JOT TOY COMPANY SYNOPSIS

Industry Background

There is a large number of companies of various sizes which design and sell toys to
retailers globally. Most toy companies outsource the manufacture of their toys and
currently 86% of the worlds toys are manufactured in China. Most of the worlds toys are
manufactured in other Asian countries, with only low volumes of products manufactured
in Europe and in the USA.
The current trend in toy sales is towards electronic toys and computer assisted learning.
Many of these electronic toys are highly developed to be attractive to children. Sales of
traditional toys and games have achieved traditionally low growth in the European
market over the last 10 years, whereas electronic toys and merchandise from popular
films and TV programmes have seen reasonable growth.
China has established itself as high quality, low cost manufacturing base for wide range
of consumer products for global markets.
There is also a large discount market for toys where toys of inferior quality are sold. The
retail prices in this market are often 50% less than in the conventional markets.

Jot Toy Company

The Jot brand was established in 1998 by husband and wife team Jon and Tani Grun.
The company initially designed a small range of toys that were manufactured in their
home European country. These toys proved to be very popular in their home country
and Jon then expanded the range of products.
By 2003, within five years of starting Jot, the founders are encouraged to see Jots
products ordered by many toy retailers across Europe. By this stage the company had
grown considerably, and had annual sales of 2 million euros. Commencing in 2004, Jot
started outsourcing all of its manufacturing to a range of manufacturing companies in
China in order to reduce its cost base and to enable the company to price its products
more competitively.
By the end of 2010 sale revenue exceeded 8 million euros and the company had
achieved substantial sales revenue growth each year. Jot has seen its sales revenue
grow by 16% in the year ended 31 December 2010 and by almost 18% in the year to 31
December 2011.

Current status

Currently, the company is experiencing unstable cash flow to fund its growth. In
connection to that, the company is also highly dependent on loan finance from the bank
which indicated that at the present time, it would not be able to provide any additional
long-term finance.
Increasing wage rates from China from which the company outsourced its
manufacturing has also become one of its primary concerns.
Emerging markets such as Russia and China got the attention of the company for future
opportunity to expand when cash flow is already stable.
For the meantime, the ultimate goal of the company is to increase and eventually
stabilize the flow of its cash to sustain and fund its sales growth and to explore new
markets. Thus the utmost priority is to generate cash flows to keep the company
growing and maintain its substantial revenue growth.