Japan an attractive market for Toys “R” Us Toy market in Japan Computer Games Dolls Animated toys with TV characters Ranked as 3rd largest & wealthiest market Health & Leisure products spending Joint venture McDonald’s Japan facilitates entry Draw expertise from stores in Hong Kong & Singapore
Toys “R” Us Geography
Geert-Hofstede FrameworkComparison: Japan v/s USASource: Geert Hofstede 2012 http://geert-hofstede.com/japan.html
Japanese Consumer Behavior & Impact on Culture High uncertainty avoidance Sensitive nature/Obstacles Demand and Preference Quality a “watchword” than Price Cheaper goods = Inferiority Locally Made Products Adapt to local conditions and tastes Established brand name Loyalty to Japanese existing stores
Doing Business In JapanCulture as main obstacle? Infamous myths of doing business in Japan – too risky?Japanese Business Culture – not impenetrable barrier tosuccessful business. (e,g . Yahoo! , Louis Vuitton, Toys “R” Us)Culture differs but it does not make it more risky do businessanywhere else.
Doing Business Index
Doing Business In JapanGroup Orientation Team work and individual identity is based by social groupsHierarchy Confucianism - status based on factors such age, employment, company and family background.Respect Showing respect – through language, behavior and body language
Doing Business In JapanBuilding Relationships Successful relationship based on three factors - Sincerity, compatibility and trustworthinessCommunication Vague form of communication – avoid direct or explicit statements Implicit communicators – minimizing information and relayed that implication will be understood.
Toys “R” Us overcomingBarriers to entry
Overcoming entry barriers into Japan Toys “R” Us - eight other countries. Drew on these experiences, especially those of its successful stores in two other Asian cultures, Hong Kong and Singapore Toys “R” Us signed an alliance contract with McDonald’s Japan. – Japanese company Toys “R” Us Utilized McDonald’s in-depth market knowledge. Japanese government waived laws which prohibited larger retailers from coming into the area.
Overcoming entry barriers into Japan Toys “R” Us Japan hired almost solely Japanese employees. Tailor advertising to what is more accustomed in the new environment. Effective in Japan was colorful inserts in newspapers. Toys “R” Us realized that they had to change their company to suit this new market without changing their style of store. “Everyday Low Prices.” - Japanese economy was in recession. Slogan very appealing.
Alternative modes of entry?
Competitive & Firm specificadvantage
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 logistical systems Bargaining power with manufacturers Wide range of products
Problems in transferring competitive advantage abroad Culture & Perception The slogan “Everyday low prices” Legal restrictions Number of stores & capacities 50% of toys need to be local ones Technology Stock control & inventories
Internalize firm specific advantage v/s license? Toys “R” Us preferred internalizing its firm specific advantage for the following reasons Licensing is too risky Vulnerability Mismanagement Losing control over brand Losing market share Retailers may replicate and implement similar business Direct competitor to the firm
Toys “R” us future strategies in Japan
Establishing a Keiretsu networkhttp://nikhilsinghal27.files.wordpress.com/2011/07/picture1.jpg
Keiretsu Increase local supply base thus decreasing imports – Lower operating costs Sharing of local experience through network Product adaption made easier as local suppliers have been made accessible Creation of a competition barrier for potential foreign entrants (e.g Walmart)
Increasing presence of Toys “R” Us inmetropolitan (key) areas
Bring Toys “R” us to metropolitan areas Very high density clusters around major cities High usage of trains and subway In 2010 - 3,232,332,000 train passengers Japanese not encourage to drive outside cities because of freeway tolls. Increase visibility and consequently increase customer awareness and sales figures
Reference ListKeiretsu. 2009. The Economist.http://www.economist.com/node/14299720 (accessedApril 24, 2012)http://www.toukei.metro.tokyo.jp/tnenkan/2010/tn10q3e004.htm