OB Group Presentation (Toy R Us) Upload

7/31/2019 OB Group Presentation (Toy R Us) Upload

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PMBA 6014A Organizational Behaviour

Toys Us Japan

Presentation


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Agenda Whos Toy Us (TU)? TUs business model Retail industry model in Japan Opportunities and Challenges for TU Underlying Issues and Goal of TU

Benefits and problems that TU wouldface when enter into the Japanese market: US mode Japanese mode

Discussion questions Anchor Recommendations


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Who is ToysUs?

A toys retailer inself serviceandsupermarketstyle format Key milestones:

1957: Founded in USA 1984: Open the first international

outlet in Canada 1988: Captured 20% of the US toy

market 1990: Apply to open the 1st TU in

Japan

1991: Operating 97 overseas storesin 8 territories (contributed 14% oftotal sales)


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TUs Business Model LargeStores inlow rentarea Encourage full year purchasevia year

round advertising

Core Competencies:- offerswider selectionthan competitors Directpurchase from manufacturersand

offer toys atlower price Centralization (i.e. No decision are made

in the field) Ensuringreplacementof inventories Knowing the customerspreferences


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Retail Industry Model in Japan

Fragmentedand retailers andwholesalers Small and large nos. of toy stores

Complexandhierarchicaldistributionsystem 3- 5 layers of intermediaries.

Almost allretail stores buy toysfromlocal wholesalers Only 9% toys are imported Manufacturers determine retail price Similar merchandiseamong stores


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Comparison: Japan vs. US

JapanHighlyfragmentedLocally-focusedSuggested-priceSmall-scalestoresSlowinventoriesturnover

SmallvolumepurchaseSentimental

USDirectdistributionlayersGlobalvisionPricecompetitionLarge-scale stores

Highinventoriesturnover

LargevolumepurchaseLow pricestrategy


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Opportunities for TU to Enterinto Japan Retail Market

2nd largest toy marketin the world Annual retail sales grew 94% in 80s Boom in GDP during 1980s Falling birth rate Parents more

willing to spend more on toys Nosimilarcompetitors Same retail pricefor all shops

By undercutting "suggested price"

could capture the discount market Proposaloflaw relaxation


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TUs Challenges (1)

Business Model Priceandsupply of goods

controlled by manufacturers Lackofrelationship/

experiencein local market High land price anddifficult

to findsuitable shops Difficultto findsuitable staff


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TUs Challenges (2)

Cultural Value Japanese is emotionally

attached to their tiny shops Social value: Centers of village

Nation of small shopkeepers

mom and pop Shop everyday for small

quantities of fresh goods Japanese is willing topay more

forbetter serviceandemotionvalueby these small shops


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TUs Challenges (3)

Legal Regulations Very stringentscreening

process for stores over 16,000sq. ft.

Literallyrequire local retailersconsent

Protect small stores Tacit non-competition

arrangements


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Underlying Issues

Should TU enter Japan basedon itsoriginal organizationalmodel?

OR

Should TU enter Japan byadaptingto theJapanese way ofdoing business?

i.e. ChangeorNo Change?


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What is TUs Goal?

Extremely straight forward and notrocket science:

Simply goglobalizationandmake

more profits!!!


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If TU enter Japan by adapting tothe Japanese way of business (1)

Position :

Differentialproduct /services

TU

Comp-etitor

Comp-etitor

TU

Comp-etitor

Japan Toy Retail MarketTU


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Challenges : Due to thesame retail priceset by the

manufacturers, to survive, TU mustdeliverdifferential products/ better

servicesto customers Highly competitiveenvironment as these

shops are currently providing high qualityservices and similar products.

A big changein theorganization modelto

adapt the market the objectives, structure, organization

culture, etc.


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Benefits :

Good Start : Better relationshipwith manufacturers/ wholesalers

Possibly able to have stablesupply of local products andpass through legal restrictions

Good Start : Get recognition fromcustomers


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If TU enter Japan based on itsoriginal organizational model (1)

Position :

Influence

TU

Japan Toy Retail Market


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If TU enter Japan based on itsoriginal organizational model (2)

Challenges:

Impairtheinterests of retailers /wholesalers / manufacturersin Japan

Manufacturers and wholesalersmaynot supply local toys

Unableto findsuitable shops

Couldnotfind suitableemployees

Interruptthe establishedsystem of

business, which is difficult to change Educate customers, change

customers behaviour


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If TU enter Japan based on itsoriginal organizational model (3)Benefits: Retain TUsorganization model

andcore competencieswhich drawmoreprofit

Supports from customersbydelivering : - Lower price products Wider range of goods sold at one

stop


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Discussion Change or Not Change?

Why 7-eleven is successfulin Japan?

Organizational model isadaptableinJapanese model of retail business

Onlyminor modificationof itsorganization structure is requiredwithout destroyingitscorecompetencies

Butcould TU do soand, if affirmative,how muchchange of its organizationstructure is required?


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Consideration One

Culturein that country. The country you are entering

What if you are TU and youare entering Canada instead ofJapan?

Would the challenge as well asthe decision be different?

Employees indifferent culturesbehaveand react differently to

various scenarios:


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The US vs Canada vs Japan

Country PowerDistance

Individualvs

Collective

Masculinevs

Feminine

UncertaintyAvoidance

Long-termvs Short-

term

US 38 1 15 43 27

Canada 39 4 24 41 30

Japan 33 22 1 7 4

Source: Geert Hofstede BV, summarized from Organizational Behaviour, Robbins/Judge, p 126-127, 2007

What are the key observations? As TU entering Japan, does it have to

amend its organization structure tomeet local culture? It depends!!!


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Consideration Two

Local business practice/ protocol How does the Japanese toy

business supply chain affectorganization structure?


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The Japan Toy Supply Chain

Apart frommaking theenduser to paymore

How wouldToysUs haveto modify itsorganization tosupport this?

ToyManufacturer

Regional

Distributor

Master

Distributor

Wholesaler

Retailer

Consumer


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Toy Manufacturer

ToysUs

Consumer

TUs supply chain in othercountries probably onlyneedsa couple of people in

a single accountto managethe entire distributionrelationship

Vendor Account Manager

TU Supply Chain, with SuggestedVendor Organizational Support


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The Japan Toy Supply Chain

Toy Manufacturer

Master Distributor

Regional Distributor

Wholesaler

ToysUs

Consumer

Due to various reasons, e.g.facilitating the manufactureto control retail price,

additional organizationalunitsare required tosupport business in Japan.Does this make sense?

Vendor Account Manager

Master Distributor Manager

Regional Distribution Manager

Wholesale Distribution Manager


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The Efficient Organization Which business model, the TUs

existing or Japan toy industrymodel is more efficient?

Maybe the concept of satisficingwould suit TU what is it?

Combination ofsufficeandsatisfy A good enoughsolution Adequately addresses issue, but

not necessarily being the mostefficient


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Consideration Three

Market Power Lets consider one last feature,

which would inevitably influencethe decision:

Entry firmsperceived marketpower(i.e. size of the business or howpowerful / influential thecompany is)


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A Wise approach?

Has everyone heard ofWise Kidsin Hong Kong before? Lets assume the case is about

Wise Kids entering the Japanesemarket

How many locations in HK? 5 stores Revenues? We could agree

that they probably had lessrevenue than the US$5.5B insales in 2001 that TU did.


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If Wise Kids said I dont agreewith the Japanese distributionmodel for toys, and I want todo business completely direct

with manufacturer. How would Japanese

manufacturers respond?

Wise Kids (1)


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What do you think? Wise Kids cannot change

market behaviour Because they aretoo small

But what about TU? Wise Kids cannot change

market behaviour Because they aretoo small

Wise Kids (2)


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Formulation of Anchor (1) What is TUs business strategy/

core competencies? Buying and selling alarge

selection of toys, direct from themanufacturer, atlow cost

If TU elects to adopt theJapanesemodel, and builds out a multi-layered account managementorganization to support this?DoesTU keep its competitiveadvantagein Japan?


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The answer is probablyNO. TUs core competencieswould

bedestroyed, as itscostswouldbedriven up significantly

Therefore itcannot changeits

organizational structurecompletely

But if TU completely adopts itsstandardized US modelwithout

modification?

Formulation of Anchor (2)


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The answer is probablyNO. TU would facestrong opposition

from the manufacturers/wholesalers, retailers

TU wouldnot know the local

needs, e.g. where to set up theshops and what are the popularproducts/ services of the local.

Therefore itcannot maintainitsorganizational structure

completely Similar to Panasonic/ Philips case?

Formulation of Anchor (3)


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TU Japan is not merely required to(1) suitablystandardizeitsorganization structure as the parentorganization in order to maintain thecore competencies, but also to (2)

adequatelylocalizeorganizationstructure in order to meet the localneeds and face less oppositions

Anchor


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Follow through the Anchor

Thedegree of adaptionis akeydeterminant

As TU hasinfluential power,theircore competenciescan be

maintainedby onlyslightadjustmentof theirorganizational model

The adjustment should becoherent with local partnersandmeet the local needs


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Recommendation 1- Avoid Cultural Misfit

Cultural Values

Strategic partnershipwith local company

Empowered management decision atcountry level (i.e. Decentralization),

management formed by local staff to fostercultural fit

SBUby country

Formal organization structure(high powerdistance)

Trainingfor US managerson culturaldifference(example: listening skills, voiceand tone, underline meanings of words)


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Recommendation 2- Local Practice Hybrid approach organizational design

MaintainTUs core competencies(range, low price, cost)

Category managersteamtodeal with

major distributorsand alsomanufacturers

Formstrategic retailer supplierrelationshiptoturn local opposition tosupport(example: 7-Eleven in Japan)


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Recommendation 3 Organization Power

Organization in wider context

Ride on MITIs vision, work with USGovernmentto move forward withJapan (not invade Japan)

Incorporate social communityinto theorganization (aged workers, femaleworkforce)


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Recommendation 4 Critical Mass

Locally large enough to provide widevariety of goods

Attract customers arcade ownerswill be willing to lease the shop

More people would be willing tojoin More manufacturers/ wholesalers

would be willing tosell

Large overseas chain stores network

Promotion of Japanese goods inforeignTUchain stores inexchangefor supply of goods.

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