R &R

Manish Kumar -2112013

GSCM-IIM UDAIPUR

Why are the opportunities in the board game industry presented in R&R case considered
inherently risky? List 5 reasons.
Few of the risk factors involved in the board game industry are:
• Products generally had a very short life and especially the products that were a part of
a particular category, (in this case, “trivia”) rode with the fate of the category. Hence
the window to make the sale was small (typically not more than a year or two) and
missing this opportunity of sale could lead to failure of entire project or lost sales.
• The success of a product was often based on less than a dozen retailers. So, promotional
plans became a key factor and hence large manufacturers were dominating the industry
as they could afford the expensive TV promotional campaigns. New players did not
have a budget for such advertisements which would surpass 1 million $.
• Major retailers were reluctant to buy from new vendors with narrow product lines
unless they felt that the volume potential was enormous. Many new products were
introduced every year which made the fight for shelf space very aggressive.
• Industry was highly seasonal. Most sales were made in the four weeks prior to
Christmas and there was a big inventory holding cost incurred by the manufacturer as
retailers did not accept the delivery until the goods were needed.
• Board games could have a limited appeal and hence not choosing a right theme to attract
a broad audience segment may result in decreased volume of sales and in-turn revenues.

What are the risks for each of the coalition partners of Bob in this venture? How do they
justify taking such a risk?
Bob got into several strategic partnerships to develop and sell the game. Below mentioned are
some risks which the coalition partners took and the justification for such risks:
1. Publishers of TV Guide:
Risks
• Taking the licensing for the project based on calculations from uncertain volume
of potential units to be sold (1000000) and number of retail partners (10000)
they can on-board was itself risky. To add to it, the royalty was also volume
based and hence betting on volume was risky.
• Just because game on Time Magazine was successful, it was no guarantee that
game on TV guide would be successful.
• Opportunity cost of inserting five ads in the magazine worth 85000 $ each.
• Taking risk that manufacturing would be able to deliver the quantity required as
all manufacturing and delivery was left in hands of Bob.
 • Payment structure of royalties over money collected rather than sales was risky
as R&R had no bad debt recovery expertise or department.
They took those risks because:
• Bob was well-qualified and an expert in his field. His assumptions could be
trusted and his experience to manage such projects would come handy.
• It would be a massive PR campaign for TV Guide.
• There was an upcoming market for the trivia category and the sales in Canada
was an indicator for the same. Also, having the name of TV guide behind the
project would give credibility to the game.
• The initial capital expenditure was very small.
• If the calculations were any way near to being right, the potential to make profits
was huge.

2. Alan Charles, for developing the game.

Risks:
• There was no sufficient risk for Alan. The project just took few weeks to
develop. May be not having any upfront payment or royalty was a risk. But
being a professional developer and a friend of Bob, he would have assessed that
the game would be a success in the market due to increasing demand for games
in this category and Bob himself was leading the project who was a master of
marketing and sales. Also, a 3-5 % royalty on sales was a big incentive to bet
on the project.

3. Sam Kaplan (Trivia Inc.)

Risks:
• Sam Kaplan invested around 30000$ to finance the first production run. This
initial capital investment with no guarantee (except potential) was a huge risk.
• This also has an opportunity cost associated with it as he dedicated both time
and capital in this project to handle day to day details.

He took those risks because he was enthusiastic about the idea and also Bob was a
long-time friend and he could trust the credentials of Bob to make this project a
success.
He also had vast knowledge about printing and had good contacts who would be
critical for the success of the project. Hence his capabilities also resonated with the
project.
4. Suppliers:
Risks:
• Upfront investment in fixed, variables and overheads could be significant.
• Not able to recover anticipated revenues.
 They must have taken the risk because the must have believed that sufficient
demand would be available and with Bob over-seeing the sales, he could on board
several retailers and mass-merchandisers to sell the game.
5. Swiss colony, for assembly and delivery
Risks:
• The risk was not high for Swiss Colony as they already had significant
capabilities to offer fulfilment for other companies. Also they followed the JIT
technique and hence the inventory holding cost must have been low.
• The risk could be opportunity cost of involving themselves in this project
instead of investing resources and capabilities on other projects if available.
• They must have taken this risk as they would have believed that there was a
market for this game and having Kaplan on-board who was along term
consultant for them added credibility to the project. Also, the variable costs were
attractive and the initial investment was also sponsored by Trivia Inc.

6. Selling Partners- Retail and Mass merchandisers

Risks:
• Providing shelf space to a new vendor rather than an established one.
• It could well be only a one-year product.
They took this risk as it would bring their names in the advertisement in TV guide
free of cost which was a very popular magazine and hence was a good PR
opportunity.
Also, there was a 5 % ad allowance for retailers if they put the product in newspaper
ads, tabloids or catalogues.
The credibility of TV Guide and Bob was also an influencing factor to take the risk.