Toys “R” Us goes to Japan

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 Framework Comparison: Japan v/s USA

Source: Geert Hofstede 2012 http://geert-hofstede.com/japan.html

Japanese Consumer Behavior & Impact on Culture

High uncertainty avoidance

Sensitive nature/Obstacles

Demand and PreferenceQuality a “watchword” than PriceCheaper goods = InferiorityLocally Made ProductsAdapt to local conditions and tastesEstablished brand nameLoyalty to Japanese existing stores

Doing Business In Japan Culture as main obstacle?

Infamous myths of doing business in Japan – too risky?

Japanese Business Culture – not impenetrable barrier to

successful business. (e,g . Yahoo! , Louis Vuitton, Toys “R”

Us)

Culture differs but it does not make it more risky do

business anywhere else.

Doing Business Index

Doing Business In Japan Group Orientation

Team work and individual identity is based by social groups

Hierarchy

Confucianism - status based on factors such age, employment, company and family background.

Respect

Showing respect – through language, behavior and body language

Doing Business In Japan Building Relationships

Successful relationship based on three factors - Sincerity, compatibility and trustworthiness

Communication

Vague form of communication – avoid direct or explicit statements

Implicit communicators – minimizing information and relayed that implication will be understood.

Toys “R” Us overcoming Barriers 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?

Proposal

Competitive & Firm specific advantage

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 network

http://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 in metropolitan (key) areas

Bring Toys “R” us to metropolitan areas

Very high density clusters around major cities

High usage of trains and subwayIn 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 List

Keiretsu. 2009. The Economist. http://www.economist.com/node/14299720 (accessed April 24, 2012)

http://www.toukei.metro.tokyo.jp/tnenkan/2010/tn10q3e004.htm