Toys r Us Case Study Solution

TOYS R US July 15, 2012

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TOYS R US July 15, 2012

SYNOPSIS OF CASE STUDY One of the largest toy company that make the mark in toy business is TOY “R” us. Toy r is the one of the largest toy store. The years passed company passes through many changes in the company. Company starts the online selling of toys. The partner of toy r is also changes with time. It also discuss the American retailer enter in to Japanese market. The case describes the growth of Toys "R" Us (TRU) as the leading U.S. toy retailer to its international expansion and entry into Japan. TOYS “R” US history to enter in to the us market and in the toy market of Japan, the case study discuss the retailing ,distribution and whole selling system of store. Toys “R”US was a brain child of Charles Lazarus founded a chain shop in 1957.their shop at that time sells rebuilt bicycle .then this store start selling baby furniture before wars baby boomer. Charles Lazarus then sees that these items were not frequently sold, toys were frequently requested and toys were greatest opportunity of business. In 1980s the executives formulated a strategy for opening a large discount toy store in Japan. Us company faces many problems in store regulation and distribution systems. After many efforts and acceptance of Japan partner enable the company to open a toy r US outlet in Japan. They face many problems of retailing. Toy R Us case gives us condition of Japan market to enter in it. TOYS “R” US faces many political and social barriers entering in market are very difficult challenge to toy R Us. Unique country problems with suppliers, local regulations, and interest groups compounded the difficulty. Entry would have high costs, but the benefits of “cracking” into Japan’s toy market proved appealing, that’s why Japan is second largest market. TOYS “R” US does not enter in same way as they are in us ,they have face retail problem in Japan .Us market is different from Japan market ,in distribution they deal with many middle man and cost high in Japan.toy r us Japan overcome different barriers in different ways. Political issue related to retailer power given, Japan is a said nation of retailer. its number of retailer is twice as per capita income of country. The barriers are local shop keeper in entering in business. Known as Daitenho, these retail laws would prove challenging for TOYS “R” US . This “Big 2

TOYS R US July 15, 2012 Store Law” went into effect in 1974. It stated that local storeowners must give their consent before a retail outlet with floor space larger than 5400 square feet can be opened in that area. This law allowed small, local businessmen the authority to force new competitors, namely TOYS “R” US, into a review process that could last years. Most of the retailers have understanding that the manufacturing prices could not be change, but the supplier are given some special benefits such as shop owner can return unsold goods or retailer gives free display items to shop owners . More retailers can buy directly buying from the manufactures TOYS “R” US’s decision to enter the Japanese market proved beneficial. Not only do they have #1 market share in the US, they also have #1 market share in Japan. Japanese consumers have typically paid higher prices for products due to a variety of reasons such as transportation costs. TOYS “R” US prides them on being able to buy direct from manufacturers, buy in bulk, and pass savings onto consumers. They typically work to have prices 10-20% lower than competitors. Japan regulation is also very strong. The big stores stuff their politicians with money. TOYS “R” US wants to satisfy maximum of its customers to gain the maximum market shares, therefore they specialized their product mix to meet the need of their local customers. TOYS “R” US also maintain good term with their local manufacturer ,whole seller and distributers.they work hard to meet 95% of consumer need that why they maintain stocks and supplier to meet their goals.. TOYS “R” US had two things going for it when making the decision to enter Japan. First, Japan’s birth rate had been decreasing, which left more time and money open for parents and grandparents to put towards toys for their kids. Noting how careful the Japanese education is, parents would only continue to compensate their children with gifts. Second, there were also changing demographics in the Japanese market. Young Japanese didn’t appreciate the idea of having to take over their parents’ small shops. They also quickly began to realize that they were paying inflated prices for everything, including toys. While demand for lower prices began to take a toll on the political barriers in Japan, TOYS “R” US would reap the benefits of this interaction.

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TOYS R US July 15, 2012 Changes in the Daitenho, or retail law, cut down the justifying review to only 18 months, and after a favorable review TOYS “R” US was finally able to open their first store in 1991, and international sales have been strong. TOYS “R” US is the first “super” toy store in Japan and it has been reaping the benefits of being the first mover advantage in employing their discount methods. Although situations have been less than ideal, it appears that TOYS “R” US choice to enter the Japanese market was good corporate strategy. Part of TOYS “R” US’s corporate strategy must include profitability, and increasingly better terms with Japanese consumers, government, and businesses have allowed that. The company is experiencing different problems with competitors and its standing in the industry is low. But given the proper use of the competitive advantage they have, the company can recover from such problems. The company has competitive advantage over retailers and the industry. One competitive advantage of the company is its brand name. The company is known as one of the established toy outlets in the industry. People easily recognize the company and the different product it has. The FDI investment also increases in Japan and stock prices also start increasing they FDI in technology, capital and in personnel does not work due to culture differences of Japanese with US. They can easily think about the company when toy selling is mentioned. Another competitive advantage of the company is its image with the clients. The company is known as one store that provides excellent service to the clients. This can be proven by the frequency of visit clients do to the company’s store and other marketing venues. Moreover a competitive advantage of the company is its increasing venue of marketing their products. Lastly a competitive advantage of the company is the wide range of business venture they are engaging in.

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TOYS R US July 15, 2012

QUESTION ANSWER OF CASE STUDY Question 1 What’s it like to shop in TOYS “R” US? Its likes to shop TOYS “R” US is that its prices are cheap . The company has competitive advantage over retailers and the industry. One competitive advantage of the company is its brand name. The company is known as one of the established toy outlets in the industry. People easily recognize the company and the different product it has. They can easily think about the company when toy selling is mentioned. Another competitive advantage of the company is its image with the clients. The company is known as one store that provides excellent service to the clients. This can be proven by the frequency of visit clients do to the company’s store and other marketing venues. Moreover a competitive advantage of the company is its increasing venue of marketing their products. Lastly a competitive advantage of the company is they have many of business venture they are engaging in.

Question 2 Is there any reason why this selling format wouldn’t work as well in Japan as it did in US? The selling pattern of Japan is different from the us market TOYS “R” US does not enter in same way as the are in us ,they have face retail problem in Japan .Us market is different from Japan market ,in distribution they deal with many middle man and cost high in Japan.toy r us Japan overcome different barriers in different ways. Another reason selling format does not work is that Japanese are quality focus and it is in their culture Another factor is Retailer are dominant in Japanese market. The whole seller deal with exclusive products. Toy r us deals with Directly manufacture and Japanese have middle man . Loyalty of supplier to their distributer is another reason. They Can’t lower transportation cost, the Japanese culture focus in quality, not in low price .their plan is to open 6 outlets but they only open 1 outlet in1991 due to high labor cost, direct distribution deals and high land prices.

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TOYS R US July 15, 2012

Question 3 What do you think of TOYS “R” US plan? Will it work? The plan of toy us is to exporting, market and direct sale to other countries does not work because its cost very high and toy r us cannot manage it. Another plan they adopt is federal direct investment, they did FDI in all ways both in technology, capital and investment in their personnel it does not work as well because of Japans culture their personnel have culture differences. They another plan they adopt is to franchising of their outlets, these plan also does not work because of property issues, either wages problem or issue of working condition of Japan.Toy r us their fore licenses and increase their profit. TOYS “R” US plan is to open its 6 outlets in 1991 but they could only opens only one outlet due to high cost, high land prices and direct distribution system. Their plan does not work.

Question 4 Is Dan Fujita a right partner? What does he bring to the table? In my opinion Dan Fujita is a right partner for toy r US because he has cultural literacy. He was not only billbugs’ but is also bicultural he has done law from Tokyo so he can manage legal issues that toy r us is facing and knows how to remove the barriers or decrease its barrier. He is well known of Japan political culture and can deals with that barrier more he gives vision to the sale of the products as he gives to MacDonald .He brings vision to the people of Japan which would increase its shares. They have done joint venture with MacDonald and both companies have same target that is youth when the joint venture take place the time is good because at that time Japan was in recession. Dan Fujita influential local partner and won approval from japans’ powerful ministry of international trade and industry. And management also felt that the restricted aspect of Japan retail regulation is about to change. 6