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Group Four

on 24 October 2013

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Transcript of Introduction

Toys R Us
Industry Analysis
1. Barriers to Entry
PESTLE and SWOT Analysis
Case Study
2. Marketing Strategy
3. Cultural Orientation
4.Rise of Competition
Brand: Toys R Us is an established toy outlet in the industry
Image: Excellent Customer Service, Low Prices

Number of branches and stores: Huge competitive advantage.

Massive distribution networks: They can benefit from advanced logistic systems and also benefit with bargaining powered with manufactures.

Competitive Advantage
Wide range of products: Suiting all customer preferences expanding customer base there for dividing and minimizing unit costs for cheaper products.

Difficulty is transferring these advantages into the japanese market

Culture and perception to the slogan: (Japanese related this to poor quality)

Legal restrictions: Number or stores allowed and capacity of stores.
Products sold need to be local and relatable to the target market.

Competitors in Japan launched an association
to help other small toy stores modernize and survive competition from large foreign retailers such as Toys R Us.

The Japanese Association of Specialty Toy Shops, which consists of 520 small toy retailer.

These association are a threat as they are set in place to protect businesses competing with the vast product range and prices from the category killers, Toys R Us.

Foreign companies Entering a Culturally Orientated Market
Easing adaption through producing Japanese toys and products
and employing Japanese employees entirely with no foreign employees to help comply and adjust to the Japanese industry and culture.
Future Recommendations/Strategy
A keiretsu strategy, which is defined in Japanese as a system, series or
grouping of enterprises in order of succession, a set of companies with interlocking business relationships and shareholdings.

This will increase the local supply base for Toys R Us Japan, which will decrease imports, customize products sold by Toys R Us to those already in the market sold by competitors easing adaption and lower operating costs and helping with local distribution.

Through keiretsu there will be a sharing of local experience through networking and developing trust and relationship building which is considered the lifeblood of successful business in japan

-Association for Consumer Research. 2013. Price-Quality Relationships. http://www.acrwebsite.org/search/view-conference-proceedings.aspx?Id=6320
(accessed October 22, 2013).

- Chadwick, M and Won, J. 1994. Toys “R” Us Goes to Japan. In Global Marketing 5th edition, Johansson, J. 185-189. New York: McGraw-Hill/Irwin

-Chris Betros. 2011. Toys”R”Us Japan. http://www.japantoday.com/category/executive-impact/view/1677606 (accessed October 22, 2013).

-Desert News. 1990. Japan Toy Stores to Fight Foreign Firms Competition.
http://www.deseretnews.com/article/124655/JAPAN-TOY-STORES-TO-FIGHT-FOREIGN-FIRMS-COMPETITION.html?pg=all (accessed October 18, 2013).

-Hofstede Center. 2013. Hofstede’s Cultural Dimensions Model, Japan in Comparision with the US. http://geert-hofstede.com/japan.html (accessed October 22, 2013).

-Princeton. 2013. Keiretsu. http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Keiretsu.html (accessed October 18, 2013).

-Toys R Us Inc. 2013. About Toys”R”Us Inc. http://www.toysrusinc.com/about-us/ (accessed October 20, 2013).

- Toys “R” Us Inc. 2013. Toys “R” US. http://www.toysrusinc.com (accessed October 15, 2013).

• One of the largest and wealthiest markets in the world for leisure products
• Leveraging brand building by piggybacking onto McDonald’s strong brand and image
• Industry power and experience in cracking foreign markets (Hong Kong and Singapore in Asia)
• McDonald’s depth of knowledge, market research skills and communication lines to the target groups of children and young families
• McDonald’s successful experience of entering the Japanese market
• Large store area (up to 3,000m2) offering a unparalleled selection of inventory; able to guarantee that popular items are always in store
• Carrying only established brand name items
• Nintendo’s backing to ship directly to Toys “R” Us stores
• Positioned system as positive innovation that provides value to Japanese consumers
• Kobe warehouse allowed the company to control in-store inventory

Nicola Tatlow
Ivana Opacic
Danny Fairhead
Ryan Vergone

• Market dominated by small specialty stores and general retailers
• Majority of large Japanese manufacturers not willing to enter into direct deals with Toys “R” Us, preferring to work though middle wholesalers and preserve traditional trade links
• Unable to employ its regular tools and discount retailing strategy that worked in the US
• High operating costs
• Japanese toy market almost untapped

• Increase computer games, dolls and animated character toy inventory
• Become a “category killer” by capitalising on the competitive advantage of having a large space and inventory and preventing entry of other retailers in the area
• Utilise McDonald’s market research to target suburban areas with young families as a primary growth base
• Develop an aggressive national television advertising campaign to reach the whole market

• Increasing competition - large toy speciality retailers (Kiddyland, Pelican), convenience stores, small general retail shops
• Increasing cost of land and imported goods and weakening of the US dollar
• Smaller retailers uniting in opposition to Toys “R” Us and asking distributors to boycott the company
• Positioning problems in terms of the products’ perceived quality
• Steady deterioration of the Japanese economy and consumer spending
• Competitors adopting non-price techniques to compete - “do-it-yourself” toy days, hiring “toy consultants” to gain insight about future trends, etc.

Increasing competition from large exclusive toy retailers, small general retail shops, convenience stores, Toy Shop Specialist Council
Expand by building more stores which are increasingly supplied by local manufacturers and conduct extensive marketing research to adjust to Japanese rules and psyche in order to become a market leader, while still maintaining the trademark innovative nature
Future Recommendations/Strategy
Embark on an aggressive expansion campaign across Japan to undercut existing retailers (especially large superstores) and become the top-of-mind brand for the toy retail market
Continue the current strategy of opening large stores and offering unparalleled inventory, thus stopping new entrants from coming in
Increase inventory of locally and culturally recognised products, such as animated television characters and other popular products (games, dolls) to combat traditional competitor offering
Concentrate on themes of quality (rather than discount retailing) and a wide inventory of major brands as part of the marketing strategy
Be proactive in predicting future trends by conducting regular market research to ascertain the next big hit
Establish and cement distribution and supply channels by further localising production and entering deals with Japanese manufacturers

Standardized --> Localized Marketing Strategy
A significant issue that Toys R Us was faced with when entering the Japanese market were the distinctive cultural obstacles.

Japan is a heavily culturally orientated country.

Toys R Us needed to carefully consider the various cultural differences between American and Japanese consumers in order to localize their business and marketing strategies

Quality is traditionally more of a watchword than price is for Japanese consumers.
It was, therefore, important for Toys R Us not to distinguish themselves as a
company that offered “Everyday Low Prices”.

As consumers naturally use a products price as a measure of the products
quality. Toys R Us, thus, had to localized their strategy and positioned their
fundamental systems rather as a positive innovation providing value for
money for their consumers.

Toys R Us developed this value proposition by promising their Japanese
consumers unparalleled inventory. This strategy assisted in Toys R Us obtaining
competitive advantage over their smaller competitors

Toys R Us Japan imported more than half it’s supplies from the US.
Japanese consumer tended to place great value on culturally recognized products
as well established brand names.
Toys R Us Japan will thus need to further develop relationships with Japanese
manufactures and suppliers.

Future Recommendations/Strategy
Continue the localized marketing value for money strategy

Further promote the quality benefits of the products

Develop stronger relationships with local suppliers and manufactures
to appeal to the Japanese consumers demands for culturally recognized products

Invest more into research and development within the Japanese market,
enabling Toys R Us to further localize their marketing strategies
Hofstede’s Cultural Dimensions Model
Toys R Us was founded as the first ‘toy supermarket’ in the late 1940’s
Has grown to become the world’s leading dedicated toy and juvenile products retailer.

Merchandise is sold in 877 Toys R Us stores in the US and in more than 685 international stores in 35 countries.
Toys R Us has successfully translated its business abroad, embodying a customer philosophy of quality, value and selection that resonates with consumers around the globe.

In the early 1990’s Toys R Us entered the Japanese market.

Prior to Toys R Us entering Japan the Japanese retail toy market tended to be dominated by small specialty stores and general retailers.
Being the category killer that Toys R Us is, this lead to a number of significant threats and opportunities for Toys R Us in the Japanese market.

Strategically signed a high profile alliance contract with McDonalds, and a new subsidiary was developed.
Barriers to Entry
Toys R us took on a Adaptation approach

Local Employees

Forced to work with smaller Japanese wholesalers

Sensitive Japanese consumer

Overcoming the Challengers
1989- Bubble Burst- Presented opportunities for a cheaper toy market

“Everyday Low Prices”- Very attractive slogan at the time

Joined forces with McDonalds (80%-20%)

Utilised McDonalds in-depth knowledge in the current Japanese market.

Marketing through press rather than media

Consideration of Other Entry Modes
Minimal market research
Serve as a tester

Greenfield Operation:
Too Risky
Culturally outweighed

Existing Threats
1. In 1991 there was 11,628 Toy Stores

2. Annual sales of approximately 3.3 million Yen
Buyer Power

1. The Average Japanese household spent on average $650 on leisure goods

2. Ranked no. 3 as the wealthiest market for leisure products

Supplier Power

1. Toy and sporting goods retailers were serviced by 5,692 wholesalers- (dealt with Japanese made products)

Toys R Us has been extremely successful in the Japanese market over the last 22 years
Resulted in Japan being the company’s biggest market outside of the U.S (Betros, 2011).

Need to continue to localize their marketing strategies, to accommodate the quality driven Japanese consumers.

Develop stronger relationships and establish deals with local suppliers and manufacturers, to appeal to the Japanese demand for culturally adapted products and combat traditional competitor offerings.

Aggressively expand across Japan, to further increase brand awareness and market share.

Proactively engaging in predicting future trends through regularly conducting market research, due to the Japanese market’s appetite for novelty.

Adopt a keiretsu strategy to emerge the Toys R Us brand further into the Japanese culture.

-Hofstede Center. 2013. Hofstede’s Cultural Dimensions Model, Japan in Comparision with the US. http://geert-hofstede.com/japan.html
(accessed October 22, 2013)
-Association for Consumer Research. 2013. Price-Quality Relationships. http://www.acrwebsite.org/search/view-conference-proceedings.aspx?Id=6320
(accessed October 22, 2013)
- Chadwick, M and Won, J. 1994. Toys “R” Us Goes to Japan. In Global Marketing 5th edition, Johansson, J. 185-189. New York: McGraw-Hill/Irwin
- Chadwick, M and Won, J. 1994. Toys “R” Us Goes to Japan. In Global Marketing 5th edition, Johansson, J. 185-189. New York: McGraw-Hill/Irwin
-Toys R Us Inc. 2013. About Toys”R”Us Inc. http://www.toysrusinc.com/about-us/ (accessed October 20, 2013).
Full transcript