TOYS “R” US JAPAN

SECTION A

TOYS “R” US JAPAN

A clear synthesis between conceptual and empirical aspects should be presented. . alternative solutions to the problem/issue should be discussed in the context of the relevant theories. Recommendations: Identify the courses of action needed to implement the best solution. Introduction: Describe the situation and identify the main problem/issue. 2.TOYS “R” US JAPAN SECTION A Case Study Analysis Report Format CONTENTS: 1. if required. Body: Analyse the problem and the issues underlying the problem in the light of relevant theory/conceptual framework. 4. Conclusion: Identify the best solution in the light of relevant conceptual aspects. 3. Also.

Special Services Provided to Toys R Us: • Order Management • Vendor Management • Inventory Management • Fulfillment . As a top global service provider. Agility is a company on the move. Toys “R” Us exclusives and many other great values under one roof. old favorites. yet we never lose sight of the fact that whether you are a small or large enterprise. distribution. Discusses the history of Toys "R" Us in the United States as well as the history of the Japanese toy market. Toys “R” Us offers an unparalleled selection of new toys. Faced with a lack of direct distribution deals and high land and labor costs. Toys "R" Us executives begin in the late 1980s to formulate strategies for opening large discount toy stores in Japan. in the United States and abroad encountered many obstacles and barriers when expanding their operation into the Japanese market.Toys "R" Us(TRU). a leading toy retailer. Partnership with our customers is the driving force behind our mutual success and the ultimate satisfaction for our more than 34. executives of Toys "R" Us Japan worry about the ultimate success of their new venture. the heart of our business is personal customer service. Eager to enter the world's second largest toy market. we do business in the most straightforward scenarios.500 freestanding destination toy and baby specialty stores worldwide. Personal Service. and a long-standing multilayered distribution system. Toys “R” Us is the world’s leading dedicated toy and baby products retailer with more than 1. The American company faces a series of setbacks due to Japanese store-size regulation. wholesaling. as well as the world’s most challenging environments. and retailing systems. Continued effort and the acceptance of a Japanese partner enable the company to prepare for the opening of a Toys "R" Us outlet in 1991.000 employees in over 120 countries around the world.TOYS “R” US JAPAN SECTION A 1 Introduction Describe the situation and identify the main problem/issue: The American retailer's process of entry into the Japanese toy market. Toys “R” Us positions itself as the authority when it comes to finding the perfect toy. application procedures.

Japan is one of the top three wealthiest markets in the world for leisure products. Toys “R” Us has a policy that none of their stores can be less than 3. Some critics said that this strategy would clash with the Japanese consumers. They stated that the Japanese culture and beliefs were too different from that of the United States and Europe for Toys “R” Us to be successful. Toys “R” Us saw a great amount of opportunity in the Japanese market. A lot of critics worried that Toys “R” Us would not be successful in this new and foreign market.TOYS “R” US JAPAN SECTION A Body Relevant theory: Toys “R” Us first told the public about their decision to enter the Japanese toy market in 1989. They raised several issues that they believed proved the Japanese market was not ready for the marketing and retailing strategy that Toys “R” Us offered. In this marketing strategy they use mass advertising in order to make brand recognition. which in turn helps consumers remember and want to shop at their store. Another concern was that Toys “R” Us Japan would not be able to get sample permission and space to build their large toy stores. but instead would only deal through middle men. United States and Europe being the other . Also some Japanese toy manufacturers said that they would not sell directly to Toys “R” Us.000 square feet. This is a problem when entering the Japanese market because they have laws against big stores and land is so expensive. They also discount some of the popular items at certain times which give the consumer the impression that everything at their store is inexpensive or discounted. Toys “R” Us incorporates a “category killer” strategy (Johansson 181). Even with the critics telling them everything that could be standing in their way. since Toys “R” Us competes on price and the Japanese culture links quality with price.

the signing of this contract was an enormous aid.S. U. Their toy market was dominated by small specialty toy stores and small general retailers. not at general retailers. Being that they knew little of this foreign market. Toys “R” Us knows how to successfully enter foreign markets and they also have a remarkable marketing strategy. With the combination of McDonald’s Japan’s know-how of the Japanese market Toy “R” Us Japan was set in motion. By seeing this they realized that Japanese consumers shop mainly at specialty stores for their toy purchases. In 1991 Japanese people spent $25 billion dollars on leisure products. There were also no foreign employees at their headquarters. The combination of these two companies’ skills would prove to be heavy competition for local businesses. This was a huge upside to the Japanese market. while Toys “R” Us would control the other 80% (Johansson 183). In order to penetrate the Japanese market Toys “R” Us signed an alliance contract with McDonald’s Japan. When McDonald’s expanded to Japan they changed their restaurant to suit Japanese rules but kept their innovative nature (Johansson 183). Seeing as Toys “R” Us had already successfully dominated the market in the United States and penetrated the European market they saw that it could be beneficial for them to expand to Japan. In the contract it stated that McDonald’s Japan would own 20% of Toys “R” Us Japan. Toys “R” Us Japan hired almost solely Japanese employees. stores like Wal-Mart and K-mart had a significant percentage of sales.TOYS “R” US JAPAN SECTION A two (Johansson 183). Only 500 larger general retailers made a significant portion of their income from toy sales. Another section of the contract stated that McDonald’s Japan could place a restaurant anywhere a Toys “R” Us Japan was located. On the other hand. Toys “R” Us learned from McDonald’s and realized that they would have to change their company to suit this new market without changing .

800 square feet. The products grew from “infant. since some of the stores in Japan are less than 2. By 1993 the company had opened 15 more stores in Japan (Johansson 184).au).” .au). It started as a baby furniture store in Washington D. They waived laws which prohibited larger retailers from coming into the area. and was opened at just the right time. By responding to the needs and wants of his customers Lazarus had turned his store into a “full-scale toy store extravaganza. World War II had just ended and Lazarus’ store hit the market just in time for the baby boom. It was opened outside of Niigata in Ibaraki Prefecture in December 1991. Therefore they found this slogan to be very appealing. one of their policies doesn’t allow any stores to be less than 3.TOYS “R” US JAPAN SECTION A their style of store.” This turned out to be a very beneficial decision. to preschool.000 square feet. to kids and then teenagers” (toysrus. Their transition was also assisted by the Japanese government. so did the range of products offered at the store. When their first store opened in 1991 there had been a recession in the Japanese economy.C. Toys “R” Us kept their slogan. They also made some changes to their policies. The store started out with just baby furniture but soon the customers were asking for toys and as the children grew. When entering the Japanese market they had to change this rule. With this help the first store that Toys “R” Us opened in Japan was 3.000 square feet. As stated earlier. The Japanese consumer was looking for low prices but also wanted good quality in their products. Conceptual Framework: Toys “R” Us was founded in 1948 by 25 year old Charles Lazarus. “Everyday Low Prices. This impeccable timing set Toy’s “R” Us up for more success than Lazarus could have ever expected (toysrus.

Japan’s culture relies on three basic values and principles: the concept of “wa. These values and principles shape the way that almost all business is conducted and to successfully do business in Japan you will need a thorough understanding of these principles and how they shape business relationships (communicaid.au). The Toy sector of retailing generates about $22 billion of that (about.com). which is approximately $12. and is very collectivistic relying heavily on the tradition of its people for centuries.” or saving “face” which stems from pride.com .com). and etiquette that is still reflected in many social and business practices today” (communicaid. Toy’s “R” Us is one of the largest toy retailers with $11 billion in sales annually. According to a retail industry profile on About. retail is the second largest industry in the U. Doing business in other countries is very different than doing business in America.500 stores worldwide (toysrus. Lazarus had revolutionized the toy retail market by opening the first toy supermarket with a HUGE range of kid-focused products (toysrus.8 trillion in sales. in terms of establishments and number of employees and one of the largest industries worldwide.retail). the concept of “kao. toy retailing. In the U.000 per capita (about. Toys’ “R” Us falls in the industry of retailing.” which relates to a sense of empathy and loyalty (communicaid. it only accounts for around 50% of . Though Wal-Mart is the worlds largest retailer with over $312 billion in sales annually. and the concept of “Omoiyari.S. “Japan has formed a distinct model of hierarchy. Toy’s “R” Us is an $11 billion business with approximately 1. Single-store business accounts for 95% of all retail business in the U.com).. specifically. Today. Japan’s culture embodies peace and harmony.com). Japan is a country on a relatively small island with over 127 million people whose ancestors have been living there for centuries.S. the retail industry generates $3. honor.S.com.com – toys).” or harmony.TOYS “R” US JAPAN SECTION A By 1957. and Japan is probably about as different as it gets from American business culture.

retail). games. skateboards. They have also opened up chains of Kid’s “R” Us which specializes' in children’s clothing. and drawing and sculpting items. Toys that help children learn have become very popular with kids and parents alike which has sparked Toy’s “R” Us to carry toys for early development. from newborns to 16. the games for those systems and any other accessory that may be needed (amazon.com – toys). which shows how powerful the chain retailers such as Toy’s “R” Us truly are. They’ve also started carrying large items such as bikes. Toy’s “R” Us has also expanded outside of their own store. They also offer action figures. Toy’s “R” Us now offers products in many different categories. Another avenue . pools. with toy stores representing 20% of all online transactions and generating over $1. in the beginning Toy’s “R” Us started with just baby furniture. and stuffed animals as well as preschool toys such as learning toys and toys that spark the children’s creative side. They offer baby products. toys to help kids learn to read and write. The gross margin for retailers typically is between 31% and 35% but varies in terms of specific types of retailers (about. They typically have a large arts and crafts section in their stores as well with craft kits.3 billion in sales in 2005 (about. such as music. One thing that is really helping the toy industry is the internet. dolls. They have opened up stores overseas creating Toy’s “R” Us International where they aim to please parents and children all around the world. electronic learning toys. More recently Toy’s “R” Us has expanded to be a leader in video game sales offering all the leading systems. As stated above.TOYS “R” US JAPAN SECTION A the retail sales. with their own brand clothing as well as recognized name brand clothing. as well as puzzles and science play sets. sports items.com). still furniture. and created other avenues for them to get their specialty products to the public.com . scooters. and yes. and water games for some elementary school aged children. and as their customer’s children grew so did the range of products offered at the store.

Toy’s “R” Us.com has expanded to include BabieRUs. But in order to grow through new customers and .com for baby’s needs and Imaginarium. than why not expand and conquer the market? Entering a foreign market has its set backs. And since Japan is also on the list. had to put on the foreign entry-“export manager hat. For example. in recent years they have teamed with Amazon.com to create ToysRUs.com to meet the needs of busy shoppers. by teaming up with McDonalds Japan they were able to use their research to help them evaluate the new environment. and all actions have to be taken with precautions. it was n’t an easy task. Even ToysRUs. or people that prefer that mode of shopping for their children. Sales associates were something Japan had never invested in.” They had to learn how to evaluate other countries markets qualitatively and quantitatively. Now just by reading the title of our case study “Toy’s “R” Us goes to Japan” you can grasp the amount of energy that it took to get the company there. friendly staff that will make your baby shopping experience as pleasant as possible. And believe us. In April 2001 the company introduced a system of “sales associates” in 13 Japanese outlets (Johansson 253). they thought it was an inefficient service. for the top three wealthiest markets in the world for leisure products.TOYS “R” US JAPAN SECTION A they have taken is to open many chains of Babies “R” Us where their mission is to offer high quality baby products and a knowledgeable. Toy’s “R” Us had huge successes with the North American and European markets.com to offer the finest learning toys available at an easy way Suggested Actions The long-term strategy for Toy’s “R” Us was to expand in international markets . And by understanding the foreign customers needs and preferences in terms of products and services they knew how to layout the store. But after doing some research and seeing how Japans market keeps going in and out of recessions they may need to change how retail is done in Japan. Lastly.

and to take it into consideration whenever doing business in . We feel that Toy’s “R” Us Japan needs to invest more money into advertising. to see this. which were then hand delivered to homes with mothers and children. As noted above.S. All these values and principles are directly related to why Japan favors quality over most possessions in life. and “Omoiyari. They would soon see the changes in increased profits. It was stated in our case that “the primary advertising media strategy was the use of colorful inserts in newspapers” (Johansson 184). “kao. Millions of dollars a year are spent specifically on “getting the word out.” or saving “face” which stems from pride.com). We suggest that it would only benefit sales and profits if they would invest more money into advertising using other sources besides hand delivered mail inserts.V/radio. Japan decided not to broadcast any advertising on Television or on the radio since they feel that it was too scattershot and too expensive.” which relates to a sense of empathy and loyalty (communicaid. Another suggested action that we saw was the way Toy’s “R” Us Japan handled advertising. But as marketing students we know the value of advertising and we feel that if they continue this simple route in advertising than the company will see decreases in sales and profits.” and we thought that Japan would soon come to realize the importance of advertising and its relationship to sales. Advertising in the US is a huge deal.TOYS “R” US JAPAN SECTION A continue high revenues the company must change how service is being done. Japan’s culture relies on three basic values and principles: the concept of “wa. It is important for the U. by taking advantages of the viewers who watch or listen to the T.” or harmony. Another suggestion that we foresee as an upcoming problem is Japans views on quality and price. Being that this is their target market it would makes sense to ensure that these particular groups of people see these ads. And this prediction by our group was seen in April 2001 with the hiring of sales associates who would simply help the selling process.

possible positioning problems. cheap money. By being prepared and having a plan of action for all these setbacks they will be able to dominate the retail market in Japan. and the steady deterioration of the Japanese economy and consumer spending (Johansson 185). High barriers is something Toy’s “R” Us saw right away as a hurtle they had to get over. then consumers will assume there store has nothing to offer them since it is all cheap items.S (Johansson 184). We also waned to spot out that they imported more that half of its supply from the U. increasing cost. The future holds competition and Toy’s “R” Us needs to keep in mind that their target market (the youth) may not be able to afford their products if other stores carry the exact same item at a lower cost. And to help them enter the country they decided on a joint-venture with McDonalds . By importing large quantities of goods they would profit from the cheap dollar (Johansson 184) but they need to keep in mind that cheap land. and cheap imports has to end at one point in time (Johansson 184). Things Toy’s “R” Us needs to continue to be on the look out for are: competition. Finding potential suppliers within Japan was something they didn’t think too much about and it became an issue. And if they stem too far away from their original concept of quality over price and start only carrying cheaper items in order to compete. We feel that Toy’s “R” Us Japan had also made great decisions when entering the Japanese market.TOYS “R” US JAPAN SECTION A Japan. By finding local manufacturers/distributors then they will help the localization process and continue to stay own the retail market for leisure goods. So this juggling act is something they need to accomplish before it’s too late. As long as Toy’s “R” Us looks at the challenges they may be faced with for the future and they have a plan then we feel they will stay on top. But what we are also aware of is competition and we worry that Japan may need to balance the two concepts of quality and price.

First. Tong always says “In order to be successful you have to come up with the right product. at the right place and the right time. Overall. Another positive aspect that Toy’s “R” Us Japan had on their side was the timing of their first opening.TOYS “R” US JAPAN SECTION A Japan with their 20%/80% relationship. Toy’s “R” Us had a huge advantage. and to see how marketing globally can benefit a company if it is done right. The joint-venture gave them a great advantage and a strong foot in the door.” From these exact famous words you can see how entering Japan at the right time was perfect for Toy’s “R” Us. they signed on with McDonalds Japan to make this a joint venture with Toy’s “R” Us owning 80% and McDonalds owning the remaining 20%. It is such a benefit for us students to apply things to real life situations. For this. This research is so important in order to enter foreign countries. Alternative solution To Be Learned: Many lessons can be learned from the case of Toy’s “R” Us going to Japan. And as Dr. we feel that this case study helped us relate what we have learned in international marketing. This was quite an advantage because McDonalds had been so ingrained in the Japanese market that they were seen to many as being a . Their slogan of “Everyday low prices” was not seen as a cheap store to get cheap things. In doing this joint-venture they were able to use McDonald’s successful international marketing research. this case shows us how high barriers to entry can be overcome. The key here is to remember that we are all human and we all make mistakes but it is our mistakes that we can learn from and to make our business a successful one. but seen as a blessing during their recessions.

183).S. and Japanese retailing systems. This was a big advantage for Toy’s “R” Us being that there were no other stores of that size. Overall.000 items. In this case there was a law in Japan that restricted the “big store” from opening. in Japan. “By creating an overwhelming advantage. would be reached. firms hoping to enter the lucrative Japanese market Conclusion & Recommendations: . waived the law and allowed Toy’s “R” Us to open a 3. in an effort to create good PR. Another lesson learned from this case is how the government can be helpful in starting your business in a foreign country. which is their target market. One more lesson learned from this case study is that you must tailor your advertising to what is more accustomed in the new environment. 184). however.S.TOYS “R” US JAPAN SECTION A Japanese company (Johansson. and what these differences imply for U. 183). this case examines differences between U.000 square meter building offering 18. radio and television are far more expensive and scattershot. The Japanese government. it was intended to stop competitors from opening opposing stores before they started” (Johansson. “Toy’s “R” Us was able to utilize McDonalds in -depth market knowledge and research skills as well as the communication lines to the target groups of children and young families” (Johansson. What they found to be most effective in Japan was colorful inserts in newspapers that could be home delivered to ensure that children and mothers. You would think that a major company such as Toy’s “R” Us would advertise on television and radio to most effectively reach their target market.

TOYS “R” US JAPAN SECTION A .

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