TOYS R US IN JAPAN

COMPANY BACKGROUND

• Founded in the late 1940s ,by chairman Charles Lazarus.

• Largest toy Retailer in the world,20 -25% of the US market and 2% of total international sales.

• Market expansion in 1970 -1980s by an aggressive expansion campaign

• First kids-R-Us stores were opened in 1982

• First international stores were opened in 1984

• Company operates total stores 1032,with581 toys- r-Us stores and 217 kids-R-Us stores in United states.

• International subsidiaries company in 18 countries

• Sales in 1993 were $7.9 billion

• Toys-r-us the 50th largest retailer in the world and 22nd

largest in the United States.

Q1. Evaluate the attractiveness of the Japan market for Toy-

R-Us?

Outline the entry barriers into Japan by emphasizing those

which culturally based in terms of how to do business.

JAPENESE MARKET STRUCTURE

• Jpanese market is industrial and developed societies.

• Oligopoly, small number of firms dominate the market

• Huge number of superstores.

• Huge distribution network due to advance system.

• Strong bargaining position when it comes to buying from

the manufacturers.

COMPETITIVE ADVANTAGE OF

TOYS R US

Brand

-established toy outlet in the industry

Image

-Excellent customer service

No. of branches

Huge distribution network

-benefits from advanced logistic systems

-Bargaining power with manufacturers

Wide range of products

JAPANESE TOY MARKET

Toy Retail market in japan is dominated by small speciality

stores and general retailers.

12582 were small general retail shops,additional 1227 were

large toy speciality retailers .And less the 500 larger

general retailer.

Japanese household spent Y 83724 per year in 1992($650)

on Health and leiusure products.

ATTRACTIVENESS OF JAPANESE

MARKET FOR TOYS-R-US

1. Buyer Power

-The average japenese household spent on average $650

onleisure products.

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

- Great fond of brand.

- More passionate with quality assurance

- Highly rank with united states

- Increase computer games, dolls, animated toys with

TV/cartoon characters.

ATTRACTIVENESS OF JAPANESE

MARKET FOR TOYS-R-US

2. supplier power

About 29000 toys and sporting goods retailers were serviced

by 5692 wholesalers (deals with japanese made products)

3. Alliance with Mc Donalds

-Utilise Mc Donald’s market research to target suburban

areas with young families as a primary growth base.

-they entered the japanese market with McDonald’s in 1989

and then they opend first store in 1991. They know about

japanese market

www.youtube.com/watch?v=niH19A5Y6o8

BARRIERS TO ENTRY IN JAPAN

1.High competition

large no.of Japanese toy, huge no. of wholesalers and retailer stores

2.Communication Barrier

-Language barrier : Direct and explicit conversation with top management level is highly avoided.

3. Size: Big size of Toys-R-US product does not match with Japanese family

Highly attract with “Small size” i.e. home, store room, car etc.

vs

4. High Cost: Expensive real estate property- store size.

land is very expensive.cost of employment is increased.

5. Legal restriction: Law against big store ,Short term leases,

Higher operating cost three times much more than USA.

JAPANESE CONSUMER

BEHAVIOUR AND IMPACT

ON CULTURE

High uncertanity avoidance

Sensitive nature and culture

Demand and preferences

-Quality a “watchword” then price

-Cheaper good -inferiority

- Locally made products

-Adopts to local condition and tastes

-Established brand name

- japanese existing stores

HOW TO DO BUSINESS

Sell toys focus to older age groups

Priority to small size product

Deliver a usuable and enjoyable online experience

Work with ,and not against the competition.

ATTRACTIVENESS

There are lots of attractiveness of the japanese market for Toy R US.

Japan is well developed country.people had big purchasing income.they r highly intrested to

expenses to leisure products

There are 11628 toy speciality retailers and 12528 are small general retail shops

The toy are not seperated from other leisure products ,such as sports and musical instruments

There are several (29000) toys and sporting goods retailers are serviced by a network of (5692)

wholesaller

The average japanese household spent 83724 yen ($650) on health and leisure products.so

must family member expenses with their leasure products.it could be a huge no. of selling

prospective

Japanese market are motivated as much by quality as price

The Toy-R-Us was established brand name,japanese consumer

Q 2: what are the problems encountered by Toy-R-Us in

transferring the company’s competitive advantages to

Japanese market?

COMPETITIVE ADVANTAGES

One stop shop concept-

• Large varieties of toys collection in one single store

• Chose of alternatives

• Tendency to keep customers in one place

Category killer strategy

• Concepts of “Every day low price”

focused on one or few categories of merchandise and offers a wide selection of merchandise in these categories at relatively low prices

• Stop competitors from opening stores before they start

Strong brand image

• Advance marketing knowledge about eastern Asian

• Internationally business operation

Store atmosphere

• Practice play area for children

• Trial facility before purchase

• Set up store lay out depending on occasion

PROBLEMS

ENCOUNTERED

Managing store space

Price perception about product quality i.e. high price

perceived better quality

Dominating power on small size competitors

Restriction on building big size store in city or centrally

location

Parental power on children

Q.3 Outline The Advantages Accruing To Toys-r-us In Entering The

Japanese Market Through An Alliance With Mcdonalds Rather Than

Through Franchising Which The Company Used To Expand Into The Middle East

ALLIANCE

Is a voluntary, formal agreement between two or more parties to pool resources to achieves a common set of objectives that meet critical needs while remaining's independents entities.

Alliance involves exchanges, sharing's or co developments of products services and procedures.

STAGE OF ALLIANCE

FORMATION

Partner assessment: its involves potential partners strengths

and weakness in market.

Contract negations: define each parties contribution and

rewards

Equity alliance: firms has different percentages in the

company formed by combining some of their resources and

capabilities

Global alliance: working partnership across national

boundaries or even governments

ALLIANCE

ADVANTAGES

Allowing each partner to concentrate on activates that best match on capabilities

Learning from partner & developing competence that may be more widely exploited

Adequate suitability of the resources and competence for organization to survive

Share risk between the companies.

Adopt with greater flexibility

DIS ADVANTAGES

Significance different between the objectives

Different in business culture and management style

Optimistic behaviour by any participant

Loss of control over operating cost or employees etc.

Competition: how to compete in future

FACTORS FOR

ALLIANCE

Select the proper partner for the intended methods

Share the right information

Negotiate a deal that includes risk and benefits for all sides

Agreement for market expansion

Flexible commitment for cultural share

COMPETITIVE ADVANTAGES WITH

MCDONALDS FOR TOY-R-US

McDonalds has a established business reputation in Japan

Image: excellent customer service and environment

Huge distribution network

Benefit from advance logistic systems

Huge market knowledge & research skills i.e. suburban and city area

Widely established location

Image of local precedent T.Fujita

Locally hired employees

More communications lines with target group children's and families gain competitive advantages.

Easily located in many different places

WHY NOT FRANCHISING

WITH MCDONALD

The franchise includes the right to sell the franchisor’s product & intellectual property

Risk of it:

Franchisor may duplicate Toy R us product

Abuse the intellectual property of Toy R Us

Use its name, trademark and services

Risk here:

Mislead the brand name or standard of the service

Adopt its business and technical methods,

Risk:

Franchisor can open a counter business

Copy its symbol or architectural methods, use its

procedural systems and methods

Risk :

Continuous and rigorous control, operational back-up,

marketing

High cost of training i.e. hire management staff from USA

are costly

Difficult on channel distribution i.e. CIF cost, tax

on-going management service fees

CONCLUSION

Therefore, the recommended business strategy for Toy-R-Us

is to format a business with McDonalds through alliance will

give them opportunity to understand better Japanese

consumers and markets.

REFERENCES

: http://www.ehow.com/facts_7370052_japanese-market-

structure.html

http://www.oecdbetterlifeindex.org/countries/japan/

http://www.slideshare.net/0710225/toys-r-us-goes-to-

japan?qid=a6486353-8bd3-4ee7-9b88-

aa117fb4bc56&v=default&b=&from_search=1

http://retail.about.com/od/glossary/g/category_killer.htm