Business timeline of Brondy’s PLC, (BRD)
1930 - Company founded (line 1)
WW2 - Toy production suspended, factory used to make rifles for the army (line 6)
1955 - New products went into production, a slot car racing set and a model train set (line 12)
1985 - Founder Geoff retires, becomes minority shareholder while son, Arnold, becomes CEO (line 21)
1990 - Brondy takes over 2 company, Matchfix & Enam
2001 - Matchfix’s factory in Wales closes and production moved to Brondy’s factory in Liverpool (line
35), Matchfix’s and Brondy’s design departments merge (line 36)
2010 - Brondy’s sales started to fall (line 97)
2015 - Pace of the decline in sales started to increase (line 114)
2022 - Brondy suffers liquidity crisis (line 124), 4Change stepped in and invested £12 million (line 133)
2024 - Brondy to change from using metal to plastic in their train models (line 109)
Tools & Theories
Fishbone diagram, SWOT, STEEPLE, Motivational & leadership theories, Product life cycle, Ansoff
matrix, Force-field analysis, 7Ps, Stakeholder mapping, Triple bottom line, Change analysis, Financial
analysis, BCG matrix
Fishbone diagram
Prepared by A & H
SWOT
Strengths
-
-
Share of share capital helped finance
acquisitions (line 29)
Takeover of Matchfix, manufacturer of
plastic model kits of toys (line 31)
Takeover of Enam, a paint manufacturer,
which would have given BRD more control
over their supply chain (line 33)
Changing to cellular production will
increase efficiency (line 44)
Matchfix’s kits are meeting production
targets (line 55)
Able to make good use of specialized
machinery (line 56)
GOod relationship between Arnold the
CEO and Liverpool factory employees (line
58)
Paternalistic leadership
Low labor turnover rate in Liverpool office,
with workers working there for over 20
years (line 63)
Design department's employees are given
responsibility for the design of a new model
train set, giving them autonomy which can
increase motivation levels (line 76)
Using 3D printer to produce working
prototypes, which reduces the time and cost
to make a model set (line 101)
Weaknesses
-
Diversification was needed (line 25)
Coordination of production process is
difficult (line 42)
Employee absence (line 44)
Machinery problems (line 44)
Communication issues (line 44)
Increased training costs due to having to
train employees to be multiskilled (line
48)
Slow updates of factory’s employee’s
contracts of employment (line 66)
Differences between employees’
contracts in the production and design
departments (line 70)
Prices charged are uncompetitive (line
120)
Customer complaints about quality
issues (line 121)
-
Opportunities
-
Interest in electric slot cars and model trains
(line 9)
BRD’s product range broadened through
acquisitions (line 28)
BRD protected from foreign competition in
the UK market the set up is not compatible
(line 85)
Niche market enable BRD to charge higher
prices (line 90)
Loyal customer base (line 96)
4Change, a private equity business
purchased 20% of their shares at £12
million (line 123)
2023 for them to use the £12 million to
Prepared by A & H
Threats
-
-
-
Interest rates were high (line 26)
BRD’s reach is limited as their train
models cannot run on two-rail systems
made by their rivals in the US and
Europe (line 86)
Their toys are restricted to wealthy
families (line 91)
Customer base was getting older (line
96), younger consumers are not
replacing the aging ones (line 117)
Sales started to fall in 2010, market
share dropped from 60% in 2001 to only
20% (line 98)
Sales to consumers in Australia and
implement strategic changes that can lead
them into a more favorable situation (line
140)
-
-
New Zealand followed suit in the
decline (line 98)
Switch to plastic materials means that
the materials are not recyclable, may
face criticisms from consumers and
pressure groups (line 108)
Lack of interest in modeling as a hobby
(line 118)
Shareholder confidence falls, share price
falls more than 50% in 2021 (line 121)
STEEPLE
Social
Changing Consumer Preferences: Consumers' preferences have shifted over the
years from clockwork toys to more sophisticated and technologically advanced
products, such as electric model train sets and slot cars. (line 8)
Aging Customer Base: BRD's customer base is aging, and younger generations are
not as interested in traditional model trains and kits. This poses a challenge for
sustaining sales and growth. (line 117)
Technological
Shift to Electric and Plastic: The transition from clockwork toys to electric model
train sets and plastic kits reflects technological advancements in the toy industry.
3D Printing: Julia's successful use of 3D printing to create plastic prototypes
demonstrates the potential for more efficient and cost-effective manufacturing
methods. (line 101)
Economics
Interest Rates: High interest rates posed challenges for diversification and
expansion, influencing the decision to convert BRD to a public limited company
and seek acquisitions. (line 26)
Financial Crisis: Declining sales, falling shareholder confidence, and liquidity
issues in recent years have highlighted financial challenges for BRD.
Ethics
Quality and Realism: BRD's commitment to quality and realism over price,
despite declining sales, reflects an ethical stance that values customer satisfaction
and product integrity. (line 94)
Political
Acquisitions and Ownership Changes: The acquisition of other companies and
the involvement of private equity firm 4Change in BRD's ownership have
introduced new perspectives and potential changes to the company's direction and
strategy.
Legal
Employment Contracts: Arnold's slow updating of employment contracts and
minimal fringe benefits for production employees might have legal implications in
terms of employee rights and benefits. (line 65)
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Environmental
Material Choice: BRD's decision to transition from metal to plastic for its model
train sets reflects a consideration of material sustainability and cost-effectiveness,
even though concerns about plastic recyclability exist. (line 108)
Motivational theories & leadership
He exhibits paternalistic leadership traits through his close and personal relationship with the
employees. He tours the factory floor every morning, engages with each of the 107 production employees
at least once every two weeks, and knows them all by name and their family situations. He keeps track of
staff birthdays and gives cards and small gifts on an employee's birthday. (line 58-62)
By personally connecting with his employees, knowing them by name, and showing genuine interest in
their well-being, he demonstrates a caring and supportive attitude. This approach aligns with the parental
role of a leader in a paternalistic style. He creates a sense of belonging and familial atmosphere within the
organization.
Arnold's consistent engagement with employees and celebration of birthdays not only fosters positive
relationships but also contributes to employee motivation and job satisfaction. Employees might feel
valued and appreciated, leading to increased loyalty and commitment to the organization. This approach
can also result in improved communication and open dialogue between employees and leadership.
Maslow
-
Herzberg
-
Adam
-
Pink
-
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Arnold Brondy's personal connection with employees, knowing them by
name and their family situations (line 60), reflects the "Social Needs"
aspect of Maslow's hierarchy.
Impact: By fulfilling social needs, Arnold fosters a sense of belonging and
employee well-being, potentially enhancing motivation and job satisfaction.
The practice of giving birthday cards and small gifts (line 61) aligns with
Herzberg's concept of "Motivators." These are factors that contribute to job
satisfaction, such as recognition and achievement.
Impact:This recognition could lead to increased job satisfaction and a
positive attitude toward work, in line with Herzberg's theory.
Arnold's practice of personally knowing employees and their situations
could reduce perceived inequities by treating employees as individuals with
unique needs and circumstances. (line 60)
Impact: This approach might foster a sense of fairness and equity, leading
to enhanced motivation to contribute to the company's success.
The "Design Team Freedom Month" (line 75) and autonomy in pursuing
individual design projects resonate with Pink's theory, which emphasizes
autonomy, mastery, and purpose as key motivational drivers.
Impact: Encouraging autonomy can lead to greater engagement, creativity,
and intrinsic motivation among employees.
Product life cycle
Introduction:
- The clockwork toys introduced in 1930 marked the inception of Brondy's products. (line 1)
-
The transition from clockwork toys to electric slot cars and model train sets occurred after World
War II, marking the entry into the electric toy market in 1955. (line 11)
Growth:
- Sales of BRD Slotcars rose quickly in the UK and the Commonwealth of Nations, indicating
growth in demand. (line 15)
- The expansion of the product range with acquisitions like Matchfix and Enam Ltd. contributed to
growth. (line 28)
Maturity to decline:
- In the late 20th century, the market for model trains shifted from metal to plastic, which other
manufacturers adopted. BRD's emphasis on metal and premium pricing could have led to a
decline in market share. (line 94)
- The aging customer base and a lack of interest in modeling as a hobby contributed to stagnant or
declining sales. (line 117)
- By 2020, BRD's share of the UK market had fallen significantly, reflecting a decline in the
demand for its products. (line 98)
- Falling shareholder confidence and liquidity issues also indicate a potential decline phase for the
company as a whole. (line 122)
Rejuvenation:
- Julia Dentes' successful demonstration of 3D printing for plastic prototypes suggests a potential
revival of the model train sets through new materials and manufacturing methods. (line 101)
- The move to plastic and the potential for cost savings might attract a wider customer base and
prolong the life cycle of the product.
- The acquisition by 4Change and their influence on strategic decisions also signals a potential for a
revitalization effort. (line 123)
Prepared by A & H
Ansoff matrix
-
Existing
market
-
Existing product
New product
Market Penetration
Product development
Brondy currently sells a range of toy
products, including model train sets
and plastic model kits, primarily in
the United Kingdom and countries
within the Commonwealth of
Nations.
They could implement market
penetration by increasing its
marketing efforts to attract new
customers within its existing target
market.
-
-
Market Development
New
market
-
Brondy's can explore entering new
geographical markets where there
might be a demand for its products.
For example, it could target regions
where traditional model trains are
still popular or collaborate with toy
retailers in emerging markets.
Prepared by A & H
Brondy's can apply this strategy by
further developing its plastic model
kits and train sets, incorporating
features that appeal to a wider range
of consumers, including younger
generations.
This could involve adding interactive
elements, customization options, or
educational components.
Diversification
-
Diversification
could
involve
expanding into related areas within the
toy industry, such as educational kits
or tech-based toys. For example,
Brondy's could develop app-connected
model train sets that appeal to
tech-savvy kids while retaining the
nostalgia of traditional trains.
Forcefield
Based on the hypothetical scores, the supporting forces appear to outweigh the resisting forces. The
potential for innovation, adaptation to market trends, cost savings, and environmental concerns suggest a
positive outcome. However, the concerns related to quality perception, customer loyalty, nostalgia, and
market differentiation need to be addressed to minimize potential negative impacts.
Forces for change (Driving Forces)
Innovation Potential (4): The shift to plastic
could allow for more innovative designs and
attract a broader audience due to potential
cost savings and versatility.
Transition
from
metal to
plastic for
model
train sets.
Forces against (Restraining forces)
Quality Perception (2): Customers might
associate plastic with lower quality
compared to traditional metal, potentially
impacting sales.
Adaptation to Market Trends (3): Using
plastic aligns with the industry trend of using
lighter and cheaper materials, potentially
appealing to a wider range of customers.
Customer Loyalty (2): Existing customers
might have a preference for metal, leading
to resistance to the change and potential
sales decline.
Cost Savings (5): Plastic manufacturing
could lead to cost savings, making the
products more competitive in terms of
pricing.
Nostalgia and Tradition (3): The
traditional metal design carries nostalgia
and
tradition,
which
could
be
compromised by switching to plastic.
Environmental Concerns (3): If Brondy's
PLC addresses plastic recyclability concerns,
this change could align with increasing
environmental awareness.
Market Differentiation (3): The shift to
plastic might make Brondy's products
more similar to competitors' offerings,
reducing their unique selling proposition.
Total: 15
Total: 8
Prepared by A & H
7Ps
Product
-
Place
-
Price
-
Promotion
-
-
Physical
evidence
-
-
People
-
Process
-
-
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Diverse Product Range: Initially known for clockwork toys, (line 1) BRD
diversified into electric model train sets (line 12) and plastic model kits (line 38)
to adapt to changing consumer preferences and technological advancements
Shift in Material: The decision to transition from metal to plastic for model train
sets demonstrates a strategic shift in product composition to meet customer
demands and potentially reduce costs. (line 109)
Global Presence: BRD's products were sold in various countries including the
UK, Australia, New Zealand, and the USA. The company's decision to acquire
companies in different locations also impacted its distribution strategy. (line 30)
Factory Locations: The company's factory locations, including Liverpool and
Wales, influenced its manufacturing and production decisions. (line 40)
They charge high prices as they target a niche market of railway modelers (line
90)
High prices restricts sales to only wealthy families (line 91)
In 2022, the prices charged are considered uncompetitive (line 120)
BRD can promote its transition to plastic as a move towards sustainability, even
though there are concerns about plastic recyclability. This may resonate with
environmentally conscious consumers who appreciate companies that address
such issues.
While targeting new demographics, BRD could also tap into the nostalgia factor
to attract older consumers who remember the brand's clockwork toys. This could
be achieved through creative marketing campaigns that evoke memories of the
past.
Quality and Realism: BRD's commitment to quality and realism is evident in its
products, which have historically set it apart from competitors. (line 94)
Shift to Plastic: The decision to transition to plastic as the primary material for
model train sets might alter the physical appearance of products and influence
customer perception. (line 109)
Long-Term Employees: Many production employees have been with BRD for
over 20 years, contributing to a stable workforce with low absenteeism and
turnover. (line 63)
Ethical Approach: Arnold's personalized approach to employee relationships,
including remembering birthdays and family situations, highlights a positive
ethical culture. (line 58)
Production Methods: BRD initially used batch production for its train sets and
model kits, facing coordination challenges leading to production delays. The
consideration of transitioning to cellular production reflects a desire for more
efficient manufacturing. (line 46)
Acquisitions and Consolidation: BRD's acquisitions of other companies led to
consolidation of design departments and manufacturing processes, impacting
internal processes and efficiencies. (line 30)
Triple Bottom Line
Economics
Positives
-
-
-
Challenges
-
-
Prepared by A & H
Social
Successful history
and experience
since 1930
Expansion through
acquisitions of
Matchfix PLC and
Enam Ltd
Steady sales
growth in the early
years with iconic
clockwork toys.
Diversification
into new products
and markets.
-
Declining sales
since 2010 due to
market shifts and
competition.
Financial
difficulties and
liquidity crisis in
2022.
-
-
-
Environmental
Strong personal
connection between
CEO Arnold
Brondy and
employees.
Long-term
employment and
low absenteeism
No history of
industrial strike
action.
Commitment to
employees'
well-being through
birthday
celebrations and
engagement.
-
-
Potential for
reducing plastic
waste if recyclable
materials are used.
Outdated contracts
for Production
Department
employees
Unequal fringe
benefits between
Production and
Design
Departments.
-
Initial use of
non-recyclable
plastic for new
products.
Potential
environmental
concerns associated
with the disposal of
plastic products.
-
-
Historic
commitment to
using metal for
quality and realism.
Transition to plastic
in 2024 for model
train sets to address
market trends.
Change Analysis
How effectively Brondy manages and implements changes, considering certain factors:
Change Readiness:
- Positive: CEO Arnold's regular interactions with employees show engagement and understanding
of their needs.
- Challenge: Lack of adaptation to changing market trends indicates a potential resistance to
change.
Communication and Transparency:
- Positive: CEO Arnold's personalized interactions foster open communication and transparency.
- Challenge: Resistance to 4Change's influence suggests a need for transparent communication
about the reasons for their involvement.
Employees
- Positive: Long-term employment, low absenteeism, and lack of industrial strikes indicate positive
employee relations. Proposal to transition to cellular production indicates consideration for
necessary employee training.
- Challenge: Outdated employment contracts and unequal fringe benefits could affect employee
morale and willingness to embrace changes. Employee training and skill development might be
needed to adapt to new manufacturing processes.
Leadership and Vision:
- Positive: CEO Arnold's involvement and personal approach reflect leadership commitment to
employees.
- Challenge: Leadership might need to clearly communicate the vision behind changes to ensure
alignment and motivation.
Strategic changes:
- Positive: Acquisition of Matchfix and Enam indicates a willingness to diversify and adapt to
market shifts.
- Challenge: Change from metal to plastic materials requires a clear strategy to address concerns
about quality and customer loyalty.
Stakeholder Engagement:
- Positive: CEO's personal relationships with employees create strong stakeholder engagement.
- Challenge: Resistance to 4Change's influence highlights potential stakeholder concerns that need
to be addressed.
Monitoring and Feedback:
- Positive: CEO's regular interactions provide opportunities for feedback.
- Challenge: Establishing mechanisms for ongoing feedback and monitoring of changes is essential
to address potential issues.
Change Resistance:
- Positive: No history of industrial strikes indicates a positive work environment.
- Challenge: Concerns about plastic materials and quality issues might trigger resistance from
employees and customers.
Prepared by A & H
Financial Analysis
This is done without any figures in the extract given, however, these are some areas that students can look
at if IB were to give any figures in Section B or C.
Revenue & Sales
Growth
-
Positive: Historic success since 1930 with clockwork toys and
acquisitions of Matchfix and Enam.
Challenge: Declining sales since 2010 due to market shifts and
competition.
Liquidity and
Financial position
-
Liquidity crisis in 2022 due to declining sales and difficulty raising
funds from shareholders.
Profitability
-
Declining sales and financial difficulties impacting profitability.
Cost management
-
Transition to plastic could lead to cost savings in manufacturing.
Challenge is to balance quality and cost with the shift to plastic.
Investment and
growth
-
Successful acquisitions of Matchfix and Enam indicate a
growth-oriented approach
However, declining sales impacting investment capacity and growth
prospects.
Market Position and
Competition
-
Declining market share and competition from other manufacturers.
Cash flow
-
Declining sales affecting cash inflow, leading to liquidity issues.
BCG Matrix
High market growth
Low market growth
High market
share
Star:
No specific products in the case
study are mentioned as stars.
Cow:
Historically clockwork toys, while not
mentioned explicitly, could have been cash
cows during their prime due to low growth
but dominant market share.
Low market
share
Question Mark:
BRD Slot Cars and BRD Three-Rail
Model Railway could be considered
as question marks due to high
market growth potential but
uncertain market share in
competitive industries.
Dog:
Potentially, the declining sales of
clockwork toys and certain products like
plastic model kits and model train sets
could be considered dogs due to both low
growth and market share.
Prepared by A & H
Stakeholder mapping
High Interest
High
Power
-
-
Low
Power
-
Low Interest
Employees: Brondy’s staff has a
pivotal role which significantly
influences the company's
achievements. Their keen
involvement in the company's
operations, policies, and choices is
quite probable.
Shareholders: Brondy operates as a
public limited company and the
shareholders hold a notable interest
in the company's success. It is
probable that they possess a strong
inclination towards the company's
financial results and its potential for
future expansion.
-
Governments and Regulatory Bodies:
Brondy conducts business across
several nations, and its activities are
subject to oversight by governmental
regulations. The actions of
governments and regulatory entities
can wield considerable influence over
the company's operations, although
their focus might not extend to
Brondy’s daily functions.
Consumers: Brandy’s consumers
may be concerned with the quality
and pricing of their toys, however,
they may not be able to exert a
significant influence on BRD as
they
seem
to
be
more
product-oriented
-
Suppliers and Vendors: Brondy
depends on suppliers and vendors to
provide essential materials for their
toys. However, these partners might
not exert a substantial influence on the
company's operations or strategic
choices.
Stakeholders
Stakeholder
Features
Concern
Power
Fair working
contracts, high
wages, job security
Medium
Internal stakeholders
Employees
-
Prepared by A & H
Low labor turnover rate in Liverpool
office, with workers working there for
over 20 years (line 63)
Design department's employees are given
responsibility for the design of a new
model train set, giving them autonomy
which can increase motivation levels (line
76)
Shareholders
-
Board of
directors
-
Arnold (CEO)
-
Shareholders does not have much
confidence in Brondy as they turned down
their offer to increase their shares (line
132)
Share price dropped by more than 50% in
2021 (line 121)
High dividends,
increase in share
price
High
Agreed to become a public limited
company in 1955 (line 27)
Agreed to change from using metal to
plastic in their train models (line 109)
Business growth
and future
sustainability
High
Paternalistic leadership
Reluctant to give 4Change more power
with the concern of the change in direction
(line 136)
Business growth &
retain control
High
High quality toys
High
For rules and
regulations to be
followed
High
External stakeholders
Consumers
-
Target niche market of wealthy families
and modelers (line 88, 91)
Sales has been falling as interest in
modeling falls (line 118)
Government
entities
Competitors
-
Changed to using plastic in the final
quarter of the 20th century (line 92)
Market share in the
toys industry
Low
Suppliers
-
Concerned with BRD’s liquidity problems
(line 128), insisted on immediate payment
for orders (line 129)
Punctual payments
High
Definitions (alphabetised)
1. Acquisitions: The process of purchasing and taking over other companies or their assets to expand
business operations.
2. Autonomy: The ability of individuals or groups within an organization to make decisions and take
actions independently.
3. Batch Production: A manufacturing process where products are produced in groups or batches rather
than individually, often to achieve efficiency and cost savings.
Prepared by A & H
4. CEO (Chief Executive Officer): The highest-ranking executive in a company responsible for making
strategic decisions and managing overall operations.
5. Competitors: Other companies within the same industry or market that offer similar products or
services and compete for customers.
6. Diversification: Expanding a company's product or service offerings into new markets or industries to
reduce risk and enhance growth opportunities.
7. Employee Engagement: The level of commitment, motivation, and involvement of employees in their
work and the organization's goals.
8. Fringe Benefits: Additional non-monetary perks or advantages offered to employees beyond their
regular salary, such as health care, meals, or car allowances.
9. Innovation: The introduction of new ideas, products, processes, or technologies that bring positive
changes to a business or industry.
10. Leadership Styles: Different approaches or behaviors that leaders adopt to guide and influence their
teams, such as transformational, transactional, and paternalistic leadership.
11. Liquidity Crisis: A situation where a company faces a shortage of available cash or assets that can be
quickly converted into cash, often leading to financial difficulties.
12. Market Penetration: A growth strategy that focuses on increasing market share by selling more of the
same products to existing customers in the current market.
13. Motivational Theories: Theories that explain the factors that drive and influence human behavior and
motivation, such as Maslow's Hierarchy of Needs, Herzberg's Two-Factor Theory, and more.
14. Niche Market: A smaller, specialized segment of a larger market that caters to specific customer needs
or preferences.
15. Paternalistic Leadership: A leadership style where the leader takes on a parental role, providing
guidance, support, and decision-making in the best interest of employees.
16. Recyclable: Refers to materials or products that can be collected, processed, and reprocessed to create
new products, reducing waste and environmental impact.
17. Social Responsibility: A business's commitment to ethical practices, community involvement, and
environmental sustainability, beyond its economic goals.
18. Strategic Changes: Significant alterations in a company's strategies, operations, or direction to adapt
to market trends, improve performance, or achieve specific goals.
Prepared by A & H
Brondy’s PLC
Brondy’s PLC (BRD) began manufacturing wind-up clockwork toys in 1930. BRD was initially
founded as a private limited company by Geoff Brondy, a skilled engineer and entrepreneur, in
Liverpool, United Kingdom (UK). BRD’s product range included clockwork cars, lorries,
motorbikes, trains, animals, and novelty items – one of its biggest sellers in the 1930s was a toy
monkey playing a drum kit.
During the Second World War, toy production at BRD was suspended and the factory was used
to make rifles for the army. Once the war was over, however, Geoff discovered that the toy
market had changed. Consumers now wanted more sophisticated toys, and the era of the
clockwork toy was ending. In 1954, Geoff visited a toy fair in New York, United States (USA),
and saw the interest that electric slot cars and electric model train sets generated among the
other visitors.
Geoff returned to Liverpool to begin designing new products that would take BRD forward, and
his first two designs went into production in 1955:
- A slot car racing set, consisting of a track and two sports cars. He chose the brand name
BRD Slotcars. Sales of BRD Slotcars rose quickly in the UK and other countries in the
Commonwealth of Nations.
- A model train set, consisting of an engine and four carriages. This set had a three-rail
system, rather than the two rails Geoff had seen in the USA. In Geoff’s design, the
middle rail supplied the electrical power to the model trains, and this feature became part
of the product’s brand name, the BRD Three-Rail Model Railway. This brand sold well in
the UK, Australia, and New Zealand. Sales in the USA and Canada, however, were very
low, as the product was not compatible with the model train sets produced in those
countries, where the two-rail system was used.
Geoff retired in 1985 and became a minority shareholder, passing on most of his share capital to
his son, Arnold Brondy. Arnold became the chief executive officer (CEO). Arnold shared his
father’s passion for toys. Ideally, he would have preferred BRD to focus on one product only –
model trains – but realized that if BRD was to prosper, diversification was needed. An issue,
however, was that interest rates at that time were very high.
Arnold persuaded BRD’s board of directors to agree to a conversion of BRD to a public limited
company. He also aimed to broaden BRD’s product range through acquisitions. The sale of
share capital in BRD helped finance these acquisitions.
In 1990, BRD took over two companies:
- Matchfix PLC, a manufacturer of plastic model kits of aircraft and military vehicles, with
sales across the world. This business’ factory was in Wales, UK.
- Enam Ltd., a paint manufacturer whose paint was used by modellers across the world.
This business’ factory was in France.
Prepared by A & H
Arnold valued efficiency and productivity. In 2001, BRD closed Matchfix’s factory in Wales and
moved production to the BRD factory in Liverpool. At the same time, BRD merged the Matchfix
and BRD design departments. A single Design Department, based in the Liverpool factory,
became responsible for the design of model train sets, slot car racing sets, and plastic model
kits. The Matchfix brand name was retained.
Production methods in BRD’s
Liverpool factory in 2023 BRD model train sets are currently manufactured using batch
production. Each train set consists of three components: a train engine, coaches, and a set of
tracks. Coordination is proving difficult, however, and production targets for each component are
not always met for a variety of reasons, including employee absence, machinery problems, and
communication issues. As a result, the daily dispatch of train sets to retailers had to be
postponed approximately three times a month in 2022, as complete train sets could not be
assembled. BRD is considering changing to cellular production for its model train sets. This
would require production to be halted for two weeks, and additional employee training would
need to be provided to make employees multiskilled. Employees would also be split into teams,
called cells. The workday would be changed to incorporate daily 30-minute cell meetings,
timetabled during normal working hours. Each cell would be responsible for producing one train
set component, and the team of employees in a cell would work at a single workstation using
parts delivered to that station by automated delivery vehicles.
The Matchfix plastic model kits are manufactured in a separate part of the Liverpool factory and
also use a batch production method. Cellular production for the model kits is not being
considered, as production targets are consistently met and the production process makes
greater use of specialized machinery than the production of the BRD model train sets.
Human resources at BRD’s Liverpool factory in 2023
BRD’s CEO, Arnold, is proud of his relationship with the Liverpool factory employees. He tours
the factory floor for an hour every morning. Arnold can guarantee that he speaks to each of the
107 production employees at least once every two weeks. He knows them all by name and
prides himself on knowing their family situations. He also keeps a record in his office of staff
birthdays and makes a point of giving a card and small gift on an employee’s birthday. Many of
the production employees in the Liverpool factory have worked there for over 20 years.
Absenteeism and labour turnover are very low by industry standards. BRD’s employees have
never taken industrial strike action. However, Arnold has been slow at updating the factory
employees’ contracts of employment. These contracts only provide the statutory minimum
benefits for employees who are absent due to illness or those who need to take parental leave
following the birth or adoption of a child. The salaries of all employees rise automatically by 3%
after every three years of employment. Employees in the Production Department do not receive
any fringe benefits. In contrast, employees in the Design Department have a range of fringe
benefits, including a car allowance, subsidized meals, and private health care. They also have
flexible working practices and can choose to work from home two days a week.
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Although employees in the Design Department have set tasks to complete, for one month each
year they can pursue individual design projects that interest them and that may be useful to
BRD. This month is known within the company as Design Team Freedom Month. Every year,
each member of the Design Department is given responsibility for the design of one new model
train set, slot car set, or plastic model kit. Their role is to manage a design from its initial
concept, through the design stage, and into production, solving any design and production
issues in collaboration with the production director. Arnold also meets with the employees in the
Design Department every two weeks to hear their views on progress in the company and listen
to their ideas for the future.
The BRD Three-Rail Model Railway, 1955–present
BRD’s model train sets are made from metal. The tracks, on which the model trains run, have
three rails, with the center rail carrying the electrical current. Competitors in the USA and
Europe use a two-rail system. This has protected BRD from foreign competition in the UK
market, as model railway engines made abroad are not compatible with BRD’s three-rail
system. However, it has also limited BRD’s market reach, as its model trains cannot run on the
two-rail systems made by their rivals in the USA and Europe.
BRD’s customer base initially included railway modelers, who were usually male and who
valued accurately made and well-designed models. Targeting this niche market enabled BRD to
charge higher prices than foreign manufacturers for its model train sets. BRD also sold its train
sets to parents who wanted toys for their children, but the high prices restricted sales to wealthy
families.
In the final quarter of the 20th century, most model train manufacturers across the world
replaced metal with plastic where possible, but BRD did not. BRD’s board of directors were
convinced that quality and realism were more important than price, so they continued using
metal as the primary material. BRD’s products became significantly more expensive than similar
two-rail train sets made by rival manufacturers. BRD had a loyal customer base, but this base
was getting progressively older, and sales fell year after year from 2010. By 2020, BRD’s share
of the UK market had fallen from a peak of 60% in 2001 to 20%. Sales to consumers in New
Zealand and Australia followed a similar pattern.
During the last Design Team Freedom Month, Julia Dentes, a member of BRD’s Design
Department, used a three-dimensional (3D) printer to produce working prototypes of five
different versions of one model train set in plastic. This took less time than it would have taken
to produce just one model train set in metal, and it was less expensive. Julia also showed that it
was possible to achieve the same level of detail and realism using plastic as by using metal.
Julia’s department head was so impressed with her work that he arranged for Julia to make a
presentation to BRD’s board of directors.
The directors were equally impressed. However, some directors had misgivings because the
plastic used was not yet recyclable. Despite these misgivings, the board agreed to make a
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fundamental change to BRD’s model trains: from 2024, they would be made from plastic rather
than metal.
Financial performance
By 2022, BRD’s finances were in a critical situation. Sales of plastic model kits and model train
sets began to fall at the start of the century, and the pace of the decline in sales increased every
year from 2015. BRD’s own primary and secondary market research suggested there were four
reasons for the falling sales:
- A decline in the customer base for BRD’s metal trains and plastic model kits; BRD’s
customer base was ageing, and they were not being replaced sufficiently by younger
ones.
- A general lack of interest in modelling as a hobby due to the advancement of the online
games industry.
- The prices charged for BRD’s train sets were uncompetitive.
- An increase in customer complaints about quality issues with Matchfix plastic model kits.
BRD’s shareholder confidence fell, and its share price dropped by more than 50% in 2021.
Following this fall, 4Change, a private equity business, purchased 20% of BRD’s shares.
In 2022, BRD suffered a liquidity crisis caused by the falling sales of its model train sets and
plastic model kits. BRD had not reduced production, resulting in unsold stock in its Liverpool
factory valued at £6 million. This led BRD to seek a financial rescue package. However, BRD’s
bank refused to extend its overdraft, which now stood at £8 million. Suppliers were beginning to
panic, and one key supplier of materials canceled BRD’s 30-day trade credit facility, insisting on
immediate payment for each order
BRD’s board decided to offer existing shareholders the right to buy an extra share for every five
shares owned. This offer was intended to raise £15 million from shareholders to stabilize the
business. Many of BRD’s shareholders turned down this offer, however, and BRD only raised £3
million. 4Change stepped in and offered to buy the £12 million of unsold shares at a 25%
discount. 4Change also insisted that it be given three positions on the board of directors.
4Change was determined to exert more influence over BRD’s strategic decision making. As
CEO, Arnold was reluctant to accept this offer, as he feared the direction that 4Change might
want BRD to take. However, the board of directors voted to accept this offer. 4Change now
owned 35% of BRD’s shares.
2023 will be a crucial year for BRD. The £12 million raised from the sale of share capital gave
BRD sufficient liquidity to continue trading, but further strategic changes will be needed if BRD is
to avoid more difficulties in the near future.
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