Dolls and New Heritage Doll

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SEPTEMBER 15, 2010

TIMOTHY LUEHRMAN
HEIDE ABELLI

In mid-September of 2010, Emily Harris, vice president of New Heritage Doll Company’s production division, was weighing project proposals for the company’s upcoming capital budgeting meetings in October. Two proposals stood out based on their potential to strengthen the division’s innovative product lines and drive future growth. However, due to constraints on financial and managerial resources, Harris knew it was possible that the firm’s capital budgeting committee would decline to approve both projects. She also knew that New Heritage’s licensing and retail divisions would promote compelling projects of their own. Consequently, Harris had to be prepared to recommend one
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But the popularity of most doll lines waned after a few years.

New Heritage Dolls

By 2009, New Heritage had grown to 450 employees and generated approximately $245 million of revenue1 and $27 million of operating profit from three divisions: production, retailing, and licensing.
The production division, discussed further below, designed and produced dolls and doll accessories.
The retailing division offered a unique “intergenerational experience” for grandmothers, mothers, and daughters, centered upon the character histories and storylines of the company’s dolls and delivered through an online website (42%), a mail-order paper catalog (33%), and a network of retail stores (25%). In fiscal 2009, the retailing division generated roughly $190 million of revenue and $4.8 million of operating profit. The licensing division was started in 1998, and represented the company’s newest and most profitable division. It sought to extend the New Heritage brand and capitalize on high levels of customer loyalty by selectively licensing the company’s doll characters and themes to a variety of media that reached the firm’s target demographic of toddler to pre-teen girls. In fiscal year 2009 the licensing division generated $24.5 million of revenue and $14.5 million in operating profit.

New Heritage’s Production Division
Production

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