Toys "R" Us is considering expanding into the Japanese market. Japan represents an attractive market opportunity for Toys "R" Us due to its size, wealth, and strong toy industry. However, there are also cultural and legal barriers to entering Japan. To overcome these challenges, Toys "R" Us plans to partner with McDonald's Japan, tailor its operations to Japanese culture and preferences, and focus on metropolitan areas to increase visibility and sales.
2. 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
5. Japanese Consumer Behavior &
Impact on Culture
High uncertainty avoidance
Sensitive nature/Obstacles
Demand and Preference
Quality a “watchword” than
Price
Cheaper goods = Inferiority
Locally Made Products
Adapt to local conditions and
tastes
Established brand name
Loyalty to Japanese existing
stores
6. 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.
8. 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
9. 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.
11. 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.
12. 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.
16. 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
17. 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
18. 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
20. Establishing a Keiretsu network
http://nikhilsinghal27.files.wordpress.com/2011/07/picture1.jpg
21. 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)
23. Bring Toys “R” us to
metropolitan areas
Very high density clusters around
major cities
High usage of trains and subway
In 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
24. Reference List
Keiretsu. 2009. The Economist.
http://www.economist.com/node/14299720 (accessed
April 24, 2012)
http://www.toukei.metro.tokyo.jp/tnenkan/2010/tn10q3e0
04.htm
Editor's Notes
The chart above gives us an interesting view of doing business index in Japan and how it has decrease in many aspect of doing business and how firms have to adapt to each of them.
Toys “R” Us competitive advantage extends not only over retailers but also over the industry Brand When it comes to brand, the company is known as an established toy outlets within the industry and people easily associate toys selling with the company Image Moreover, Toys “R” Us is known as a store that provides excellent service to clients which can be proven by the frequency of visit clients do to the company’s store. No of branches Toys “R” Us has engaged itself in a strategy of having many branches at different places so as to reach more people Huge distribution network As such, with branches all over, Toy “R” Us has more shelf which means stronger bargaining position when it comes to buying prices form manufacturers. In addition, Toys “R” Us benefits from advanced logistical systems Wide range of products Toys “R” Us ahs diversified itself by engaging not only in toys but also in other consumer products like baby clothes and kids apparel
The shifting of Toys “R” Us competitive advantage to a foreign market notable to Japan was problematic because of the country's external environment As such, for Japanese, the higher price the higher the quality of the product which impacted on Toys “R” Us The laws prevailing within countries differ thereby highly impacting on the way business is done and in that case, Japanese laws restricted the number of stores but also their capacities which completely goes against Toys “R” Us strategy. Moreover, Toys “R” Us had to abide to the law thereby having 50% of its products locally which impacted on its bargaining power Moreover, host country practices acted as barriers ‘forcing’ Toys “R” Us to go through established channels for warehouse inventories instead of relying on their proven technological system.
