is also important to note that the job of Senior Vice President (International Sales), in collaboration with the other senior positions in the company, ties to a key component of the group level, i.e. sales regions outside the U.S. It is, therefore, a position of great relevance as far as the international expansion of JAKKS is concerned. In the final analysis, it is clear that as far as Nadler-Tushman Congruence Model is concerned, one of the most important considerations is how dynamic the relationships among various components are.
















References
Business Wire (2018). JAKKS Pacific Taps Jared Wolfson as Senior Vice President, Digital Marketing & Studio JP. Retrieved from https://www.businesswire.com/news/home/20180102005111/en/JAKKS-Pacific-Taps-Jared-Wolfson-Senior-Vice
JAKKS Pacific. (2018). Jakks Pacific. Retrieved from https://www.jakks.com/
Reuters. (2018). JAKKS PACIFIC Inc. (JAKK.O). Retrieved from https://www.reuters.com/finance/stocks/company-profile/JAKK.O
Schermerhorn, J. R. (2009). Exploring Management (2nd ed.). Hoboken, NJ: John Wiley & Sons.
Statista. (2017). Number of employees of JAKKS Pacific in 2016, by country. Retrieved from https://www.statista.com/statistics/698015/number-employees-jakks-pacific-by-country/
United States Consumer Product Safety Commission. (2017). Small Parts for Toys and Children's Products Business Guidance. Retrieved from https://www.cpsc.gov/Business--Manufacturing/Business-Education/Business-Guidance/Small-Parts-for-Toys-and-Childrens-Products