62379030-toy-r-us-in-japan-case-study.pdf

8/10/2019 62379030-Toy-R-US-in-Japan-Case-study.pdf

1/24

Toys R US in Japan

Vinsen Poonoosamy

W. Carr

A. Mag


2/24

Presentation - Overview

Introduction

Toy R Us background/ Japan in brief

Impact on Management Practices Entry Barriers

Competitive Advantages

Internalizing vs. Licensing

Future Strategy Japan and USA

Conclusion


3/24

World's leading retailers of toys, children's appareland baby products

Sells merchandise in more than 1,550 stores 849 stores in the United States 700 international stores in 33 countries 170 stores in Japan

Has 5 Division Toys R Us, U.S. Toys R Us, International Kids R Us Babies R Us Imaginarium

Estimated business value: $11 billion E-commerce sites including Toysrus.com,

Babiesrus.com, eToys.com, FAO.com andbabyuniverse.com,

Toy R Us background


4/24

Japan In Brief

Total Area: 377,835 sq km

Population: 127,078,679 (2009 est.)

Ethnic groups: Japanese 98.5%, Koreans 0.5%, Chinese

0.4%, other 0.6%

Religion: Observe both Shinto and Buddhist 84%, other16%

Economically powerful and stable Among the 3 largest and wealthiest markets worldwide

Japan is the second most technologically powerful economy

Strong Cultural Values Culture influence by Confucianism and western culture

Strong Loyalty


5/24

Hofstede Cultural dimensions

Country PDI IDV MAS UAI LTO

Japan 54 46 95 92 80

According to Hofstede, Japansculture has: low power distance High collectivism High masculinity High uncertainty avoidance Long-term oriented

These are reflected in JapansMarketing practices and consumer

behavior

PDI = Power Distance Index

IDV = Individualism

MAS = Masculinity

UAI = Uncertainty Avoidance Index

LTO = Long-term Orientation

Source: Geert Hofstede 2009

Japan In Brief


6/24

Factors Impacting on Marketing management

practices in Japan Japanese Culture

Long-term oriented/high uncertainty avoidance Life long employment

Market in Japan Preference to local products High Quality Product

Competitors and Barriers Wal-Mart Political barriers Large number of retail stores present in Japan

Porters 5 forces need to be considered

Impact on Management practices


7/24

Japanese market for Toys R Us Attractive Market

Along with the US and Europe, is one of the 3 largestand wealthiest markets in the world for leisure goods

Ease of entry provided by Joint-Venture with McDonaldin Japan

Cultural Obstacle Employment culture No more than 50 employees per store regardless of its

size

Loyalty to existing stores

Strong competitors specialty stores general retailers occupy the largest portion of sales in Japan


8/24

Entry Barriers - Japan Japanese toy retail dominated by small specialty

stores and general retailers Large toy retailers make much less sales than small specialty

stores

Wholesalers deal almost exclusively in Japanese-made products Not specifically in foreign products.

Loyalty of suppliers Unwilling to enter into direct deals with Toys R Us due to

their traditional way of making trades Go through several layers of distribution Cannot profit from low transportation cost for goods

manufactured in Japan.


9/24

Entry/Cultural Barriers - Japan

Developed/Industrialized country Hard to find empty space for opening large stores

Behavior of customers

High purchasing power parity

Values quality over low prices Values established brand name over lesser-known goods Everyday low price strategy does not work well in Japan

Everyday low price also their company specific advantage


10/24

Barriers Behavior of customers Behavior of customers

Loyalty Towards the stores that they have visited Primarily towards established specialty stores and

general retailers around the neighborhood

Huge selection of product but Japanese not interested ingoing into a giant store that has everything

Expected exceptional customer service Employees are expected to have an expert knowledge of

products Training cost Long-term employees


11/24

McDonald in Japan In 1971 McDonalds entered the Japanese market

first McDonald's in Mitsukoshi department , anupscale district in Tokyo

Overcome cultural barriers ( to make hamburgerspart of the Japanese diet )

Joint alliance with Toys R Us in 1986

Now has 3800 restaurants, earning revenue ofapproximately $4 billion a year (60% of thehamburger market)


12/24

Toys R Us - How they managed to

cross entry barriers? Its excellent marketing strategy and experience in

cracking foreign markets

Joint alliance with McDonalds

Benefited from the depth knowledge of the segment groupof children and young families

Market experience of issues regarding establishing

distribution & supply channels


13/24

Timing was good because Japan was in recession

Political factors from the Japanese government

Competitive advantage of the store- 18,000 items

Effective way of advertising

Toys R Us - How they managed to

cross entry barriers?


14/24

Alternative modes of Entry

Exporting: marketing and direct sale of domestically-produced goods in another country

Foreign Direct Investment: the direct ownership offacilities in the target country. It involves the transferof resources including capital, technology, andpersonnel.

Licensing : permits a company in the target country touse the property of the licensor. Such property usuallyis intangible, such as trademarks, patents, andproduction techniques


15/24

Would an alternative mode of entry

work? Direct exporting all goods from Toys R Us Japan is

not going to work due to high shipping cost.

Foreign direct investment is not going to work welldue to the Japanese culture

Franchising is not going to work either due to

different wage policy and working condition. Strategic alliance is therefore the most secure mode of

entry in Japan


16/24

Competitive Advantages

Problems associated in transferring it to Japan

Low Prices

Japan High Purchasing Power Index

Low Price might means Lower Quality

Product Selection

Japanese not amazed by huge product selection Japanese know what they are looking for


17/24

Toys R Us - Alternative mode of

entry Direct exporting all goods from Toys R Us Japan is

not going to work due to high shipping cost.

Foreign direct investment is not going to workwell due to the Japanese culture

Franchising is not going to work either due todifferent wage policy and working condition.


18/24

Internalizing FSA vs. Licensing

Why internalize Firm Specific Advantages?

Mc Donald Family and children network

No need to spend extra cash in Market Research

Mc Donalds Japanese Management Style No need training new employees


19/24

Internalizing FSA vs. Licensing

Why not Franchising?

New Market Research and adaptation

Japanese want to do business in their own way


20/24

Toys R Us Future Strategy - Japan

Profit Driven

Do not exclude Japanese or US market

Should be innovative to survive

Establishing better network

Wal-Mart not present yet

Mc Donald and Toys R Us compliment each other targetmarket


21/24

Toys R Us Future Strategy - USA

Import & Sell Japanese Toys

Cheaper prices and larger product selection by Toys R Us

Too Costly for Wal-Mart

First Hand Items by Toys R Us

Wal-Mart has small portion of their product


22/24

Conclusion Japan: prospective and important market

High Entry Barrier to Japanese Market

High Buyer bargaining power

Everyday Low Prices annoy Japanese

High Supplier bargaining power

High degree of rivalry

Threat of Substitute Protected by law from large competitors such as Wal-

Mart

Licensing to Japanese local store not going to work


23/24

References About Toys"R"Us, Inc.. 2010. http://www1.toysrus.com/about/

(accessed May 5, 2010).

Chatterjee, S.R., and A.R.Nankervis. 2007. Asian Management in

Transition: Emerging Themes. Houndmills: Palgrave Macmillan. CIA World FactBook Japan. 2009

https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html (accessed May 5, 2010).

Hill, C.W.L 2009. Global Business Today. Boston: Mc Graw Hill Irwin.

Hofstede, G. 2001. Cultures consequences. London : Sage.

Japanese Culture -- A Primer For Newcomers. 2004.http://www.thejapanfaq.com/FAQ-Primer.html (accessed April 08,2010).

Johansson, J. K. 2006. Global Marketing: Foreign Entry, Local Marketing

and Global Management. Boston: McGraw-Hill Publishing Group.


24/24

Question Time

62379030-toy-r-us-in-japan-case-study.pdf

Documents