EXTERNAL ENVIRONMENT ANALYSIS

We have done our external analysis for Toys R us on the basis of following factors: 1. Economic 2. Political 3. Competitor 4. Culture 5. Legal ECONOMIC: We will analyze the economic situation of the host country which is Pakistan in our case. We will see that whether the people are able to afford Toys R us products or not. We will launch the product according to people purchasing power and target the market which we want to capture. If we analyze in Pakistan than we will see that people have the purchasing power for toys but they dont have Toys R us type stores who have innovated products that is why this will be good market for Toys R us. POLITICAL: Pakistani political factor will be in favor of Toys R us as they have softer policies in terms of companies coming here and opening a business .They will also maybe enjoying incentives like tax free land etc. COMPETITOR: In Pakistan there is no such proper toy manufacturing brand exists that compete Toys R is side by side that is why they will be having an edge of being first one to introduce innovated toys in Pakistan.

CULTURAL: Pakistani culture is enrich with different festivals and having various kind of occasions in which toys are a brilliant choice for present as a gift. Birthdays, Eids, festivals etc. all these are very big points in selling toys. Toys R us will be having a great edge due to all these occasions in Pakistan. LEGAL: Pakistan is not having any rules and regulations against toys business which become a hurdle in Toys R us way. There are normal business rules that are being followed by every business that comes to Pakistan from abroad so Toys R us will be having green signal from the legal factor of Pakistan.

INTERNATIONAL TRADE THEORIES

MERCANTILISM: Mercantilism came into being in 16th century and when this theory was introduced there were two medium of exchange that were gold and silver. The intervention of government in businesses was also very common and it was preferred by the countries to export goods then importing them. This theory cannot be applied today because firstly the medium of exchange has completely changed and today every country has its own currency and there is a foreign exchange market which controls and contains all the currencies of the world and the concept of demand and supply has also taken over the markets. Secondly so much intervention of government is not acceptable in this era business prefer to control their activities by their own methods and they only follow the overall rules and regulations made by governments. ABSOLUTE ADVANTAGE THEORY: Toys R us s history shows us that according to USA need of absolute advantage it is always been beneficial and Toys R us has always provided the absolute advantage to the USA in compare to other product. That is why this theory is been applied

COMPARITIVE ADVANTAGE THEORY: This theory is not applicable in this situation because Toys R us is only a retailing business and not working under any government sector that is why government has not compared it with any other product. And for that reason this theory is not applied. PRODUCT LIFE CYCLE THEORY: Toys R us was on the introduction stage on 1948 when it was started as a children supermarket. At this level there was no international trade was going on. With time the demand for its product increases and it turned to Toys R us in 1957 and at that time it had started to grow in USA. Toys R us was on growth stage in 1960s when they started to increase their production and started the international trade. It had adopted many brands like toys r us, babies r us, and it became one of the most famous brands in the world. Today toys R us is on growth stage international trade is going on advanced countries are having demand for its products and it is growing at a massive level in the world. So by viewing the above factors this theory is been applied. NEW TRADE THEORY: Toys R us is working since 1948 and having a very good reputation in childrens furniture, toys, accessories etc. Toys R us has made their products more innovated and unique in a way that no other company has done it before and also introduced brands like Babies R Us which has become a giant in baby accessory industry .It has kind of a become a trend setter or the innovator of things that are new to everyone eyes. And as when Toys R us was made there were no such competitors who are competing with it in International market so it kind of got the First mover advantage also and has created a trust with the worlds markets of being the best in this business which is very beneficial to it. So by above facts we can say that this theory is also applied. NATIONAL COMPETITIVE ADVANTAGE: PORTERS DIAMOND: This theory is also been accepted proved as by seeing following factors: Factor endowments: Toys R us has been introduced in the market with the attitude of new, advanced and innovative ideas. Toys R us always preferred using advance factors like skill labor,

research facilities and technology. And it has always been successful on the basis of using advance factors. Demand Conditions: Toys R us is having a great demand in USA since it was created. All over the country it was famous and within few years it was having a large collection of stores all over America having great returns due to great demand. And this makes the very well reputation of Toys R us in international market. Related and Supporting Activities: Toys R us have a very big supporting advantage in USA was that the raw material was very economical for the company to produce good quality products. That is why Toys R us produce its toys in America because of very good quality and low cost raw material for toys in America. Firms Structure, Strategy and rivalry: Toys R us was having some rivalry in the beginning with the standard toys production as they were working in USA for a long time so they gave a little hard time for Toys R us but its managed to keep in the market. Toys R us was only one brand in the beginning but with passage of time as demand increases and they felt for the expansion of business they introduced their sister brand Babies R us and more and expanded their structure. Toys R us has always set the best strategy for the business by considering all the factors around them and for the best decision in the dynamic business environment. FACTOR PROPORTIONATE THEORY: This theory is not applied here because if we see the history of US we will come to see that US is not a very big manufacturer or it doesnt export toys on a very high level. Because toys are made in different countries having great history of exporting toys as China who is having a enormous export in toys all over the world so this theory does not apply.

MODE OF ENTRY

The mode of entry that best suites the requirement of Toys R us in entering Pakistani market as they want to control the operations directly under their supervision and they want the full control over every activity due to these reasons the mode of entry they will chose is FRANCHISING. Franchising will be the best ways under the requirements of the natre of our existing business plan of Toys R us in Pakistan. Franchising is the best way to put a image in the people minds of a great product. With this we could get the maximum initial market share and could increase our operations after seeing the feedback of the customers. By franchising two groups come together and share the methods of doing business that created more possibility of innovated and more efficient workforce with diverse ides. That is why we will choose this as our mode so that we could gather maximum market share and do best marketing and distribution activities.