Post on 02-Jun-2018
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Toys R US in Japan
Vinsen Poonoosamy
W. Carr
A. Mag
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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)
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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
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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?
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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
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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
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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
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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.
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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
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Internalizing FSA vs. Licensing
Why not Franchising?
New Market Research and adaptation
Japanese want to do business in their own way
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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
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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
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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
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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.
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