CASE STUDY NOV 2023

Historical Background
Brondy's PLC has a rich history dating back to its founding in 1930 as a clockwork toy company. Its
founder, Geoff Brondy, proved to be a talented entrepreneur and engineer. However, the company
had to adapt during World War II, shifting production from toys to rifles. After the war, Geoff Brondy
realized that the toy market had evolved towards more sophisticated toys.
Diversification and Expansion:
Geoff Brondy's vision led to diversification into electric toys, such as slot car racing sets and electric
model trains. This was successful in the UK and other Commonwealth countries, although it didn't
have the same impact in the United States and Canada due to differences in rail technology. The
company also made strategic acquisitions, such as Matchfix PLC and Enam Ltd., expanding its
product portfolio and geographic reach.

Change in Leadership:
In 1985, Geoff Brondy retired and passed the CEO role to his son, Arnold Brondy. Arnold shared his
father's passion for toys but also faced the need for diversification and high-interest rates. This led to
the conversion of Brondy's PLC into a public limited company and the sale of shares to finance
acquisitions.

Production and Human Resources:

Production of model trains in 2023 is based on batch production but faces coordination challenges
and target fulfillment due to issues like employee absence and machinery problems. The company is
considering a shift to cellular production, which would require a temporary halt and employee training.
The relationship between management and employees is strong, but employment contracts offer
limited benefits, and conditions vary across departments.

Material Challenges:
Brondy's PLC has maintained metal manufacturing of model trains, despite the industry moving away
from metal toward plastic. This has negatively impacted sales and competitiveness, as BRD's
products are more expensive compared to plastic-manufactured ones.

Financial Challenges:
The company faces a critical financial situation with declining sales since the early 2000s. This is
attributed to a shrinking customer base, non-competitive pricing, and quality complaints. Shareholder
confidence waned, resulting in a stock price drop in 2021 and the entry of 4Change as a shareholder.

Critical Strategic Decisions:

Brondy's PLC stands at a strategic crossroads and needs to make significant decisions for its future.
These decisions include adopting plastic manufacturing, reevaluating the employee relationship, and
managing the financial crisis.
1. Private vs. Public Companies:

- Private Company:
- Description: A private company is not publicly traded, meaning its shares are not available for
purchase on stock exchanges. Ownership is typically limited to a small group of individuals or
investors.
- Significance: Private companies have more control over their operations and are not subject to
the same level of regulatory and reporting requirements as public companies.

- Public Company:
- Description: A public company is one whose shares are available for purchase by the general
public on stock exchanges. Ownership is distributed among a wide range of shareholders.
- Significance: Public companies have access to a larger pool of capital through stock offerings but
must adhere to strict financial reporting and regulatory standards.

2. Entrepreneur vs. Intrapreneur:

- Entrepreneur:
- Description: An entrepreneur is an individual who starts and manages a new business venture,
assuming the associated risks and rewards.
- Significance: Entrepreneurs are known for their innovation, risk-taking, and ability to create new
businesses from scratch.

- Intrapreneur:
- Description: An intrapreneur is an employee within an organization who acts like an entrepreneur
by driving innovative projects or initiatives from within.
- Significance: Intrapreneurs contribute to a company's growth by fostering innovation and
exploring new opportunities while benefiting from the resources and support of the organization.

3. Consumer Behavior vs. Market Behavior:

- Consumer Behavior:
- Description: Consumer behavior refers to the study of how individual consumers make decisions
to allocate their resources (such as time and money) in the consumption of goods and services.
- Significance: Understanding consumer behavior helps businesses tailor their products,
marketing, and pricing strategies to meet consumer needs and preferences.
 - Market Behavior:
- Description: Market behavior encompasses the collective actions of buyers and sellers within a
market. These actions influence supply, demand, prices, and overall market dynamics.
- Significance: Analyzing market behavior helps businesses adapt to changing market conditions,
identify trends, and make informed decisions about production and marketing strategies.

4. USP (Unique Selling Point):

- Description: A Unique Selling Point (USP) is a distinctive feature or benefit of a product or service
that sets it apart from competitors in the eyes of consumers.
- Significance: A strong USP helps businesses differentiate their offerings, attract customers, and
build brand identity. It answers the question, "Why should customers choose your product/service
over others?"

5. Ansoff (Diversification):

- Description: The Ansoff Matrix, developed by Igor Ansoff, is a strategic planning tool used by
businesses to assess growth strategies. Diversification is one of the four growth strategies in the
matrix. It involves entering new markets with new products or services that the company has not
previously offered.
- Significance: Diversification is a high-risk, high-reward strategy that allows a company to reduce its
dependence on existing markets or products. It can open up new revenue streams but requires
careful planning and market research.

6. Transition from Private to Public:

- Description: The transition from a private company to a public company involves conducting an
Initial Public Offering (IPO) to sell shares to the general public and become listed on stock exchanges.
- Significance: Going public provides access to a larger pool of capital, but it also comes with
increased scrutiny, regulatory requirements, and reporting obligations.

7. Acquisition:

- Description: Acquisition refers to the process of one company purchasing another company, often
to gain access to new markets, technologies, products, or customer bases.
 - Significance: Acquisitions can be strategic for growth, enabling a company to expand rapidly or
diversify its business. However, successful integration and management of the acquired company are
essential for success.

8. Different Finance Sources:

- Description: Different finance sources refer to the various ways a company can raise capital to
fund its operations and growth, including equity financing, debt financing, venture capital, angel
investors, crowdfunding, and more.
- Significance: Choosing the right finance sources is critical for a company's financial stability and
growth. The choice depends on factors like risk tolerance, cost of capital, and the stage of
development.

9. HR Responsibility and Duties:

- Description: Human Resources (HR) is responsible for managing various aspects of employee
relations, including recruitment, training, benefits, payroll, compliance with labor laws, and maintaining
a healthy work environment.
- Significance: Effective HR management ensures a motivated workforce, compliance with labor
regulations, and a positive workplace culture, all of which contribute to a company's success.

10. Different Types of Production:

- Description: Different types of production methods include batch production, cellular production,
continuous production, and more. Each method has its own characteristics and suitability for specific
industries or products.
- Significance: Choosing the right production method is crucial for efficiency, quality control, and
meeting production targets.

11. Issue with Production Target:

- Description: Issues with production targets refer to challenges that companies face in meeting
their production goals. These issues can include factors like employee absenteeism, machinery
breakdowns, or communication problems.
- Significance: Failure to meet production targets can lead to delays, increased costs, and customer
dissatisfaction.

12. Inequality (Production | Design):

- Description: Inequality in a company refers to disparities in benefits, working conditions, and

opportunities between different departments or employee groups, such as production and design
teams.
- Significance: Addressing inequality is crucial for maintaining a harmonious work environment,
boosting employee morale, and ensuring fairness within the organization.

13. Market Research Advantage | Disadvantage:

- Advantage: Market research provides valuable insights into customer preferences, market trends,
and competitive landscapes, allowing companies to make informed decisions and tailor their
strategies accordingly.
- Disadvantage: Market research can be costly and time-consuming. There is also a risk of relying
on outdated or inaccurate data if not conducted rigorously.
14. Type of Markets (Niche Market):

- Description: A niche market is a specialized segment of a larger market with distinct preferences
or needs. It often consists of a smaller but more targeted customer base.
- Significance: Identifying and targeting niche markets can be advantageous for businesses, as
they can tailor their products or services to meet specific customer demands, potentially leading to
higher profitability and customer loyalty.

15. Company Market Share:

- Description: Company market share represents the portion of total sales or revenue in a specific
market that a particular company controls. It is often expressed as a percentage.
- Significance: Monitoring market share helps companies assess their competitive position and
track their performance relative to competitors. It is a key metric in evaluating market success.

16. Julia's New Product:

- Description: Julia's new product development using a 3D printer to create plastic prototypes
represents an innovative approach to product design and manufacturing. This method can potentially
reduce production costs and improve efficiency.
- Significance: Julia's innovative approach demonstrates the importance of adopting new
technologies and methods to stay competitive in the market. It showcases the potential benefits of
embracing cutting-edge tools in product development.

1. **Private vs. Public Companies**:

- In the case study, BRD transitioned from being a private limited company to a public limited
company, allowing it to sell shares to the public to raise capital for acquisitions and diversification.

2. **Entrepreneur vs. Intrapreneur**:

- Geoff Brondy, the founder of BRD, can be considered an entrepreneur who initially started the
company. Arnold Brondy, his son and later CEO, displayed intrapreneurial skills by expanding and
diversifying BRD's product range.

3. **Consumer Behavior + Market Behavior**:

 - BRD adapted its product range based on market behavior. Geoff noticed the shift in consumer
preferences during and after WWII, leading to the development of electric slot cars and model train
sets.

4. **USP (Unique Selling Point)**:

- BRD's unique selling point was its three-rail model train sets, which differed from competitors in the
USA and Europe that used a two-rail system. This uniqueness protected BRD's market in the UK but
limited its reach abroad.

5. **Ansoff (Diversification)**:
- Arnold Brondy diversified BRD's product range through acquisitions, taking over Matchfix PLC and
Enam Ltd., which expanded BRD's offerings beyond model trains.

6. **Transition from Private to Public**:

- BRD transitioned from a private limited company to a public limited company to access more
significant sources of capital through the sale of shares.

7. **Acquisition**:
- BRD acquired Matchfix PLC and Enam Ltd. to broaden its product range and improve efficiency by
merging design departments.

8. **Different Finance Sources**:

- BRD used the sale of share capital to raise funds for acquisitions and diversification,
demonstrating the use of equity financing.

9. **HR Responsibility and Duties**:

- Arnold Brondy, as CEO, maintained close relationships with employees, which contributed to low
absenteeism and labor turnover. However, the case study also mentions the need for updates to
employment contracts and differences in fringe benefits between departments.

10. **Different Types of Production**:

- BRD's Liverpool factory employed both batch production for model train sets and plastic model
kits and specialized production methods based on product characteristics.

11. **Issue with Production Target**:

- BRD faced challenges in meeting production targets for its model train sets due to various factors,
such as employee absence and machinery problems.

12. **Inequality (Production | Design)**:

- There was inequality in fringe benefits between employees in the Production Department and the
Design Department, reflecting differences in roles and responsibilities.

13. **Market Research Advantage | Disadvantage**:

- BRD conducted research to understand the reasons behind falling sales, helping identify factors
like a declining customer base and quality issues with Matchfix plastic model kits.

14. **Type of Markets (Niche Market)**:

- BRD targeted a niche market of railway modelers and collectors who valued high-quality and
realistic model train sets, allowing the company to charge premium prices.

15. **Company Market Share**:

 - The case study mentions that BRD's market share in the UK declined from a peak of 60% in 2001
to 20% by 2020 due to changing market dynamics and competition.

16. **Julia's New Product**:

- Julia Dentes used 3D printing technology to create plastic prototypes of model train sets,
potentially addressing BRD's declining sales by offering a more cost-effective and innovative product.

These business concepts are intertwined with BRD's history, decisions, and challenges, illustrating
how they played a role in the company's evolution and current situation.

Certainly, let's relate these additional business concepts to the case study of Brondy's PLC (BRD):

1. **Primary Market Research**:

- Primary market research involves gathering firsthand information directly from individuals or
sources. BRD likely conducted primary market research to understand the reasons behind declining
sales, such as a shrinking customer base and quality issues with Matchfix plastic model kits.

2. **Secondary Market Research**:

- Secondary market research involves analyzing existing data and information. BRD might have
used secondary research to gather industry data and market trends to assess its competitive position.

3. **Financial Performance**:
- The case study indicates that BRD's financial performance was in a critical situation by 2022 due
to declining sales and a liquidity crisis. Specific financial figures are not provided, but the company's
financial health was compromised.

4. **Liquidity Crises (Formula)**:

- The case study mentions a liquidity crisis at BRD. While specific financial ratios aren't provided,
you can use the Current Ratio or Quick Ratio formulas mentioned earlier to calculate liquidity ratios
and assess the severity of the crisis.

5. **Trade Credit Facility**:

- The case study notes that one key supplier of materials canceled BRD's 30-day trade credit facility,
insisting on immediate payment for each order. This action by the supplier contributed to BRD's
liquidity challenges.

6. **Evaluation of 4Change Offer**:

- The case study describes 4Change, a private equity business, purchasing 20% of BRD's shares
and later offering to buy £12 million of unsold shares at a 25% discount, along with securing three
board positions.
- Evaluating 4Change's offer involves considering the benefits and drawbacks of accepting the
investment. Benefits may include immediate capital infusion, while drawbacks may involve loss of
control or influence in the company's strategic decisions.
- The board of directors ultimately voted to accept the offer, indicating that they believed it was the
best course of action to address BRD's financial challenges.