Toys (Cyprus) Ltd.
Toys Ltd. was established in 1990 in a provincial town close to Larnaca in Cyprus with the stated
objectives of producing high quality toys and educational equipment for principally, the Cyprus
market and later the middle-east. Over the period of 20 years it has seen various ups and downs in
fortune but has been facing increasing competition especially in the education segment of its
Recently it has experienced a downturn in its profitability which its management ascribe to the
deteriorating economic markets in Europe and the ”knock on” effect in the Cyprus market. Various
strategies to overcome this deterioration in its sales and profits have been proposed and cuts in the
employee force and production techniques have been proposed. The management consider that
these strategies together with more stringent cost controls and cost cutting will produce the desired
results in the future.
One of the factors reported by the sales director, Kyriacos Dmitriou, is the increasing number of
returns being received by the goods returned department. This phenomenon he says, “….. is not
sustainable if the firm is to return to profitability. “
The production manager has suggested that if 100% of items produced are inspected at the end of
the production line then the problem of returns of defectives will be solved. This operation could be
achieved by moving 2 or 3 of the more experienced workers from the assembly line and onto final
quality inspection. Again, this strategy would not involve changes in staff numbers. It has also been
suggested by the production department that a higher degree of self assembly by the
customers/consumers could be used as this would again reduce production costs and place the onus
of the defectives issue on the consumers.
The Marketing Director, Stavrou Kiriacou, is concerned that so many items with working parts are
being returned due to erratic or non-working parts. He is concerned that this will affect the
reputation and image of the firm. His senior assistant has proposed that as a measure of good will
the firm agrees to receive faulty goods back and replace them with new items. This, he says, will
cure the image problems. He also suggests that the faulty units could be rebuilt and repaired then
sold in the outlet shop. These could be sold at a compensating discount. He believes also that this
would not detract from the sales of new items. Under this strategy no extra staff would be needed
as regular staff could carry out the functions during lulls in their regular work.
It has been suggested by the accountants that the company should be looking for cheaper
components even if they are considered lower quality as this would satisfy the company’s need for
cost reduction in production. With the change in staff organisation, cheaper components, cheaper
materials, rebuilding products and sales in outlets the returns problems and profit levels would be
addressed. The accountants have asked for more accurate figures of returns, defectives, fault points
and total production volume figures are provided to them. It could be they say, that the levels of
returns are at acceptable levels. After all they claim, the percentage “defectives” may well be within
the parameters laid down in industry standards and bench marks.
Additionally, the accountants have queried if the firm can afford to choose strategies other than
those they have proposed:
a)buying cheaper components and materials
b)working to industry norms on defectives and acceptance levels
c)”toughing” it out as far as returns are concerned by denying liability and resisting compensation by
replacement of defective products.
Operations Management – Assessment 2 – Toys (Cyprus) Ltd. – Case study
You have been requested to provide advice and justified recommendations, as a new graduate of
management studies, to the management of TOYS (Cyprus) Ltd. regarding their problems with their
products and processes. They are particularly interested in your observations regarding their
proposals to overcome their poor performance in the markets they are in.
They have asked that you provide them with justified reasons for recommendations.
You are to write your recommendations, findings and observations with fully justified arguments.
Guidelines for assignment
This is an individual assignment
Plagiarism and reproduction of someone else’s work as your own will be penalized
Make use of references, where appropriate – Use Harvard referencing method.
Structural elements should include an introduction, main body, and a conclusion
Weight – 50%
All of the following questions are to be attempted.
Maximum word count: 2000 words
Type of assignment: Essay
Deadline : Week 6
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