Learning from Leapfrog Case

I) General nature of competition

Since the company is running two different business models, Leapfrog competes in two different types of industries: the toy industry (on the home market) and the education industry (on the school market). If we focus on the core business of the firm that is to say the toy market, the most two important variables of the competition are:

- theglobalization of the competition (intensification of the competition and standardization of the kids tastes around licensed toys from movies or TV programs, mostly American)

- the virtualization of the toys (replacement of physicals toys by virtual games) which is also true for the school market.

If we analyze the LeapFrog's industries through the 5 Porter's competitive forces we can conclude that the nature of competition depends on:

1) The threat of substitute offerings (strong threat)

In the home market, the substitute offerings are as diverse and numerous as video games, sports, TV, computer activities. In the school market, the substitute products are the traditional educational materials such as "worksheets" or computers as they mention in the case.

2) The threat of new entrants (growing threat)

As experts of the market say, "launching a product in the toy industry is not harder than launching another product". As a trend-driven business the "barriers to entry are low and the barriers of exit even lower". It is then vital for a toy manufacturer to raise those barriers to entry for instance by elevating the R&D expenditures (to differentiate their products from the competition) and thus elevate the fixed costs of competing on this market or by finding ways to guarantee customers loyalty.

In the school market the threat of new entrants is not that fierce because of the high capital needed to launch a product (signing contracts might take several semesters). Moreover the threat of new entrants (in the US market for example) from foreign countries is kind of limited...