Case study methodology and applications

¶ … business has a relatively low level of globalisation. On the production side, the company has maintained production in the UK and sources most of its materials in the UK as well. The level of globalisation in production is therefore very low.

In terms of sales, the company sells its bears primarily in the UK, but has also developed some overseas markets. There are individual collectors located overseas who can interact with the company via multiple different modes of communication. There are also one or two trade customers who are located in other countries. There is significant sales potential if the company can increase the globalisation of its customer base.

The business in which the company operates, however, is highly globalised. Firms typically are involved in the design and marketing steps of the process in their home markets, but source their manufacturing in other countries. By having teddy bears produced overseas, the price of the bears is much lower than that of Merrythought's bears. This has changed the market for the bears to one where price is a primary consideration for most customers. Most companies in the market, therefore, are producing products intended to have short lifespans, and to be purchased almost on impulse. The high cost of production at Merrythought has forced the company to change its business model. One imagines that when the company started it was not competing against low-priced competitors and therefore was not forced to occupy a high-end niche in the market. The company's new market positioning has been the direct result of the globalisation of the supply chain in the stuffed toy business.

The globalised supply chain has affected the company's finances. Merrythought struggles to be profitable. This is likely the result of being forced into a niche by companies that are able to sell at a much lower cost. The company's finances and current market position are therefore both the result of the gradual globalisation of the business. Its solutions lie in using the forces of globalisation to its advantage, something the previous administration does not appear to have done particularly well.

2. For Merrythought, the most important driver of globalisation to this point has been cost, but ultimately the company needs it to be market. Government is not particularly relevant, because the UK government promotes free enterprise, something that allows for foreign competition in the market. However, Merrythought is equally capable as its rivals of using overseas manufacturing, so its current position is the result of company choice not government policy. Likewise, the company's competition plays by the same rules that it does. There is neither advantage nor disadvantage to the competition as the result of globalisation -- they have merely chosen a different path to profitability.

To this point, costs within the industry have been held low as the result of using overseas manufacturing. With modern equipment and cheap labour, firms in the industry have been able to contain cost increases for teddy bears. Quality may have suffered as the result, but the current cost structure within the industry is definitely the result of globalisation, which has opened low-cost manufacturing sites to the industry. To this point, cost has mostly impacted Merrythought negatively, as the industry has shifted from one focused on high quality, differentiated products to one that is focused on low cost products. The differentiated component of the business is now a tiny niche, the one Merrythought occupies.

The road forward for Merrythought is to look beyond Britain for its market. Globalisation not only changes the cost structure of industries, but it also opens up new markets. The government's commitment to free markets and its membership in the EU improves global market opportunities for British companies. Merrythought occupies a narrow niche market with its product, but this is a niche that can be built around the world. There is not inherent reason they cannot sell in dozens of different countries. The product is easy to ship globally, and the Internet allows for global marketing. There is no reason why Merrythought shouldn't look globally for new markets in order to build its economies of scale.