2. 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.
3. 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.
4. 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.
5. 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
6. 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.
7. 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.
8. 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
9.
10. 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
11. 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.
12. 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
13. 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.
14. 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
15. Q 2: what are the problems encountered by Toy-R-Us in
transferring the company’s competitive advantages to
Japanese market?
16. 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
17. 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
18. 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
19. 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
20. 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.
21. 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
22. 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
23. 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
24. 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
25. 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
26. 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
27. 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.
