IMCM Case Study 5

Case 5 – Green Toys Inc.: The manufacturer of eco-friendly toys is

Founded in 2007 by Robert von Goeben and Laurie Hyman, Green Toys Inc. makes a line of
classic young children’s toys constructed from recycled plastic and other environmentally
friendly materials. Their toys are well-designed in terms of aesthetics, functionality and safety.
Most importantly, they are dishwasher safe. The original idea for Green Toys came from Robert
von Goeben’s wife, who suggested that he creates a simple line of toys that would appeal to
parents who identified with the green movement. She realised that more and more parents,
particularly those who buy organic food and more health-oriented products, are starting to look
at toys like they look at food. Now that green has gone mainstream, parents want to know what is
in their toys.
In August 2006, Mattel Inc. recalled more than 10 million Chinese-made toys, including the
popular Barbie and Polly Pocket toys, because of lead-paint hazards and tiny magnets that could
be swallowed. The U.S. government warned parents to make sure that children would not play
with any of the recalled toys. As questions about toy safety made more headlines in 2007 with
the recall of more than 17 million Chinese-made toys, Robert von Goeben partnered with Laurie
Hyman, a business acquaintance, to start-up Green Toys Inc. It was profitable from its first year,
and by 2014, the company had a turnover of approximately USD 20 million and 80 employees.
Robert von Goeben has strong product design experience having worked with major toy
companies such as Mattel while running his own toy design studio previously. Before that, he
managed a venture capital fund in Silicon Valley. Laurie Hyman has extensive experience in
online consumer-marketing having worked at Ingenio. Before that, she managed Webvan’s
relationships with some of the world’s largest consumer packaged goods companies, including
P&G and Nestlé.
Green Toys’ standard range of key products include trucks, cars, planes, helicopters, boats, as
well as fire-station, farm, tool, tea, cookware and dining sets. They are made from post-consumer
recycled High Density Polyethylene (HDPE) milk jugs that were of consistent quality and not
contaminated with other materials. The use of recycled milk jugs provides a unique marketing
angle for Green Toys to educate both children and adults about “closing the loop” and make
visible the tangible benefits of recycling. Its “How Green Toys are made” life cycle infographic
is printed on all of its packaging. And of course, the printing ink is made from natural soy
pigment and the packaging from recycled paper.
Unlike its half-dozen eco-friendly competitors that manufacture or buy raw materials for their
toys overseas, Green Toys contracts only with companies in California. Sourcing locally means
burning less fossil fuel for transporting the raw material to its factory and helps to create or
maintain more U.S. jobs. At the same time, Green Toys is better positioned to track the chemical
content of its toys as compared to its counterparts.
Green Toys’ key customers consists of mothers between the ages of 25 and 40. Most of them are
well-educated and online. The number of parents who are blogging and searching online about
products and trends for their one to four year old children is huge.
Green Toys’ products are about 30 percent more expensive than similar toys from major players.
Green Toys should be able to narrow that price difference by at least two-thirds as the company
grows and it can utilize ‘economies of scale’, though it is unclear how popular its market
segment will become. In 2014, eco-friendly toys generated just USD 40 million in sales, a
fraction of the USD 22 billion for the US toy industry as a whole. In 2014, the size of the global
toy market was USD 84 billion.

Green Toys’ products are sold in 5,000 retail stores across the U.S., including Barnes & Noble,
Whole Food and Toys R Us. Today, many of Green Toys’ biggest retailers concurrently sell
online. As a large percentage of Green Toys’ products are also sold through online retail giant
Amazon, the majority of its marketing budget is spent online. With the U.S. market currently
representing 90 percent of its sales, Green Toys hopes to increase its global presence for its same
standard range of key products. At present, it has exclusive distributors in 35 countries, with
Australia being a key overseas market.

Green Toys’ exclusive distributor in Australia is Modern Brands, a leading supplier of quality
toys to retailers in the country for 60 years. Modern Brands is also the exclusive distributor in
Australia for renowned international toy brands such as Playmobil, Sylvanian Families and
VTech. Through Modern Brands, Green Toys are sold in both the physical and online stores of
leading department store chains such as David Jones, as well as small independent specialist toy
retailers throughout the country.

The average retail price in Australian shops for Green Toys’ popular Red Airplane is AUD
27.95, which is equivalent to USD 21.50. That makes it about 35 percent more expensive than if
it were purchased in U.S. shops. Although the basic price for this item is much cheaper on
Amazon, the extremely high shipment cost to Australia pushes its final price up to USD 27.70,
which is way above its prices found in Australian shops.

Meanwhile, Green Toys’ bestselling Tea Set is priced at AUD 49.95 in Australian stores. This is
equivalent to USD 38.50 and approximately 28 percent more expensive than if it were purchased
in U.S. stores. Interestingly, the final price for this item on Amazon, inclusive of shipment costs
to Australia, is only around USD 35, which is close to 10 percent cheaper than if it were
purchased in Australian stores.

The Australian market is highly receptive to “green” products, as the environmental movement
in Australia was the first in the world to become a political movement. In recent years, the online
press coverage of Green Toys’ products on U.S.-based articles such as Forbes’ “The Savvy
Parent’s Shopping Guide for Earth Day 2015” and Green Toys’ clinching of U.S.-based awards
such as [Link]’s “Best Green Toy Winner 2016” for its “Rescue Boat & Helicopter Set” has
helped to strengthen Green Toys’ brand image on the minds of environmentally conscious
parents throughout Australia.
Presently, Green Toys’ strongest direct competitors for environmentally friendly toys in
Australia are fellow U.S. brands Hape and [Link]. There are currently no strong local brands.
However, with the Australian government’s “Australia Made” campaign increasing its influence
on the purchasing decisions of Australian consumers in recent years, it may only be a matter of
time before a strong local brand enters the market.
Adapted from Hollensen, “Global Marketing”, Pearson, 2017
Discussion Questions
a. Using materials from the case, discuss THREE opportunities that Green Toys is currently
encountering in the Australian market.
(6 marks)

b. Using materials from the case, discuss ONE major threat that may negatively affect Green
Toys’ business in Australia.
(2 marks)

c. Identify SEVEN specific segmentation bases that are most probably used by Green Toys in
its target marketing strategy in Australia and indicate the segmentation category that each of
them belongs to. Then describe in detail the target market of Green Toys in Australia based
on evidence from the case.
(14 marks)

d. Identify and describe the type of target marketing strategy used by Green Toys in Australia.
Provide THREE reasons to support your answer based on evidence from the case.
(5 marks)

e. From the case, Green Toys standardises their range of eco-friendly toys around the world.
Explain FIVE advantages and TWO disadvantages to Green Toys for doing so.

(14 marks)

f. Elaborate on TWO reasons for the much higher prices of Green Toys’ products in Australia
as compared to in the U.S.
(6 marks)

g. Identify THREE key functions that Modern Brands can perform as an intermediary and
describe in detail the activities related to each function.
(13 marks)

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