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POP MART – Organization Analysis
Contents
Contents 2
Executive Summary 3
Brief Description 4
POP MART Background 4
IP Pool 5
Organizational Strategy 7
Miles and Snow 7
POP MART’s Goals 12
Organizational Structure 13
External Environment 15
Internal Environment 17
International Environment 19
Products & Services 21
IT and Information Systems 23
Organization Size and Life Cycle 28
Organization Culture and Ethical Values 30
Innovation and Change 32
Decision-Making Process 37
Conflict and Power 38
Recommendations 41
References 42
Executive Summary
According to a report published by Frost & Sullivan, initially founded in 2010, Popmart is the largest and fast-growing pop toy company in China, whose creation of unique toy products for its customers using an extensive IP pool is at the center of its success. The company has grown and withstood major challenges in the market. With an increase in the popularity of the toy culture, Pop mart has created a link between designer toys from artists to a large fan base that is willing to spend on the toys. The industry’s growth has increased in the past few years as many people are exploring their inner wants, and many find themselves buying toys. The company set itself to be one of the pop toy culture pioneers and has come up with some of the best strategies to retain its position in the market. Pop mart has also ventured into international markets and is looking to grow even further to reach more clients. The company is also innovative in many ways, which has helped it outdo many of its competitors, such as Maylok Toys.
The purpose of the analysis is to get a deeper understanding of how the company has grown over the years, including how it has countered challenges faced along the way. The analysis will also be beneficial for the company to identify areas of weakness and strengths, which are helpful to eliminate potential risks as well as leveraging on its strengths. To be able to achieve this objective, this report looks into various aspects of the company, including the challenges faced, internal and external issues affecting the company, culture and ethical values, products, strategies being used by the company, and the company’s size as well as its contribution to company success, among others. In addition, the report looks deeper into the company’s integrated platform for the development and sales of products, how the company can attract artists and its marketing strategies.
Pop mart has dominated the toy market and is always looking into new ways of growing and becoming better. Some of its strategies are top-notch, and the company is able to profit from them for long periods of time. The company sets the stands for companies in the toy industry, and a lot can be learned from them. The company is also able to maintain the risks and uncertainties that are faced by the toy market. In the analysis, the overall aim is to break down how the company functions as a whole to meet its requirements.
Brief Description
POP MART Background
POP MART Cultural & Creative Co., Ltd. was found in 2010 in Beijing, and it has become a leading company in China’s entertainment industry and pop culture in recent years, which mainly designs, produces, distributes, and commercializes pop toys. In most pop toy lovers’ minds, POP MART is the top company that created collectible toys for them. The headquarters region of the Beijing-based enterprise is in the Asia Pacific (APAC), and the total funding amount is US$114.9 million. The brand concept and slogan of the company are “To light up passion and bring joy”, which created an integrated platform that covers the industry chain of designer toys. Official data also shows that as of 2019, POP MART has covered 57 cities across China with a total of over 114 vending stores and 825 vending machines. Meanwhile, the company’s market is expanding globally, with 21 overseas countries already in place, including Singapore, the U.S., Japan, and South Korea. Moreover, according to Table 1, the total revenue of POP MART has rapidly grown from RMB158 million in 2017 to RMB1683.4 million in 2019 respectively; and the net profit was recorded as RMB75 million in 2017 and increased up to RMB109 million in 2019. These data indicate that the growth rate of POP MART from 2017 to 2019 is not to be underestimated. Furthermore, according to POP MART itself, “POP MART has offices in major Chinese cities, including Beijing, Shanghai, Nanjing, and Dongguan exceeding 1500 employees who take charge of the physical stores, product design, intellectual property licenses, app development, and exhibition management”. POP MART is a company that focuses on talent development, and in recent years, as the company has grown in popularity and sales nationwide, the company’s demand for talent has increased.
Table 1: Revenue and Gross Profit of POP MART
Source: http://corpsv.etnet.com.hk/data/documents/ipo/20201201/HKEX-EPS_20201201_9529208_0.PDF
The 33-year-old founder and chairman of China’s largest toy enterprise POP MART, Wang Ning, was born in Henan province located in the middle east of China. Also, since the company’s initial public offering (IPO) in Hong Kong, its market capitalization has reached $3.2 billion, and Wang has become a newly minted billionaire and prominent Chinese entrepreneur with a majority stake through a holding company. According to Zhuoqiong Wang, “in 2010, he founded Pop Mart to sell arty designer products including accessories, makeup, and digital products”. Wang Ning started POP MART as a retail store, Wang has learned a lot from running his first store and has identified many problems, such as inventory management, staff allocation, and after-sales service. Wang also said that the reason for the victory in the international toy manufacturing market is to leave behind the usual low-cost and high-volume characteristics of most Chinese toy manufactures, but stick to his strategy and philosophy. To follow with, the purpose of POP MART is to commercialize and industrialize the toys designed by the artists, to raise the awareness of these toys through its platform, and to bring them to more toy lovers.
IP Pool
POP MART itself is a lifestyle retailing company, which was started as selling lifestyle commodities, like beauty, digital, etc., and in recent years, it found the unfulfilled demand of designer toys of the Chinese younger generation, followed by changing its business strategy and focusing on designing and selling designed toys since then, which led its market share to increase rapidly.
Source: http://corpsv.etnet.com.hk/data/documents/ipo/20201201/HKEX-EPS_20201201_9529208_0.PDF
For a design-based company like POP MART, IP is at the core of their business to maintain a high-quality IP resource in the popular toy market and continue to be a leader in the industry. According to POP MART itself, as of June 2020, the company has 93 IPs in operation, and the IPs held by the business are divided into three categories: proprietary intellectual property, exclusively licensed intellectual property, and non-exclusively licensed intellectual property. In more detail, the proprietary IP of the company indicates that the company has its complete IP so that it can develop and sell popular toys designed by its own company for a higher profit, such as the most popular IP of the company Molly; and the exclusively licensed IP refers to the company is granted exclusive rights to develop and sell the pop toys based on these intellectual property rights in China and other licensed territories; POP MART has also been granted non-exclusive intellectual property rights to sell products based on this property right in designated territories and in China. Its main non-IP partners are relatively established suppliers around the world, the better-known being Disney. POP MART usually sells some third-party products selected by third-party suppliers, such as Frozen, Harry Potter, etc., through e-commerce platforms (like Tmall) or some retail stores. In addition, the company’s exclusive licensed IPs and proprietary IPs have similar functions which are designed and researched by its in-house development team, usually with designers who have relatively high artistic value and appeal to a specific demographic.
Organizational Strategy
Since POP MART’s market share has skyrocketed in recent years, and its organizational strategy has been significantly altered to meet this progress. In this section, the organizational strategies of POP MART will be analyzed based on the theory of Miles and Snow, Porter’s competitive strategies model, the company’s goals, the present and current strategies that the firm have implemented, as well as if those implemented strategies are effective for the development of the company so far.
POP MART Regarding Miles and Snow
POP MART Regarding Miles and Snow
Defender: Ecosystem
Defender: Ecosystem
Prospector: Global Market Expansion
Prospector: Global Market Expansion
POP MART
POP MART
Reactor: Change
Reactor: Change
Analyzer: Intellectual Property
Analyzer: Intellectual Property
Figure 1
Figure 1
Miles and Snow
The theory of Miles and Snow encourages entrepreneurs to set business strategies based on four categories: prospector (innovating), defender (protecting and sustaining), analyzer (maintaining), and reactor (changing).
To start with, to meet the long-term vision of the company, which is becoming a global pop culture and entertainment company, POP MART’s long-term strategy is to expand its global market. According to the interview with Justin Moon, the vice president of POP MART, who stated that there are three main reasons for the company to expand globally: they believe that the capability the company developed in the domestic market in China can support the company to gain a foothold in the global market; they can seek for the resources that are unavailable in China’s market to enhance the competitive advantages in the international market; and the third reason is their belief in the strong demand for collectible pop toys from the overseas consumers and the potential for the artists to develop overseas, which can create a huge-scale business in the global market. This strategy meets the category of “prospector” from Miles and Snow, which is about innovating and seeking a new market for more chances to develop. Meanwhile, as recorded by Lauren Hallanan, a contributor of Forbes, POP MART started its overseas market officially since 2018 and has been active in over 20 nations or territories (like Japan, Korea, Canada, etc.) in the world, mainly focuses on retail stores, vending machines, as well as online shops through third-party platforms like Amazon. It is smart for the company to also expand its online market globally because the trend of the e-commerce market in the global economic environment is substantial.
Then, POP MART, being the giant enterprise in the domestic collectible pop toy market in China, also implements strategies to protect its current place and make the business sustainable in the competitive environment, which can be considered as a “defender” in Miles and Snow’s theory. For POP MART, the economic ecosystem is the most effective protector for its development. POP MART’s extremely rapid growth over the past two years has resulted in a strong ecosystem driven by upstream and downstream, which has effectively driven the company’s performance and profit expansion. POP MART is at the forefront of the market because it has developed a more substantial consumer base through its high-quality and low-price sales model, and it has been able to save costs and increase profit margins by acquiring IP upstream while also collaborating with designers on exclusive IP. Furthermore, before POP MART’s transformation into an integrated collectible pop toy design, production, and sales company, most products in the collectible pop toy industry were priced higher, which meant a more limited consumer demographic, but POP MART’s product model established a new market in the industry and was highly successful. In addition, the company’s main target group is adults, because adults have their independent purchasing power compared to children, and according to the survey, 95% of PM toy consumers are between the ages of 15-40, which is an effective influence on the company’s sales model realistic. From this point on, POP MART will continue to hold on to this category of consumer population by acquiring more IP to maintain its position in the market, and to maintain economic stability in the market with the ecosystem that has been formed.
In addition to ensuring customer satisfaction and maintaining a stable and sustainable market share, POP MART is also engaged in the intellectual property business to nurture more talented artists, which will ensure the company’s growth prospects in the long run and can be seen as an “analyzer” in Miles and Snow’s theory. According to China Daily, “wang’s vision is to be inclusive, and to nurture the entire market”. Wang Ning, the founder of POP MART, states that the goal of the enterprise is not to establish many competitors in the collectible pop toys market, instead, by partnering with toy manufacturers who have significant intellectual property rights, POP MART has transformed competitors in the industry into distributors or partners. Moreover, Wang Ning’s goal for cultivating artistic talents is not only for China, but to cultivate and gather artistic talents globally. According to research, in the process of POP MART’s global expansion, 20 countries and regions have achieved sales growth, and the company aims to make overseas sales revenue equal to or greater than domestic market sales revenue, even though overseas sales currently account for only 10% of total revenue. As such, the company can ensure a sustainable future by cultivating and gathering artistic talent and controlling intellectual property while the company has already reached the front end of the market.
The market ebbs and flows constantly according to consumers’ likes and needs, so POP MART needs to respond to this changing market environment to make relative changes to meet customer needs and maintain its position in the market, related to “reactor”. China’s collectible pop toy market is still in its early stages and not fully mature, as pop toys are not widely known in China. POP MART entered the market when pop toys were just starting to be widely accepted and liked by the mainstream in China and has seen extremely rapid growth in sales in recent years. In the “reactor” section, the company does not have a clear strategic plan but rather changes to meet the changing environment. In the early years, POP Mart’s main sales channels were stores and vending machines, but in recent years, with the continuous expansion of China’s e-commerce market and the proportion of online retail market coverage, POP Mart has also made certain adjustments to its corporate sales channels, that is, shifting its focus to online sales since 2020. Figure 2 shows the presence of Molly designed by Kenny Wong and POP MART at Tmall, for celebrating Chinese New Year.
Figure 2
Source: https://www.thetoychronicle.com/wp-content/uploads/2021/01/MOLLY—Chinese-New-Year-2021-by-Kenny-Wong-x-POP-MART-x-Tmall-The-Toy-Chronicle-CNY-Chinese-New-Year.jpg
Porter’s Competitive Strategies Model
To determine the industry structure and competition level of an enterprise in the industry, Porter’s five forces of competitive strategies model is a useful tool, which was brought out by M. Porter in 1979. As figure 3 shows, Porter’s five forces include the threat of entry, bargaining power of suppliers, the threat of substitutes, bargaining power of buyers, and industry rivalry.
Figure 3
Source: https://strategicmanagementinsight.com/tools/porters-five-forces.html
At the time when POP MART was a barely competitive retailer, the market for collectible pop toys in China had not yet developed. When the Chinese mainstream began to take notice of the industry, POP MART’s transformation allowed it to flourish, driven by the growing trend from a niche market. In 2015, a chance of cooperating with a famous Japanese pop toy brand Sonny Angel had inspired Wang Ning to transform into an IP owner, which was also the generator of his success in the market. At this point, at the time when POP MART entered the market, the barrier for new entrants to enter was relatively low because the market was considered niche, but things seem to be different nowadays. According to Statista, “in China, the pop toy retailing market has witnessed a steady growth in the past few years, with the market size increasing from 6.3 billion yuan in 2015 to 20.7 billion yuan in 2019”. Hence, since the market size has grown by over three times from 2015 to 2017, it is obvious that the pop toy market in China now is no longer in its early days, it is in a mature market state compared to a few years ago, which indicates that the threat of entry of the market is low. Meanwhile, POP MART’s sustainability also relies heavily on consumer loyalty. Most pop toy collectors like to collect complete sets of toys from the same brand line and do not easily shift their interest from one brand to another new brand. From this perspective, the market in which POP MART is located has high barriers for new entrants.
POP MART is an IP operation company and has its ecological chain from design, production to sales, but it also has third-party partner IP suppliers. It deals with Universal Studios and Walt Disney as licensing third-party partners and sells products from those suppliers, and figure 4 shows the products that POP MART and Walt Disney corporates. Since Disney is already the top brand in the upper reaches of the world, POP MART has little bargaining power with this supplier company, so from this point of view, POP MART does not have an advantage. Meanwhile, POP MART mainly corporate with the third-party manufacturing factories for producing their products with reasonable quality, capacity, price, reputation, compliance, as well as applicable regulations and laws, which also produces for many other toy brands in China or other global toymakers. It is considered that the bargaining power of the suppliers is high due to such requirements from POP MART.
The high dependence of Bubble Mart’s products on the loyalty of its consumers leaves its consumers with less room for bargaining. For example, the consumers’ most favorable series of POP MART, blind box, which is the same from outside of the box and with different looks of the figurine insides, has brought uncertainty and mystery for the consumers and stimulates the consumers to purchase again and again. Meanwhile, pop toy lovers are willing to pay higher prices for the toys they want, so in that sense, the bargaining power of POP MART consumers is not high, which is positive for the business to be more competitive in the market.
Figure 4
Source: https://up-next.com.hk/products/pop-mart-disney-classic-animals-series-mini-figure
The threat of substitutes should be worried by POP MART since the revenue of the enterprise starts to grow slow in 2020. Another franchised pop toymaker Kule Chaowan which also sells blind box toys and China’s largest variety store chain Miniso Group had put POP MART in major threat of competition in the pop toy market. Meanwhile, a university student Xiao Peng, a pop toy collector who studies in Shanghai, said “I just want to buy something, the brand I buy is not important”. Hence, it seems the favorable toys can be easily shifted from POP MART to other brands by the consumers, which determines that the threat of substitutes is relatively high for the enterprise. Furthermore, since new entrants have entered the market of pop toys, the competition level increases, which means the industry rivalry is also high for POP MART, and it should be highly recognized by the company.
POP MART’s Goals
According to its own, the business strategy that POP MART implements to reach its goal is mainly focused on building a rapid-growing, young, passionate, and strong fan base. To follow with, POP MART has created a multi-channel program as a community for the pop toys fans to communicate and share their collects, and the consumers can apply for membership for free through online platforms like Wechat or Alipay, as well as offline channels like retail shops. Through this strategy, the company can enhance the stickiness of the consumers, and improve consumer loyalty to their brand. The collectible pop toy consumers communicate with each other on e-commerce platforms like PAQU, as well as make deals on secondhand selling platform Xianyu. What is worth to be mentioned is that, in the second-hand market, the price of some of the sought-after toys will be speculated several times higher than the original price. Hence, if the consumers with a collecting purpose do not want to pay such a high price for buying a favorite toy, they will always pay attention and follow the official POP MART sale to buy at an original price. Such a marketing strategy for POP MART has been particularly effective, driven by the sudden growth of China’s popular toy market in recent years, and has brought the company benefits that should not be underestimated.
Organizational Structure
An effective organizational structure provides an enterprise guide to the entire team through a complete official reporting guidance that governs the workflow of the enterprise, and a formal organizational structure supports the company to develop more flexibly and readily. As such, since POP MART’s size has continued to expand at a high rate in recent years, it has had to keep pace with improvements to its organizational structure.
Wang Ning, the founder, chairman of the board, and the current CEO of POP MART holds 47.57% of shares of the company, is the largest shareholder so far. According to its own, “POP MART has offices in major Chinese cities, including Beijing, Shanghai, Nanjing, and Dongguan exceeding 1500 employees who take charge of the physical stores, product design, intellectual property licenses, app development, and exhibition management”. Hence, the introduction of its team shows that the 1500 employees of POP MART are spread in different cities with different major jobs based on their skills, like physical stores operation, product design, IP licenses, app development, and exhibition management, which indicates that the type of structure model the company implements is functional organizational structure. Functional organizational structure can be understood as the positions are structures from the highest level, and goes down from there, while each employee at a different position has their major tasks depended on their skills, and each department is managed independently. This organizational model helps the company’s employees in different areas to have an independent and fit relative management model to accomplish the work content of the area more efficiently.
Figure 5 shows the director board and the major roles with their functions of the company. It can be seen from the director board in figure 5 that there are five executive directors, led by the chairman of POP MART, Wang Ning, followed by Ms. Yang Tao, Ms. Liu Ran, Mr. Si De; the two non-executive directors are Mr. Tu Zheng and Mr. He Yu; and the independent non-executive directors are known as Mr. Zhang Jianjun, Mr. Wu Liansheng, and Mr. Ngan King Leung Gary. Furthermore, the main roles are audit committee (Chairman Mr. Wu Liansheng, Mr. Tu Zheng, and Mr. Ngan King Leung Gary), remuneration committee (Chairman Mr. Zhang Jianjun, Mr. Wu Liansheng, and Mr. Wang Ning), and nomination committee (Chairman Mr. Wang Ning, Mr. Zhang Jianjun, and Mr. Wuliansheng).
Figure 5
Source: http://corpsv.etnet.com.hk/data/documents/ipo/20201201/HKEX-EPS_20201201_9529208_0.PDF
Furthermore, other than the internal organizational chart, POP MART also has a variety of subsidiaries spread all over the country, which are also significant roles for the development of the company. Figure 6 shows the major subsidiaries, their operating entities, as well as the date of establishment and commencement of business. Accordingly, the headquarter Beijing Pop Mart, focuses on design and sale of pop toys, was established on October 20th, 2010; Paqu Huyu was established on March 8th, 2016, whose major business is internet technology services; Tianjin Pop Mart Cultural Communication Co., Ltd., which is for sales of pop toys, was established on November 29th, 2016; Pop Mart Hong Kong Limited, which was established on January 27th, 2017, mainly controls overseas operations and sales of pop toys, and is the key point of POP MART’s global expansion; and Shanghai Paqu Commerce Co., Ltd. is also for selling products, which was established on September 21st, 2017.
Major subsidiaries and operating entities of POP MART:
Figure 6
Source: http://corpsv.etnet.com.hk/data/documents/ipo/20201201/HKEX-EPS_20201201_9529208_0.PDF
External Environment
The external environment for the progress of POP MART in this report will be divided into 5 categories: economic forces, demographic forces, social forces, technological forces, and competitive forces.
From the economic perspective, POP MART’s rapid development has been pushed by the fast-growing pop toy market in China. Data shows that the market size of China’s pop toy market has been grown from RMB 6.3 billion to RMB 20.7 billion from 2015 to 2019, which means the compounded annual growth rate went up to 34.6%. Meanwhile, since the popularity of pop toys in China kept growing, the market size is expected to reach RMB 76.3 billion in 2024. Moreover, the growth of China’s pop toy market in recent years, from a demographic perspective, actually represents the growth of China’s GDP in recent years. Only when people’s income is much higher than their necessary expenses, then they have spare money to buy some products that are used to buy enough spiritual needs. POP MART’s products meet this condition precisely, which is why its popularity has increased. To follow with, a Frost & Sullivan survey shows that near 95% of POP MART’s consumers are aged between 15 to 40, while over 65% of them hold bachelor’s degrees or even above. Hence, from a social perspective, in the rapidly developing Chinese society, the younger generation of consumers tend to have access to a more diverse culture and tend to pursue a higher level of lifestyle, and they have a stronger desire to express their individuality. Therefore, many young people will repeatedly buy and collect pop toys to put their spending power on spiritual satisfaction and share their preferences through social platforms.
E-commerce Revenue Forecast in China from 2017 To 2025, by Segment
(In billion U.S. dollars)
Table 1
Source: https://www.statista.com/forecasts/890275/e-commerce-revenue-in-china-fashion-by-segments
From the perspective of technology, we have to mention the brilliant e-commerce market in China in recent years, because the development of POP MART is extremely dependent on the promotion and sales on e-commerce platforms. Table 1 represents the E-commerce revenue forecast in China from 2017 to 2025 by segments, and the data clearly shows that the revenue generated from toys, hobby and DIY grows from US$129.6 in 2017 to US$256.4 in 2020 and predicted to reach US$406.8 in 2025. It indicates that pop toys are being highly shared and traded through China’s e-commerce platforms, while POP MART also takes advantage of this trend by applying online shops on Tmall, as well as its third-party platform for the pop toy lovers to share, communicate and sell their collected pop toys. Then, from the competitive perspective, the leading pop toy companies in China’s pop toy market are mainly focused on obtaining high-quality IPs in their competition. Amid the rapidly growing pop toy market in China, as it was mentioned before, POP MART has heavy pressure of competition in the market because of the threat of new entrants like Miniso and Kule Chaowan, and the pressure of striving for highly qualified IPs with the competition from other leading toy companies.
Internal Environment
The internal environment of a company is more important than the external factors in achieving and sustaining its competitive advantages, which includes a firm’s strengths or resources that its competitors are unable to obtain. According to POP MART’s company report, there are six strengths that it is more advantageously competitive than other toymaking companies in the market, which are as follow: it is the vanguard of China’s pop toy culture, tough IP creation and strengthened operation capabilities, integrated consumer access from multi-channel sales and distribution network, high stickiness and consumer loyalty, strong global operation capabilities to capture the global market growth globally, a strong management team with foresight.
The vision of the company POP MART, as the pioneer in the pop toy market in China, has identified its opportunity in the industry, so it focuses on developing its house brand products and proprietary IPs. Since the core of POP MART is its IPs, it is significant for the company to maintain its current IPs and develop new IPs for catering to the consumers’ favor. According to POP MART itself, “leveraging our integrated platform and market-leading position, we have attracted and maintained a pool of high-quality IP resources in pop toy industry”, and to follow with, the company has operated 93 IPs until June 2020, including proprietary IPs, exclusively licensed IPs, and non-exclusive IPs. POP MART focuses on developing the commercial value of their own IPs, and the operational IPs and management team during the entire operation cycle enhance the competitive advantage of the company in the pop toy market.
Moreover, the Omni-channels distributed by POP MART is also a competitive advantage for the enterprise, which allows the consumers and toy-lovers to closely connect to the brand from a variety of channels. According to the results presented in Table 2, back in 2017, the company’s main sales channels were mainly offline retail stores (63.9%) and vending machines (18.9%). However, by 2020, the share of online transactions (40.9%) has surpassed that of offline retail stores (38.3%). It indicates that the progress of POP MART closely follows the related developing markets in China, like e-commerce. Meanwhile, since the vision and mission of POP MART are “to light up passion and bring joy”, the multi-channel of the company enables the consumers to share their collects, seek for their needs, as well as being a platform for pop toy lovers and artists to communicate, which increased the stickiness and loyalty of the consumers and enhances the future of the market in a way. Furthermore, as it was mentioned in the “Business Strategy” section, POP MART has been put the effort into expanding the global market in recent years. This means that the company has huge ambitions for the future, as the company’s CEO, Ning Wang, as mentioned earlier, is looking to turn POP MART into a global platform for gathering popular toy artists.
Table 2
Source: https://valueinvestasia.com/10-things-to-know-about-pop-mart-international-group-limited-before-you-invest/
While a company has its competitive advantages, there are also inevitable drawbacks and risks. Since POP MART focuses on IP operations, it is important to keep up with consumer favorites and the fashion trends of the popular toy scene. In the collectible pop toy market, while a portion of toy-loving collectors will stick to a line of toys from one brand, switching from one brand to another is not something that requires much thought for most consumers, because of the tastes of consumers change extremely fast and dramatic. Hence, for POP MART, the team is unable to guarantee that the products they design, and launch will be accepted or loved by consumers, nor that the company can fully guarantee that the current line of popular toys will remain high-volume. According to its own, the revenue generated by its most successful figurine Molly accounted for near 89.4% in 2017, 62.9% in 2018, and 44.5% in 2019, respectively, which indicates that the most popular series takes a huge part of its total revenue. Hence, once Molly becomes less popular in the market, POP MART would be in huge trouble to figure out other IPs and design new pop toys, while the popularity of new toys cannot be guaranteed. In addition, the international market that POP MART yearns for is also risky, due to the variety of tastes of the consumers from different cultures and regions, it is challenging for the company to design such products that meet the favor of all the consumers in the global market from a demographic perspective. In addition, it is also a weakness that POP MART’s third-party licensed products’ sales volume is highly dependent on those third-party brands’ popularity. For example, if a figurine POP MART sells is designed based on a cartoon character from a movie published by its third-party corporate Disney Walt, and the movie is not as popular as expected, the sales volume of POP MART can be seriously affected.
International Environment
In recent years, many up-and-coming Chinese brands have tried to expand their market globally after their success in China, but the original strengths of these brands in China, such as the advantages of local marketing and sales models in China, do not play any supportive role abroad, resulting in a great challenge for these brands to expand in the global market. POP MART, being one of those new companies, strives to take its footsteps out of China and bring its corporate culture to the world.
Taking a look at the global pop toy industry, the market is growing rapidly in recent years. According to Table 3, the market size started to grow faster in 2017, from US$119 to US$150 in 2018 and kept growing at a stable pace up to US$198 in 2019, and US$237 in 2020. Also, the market is predicted to be keeping increasing in the next four years up to US$448 in the year 2024. These data show that not only China, but the global pop toy market has also begun to develop rapidly in recent years. This means that competition in this market is just beginning, which has both advantages and disadvantages for POP MART’s global expansion.
Table 3
Source: https://www.the2sidestory.com/2021/04/14/in-the-art-toy-industry-top-toy-rather-than-pop-mart-takes-the-lead-as-the-highest-trending-giant/
According to an interview with POP MART’s vice president, Justin Moon, there are three reasons to understand why the company choose to expand internationally, which are known as follows: they want to use the capability that the company creates in the domestic market to stabilize its foothold in the overseas market; it is necessary to seek the resources like market models from overseas market to enhance its competitive advantages in the local market, which is unavailable in China; the third reason relates to the big goal of its CEO, Wang Ning, who is looking forward to drug out the potential of the international artists and find out the consumers’ needs in the overseas market, and expand POP MART to become a large-scale business in the world.
POP MART’s business strategy aiming at the globe can be simply put as expanding its global market, especially in Asia Pacific Region like Japan, Korea, and Singapore, and attracting more local artists by improving the brand awareness in the global pop toy market. In more detail, before entering a new market, the team of POP MART conducts a comprehensive analysis to figure out the market conditions and related regulations of the target market, then provides advice. The first step is to gather information of the target market, including the popularity of pop toys, related artists, and history of the industry, and its local partners might be helpful in this process. Then, its team will conduct and analyze the newest information related to the market condition. The last step is to develop a complete business plan for successfully entering the target market.
As mentioned previously, POP MART’s overseas market has covered 21 countries or regions as of 2019, which includes Korea, Japan, Singapore, and the U.S… Meanwhile, POP MART also officially announced that it is entering the European market by the corporation with its European partner called Baby Watch, which is a great opportunity for the company to enter the European market. Furthermore, data shows that the revenue generated from POP MART’s overseas market raised from RMB0.7 million in 2017 when it first launched to the global market, to RMB26.9 million in 2019, and decreased to RMB20.7 in 2020 because of the Covid-19 pandemic affecting the entire global market. It demonstrates the fact that POP MART is progressing in the global environment, and since its development of is closely related to the market trend, the increasing global pop toy trend might lead it to a higher position in the market.
Products & Services
The most popular product line of POP MART is Blind Box. Blind boxes (Chinese: Manghe) are known as the toy boxes that look the same on the outside but have different types of toys inside which are designed by different designers and artists; and normally there are 12 figurines in each character series, and 12 blind boxes make up one package while 12 packages are combine of one cartoon character. Each figurine is about the size of a palm, and they are put into individual clear bags, which are then placed in blind boxes.
The reason why blind boxes are so popular with young people is that they bring a sense of mystery to consumers. Among the 144 blind box sets, there is a unique toy called mystery style, which greatly stimulates consumers’ curiosity about the blind box, and data shows that in 2019, POP MART’s most popular character toy “Molly”, designed by Hong Kong designer Kenny Wong, sold 4 million pieces. Except for Molly, the best seller IPalso include Pucky, The Monsters, Dimoo, Yuki, Bobo&Coco, Satyr Rory, Coarse, and other offers. To add with, figure 6 shows the looks of POP MART’s most famous IPs, and each blind box is sold at around US$9.5, while consumers can also buy a whole set worth US$114. In fact, for a palm-sized toy, the price is not cheap, but POP MART’s clever marketing methods make consumers willing to pay for it and to collect a series, many pop toy collectors would like to buy all 144 figurines at once.
Figure 8
Source: https://global.popmart.com/collections/dimoo
As previously mentioned, there are three types of IPs that POP MART operates: proprietary IP, exclusive licensed IP, and non-exclusive licensed IP. According to figure 7, the proprietary IPs are Molly, Dimoo, BOBO&COCO, Yuki, and others, occupies 34.4% of the total revenue in 2020; the exclusive licensed IPs include Pucky, The Monsters, Satyr Rory, and others, accounts for 33.4% of the total revenue in 2020; and the non-exclusive licensed IPs takes 16.3% of the total revenue in 2020, respectively. In comparison, it is obvious that the major revenue was generated by proprietary IPs and exclusive licensed IPs, and among them, the most high-volumed IPs are Molly, Dimoo, and Pucky, which account for 13.7%, 14.4%, and 14.6% of the total revenue in 2020. Hence, the popularity of the best-sellers has to be maintained and sustained since the revenue share them seems to be the key to the development of the company.
Revenue generated by IP categories for the period indicated:
Figure 9
Source: http://corpsv.etnet.com.hk/data/documents/ipo/20201201/HKEX-EPS_20201201_9529208_0.PDF
IT and Information Systems
Information technology has become a part of our day-to-day lives, and people are embracing it. Companies are integrating IT into their activities to achieve more efficiency and productivity. IT systems, unlike man, are prone to mistakes and very fast. In this technological era, businesses, no matter how small, have found ways to incorporate various technologies that benefit them, such as mobile money transfer. Pop mart relies heavily on Information Technology to function efficiently. The company uses IT systems and software applications to run significant activities such as product development, managing supply chain, sales, and delivery, formulating financial reports, among others. Some of the systems that Pop Mart owns include those used for enterprise resource planning, systems at the point of sale and the finance and an accounting systems. The POS, point of sale system, is helpful since the company has lots of stores both locally and internationally. The system is used to track sales from any of its shops and also covers online shops. With one central system, the managers can keep track of sales and monitor sales patterns. Sales data is important as it is used to balance inventory and keep track of revenue collected. The company can keep track of inventory from all the stores, and if a product is running low, the company can know and restock where necessary. As discussed earlier, Pop mart decides prices for products according to their popularity, and without the POS system, it would be hard for the company to use this strategy. With several shops all over the globe, the Pop mart can compare sales data of each product and decide on the price tag. Data on sales of each product helps the company plan for the future as they can find out which brand is becoming more popular and then put more work into refining it.
An example is Pucky which recorded high initial sales, which led to the company releasing more series over the years, and Pucky became the most sold brand in 2020 by Pop mart. The POS system was key in Pucky’s development as the managers could monitor its popularity across all of its shops. The POS system also helps the company to keep track of financials. The company can easily formulate financial statements, which help check whether the company is doing good or bad and evaluate the company. Sales data also help to keep track of money in the company and discourages theft. Once a sale is made and recorded in the system, the counter at the store is responsible for the money. Without a system to keep track of the sales, the employees might be tempted to pocket money from sales, and it would be hard for the management to realize since the company is so big. The data has also been useful while compiling annual statements on sales, and the company has been able to provide well-structured data for the public.
An ERP software is also used to interlink the departments in the company. Pop mart works with numerous manufacturing companies, third-party companies, artists, and distributors, among others from different countries. Using an ERP, enterprise resource planning software, the company can link all its activities to produce faster and better outcomes. Different departments can share information on the toys and help to improve them for better customer satisfaction. For example, suppose customers are complaining about a certain toy or have ideas about improving it. In that case, the information can be easily delivered to the artists using the ERP software. After modifications, the artists can then share final designs with the manufacturers who then produce the toys. After production, the distributors can then be informed that the product is ready for distribution. The sales department can then share information with the production team on what they need. The company stores products from manufacturers in warehouses that are operated by the ERP system. The system allows the warehouses to achieve full automation, and cameras have also been set up to monitor the movement of the items. All of the activities should run smoothly, and if any of them fails, the company will not be able to run its activities. As seen, the life cycle of a product from designing to selling depends on the ERP system, which has been key for the company’s growth and expansion.
Using an IT system is accompanied by a lot of risk factors, such as attacks from hackers. Pop mart has invested in various technologies such as anti-virus software, encryption of data, and setting up firewalls to mitigate such attacks. Hackers attack large companies to steal data or for blackmail, and such cases can cause the company considerable amounts of money. Pop mart has put in place numerous measures; for example, customer data can only be accessed by a few authorized staff who are given a coded key. The company also stored key data, which is transmitted through the company’s own internet to avoid exposing itself to the public internet. As hackers are gaining new ways into hacking systems, the company conducts regular training where employees are taught various ways to mitigate such attacks. The systems are also susceptible to damage, catastrophic events, or interruptions from electrical failures. Such cases can cause the company a lot of money to repair, and a lot of time is wasted. For efficient operations and successful company growth, Pop mart requires these systems and has thus spent money to maintain and modify them. IT is ever-growing and more solutions are coming up, and if the company is left behind, the systems might not be sufficient for them. Such modifications may also cost Pop mart a lot of money, but they are necessary and help the company in many ways. The company does not currently have an in-house IT team as they source outside from renowned professionals.
Pop mart stores most of its data electronically, as is it easy to manage and access. The data consists of customer data, employees, current and future developments, and partners. The data is vital for the company, and leakage can give its competitors an advantage as they can analyze the company’s information to Pop Mart’s detriment. Data from customers is also crucial as it is subject to privacy laws and regulations. Pop mart collects data from customers, especially members, and is responsible for protecting it. Privacy has become a very delicate topic, and new laws are being formed to ensure that the data collected is well managed. When new rules come into effect, the company might need to change some of its procedures and soft wares in compliance and might have to use a lot of money. To give an example, the Cyber Security Law of China, which was passed in 2017, had major changes, and the company has to review its processes to adapt to the changes. Pop mart is also aware that unlawful practices might resort to negative publicity, which might draw customers away. Therefore, pop mart does not conduct any business concerning customer data and has made its customers more confident when giving away personal data.
As the company plans to expand, it plans to expand IT extensively and have its in-house team develop and maintain the systems. Pop mart’s goal is to automate the relevant processes to attain higher output and reduce the cost of manual labor in the long run. In addition to the current IT infrastructure at the company, Pop mart plans to deploy new soft wares and optimize the current ones for better productivity. Approximately $17.7 million will be allocated for talent recruitment. The company currently has 51 members in the technical team and wants to recruit an additional 150 practical talents with experience in IT fields such as big data analysis in the coming three years. The sum is in regard to the 150 personnel to be recruited as well as the compensation rates of excellent talents in the field. Among the 150 talents, 60 will be in charge of the digital transformation of internal operations, 40 people in charge of transforming the sales data into digital data and management of network distribution, 20 people to come up with a big-data collection structure, and 30 people to set up a cloud-based network. The team will help Pop mart expand further and put in place a more effective digital structure. In addition, Pop mart believes that having an in-house technical team will be more cost-effective than outsourcing from third-party suppliers. Systems from third-party suppliers may need customization based on the company’s needs and might incur additional costs, longer research, and unstable product performance. In addition, third-party suppliers are not fully conversant with the company’s operations. As a result, they cannot work with the relevant departments, making it hard to develop the best products. Sharing a lot of information about the business with third-party suppliers is also risky as it can be used against them and might expose their secrets. With an in-house team, the company can provide regular training on technical aspects of the company. With close relations from other departments, they can develop the necessary systems specifically for the company.
Approximately $35.3 million will be used to acquire relevant software and hardware to improve IT. The soft wares will be used to enhance digital marketing, customer service, supply chain, management of transactions, among others. When allocating the funds, Pop mart considered the number of soft wares needed and the prices for each. The soft wares implemented so far have helped the company numerous ways and have encouraged them to invest more for even better outcomes. Approximately $ 35.3 will also be used to optimize online marketing. As discussed earlier, digital marketing is effective as products can be marketed to the whole world and have been key for the expanding plans. The money will be used to place strategic advertisements, links, icons, and the inclusion of news feed on other platforms, including those own or run by third parties. Pop mart has been very observant and considerate of the levies or fees required or levied by such sites operated by third parties and the need to maintain the business’s projected expansion through their digital platforms while allocating such fees. As seen, IT has helped Pop mart reach its international level, and more efforts have been kept to ensure that the role of IT is further developed and the systems are well managed.
The company also rolled out paqu, a mobile application owned by them where fans can access updates and news on the pop toy culture, interact with other pop toy fans as well as trade their collections for money or for another toy. The application has helped the company as fans get to interact with each other and gain more knowledge and understanding of the toys, and by trading, they can get to experience new products, which might lead to new interests, which results from repeat purchases. Moreover, as the fans interact and share information on the artists and products, the company is able to process the data and identify the most popular designers, products, and IPs and be able to know what steps to take in the future. Paqu also helps the company to understand its customers to enhance its fan base and gain insights on the market trends and customers’ tastes, which helps them to come with products that have both a market and artistic value. Paqu has a total of 650 pop toy brands produced by the company. Through a Weixin account, the fans can also get news on product releases and any other information about toys, including upcoming events. The Weixin account has a huge number of followers, with the company recording 2.4 million users in 2020.
IT has also helped the company to operate roboshops that do not require people to operate them as they use their own integrated system. In 2020, the roboshops contributed to 12.9% of the total sales. Although the number is considerably low, the automated machines cut down costs of human labor, maintenance costs, and renting costs which then increase their profit levels. Despite retail stores contributing to 38.3 of total sales in 2020, a lot of money is invested back to maintain the stores and pay the employees. Using roboshops is a more strategic method of increasing profit margins. The roboshops have also been used strategically to identify areas to expand potentially. If a certain roboshop has high sales, the company can then open a physical store nearby to boost sales. Physical shops offer a wider variety of toys and a place where people can come and interact with the toys. Once the company spots a potential area with a large fan base, it can confidently open another branch. The roboshops have also made toys available to more people. The company has set in place more than 1000 automated roboshops. The shops can reach many people, help the company collect more revenue, and establish a broader fan base. The company also allows people to set up roboshops as a business. To a lesser extent, the company is working with trusted partners who come up with the location of the roboshops and maintain them. In June 2020, the company leased 81 of the roboshops. Although the roboshops are not owned by the company, Pop mart decides on the products to be sold and the quantity to be stored according to the sales patterns. The owners must follow the instructions or risk termination of the leaser agreement. Although Pop mart will be in charge of the roboshops, the owner will collect profits generated from sales of the shops.
The company has also set up an interactive website where they have showcased all the products and prices. The website can be used to compare prices, and the different toys and purchases can also be made online. Furthermore, the company implemented a shipping feature for online customers to facilitate online purchases. For international customers who are not near physical shops, the company has put a shipping structure that takes an estimate of 15 – 30 to be delivered. This strategy has helped the company to reach more people and generate more revenue as online shopping cuts the cost of having physical shops and employing people to manage them. The company also uses online platforms such as Instagram and Facebook for marketing and posting upcoming events. Most people use social media, and Pop mart is able to capture a large audience by using them.
Pop mart is able to provide a reliable and exciting shopping experience to its customers through an ever-growing online platform including Pop Draw, Paqu, Tmall store, among other prominent platforms in China. The company, through agreements, pays the platforms for the services rendered, which include marketing and operation service. The payments consist of either commission, which is charged according to the company’s sales on the platform, or through marketing fees which is simply an agreed amount to use the platform for marketing the products and does not rely on the number of products sold—many of the online platform charge a commission fee of 5% on the products sold through them. Pop draw charges fees on marketing only and does not charge the company commission fees. Service charges incurred by the company for the use of these e-commerce platforms for the years 2017, 2018, 2019, and 2020 totaled $0.14 million, $0.98 million, $4.47 million, and $3.97, respectively. The rise in charges is in accordance with the rise in sales from online platforms. Pop mart does not mind spending more money as long as they are able to gain more profit. Commissions incurred by the company in its use of these e-commerce platforms for the years 2017, 2018, 2019, and 2020 totaled to a hundred thousand dollars, six hundred and eighty thousand dollars, seventeen million two hundred throusand dollars, and one million, four hundred and sixty thousand dollars, respectively, with marketing and technical charges totaling to fifty thousand dollars, three hundred thousand dollars one million eight hundred thousand dollars, and 2.5 million, respectively. Due to the Corona pandemic, the company had to promote online shopping, which led to the increase in marketing and technical charges incurred by the company. The flagship Tmall store has been a major way to attract new customers. The company commenced operations of the flagship store in 2016 and has since steadily grown over the years. According to a report published Frost & Sullivan, a global research and marketing firm, under the commissioning of the Hong Kong Stock Exchange, revenue collected from the Tnall store in 2019 amounted to approximately $39 million, leading it to be ranked at top position amongst the company’s competitor toy stores on the Tmall platform. Revenue from the Tmall store increased from $10.3 million as of June 2019 to $22.7 million as of June 2020. During both the 2019 and 2020 Singles Day Shopping Festival (Chinese organized biggest online shopping event in the world), sales from the company were ranked first among the other toy stores. The company also rolled out Pop Draw in 2018 to create a playful and exciting shopping adventure. The application offers the blind boxes feature embedded with animations to capture the audience and boost the sales of blind boxes through smartphones. The application has grown over the years which revenue generated increasing from an initial 3.57 dollars in 2018 to 42 million dollars in 2019 and 25 million dollars as of June 2020.
Organization Size and Life Cycle
The organizational life cycle is a model which tries to explain the different stages that a company goes through. Like animals, companies go through certain stages, which include the start-up stage, growth stage, maturity stage, and decline. Companies that don’t get to the decline stage have a revival stage between maturity and decline. The life cycle is important as different stages in the cycle come with their challenges. Knowing where a company lies in the cycle will help it overcome challenges to study and foresee the challenges. In the start-up stage, companies raise initial capital, hire workers and start developing products for the market. This stage is more often capital and labor-intensive, and the investors are focused on growth rather than profits. After start-up, successful businesses go through a rapid expansion which takes to the growth stage, where the returns outweigh the investment. In this stage, the company can focus on expansion and hires additional employees to cater for the expansion. Revenue also grows as financial situations become better and companies can establish a stronger customer base. In the maturity stage, the company has been able to rack up profits and is well established. The main aim at this stage is to maintain or improve the cash flow. For companies that depend on innovation, such as Pop mart, the aim is to continue refining products that fit the current generation. If companies fail to maintain their position, they may possibly enter the final stage, which is decline. Reduced sales and profit accompany the decline stage due to reduced demand levels. Reduced sales might lead the company to fire employees to survive. To avoid total decline, companies might decide to downsize or reinvent their way of conducting business, and if it fails, the company is shut down or sold off. Instead of a total decline, companies opt to go through a stage revival stage where the company reinvents all the processes at the company, and a lot of research on problems and possible remedies is needed. The leadership might also be changed to bring new ideas to the company. If a company successfully goes through this stage, then decline is avoided, and it can look into growing further.
Pop mart lies in the late growth stages as it still looks to expand. Although Pop mart has experienced rapid growth over the years to become an international company, a lot of efforts have been kept to further develop the company. Revenue collected from Pop mart can manage itself and fund future developments meaning it is well past the growth stage. In the growth stage, Pop mart has been able to diversify innovation and distribution. With the company operating in 22 countries, growth has become more rapid, and the company is nearing the end of its growth stage. If all goes as planned and the company can expand in the coming few years, Pop mart will be able to focus on product development and distribution, which will take it to the mature stage. Pop mart has set aside plans and capital for growth as it believes it has not yet achieved all its goals. Some of the areas of growth include strengthening internal systems and innovation.
Pop mart can be classified as a large enterprise based on organization size as it operates with more than 2300 employees. As of June 2020, Pop mart owned 136 retail shops across 33 cities in China, 1,001 roboshops across 62 top-tier cities in China, online platforms such as the Tmall flagship store, and wholesale distributions comprising of 25 local wholesalers in China and 22 off-shore distributors. Furthermore, with a large fan base, the company was able to register more than 3.6 million members by June 2020 who are key to the company as they contribute majorly to the revenue. Pop mart also works with a subsidiary entity, Paqu Huyu, to enable them to conduct business in China. Beijing’s Pop Mart and Paqu Huyu entered into an agreement, the Exclusive Consultation and Service Agreement to enable such trading collaborations. Under this agreement, both parties agreed that Paqu Huyu would pay a service fee to Pop Mart in consideration of the services provided by the latter party. It is important to mention that the service fees to be paid by Paqu Huyu, although subject to Pop Mart’s adjustment from time to time, equal all of Paqu Huyu’s net profit. Sometimes, such service fees may extend to include Paqu Huyu’s retained earnings from financial periods preceding this agreement with Beijing Pop Mart.
Additionally, any adjustments by Beijing Pop Mart are completely discretionary, but may, which is most times the case, allow Paqu Huyu retain sufficient working capital to allow the company carry out any growth plans it may have. Under the agreement, Paqu Huyu is also expected to deliver its management accounts as well as any other operating statistics, at least once every year to Beijing Pop Mart. The agreement also allows Beijing Pop Mart to, at its sole discretion, mine or take away all of Paqu Huyu’s economic benefits. Due to such benefits and Beijing Pop Mart’s control over Paqu Huyu, Pop Mart’s financial statements include those of Paqu Hayu because essentially, Paqu Huyu is almost fully absorved into the operations of Pop Mart. The effect of this state of affairs to is to increae the sheer size of Pop Mart as a company. However, it is important to note that Paqu Huyu operates as a community toy application allowing puchasers to access pop toys for averagely low prices. However, over the recent past, this part of Pop Mart’ most hyped commodities in the form of a mobile phone application (Paqu Huyu) has been challenges, causing it to decline in popularity, thus affecting not only the popularity of the toy company in the digital sphere, but also its earnings and position in China’s and Beijing’s highy competitive toy market.
On the possible decline, the blind box strategy has been criticized by a lot of people, and the company should look into newer strategies in the future. The strategy in cooperated gambling as the buyer can either get a normal toy or, if they are lucky, get a popular toy from a released series. The toys can then be kept or sold for profit through third-party online platforms such as Paqu. This strategy has made customers make multiple purchases with hopes of getting a popular one. If a customer makes multiple purchases and keeps on getting regular toys, they might be discouraged from continuing making purchases and might even spread negative news about the company. The strategy has worked for many years, but people are getting tired of old tricks.
Organization Culture and Ethical Values
Organizational culture is a collection of practices that guide a company and its employees. Pop mart is among the pioneer developers and pushers of the culture of pop toys in the Chinse market. One of Pop mart’s culture is to support the foundations of the designer toy market. The market for the past years has not been dominant and pop mart proves that the market can be grown even further. The company also invests in homegrown talents as it organizes seminars in partnership with the Chinese Central Academy of Fine Arts, where top designers come and share some of the tricks of the designer toy market. The support has helped the company recruit new local designers that understand the local market needs. Through an IP pool, the artists can design unique products for Pop mart. Pop mart plans to allocate approximately $105M to expand the IP pool. The money will be put to use through various venues including elevating Pop Mart’s ability to pinpoint outstanding designers through organizing and attending pop toy events organized both in China and abroad. The company also has rooled out plans to recruit an additional team of skilled designers as part of the in-house design team. The main goal here is to spur the growth of the company’s in-house development capacity in terms of intellectual poperty rather than relying on outsourcing, as well as to achieve an increased number in terms of proprietary Intellectual Properties. In additiona to having in-house designers, Pop Mart plans to procure well-known IPs from other talented designers not employed by the firm. The amount will be allocated as follows:
Approximately $26.5M will be used to strengthen the company’s ability to find outstanding designers. This will be achieved by increasing the scale of pop toy events. For example, apart from hosting the shows in Beijing and Shangai, the company might opt to explore other major cities in China as well as selecting larger venues to host more people and artists who are interested. Apart from hosting such events, the company also plans to attend other pop toy events set up by other companies in order to get more insights as well as market themselves. The amount specified is to be used within 1 to 2 years in an effective and efficient manner.
Approximately $8.8M of the net proceeds will be used in acquiring new artists to add to the in-house development team in order to enhance in-house originality as well as providing a competitive salary. The artists will be tasked with refining products from other artists to meet the market demands as well as designing new IPs for the company. As the number of IPs increases, the company, in turn, needs to add to the in-house team to be able to cater to the IPs efficiently. Pop mart also needs artists for 3D designing, industrial designing as well as graphical designs, which will work hand-in-hand with the designers to optimize IP design and produce likable products. The company is currently working with 139 in-house designers, and the plan to employ an additional 100 artists by the end of 2023 because (i) to cater for the expansion plans of proprietary IPs in future (ii) to provide the artists with a more experienced in-house team to help bring the growth projections to life as the number of IPs is predicted to rise in future. Pop mart mainly wants to recruit talented people in art designing, animations, and keyframes, among others.
Approximately $70.61M of the total is estimated to be used in acquiring prominent IPs to increase the IP pool at the company. While looking for potential IPs, the company considers the sales performance, design quality, the fan base of the IP, and IP adaptations which are validated based on previous experience by the company. So far, pop mart is yet to identify any IP target, but efforts are still being kept toward finding IPs that meet their criteria and may engage in early negotiations to acquire them. The company mostly focuses on finding high-quality IPs that are distinguishable from others, have an established fan base, have a recognizable feature that makes them easily recognizable, as well as high adaptability; that is, they have the potential of being transformed into other designs. The company is set to employ twelve highly skilled IPs at the maximum by the end of 2024. The Frost & Sullivan report intimated to earlier is of the view that established IPs, having stood the test of time and economic value, fetch or attract remarkable market value beyond the value of the original formats in which they come. Even mor lucrative is that original IP formats fetch well over fifty million US dollars, proving to be of tremendous use and commercial value to Pop Mart, due to their capacity, especially that of prominent and famous IPs, to fetch the company over billions of dollars in terms of revenue. Even more important is that the Frost & Sullivan Report, promotes the view that at least about a hundred of the targeted famous IP invenstement have the capacity and the potential to intersect with Pop mart’s market criteria preference.
By supporting the designer toy market, Pop mart, in turn, gets profit from selling products from the designers. The company inspires artists from all over to pursue their passion for art. Pop mart can identify market opportunities for artistic pop toys and encourage artists to come up with more designs. By doing so, Pop mart is dedicated to working with artists to produce its own products rather than be reduced to a mere selling point or sales markt for third party-produced products. This has helped them maintain their position in the market as their success depends on their actions rather than dependent on other suppliers.
It has also been Pop mart’s culture to hold events majorly to grow the designer pop toy market. Initially held in 2017, the shows have been a significant way to market and sell their products on a larger scale. The events have caught the public’s eye, and people turn up in heavy numbers to see what Pop mart has to offer. Last year, the company hosted the 2020 Shanghai toy show, which was a huge success. As a result, pop mart captured the public’s attention to their products and boosted their sales. Since 2017, after launching the first event, the company has increased revenue collected from $24.7M in 2017 to $393.9M last year, showing how the toy shows have significantly increased the sales and helped them grow their fan base.
The events have been helpful for the public to learn more about the toy culture and identify artists that can work for them. The company has also been able to produce quality products with good prices for the consumers. Pop mart values its customers and has been known to produce the best products when it comes to pop toys in China and maintain a suitable market price for customers.
The company also focuses on establishing a sticky fan base who, in turn, don’t mind spending money to satisfy their needs. In order to appeal to first-time cutomers and to continually push existing customers for repeat purchases, the company has a plan to nourish and cultivate brand influence as part of its sales and marketing endevours. In the works as part of Pop mart’s strategies to attract new and retain existing customers include pop toy exibits, hosting utograph sign up sessions for fans and Pop Mart’s celebrites and celebrity influencers, conventions, and so many other marketing strategies. Pop mart’s traffic management scheme as well as its membership program are other strategies that offer optimal and unique benefits to the company’s most loyal customers.
Therefore, these two tools can be optimized to build conections with fans through interactions. For example, the successful membership program has been vey instrumental in helping gow a large pool that forms a part of Pop mart’s fan base. This fan base is very useful in terms of encouraging multiple purchases from members of the insider members program, as well as enhance fan stickiness,. Through the online platform, customers can register for free as members, accessing membership benefits through various ways. Popmart runs a four tier memebership scheme where the members receive benefits according to their tier. Through the membership , fans can earn “Pop Points” throught being frequent buyers as well as through commissions on products for six months. The points are used to determine which tier the fans belong to. The members enjoy a number of benefits including promotions during birthdays as well as redeeming points which help in purchases. Fans earn pop points from both online and offline purchases of company products. The membership program also allows Pop Mart an opportunity to communicate more efficiently with fans through frequent, real-time messages and notifications. Big data and artificial intelligence enables Pop Mart achieve this fete by customizing feeds and promotional messages specific to client needs, purchase history and interests. This tailoring of adverts and messages to customer preferences has been a big boost in sales as customers do not have to go through tedius processes of finding something they like.
The company also has plans to pomote Paqu, despite recent failures of the online platform to ainstain its initial success. This online application promotes fan and member engagement through online interactions. Other plans for future development include plans for strong data capacities for better understanding of fan demands. Additionally, the company will keep launching new products to keep the existing fans satisfied, as well as attract new fans to the products, through a process called innovative gameplay.
Pop mart also focuses on expanding in first and second-tier cities in order to attract a huge number of people. Some factors considered in this cross-city expansion include the targeted city’s overall economic situation, including available disposable wealth or income among the city’s dwellers and residents, the city’s location, but most importantly, the location of its commercial district, and the disposable income among dwellers of the city’s commercial district. Additionally, Pop Mart considers other economic factors of target cities to include spending habits among inhabitants of such cities, how frequent malls in such cities make sales or how frequent inhabitants frequent malls, sales traffic especiay during peak hours, and lastly, the costs of renting space (for selling outlets) and return on investment.
Innovation and Change
Being a company that relies upon art, innovation is at the center of it all. With numerous artists from around the world, Pop mart can develop new products and refine old ones. Pop mart has managed its innovation to make sure that the public likes what it produces. A few are produced whenever a new product is designed, and the company first monitors the sale patterns. If a product becomes very popular, the company can confidently make more to meet demand and reduce the risk of overproduction. If a product is very promising, Pop mart then puts in place plans to refine it further to give customers newer versions. The process involves ideas from customers and the designer’s ideas with the help of the production team. A team is set up that looks into ways to improve current products. Although the company has produced quality products in the past, it emphasizes that it might not promise to always produce likable products in the future but has also put in place a good infrastructure to prevent its demise. The company has also been innovative in their marketing strategies and have come up with modern ways that were not previously explored by toy manufacturers. The use of blind boxes was one of the major innovations by the company and boosted revenue drastically. The strategy also made the company become more popular, and many people take part in gambling-like purchases. The use of roboshops was a key innovation by the company as it helped them reach more people. Roboshops are not as expensive as setting up and running physical shops. Pop mart was able to come with a solution to expand rapidly at lower costs. The innovation of roboshops gave Pop mart a major competitive advantage over all of its competitors and has grown to be the largest pop toy company in China. The company is looking to add more roboshops to reach more people.
For Pop mart to thrive, innovation of likable products from artists is key. Pop mart is working with some of the best artists to produce quality products for its customers. The company, due to its integrated toy platform, attracts artists to work with them to further develop the pop toy culture. The company also holds conventions to attract artists from all over the globe, and some end up working for the company. The events are also used to showcase pop culture and to provide an educative platform for upcoming artists. The artists have been able to produce blockbuster products such as “Molly” and “Pucky.” Pop mart is then able to deal with the innovation from artists through strategic marketing and further development of the product. The unique innovations from the artists provide a competitive edge over its competitors. In order to manage the innovations, Pop mart releases them under IPs. Molly was one of the innovations by the company under proprietary IP and has since been one of its most sold products. Being a proprietary IP, only Pop mart can design and sell Molly, which the public likes. Initially released in August 2016, the company sold 200 pre-sale tickets in 4 seconds which encouraged pop mart to produce more. In 2017 alone, Molly contributed to 89.4% of the company’s revenue based on Pop mart’s products, and in 2020, it contributed to 16.3%. The drop was due to the increase in IP portfolio, coupled with the swift/brisk increase in revenue collected from these IPs. Although there was a percentage decrease, it should be noted that revenue collected from Molly alone grew from $6414 in 2017 to $17,523 in 2020. Molly’s popularity has been increasing over the years has helped the company collect more revenue. Dimoo has also been a significant proprietary IP for the company and last year was able to generate revenue of $18,367 which, for the first time, was higher than Molly’s revenue. Other products based on proprietary IP include BOBO&COCO and Yuki, which the company takes pride in producing series based on them and have also contributed to the company’s revenue.
Innovations based on singularly regulated and exclusively licensed IPs include Pucky (the adorable baby), The Monsters, and Satyr Rory. Pucky, an adorable baby with a versatile wardrobe, has been a major exclusive IP that has pushed the company forward. In 2017, the company entered an exclusive agreement with the artist, Grace from Hong Kong, to produce and market Pucky. Come April 2018, Pop mart released into the market the very initial batch of the “Pucky Pool Babies” toys from Pop Mart’s blind box series. Later, the company launched a very limited edition of Pucky Xmas babies’ blind box series during the Singles day Shopping festival, selling a total 5,000 toys in only a minute. The sales gave Pop mart the courage to further develop Pucky and enhance its popularity. The company released 12 more series based on Pucky from 2018 to 2020 to maintain its popularity and refine the art to attract more buyers. In 2020, revenue collected from Pucky amounted to $18,628, which was higher than revenue collected from any other product. The popularity of Pucky has been growing over the years since it was launched and has become many people’s favorite. Although the other products based on exclusive licensing are not that popular, they have also contributed to the success of the company as revenue from The Monsters, and Satyr Rory amounted to $10,950 and $2490, respectively, which was 8.6% and 1.9% of the overall earnings in 2020. The chart below shows the growth of some of the company’s products from 2017 to 2020;
Data on sales for 2020 only includes the first six months, which is the cause of reduced sales according to the chart.
After innovation, Pop mart continually works with the artists and an in-house team to further develop the product and prevent its popularity from diminishing. Although the company doesn’t promise it will create more likable toys in the future due to the tricky nature of the toy market, the strategy has been working as they keep on innovating better toy products. In order to focus mainly on innovation, the company opted to use Chinese-based manufacturering companies.
Pop Mart select such anufacturing firms based on a multitude of factors that include price, capacity, reputation, their regard for the law, and how long thy have been in business. Some of these companies have demonstrated a broad range of experience in the industry, especially through their work with other renown companies in the toy market both within China and internationally. Terms of service with the firms include;
Production: The firms are tasked with producing products according to Pop mart requirements as instructed in the orders and not own their own will.
Quality of products. The raw materials used for creating the toys as well the final product should be of high quality and meet all the standards and regulations by the industry. Once the products are delivered the company assigns a quality control staff to sample and inspect the products to prevent delivery of defective products.
Highly-functioning delivery services. The company caters for all the delivery expanses and the manufactures are supposed to deliver the products in designated areas at specific times choosen by the company and stated in the purchase order.
Terms of the agreement with Pop Mart:The IP rights are owned by Pop mart and the manufacturer can not participate in any outside business with the products unless specified otherwise by Pop mart. The company mostly enters into one year agreements with the manufacturers.
Liability for defective or lost products:. Incase of any defective products, the specific manufacturer will be liable for the loss. If the company receives a lot of complains on defective products, they might opt to terminate aggreememts with the relevant manufacturer.
Termination of contracts of engagement:. Upon mutual consent between Pop mart and the manufacturers, the aggreements can be terminated.
Another major innovation by the company was the use of roboshops. Using automated shops placed strategically in big malls and places with large crowds helped the company increase sales. The company built on the idea and was able to roll out more than 1300 roboshops. In comparison to physical shops, roboshops require very low set up and maintenancecosts, including rents, wages and salaries and maintenance fees. This cost-effectiveness allows the company an opportunity to quickly and efficiently grow its network of roboshops and undertake expansion initiatives to locations yet to benefit from physical shops. In addition, roboshops make it easier for data collection especially with regard to customer feedback and sales performance. This data is quite important, especially to guid the company’s expansion strategies as it provides raw data from genuine purchasers of Pop Mart’s products. This way, the company can still use roboshops in areas it was previousy absent as it secures finaces to set up physical stores in the same locations, thus increasing sales volume. The innovation of blind boxes has also captured the attention of many and has helped the company to grow its sales.
Pop mart develops several blind box series-based products developed from IPs. The number os units produced per IP series is guided by various factors including the current demand for that series that year, as well as its popularity. Typically, the range is between 1-7 series per IP so that popular series receive mor product units while less popular series are produced in less numbers, allowing for a balance between demand and supply. Each and every blind box series is designed around a particular theme, while each theme is made in a way to reflect twelve different designs. This way, each series is produced in 12 different dsigns but revolving around the same theme. These 12 designs include a unique hidden edition. The creative packaging, which uses the same packaging desin for the 12 designs in each themed series mkes it quite difficult for buyers to decipher which of the box contains the hiden edition. This unpredictability increases fan anticipation during the release, creating the hype around the products and attracting more customers, especially first-time clients. Pop mart was the first company to come up with this creative marketing technique and has since immensely profited from it.
The pricing technique by the company was also an innovative step that helped it provide good prices for products. Instead of pricing products after production, they are priced according to popularity, where more popular products are more expensive. Once a product is released, it is given a standard price, and then the company can measure the popularity of the product through sales and come up with a suitable price. The technique allows Pop mart to fully utilize its products by providing better prices. Using the strategy has helped to maximize profits as the most sold products have a larger profit margin. It also helps to give considerable prices as a toy can be expensive and yet becomes less popular; the product will be hard to sell as people don’t like it and expensive.
Pop mart has proven in the past that it is able to deal with change. Pop mart was initially a lifestyle store inside Beijing EC Mall, an ordinary shopping mall near Zhongguancun. However, as I was in its start-up stage, it faced a lot of problems such as poor customer service and supply chain. As a result, the company’s run loses and was nearing its decline stage. In 2014, the company decided to change tactics by focusing on pop toys. The company focused majorly on promoting the pop toy culture by collaborating with local artists to produce cultured products. The company was able to bear with the different tactics, and as seen, it has immensely paid off. Pop mart was able to establish itself and build the roots for a successful future. As the company expanded to the international market, it dealt with the market change by working with global artists and renowned top brands to produce suitable products. Thus, the company is able to integrate cultured products as well as famous brands to survive the international market.
The company has also been able to integrate change during the Corona pandemic. The company decided to completely suspend business operations and hence stopped generating revenue after June 30, 2020. With existing financial resources and 10% of expected net proceeds from the global offering, the company is set to survive for three years. Some of the changes that the company had to implement to survive include;
Refraining from the expansion of retail and roboshops to prevent capital expenditure.
The sole maintenance of necessary costs and avoidance of unnecessary costs.
Assurance of any forms of royalty payments to the company’s creative such as IP providers and in-house designers to secure their loyalty during the covid-19 period.
Restriction of internal and external funding from staehoders and other financial institutions.
Halting of any dividend distribution endevors.
Through the following changes, the company believes that it will be able to survive past the corona pandemic and continue with normal activities once it is over. Change is inevitable for any institution, and Pop mart has
proven that it can deal with change effectively.
Last year, despite the rough economic times due to the corona pandemic, the company’s revenue went up by 50%, from $263.5M in 2019 to $393.9M in 2020. The company was able to counter the pandemic in several ways. First, the company registered an additional 5.2 million members, which was a 236% increase of the initially registered members. Sales from members make up 88% of total sales, and that’s how Pop mart was able to boost revenue. Second, the company was able to make its customers frequent buyers as they encouraged them to make multiple purchases. Using toy series, customers can relate to a particular brand according to their tastes and preferences. The company, through the artists, can then improve the toy series, and customers are willing to buy as they are rolled out. Molly, for instance, has a large fan base and has contributed to more than 25% of total sales. Third, through the 2020 Shanghai toy show, the company boosted sales during the pandemic, as discussed earlier on. The show was attended by many toy fans and artists and was a success for the company. Ideas were also shared on the future of the toy market, and customers could share opinions with the artists on what they would like to see in the future. The artists could also showcase their various toy series and get feedback from the public on improvements that they can implement.
Decision-Making Process
Pop mart claims that its role is to develop the pop toy culture and support local artists. Pop mart provides one of the best platforms for marketing products from the artists and also helping them refine their products. Input from the artists is key as they are important in the toy business, and the heads of the company cannot use a top-down decision-making model. Using a bottom-top decision-making model allows the company to leverage ideas from its employees before making decisions. For example, the artists make designs based on their knowledge but not as ordered. When it comes to production, the decisions are based on the artists and in-house who develop products that they think suitable for the market. The artists provide two-dimensional sketches to an in-house team that inspects them and sends suggestions to the artists based on their first-hand insights on fan preferences and market trends. The in-house team then works closely with the artists to refine the products from a commercial and artistic perspective. For example, it is the duty of in-house design teams to leverage on the two-dimensional thinking and design of artists with their three-dimensional eye, thus bringing much needed richness to the designs’ patterns and poses. This approach enables Pop Mart to combine its wide array of resources, as well as the skill and talent of its in-house design teams, with the good eye or artists. In the end, its products are high-value, and of impeccable design, llowing the compny the competitive edge that most of its competotors in the ndustry either lack or do not exloit fully. This is made possible by the fact that the in-house team’s capacity to use thre-dimesnional design while working on the designs of the final products, designs mainly curated from the aryist’s point of view. After agreeing on the final commercialized version of the design by both the artists and the in-house designers, the products go through mass production before finally being released into the market. Pop Mart has also enlisted the sevices of industrial development design teams, whose work or initiatives include the dsigning of unique, stylish and exclusive or attractive packaging for the packaging of the final design products. This industrial development team is also tasked with coming up with cmprehesenvie and custom or tailor-made marketing strategies and promotional plans as this team interacts more with the members program and fan community through various sales channels. The industrial development team is expected to leverage on such groups, especially inter-group or inter-community interactions to push for their prior designed marketing agendas on the fan base.
The company also collects feedback from customers, about the products, through the employees. A bottom-down model is more suitable to use as the company heads can first collect designs and data from employees and then make decisions. The different departments in the company can come up with ways to improve. For example, the marketing department has better marketing strategies as the production department comes up with better designs. The company then combines the decisions and efforts from all departments to make sure that quality products are produced and marketed globally. Each department is encouraged to come up with new, better ideas to prevent the company from dying. The different departments rely on each other to meet their specific goals. Suppose one of these departments is unable to perform well. In that case, it will directly affect another department, and the company could collapse if artists cannot come up with likable products, then the marketing department with hard work. If the marketing department cannot come up with better marketing strategies, the artist would be discouraged from coming up with new designs. The sales department is also involved in the decision-making of prices and products to be produced. As discussed, after the production of a toy, the company does not decide on the price. Based on the popularity measured by sales, the sales department can then come up with a more reasonable price for the products. The decisions are made by the sales team and approved by the heads of the company. With input from the sales department, the company then knows which products to focus on. Such decisions cannot be made without data from the sales department as it may lead to poor development strategies. Innovation is key for the company, and the heads cannot come up with decisions on their own. Innovation and ideas from the company are what drives the company and prevent it from collapsing even in the midst of a pandemic such as the Corona pandemic.
Conflict and Power
Contractual agreements mostly handle conflicts in Pop mart. The company deals with a lot of third-party companies, which opens them to risks of conflict in the future. Pop mart gets into an agreement with such companies, and terms are set to prevent any future conflicts. As of 2020, Pop mart had a total of 47 distributors, and the company has put in measures to prevent potential conflicts among distributors or conflicts between distributors. In the distribution agreement, the designated area of distribution is specified to eliminate unhealthy competition among distributors. If a distributor breaks the requirements on the geological area of distribution, the company has the power to terminate the agreement. The agreement also states that the distributor cannot return products after they have been delivered unless they are defective, which is in line with industry practice. Pop mart has put in this measure to ensure that no obsolete stock remains at its end. The distributors are responsible for selling the products ordered, and if they are unable, the products should not be returned to the company.
Although the company does not require a minimum sale from the distributors, it has the power to monitor their performance. The distributors are required to submit monthly or quarterly reports on sales for the company to cross-check with its internal database. If the company notices a significant drop in sales from distributors, it has the power to adopt necessary measures to handle such as suspending the supply of relevant products. This helps the company to retain a good distribution channel and have its products reach the consumers rather than been stuck in shops. Through the agreements, the company is able to maintain genuine practices that are in line with market demands. If the company discovers a distributor has breached any agreement, a request is sent to cease the unlawful act within a specified period of time. The distributors are liable for any breached agreements, and the company might claim compensation for the breach or decide to fully terminate the distribution agreement.
Pop mart has also placed measures to control corporate governance. The company understands the importance of good corporate governance and has put in measures to avoid conflict between the company and controlling Shareholders. Such measures include:
Exemption from viting on resolutions as well as exemption from the quorum, of contolling shareholders in meetings held to establish proposed or sxisting transactions with which such controlling shareholders have or showcase material interest. These exemptions from voting and quoram considerations also pply is the material interests in the transactions at hand are held not only by the controlling shareholders themselves, but their associates as well.
Internal control mechanisms set forth by Pop Mart to ensure compliance with listing rules, where the company identifies that it engages in connected transactions with its controlling shareholders or their associates.
Establishment of positions of independent and non-executive directors whose roles include conducting annual reviews on the existence or posiibilities of cases of conflict of interest between the company and its controlling shareholders. In cases where a conflict of interest is identified, it is the role of these same directors to provide professional consultations that is impartial and in pursuance of the interests of minority shareholders.
An undertaking for provision of all necessary information held by or known to controlling shareholders to the non-executive directors. This information shall be shared through announcements or details in the annual report.
Apointment of independent professionals at Pop Mart’s expense where necessary, but at the request of directors.
Appointment of Guotai Junan Capital Limited as Pop Mart’s compliance provider. The role of this appointed compliance manager is to offer any necessary guidance regarding to compliance with any set laws and regulations including those that have to do with listing and corporate governance.
Another aspect of conflict and power in Pop Mart has to do with its position toward Paqu Hayu, as discussed in above sections. Essentially, Pop Mart is a company incorporated under Cayman Islands’ legal framework. On the other hand, Beijing Pop Mart is Pop Mar’s subsidiary registered under the laws of the People’s Republic of China, to allow Pop Mart operate in line with Chinese legal frameowkr on omestic and intenational trade. In order to further comly with Chinese company laws, Pop Mart operates a substantial portin of its business through Paqu Hayu, which, as earlier mentioned, is controlled to significant lengths by Pop mart, thrugh contractual engagements allowing for such strong powers of Pop Mart over Paqu Hayu. These contractual engagements make Pop Mart both the contoroller and beneficiary of Paqu Hayu.
Now, conflict and power arise in instances where either Paqu Hayu or Pop Mart or both act in contravention of Chinese laws on foreign drect investment and other international trade doctrines. This contravention could be in the form of failing to procure the requisite license and regulations. In such an instances, the laws operative in China on such matters permit the Chinese government and regulatory authorities braod discretion in handing out the legally correct repercussions for such legal violations. The possible conseuences include revocation of Pop Mart’s operating licenses and other forms of business permits as well as the busness operations themselves, imposing hefty fines on Pop Mart, and seizure and confiscation of all forms of assets, including any income that the authorities believe to have been acquired by Pop Mart through unscrupulous or illegal means. Additionally, the authorities have the discretionary to impose unrealistic conditions on Pop Mart and any of its affiliates with the sole purpose of ensuring that they do not comply with such conditions. At the same time, the authorities may enforce restrictions on the use of any proceeds from pop Mart’s IPO to finance any of its business operations. In their good graces, the authorities may give Pop Mart and its affiliated companies the opportunity to restructure their operations in a way that aligns with China’s laws and regulations. The authorities can also enforce any other measures they deem fit as against Pop Mart, including harmful or business-unworthy restrictions.
As is evident, all these repurcussions can be very harmful to Pop Mart’s business in China. Therefore, to protect the company’s interests, and to ensure that Paqu Huyu remains instrumental to Pop Mart’s business opeartions within the PRC, it is crucial or stakeholders to take measures to nip any form ofconflict that is likely to arise. This includes taking the necessary caution to ensure thet they do not enter into any agreements, sign any documents or take any form of undertakings that cause there to exist any form of conflict of interest as against any of the agreements and contractual engagements between entered into between Caymans Islands’ Pop Mart and PRC’s Paqu Hayu. The need to avoid any conflict of interest requires relevant stakeholders to refrain from any other acts that engender a conflict of interest, the determination of which rests solely with Beijing Pop Mart, as well as PRC’s laws and regulation. It is Beijing Pop Mart’s mandate to act promptly in eliminating any conflict of interest with any of the company’s partners or stakeholders. If the relevnant stakeholders do noth repect any measures taken to eliminate such conflicts of interest, the former has the right to terminate any form of business with such stakeholders that is in competition with Paqu Hayu. Additionally, such unabiding stakeholders shall be restricted from employment by other organizations or entities whose business poses competition to that of Paqu Hayu.
As with most companies, power at Pop Mar and Paqu Hayu rests with the company’s board of directors. In total, there are nine directors, four of them being executve directors, two of them being non-executve directors, while the remaining three act as independent non-executive directors. The Chairman of the board at Pop Mart doubles up as the company’s CEO and executive director. The CEO cum Chaiman’s job is to oversee the overall operations of the company, including its strategic planning endeavors. The company has two vice presidents who are also executive directors. The first vice president oversees produt development and acts as director to the Beijing Pop Mart subsidiary. On the other hand, the second vice president oversees offline business and also doubles up as director at Beijing Pop Mart subsidiary. The fourth executive director acts as the chief operating officer for the company and is responsible for branding. The other directors hold positions that include provision of professional advice and guidance to the board. The difference between the non-executive directors and the independent non-executive directors is that the latter are tasked with providing independent advice to the board.
Among the several powers given to the directors is the power to assign and issue the company’s shares. The company’s directors have mandate and power over the company’s unissued shares, powers which allow them to grant, allot, offer or otherwise dispose ofs such shares to other persons. The directors are responsible for the shares and have the power to use them as they see fit. The directors meet in a general meeting conducted under Pop mart where they can discuss how the shares will be used. The directors also exercise power to dispose of the assets of the company or any subsidiary. Assets at the company include revenue and products. The directors, through the general meetings, decide on what to do with the company’s assets. Most of the revenue, according to the company’s prospectors, has been allocated towards the expansion of the company by the directors.
The directors also have the rights to remove and assign new directors. The directors have the right to appoint anyone as a new Director either to fill a vacant position or as an additional Director where necessary. Any director appointed shall fill the office until the next general meeting where they shall then qualify for re-election, but shall not be taken into account in determining the number of Directors and which Directors are to retire by rotation at such meeting. The directors may also decide to remove any Director, including a managing director, before the expiration of his expected serving period and appoint another person in his place. The newly appointed director will then serve as the reminder of the time that was left by the outgoing director. Where necessary, the directors also have power to appoint additional directors fr additional assistance with running the company. Before any eligible person is appointed as an additional director, they must first be recommended by the existing directors in a general meeting. However, it is not mandatory that directors awaiting election be shareholders of the company and no age limit is set as a qualification for election as director. Vacancy arises in a director’s office due to resignation by notice to the company, court order disqualifying such a director from acting due to any form of incapacitation including mental disorder and inability to carry out the official duties resting with that office, absence without leave from board meetings for twelve consecutive months, by reason of bankruptcy, prohibition from that office by any law or by the company’s Articles of Association, removal from office by notice in writing supported by at least three quarthers of the total number of directors of the company, himself included, or through demotion from office through a decision made by the company’s shareholders.
During every annual general meeting, a third of the directors are expected to exit from their current position through a rotative process. However, there is a proviso to this requirement where it is required that every director must undergo through the process of rotation fror their retirement. This is to take place at least once per every three years for every director. During these rotations, the director remains in office until the meeting is closed. At the end of the meeting, the director retires automatically but remains eligible for re-election for another term. However, the shareholders may also choose to elect other equally fit persons as directors.
Recommendations
Pop mart has been able to survive for 11 years now and has mainly been through the different strategies set in place. The company should continue to leverage its strengths to avoid collapsing and also to maintain its position as the largest pop toy brand in China. One of the major strengths of the company has been to identify good artists and help them grow their individual talents. Through this, the company is able to generate a lot of income by providing a link between the artists and their fans. The pop toy industry is driven by innovation, and the company should look into working with new artists to produce different products. Although refining old products such as “Molly” is working for the company as people are still purchasing them, the company should not entirely focus on them and should look into producing new products. The popularity of old products may diminish due to a change in market demand and personal tastes. Data from recent years shows that new products can gain more popularity in the market. In the past, “Molly” was the most popular series, but the company introduced “Pucky,” which was able to gain more popularity and increase the company’s revenue.
The blind box strategy has also been criticized by a lot of people, and the company should look into newer strategies in the future. The strategy in cooperated gambling as the buyer can either get a normal toy or, if they are lucky, get a popular toy. The toys can then be kept or sold for profit through third-party online platforms. This strategy has made customers make multiple purchases with hopes of getting a popular one. If a customer makes multiple purchases and keeps on getting regular toys, they might be discouraged from continuing making purchases and might even spread negative news about the company. The strategy has worked for many years, but people are getting tired of old tricks.
The company should also look into expanding through online platforms in the midst of the Corona Pandemic. Before the pandemic, the company was looking into various ways of expanding by adding more physical shops across the world. Since the outbreak, a lot of businesses have been affected, including Pop mart as they were forced to close down some of its shops. The regulations had to be put in place to control the spread of the virus. Although efforts are being put to end the virus, it is still affecting our lives, and no one is sure if it will end soon. The company should refrain from opening up new stores and focus on online platforms that are much more secure and are safe from any regulations that affect physical shops. The pandemic has also discouraged people from moving and has made the online platforms grow as people are mostly at home on social media. The online platforms will also help the company to save capital that would be used to maintain stores and can then be used to expand once the pandemic is over. One of the factors affecting the online platform is delayed shipping periods. When customers purchase the toys online, the delivery takes approximately 15- 30 and might be too long for some people. The delivery business is also growing rapidly, and a lot of companies offer shorter delivery periods for a small amount. Pop mart should look into working with third-party companies that will help its products to reach customers quicker. This will encourage more people to shop the toys online and have them delivered rather than going to the physical shops.
Focusing on the pop toy culture and encouraging its growth is a key organizational variable for Pop mart. Since the pop toy culture was previously not huge, a lot of companies involved with toys opted to sell third-party products rather than producing their own. Pop mart was able to produce unique and popular products for its consumers. The company should keep focusing on producing their own products with the help of the artists and an in-house design team. By being unique, pop mart is also able to eliminate competition as they are not selling similar products with competitors. If a customer is interested in a product developed by Pop mart, they would have to buy it from one of Pop mart’s distributors.
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