Executive SummaryLeapFrog Enterprises, Inc. is an educational toy company that develops learning toys for young children. Since the launch of its best-selling game LeapPad in 1999, LeapFrog has controlled the interactive learning niche market segment of the toy industry. LeapFrog's main competitors, Hasbro and Mattel, have yet to fully explore the development of learning toys. LeapFrog successfully uses its core competencies, such as the proprietary NearTouch technology found in the award-winning LeapPad, to stay ahead of the competition by making incremental innovations to its existing products. To protect itself from challenges created by altering consumer purchasing trends, changing demographics, and evolving toy industry trends, LeapFrog has developed its identity as an educational toy manufacturer and reorganized its structure to operate in more efficient way in the long run. A key element of its success is the expansion of the SchoolHouse division's presence. LeapTrack, the company's most ambitious product, launched in 2002, offers teachers a way to assess students from kindergarten through fifth grade. The built-in assessment system allows teachers to monitor their students' educational progress through LeapFrog games on the LeapPad, and based on students' ability to learn quickly, Leapfrog will provide teachers with product recommendations. LeapTrack has the potential to be a crucial differentiator against existing competition in the education market, which includes McGraw Hill, Pearson, Harcourt, Houghton Mifflin and Scholastic. Penetration into the school market will help dramatically reduce the risk of the sector by diversifying markets. Additionally, schools account for a high volume of purchases, which will result in… half the paper… millions in savings per year. Additionally, LeapFrog is expected to put its research and development into its core products, LeapTrack and a home version of LeapTrack. Among LeapFrogs' competitors, Hasbro would be the most compatible. It has the financial strength to acquire Leapfrog and will be able to pay extra for the start-up. Hasbro has yet to develop a serious educational toy brand. Judging by the trends in the toy market, Hasbro will try to produce educational toys. Hasbro focuses more on traditional toys and games, so adding LeapFrog to its company wouldn't cannibalize any of its products. LeapFrog can integrate into Hasbro's corporate structure as a separate brand, so LeapFrog's creative culture will not be sacrificed. For years, LeapFrog has successfully combined fun and learning for children, and its addition to Hasbro would provide it with the capital to take the business to the next level.