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Case Study: Baby Dolls, Move to China

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Introduction

The case study, “Baby Dolls, Move to China”, looks at the decision that was made by a popular

toy manufacturer to shift its operations from Spain to China. To come up with the decision, the

company considered factors such as reducing the production costs, improved efficiency, more

market penetration, and improved profits from the Chinese markets. This case study analysis is

relevant for multinational companies as it examines the challenges and benefits that may accrue

from such decisions to relocate from one country to another. Many companies can learn from the

case study before they make a decision to relocate their operations. The study concentrates on

logistical and financial aspects as well as the cultural differences that should be considered to

implement this type change work. The principal objective of this research paper is to analyze the

strategic implications as well as the decisions-making process for Baby Dolls Inc.'s shift to China

and to provide details on the key elements and possible consequences for financial risks and

opportunities that affect the strategies for expanding global of companies in the current

interconnected business world.

1. Core Strengths of Baby Dolls

Quality and Artistry/Workmanship: Baby Dolls is well-known for its superior quality. Each Doll

made from them has been a masterpiece of art with striking features and high-quality materials

that are not only visually attractive but also strong. Baby Dolls has a long history of making

high-end, top-quality dolls for adults and children.

Brand Recognition: Baby Dolls has been manufacturing specialized products and selling the

stores that they sell for a long period of time. These items are not just reliable, they are the
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perfect example of class and style. The trust and confidence of the customers is built upon the

solid foundation of quality and innovation.

Innovation and Planning: According to Pawliczek et al. (2015), the brand's capability to design

specific strategies and offer personalized service sets it apart. Every consumer will find

something they enjoy and the brand is guaranteed to attract a variety of customers. Baby Dolls

are continually developing and reinventing sectors that haven't been utilized to keep up with

changing needs and desires.

Global Presence: The goods manufactured by the company don't limit themselves to the market

in which they are sold. Their international reach and huge client base is assured by global

accessibility and essential partnerships with other stores with the highest-quality. Baby Dolls is

sold throughout more than 50 nations across the world.

Vertical Integration: Baby Dolls has a vertically integrated supply chain which offers a high

degree of control over manufacturing process's quality distribution, production, and quality. This

means that the items can be easily purchased by consumers.

2. How Baby Dolls Manages its Supply Chain

Demand Forecasting: This business uses sophisticated tools for data analysis and provides an in-

depth analysis of the trends in advertising to anticipate trends in demand. This method is

proactive and enables the business to anticipate demands of the market and satisfy the demands

of customers efficiently. Each calendar year Baby Dolls meticulously assesses the demand for its

merchandise. This is essential to keep the inventory and production levels stable.
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Achieving Effective Inventory Management: Proper management of inventory as well as keeping

the safety stock are essential measures to reduce costs and plan for sudden increases in demand

(Huang, Song & Tong 2016). As a result of this, the company will maintain enough stock to

meet the continuous demands of the customers. Any disruptions of the supply chain will

therefore not adversely affect the operations of the company.

Good Relationships with the Suppliers: The company strives to maintain good working

relationships with its key suppliers. Large and big supplier companies ensure a consistent and

reliable stock of the raw material which reduces the risk of material shortages. This permits the

company to collaborate with suppliers to meet the requirements of its production during peak

times.

3. Financial Factors Contributing to Baby Dolls' Declining Profits and Response to the

Challenges

i. Challenges

The financial factors that caused Baby Dolls' declining profitability in 2005 can be summarized

as follows:

Increased Competition: At the beginning of 2000, the Dolls market was more competitive, in part

because of the rise of new competition from China along with other countries with lower-

cost. This has increased pressure on margins and expenses.

Growing Expenditure: Babies Dolls has been hit by the rising costs of raw materials and labor

and shipping in the early part of 2000. These have dramatically reduced the profits of the

company.
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Global Financial Crisis: This took place between the years 2008 and 2009 and had a negative

impact on the investments of consumers, which affected the Dolls markets as well as the profit.

The increasing operating expenses and financial uncertainty are also major challenges. They

have a broad impact on overall profitability and growth too and firms have to devise an approach

to deal with this.

ii. Responses

The suggestions that the company had come up with in order to deal with the issue comprise:

Pricing Optimization, Diversification of Products and Cost Control are vital to a growth of the

company. It's not only a method to lessen the negative effects of price rises but also creates new

revenue streams and helps ensure the sustainability of financial resources.

A focus on premium brands: Baby Dolls concentrated on different ways to differentiate them

from the premium brands of their rivals. They are adamant about the quality of the products they

create.

Reduction in costs: Baby Dolls has adopted strategies to reduce costs, like negotiations with

suppliers to decrease expenses and outsourcing of activities that are not essential.

Expanding into new markets: In order to counter the decline in sales in established regions Baby

Dolls went into a market that was not yet developed as China and India. It could bring a number

of benefits like lower costs for labor, easier accessibility to the raw material and proximity to

important markets. But certain challenges are connected to quality issues, and the potential theft

of intellectual property.
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4. Potential Advantages and Negatives of transferring production to China from Spain

i. Potential Advantages

Lower costs for labor Expenses: The cost for labor costs in China are lower than in Spain (Perea

& i Alcon, 2014). This can lead to an incredible reduction in operating costs in Baby Dolls

investments. Because of the lower operational expenses and easy access to global marketplaces

and suppliers this can yield significant savings and boost the effectiveness in supply chains.

More access to raw materials: China could grow into a major producer of the many raw materials

used for the manufacturing process. This will lower the costs of transportation because it

eliminates the need for baby dolls to carry the essential products.

The proximity to major Markets: China is likely an immense market for Dolls as well as other

products. Baby dolls may gain from this and speed up processing time by transferring their

generation to China.

ii. Potential Disadvantages

While there are some benefits evident, there could be a loss of quality and brand recognition

which could result in a decline in quality and brand's advantages.

Quality Issues: China is well known for producing low-quality products. Baby Dolls must be

able to monitor on the standard of their merchandise if the business moved to China.

Intellectual Property Theft: Intellectual Property Theft is a major problem in China. If Baby

Dolls wants to grow in China, they must defend intellectual property rights such as trademarks

and designs.
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Delivery Time: The average delivery time for other areas is more than Spain's. Thus, Doll's

inventories may grow, and their ability to react to changing demand might be affected.

5. How Baby Dolls' Competitiveness May Be Affected by Moving to China

i. Positive Effects

The decision to enter the Chinese market could boost Baby Dolls' competitive position in the

Dolls market as we'll see in the following paragraphs:

 Reduced Costs

Due to China's low labor costs, companies might reduce its expenditures or enhance

management. This means that the company's competitiveness could increase. This is confirmed

by numbers showing that the costs of labor have been reduced by between $20 and $5 per

hour. Operating expenses have decreased by 30% because of reduced utility and support

costs. Costs for materials are reduced to 25% whereas logistic costs are reduced due to the close

proximity of suppliers.

 Increase in Manufacturing Capacity

Based on the information available in the report the capacity of manufacturing currently of

10,000 units. Due to the increase in reserves and the availability of workers production capacity

is believed to be at minimum 20000 units per month.

 Price Cuts and Increased Sales Volume

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The cost of an individual dollar is currently $110. With the anticipated reductions in spending

and the anticipated cost of living will be $80 for each person. The sales forecast will rise by 40%

because of the reduction in prices and market growth.

ii. Negative Effects

Although there are many positive outcomes of the move, the transition to China could also bring

obstacles to the competitiveness of. Quality concerns on the Chinese market as well as the threat

of theft of intellectual property can harm the reputation of the company. In addition, Baby Dolls

may be less vulnerable to changes in markets than some firms due to the length of duration

required to transport goods all across China to other parts around the world.

 Quality Concerns

Due to the early problems in quality control: The rate of return rises from 5 to 5%.

Customers complain: An unforeseen rise in complaints is expected due to changes in the quality

of the products that the company offers.

 Brand Perception and Loyalty

Brand loyalty: The chance of a decrease on the level of services due to concerns regarding

quality control. There is also an opportunity to be seen as being less reputable in the marketplace.
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References

Huang, L., Song, J. S., & Tong, J. (2016). Supply chain planning for random demand surges:

Reactive capacity and safety stock. Manufacturing & Service Operations

Management, 18(4), 509-524.

Pawliczek, A., Kozel, R., Vilamová, Š., & Janovská, K. (2015). On the strategic planning,

innovation activities, and economic performance of industrial companies.

Perea, E., & i Alcon, J. R. (2014). A profile of Spanish firms in China: reasons to set up business

and future perspectives. Universia Business Review, (43), 58-82.