How eToys Could Have Made It
The functions of managerial accounting include planning, decision-making, controlling, and evaluation. To make good decisions, managers must constantly adapt to technological changes, changes in the organization's needs, and new approaches to other functional areas of business-- marketing, production, finance, organizational behavior, and corporate strategy. Planning is the setting of goals and developing strategies and tactics to achieve them. Controlling is concerned with achieving the goals and evaluating performance. The success of an organization lies heavily on the shoulders of those making these decisions.
Toby Lenk, founder of eToys, is responsible for controlling the success of eToys. eToys is one of the most known names on the Net; however, a famous name doesn't turn a profit. eToys is in trouble and many of the decisions Toby Lenk made throughout its life may have contributed to its demise.
When planning to launch eToys, Lenk considered a niche market focusing on educational toys. Instead, Lenk wanted to compete in the mass market, namely with Toys 'R' Us. Lenk's company would not be able to compete on prices because the profit margins were already low and the mass-market competitors were able to buy in large volumes. He believed that customer service and convenience alone would give him a strategic advantage.
To promote the company, Lenk spent lavishly to build the company's global presence and brand. For example, he spent two-thirds of eToys' advertising budget, about $72 million, on TV spots. In order for eToys to break-even, the company would have to hit $750 million in annual sales.
Lenk also wished to capture a larger share of the market. Hoping to accomplish this, Lenk made the decision to buy the online baby-supply retailer BabyCenter. He further added party supplies, hobbies, specialty toys, and planned to add eToys private-label merchandise and clothes. However, due heavily to the marketing strategy Lenk pursued, consumers viewed the brand as specializing only in toys.
Toby Lenk faced other decisions as well. Top executives of Toys 'R' Us wished to meet with Lenk to discuss how the two companies could team up and play to each others' strengths. eToys has a sophisticated site and an illustrious distribution facility while Toys 'R' Us has a large inventory and the ability to buy in volume. However, Lenk was unwilling to share in revenues with...