Confused about strategy: Scale model manufacturers

Confused about strategy: Scale model manufacturers

One of the interesting aspects of business strategy is that doing something different to everyone else is often successful, so why do the majority of managers want to do exactly what their counterparts in the competition are doing?  I guess it’s easier to justify a decision when it’s “best practice”, rather than finding an argument that “best practice” is simply “what works for those guys, and we keep saying we’re different to them”.

In this blog I intend to show the ways in which this approach is affecting companies in one industry (scale model manufacturers), why they have fallen into this trap, compare and contrast two manufacturers and show how different strategies are valid.

The market

Today’s scale model industry is fascinating largely because it is in denial about the fact that it is not doomed. You didn’t read that wrong: this is an industry where both the companies and the majority of commentators will vehemently argue that “the hobby is dying”, when in reality it is in transition.

Without being too crude, what is dying out is the particular way in which it was conducted since the ‘50s, with small local shops selling a very restricted range of rather cheap products to an audience who engaged through small, local groups and amateur-produced magazines. This audience has remained the same since the ‘50s. Literally, in that the same children who purchased the products then are the same adults who do so now. A moment’s thought about demographics also illustrates why this particular model is in trouble.

These people are also not a market most companies would want: they remain rooted in their nostalgia, unwilling to learn about new techniques or products, resent paying more than childhood pocket money sums, and incidentally, appear to have bought up all the stock sometime in the ‘80s and now endlessly pass their “stashes” around like so many squirrels.

Fortunately, we don’t need to accept that “the hobby”, and thus the market, is limited to these people. With the growth in popularity of popular history, science fiction and fantasy films, tabletop and video gaming, there is an ever-widening audience who become a market for a replica of something they enjoy which you get to construct and paint yourself. Actually, it goes even further than that: scale modelling is a great tool for meditation, creativity and mindfulness, and has been used as art therapy for people suffering from mental issues. That’s still before we talk about 3D printing, where the market is for good CAD files to print… However, these people are almost entirely separate from “the hobby” and that’s probably just as well because “the hobby” doesn’t seem to want them either.

Problematic product

To understand today’s scale model product, we need to look back at the group that built these things years ago, because they tended towards a certain level of obsession and started making and selling their own “aftermarket” detail sets to add to the model you bought. This became an industry almost on the same scale as the kit manufacturers themselves, and formed a symbiotic relationship. Unfortunately, it’s now almost parasitical.

In “ye olden days”, we were looking at the start of plastic injection moulding. Moulds could cost well into the £100,000s even for simple kits, and with low selling prices very high volumes were needed to make a profit. What the aftermarket allowed was for the kit manufacturers to keep their product simple and cost-effective while still providing an option for the hardcore few to turn out something very detailed. This had an unhealthy side-effect of allowing those who cared about such things to stand out and promote themselves as “professionals”, in a way that they could not if the basic product was better, but that’s a tale for another day. Meanwhile, the aftermarket allowed a way for people to start small businesses in the hobby at a time when being a primary kit producer required too much up-front investment.

Examples of today’s product

To illustrate the state of the market today and how new manufacturers can succeed, I will use the examples of Hasegawa and Wingnut Wings, the first of which is typical of how the industry has operated and the second has been successful by exploiting a niche that others dismissed.


Hasegawa is a Japanese company which became famous for producing well-engineered kits that were easy to customise. They have been prolific, but as time has gone on their offerings have increasingly appeared somewhat dated. This is because their approach was to build the “base kit”, a relatively simple and cheap to manufacture kit that had a good shape, to which the serious modeller could add various aftermarket detail sets to make it exactly what they wanted.

With today’s injection moulding technology these kits look a bit too basic, in that it’s not simply that you can detail them, but that you feel obliged to in order to get a reasonable level of detail. Further, in order to keep up sales of what are often the same old products, they have increasingly focused on “limited edition” examples where you get the same parts but some new markings schemes, rather than investing in updating the product.

In terms of product strategy, this fits a cost leadership position as the vast majority of the investment took place years ago and now the sales represent significant profit. In terms of product lifecycle, it is also reminiscent of a product which is declining, with little continued investment but good margins for as long as it lasts.

Wingnut Wings

In contrast, Wingnut Wings emerged in 2008 and represents a different approach to the industry. Where previously manufacturers had gone for mass market kit subjects which could be easily repackaged with minimal investment, Wingnut instead focused on a small and disregarded section of the market and focused on using modern manufacturing techniques to produce the highest quality kits with a correspondingly high price.

Wingnut’s focus is the aircraft of the First World War, an era which had previously been dismissed because “no one is interested”. Similar argument are reflexively made against many other potential products in this industry, and Wingnut’s success shows that there is a market for high quality products and that broader interest appears to follow availability. Wingnut Wings took advantage of the progress in injection moulding technology and CAD design, which allows the 3D model to be created and then broken down into the parts according to what the designer sees as being “fun” for the modeller and of course the mould creator’s input on what will and will not work. This has made the process of designing the tooling far shorter, and of course today the injection moulds themselves can be cut with CNC machines which again reduce the upfront investment needed.

This is a differentiation strategy (and follows Porter’s predictions as Wingnut has indeed been able to charge a premium for the perceived quality), and in industry lifecycle shows a view that things are just getting started.

A way forward

I mentioned early on that the potential “scale model” market is far larger than it has previously been considered. The changes in technology along with the broader public interests show that today, there is opportunity for small companies to enter the market in whatever niche they see an interest in. Certainly, modern manufacturing technologies are empowering this shift by allowing products to be developed and brought to market faster and cheaper than ever before, while simultaneously allowing levels of quality that were previously unthinkable.


Article first published on my LinkedIn

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