A Case Study On International Market Analysis And Strategy For Toys’ R’ Us

Global Factors Affecting the Toy Industry

It is very much important to understand the internal environment before entering into the market with the new business. The business organization should understand the country and the region in which they are planning to establish their business. His is because all the operation of the business is affected by the environment factors of the location of the business. This report discusses about the international environment for the company called Toys”R”Us, this company deals with toys and baby products. This report initiated with the discussion of global factors that affect the business of the company along with the analysis of business internal environment. It further discusses about the potential of four countries such as Nigeria, India, Russia and Sri-Lanka in order to recommend the best country to be selected for establishment of the business for Toys”R”Us.

Toy industry is the type of industry that is not experiencing the growth at global level. Various factors are there that can affect the global growth of the industry. In case of toys industry, the growth rate of productivity as well the growth rate of GDP was very low in the year 2001. This results in declining global sales of the toys in the market. This may be the effect of the export sector (Jones, 2013). If the other side of the industry is observed, it has been analyzed that the industry is experiencing growth in Asia.

As far as the global macro factors are considered, it has been determined that these factors are related to the economic condition the country or the place where the company is operating (Stevenson, 2014). There are many macro factors such as political factor, economic factors, demographic factors, inflation rate etc. that affect the business of any of the industries. In case of toy industry, age is also a factor that needs to be considered. These factors are not directly linked with the industry but somehow affect the production cost, demand and supply of the product and hence affect the business of the company at global level  (Doiz, Lasagabaster and Sierra, 2013).

Toy industry is considered very competitive in nature. This is because the market of the industry is very much saturated. There are many big and small businesses in the industry that are continuously coming up with new ideas to attract children of all the ages. The volume of this industry is very vast and is very much economically strong. This is because this industry has many ideas to sell. In terms of marketing also, the industry is very strong. This industry involves many big layers that are competing with each other and thus making the industry more attractive. The leaders in the industry have competitive advantage over the other and also have economies of scale (Cavusgil, Knight, Riesenberger,  Rammal  and Rose, 2014). One of the major competitive advantages of the industry is the competitive prices. This is because every business in the industry is producing similar kind of products so the companies have to keep the prices competitive so that they can withstand in the market. One of the reason behind competitive pricing is that the customers are not that much loyal to the brands. As far as the above company is cindered, it is very good in his production and marketing, the company is serving the customers with exact copy of the products that they market in their advertisements and des not manipulate the customer (Dube, 2016). This acts as the strength of the company.

Internal Business Environment Analysis of Toys’R’Us

Socio-cultural factors: The socio-cultural factors can be defined as the factors that are related to the culture and beliefs of the people. As far as the internal environment of the company is considered, the company has the culture of giving gifts to each other. This customs motivates the employee to perform ad removes the communication barriers between the employees. The company always wants to satisfy the customers and the toy lovers with their product and thus frame the products according to the choice of the customers and with their traditional designs  (Dunning, 2014).

Technological factors: The technological factors that affect the operations of the business fall under the category of internal environment of the company. This company is very technologically updated. This can be said because the company provides the customers with the facility to shop online (Aruoba, Diebold, Kose and Terrones, 2010).

Political factors: The political factors that affect the business of the companies are related to the legal framework of the government. The main two factors are taxation policies and the tariffs.

Number of stores: According to the analysis, it has been identified that the company is operating with total of 1871 stores in the market. Among these stores, 361 are the traditional toy stores, 224 baby stores, 213 SBS stores and 68 permanent express stores.

Technological upgrade: The Company is very much influenced with the technology and always remains updated with the new technology. It has developed its own e-commerce site to facilitate the customers to buy the products online. Different sites of the company are babyuniverse.com, babiesrus.com, eToys.com etc.

Revenue: As the company is a second largest retailer chain in US so, it is earning high revenue from the country as well as from international countries. The revenue of the company is around $13.646 billion.

Lack of competitive advantage: Toys”R”Us is the company that lacks any of the competitive advantage over its competitors. It deals with many of the brands but do not have any competitive advantage. Wal-Mart, one of the biggest competitors of Toys”R”Us serves the customers with many offers and discounts unlike Toys”R”Us.

Strategic alliance and joint ventures: The Company has the opportunity for strategic alliance and joint ventures with the relevant companies such as Amzon.com. The company is already working with Amazon for long time and both the companies are benefitting each other with their work. Toys”R”Us sells its baby product on Amazon and used it as an online source to reach the market (Fearne, Garcia Martinez and Dent, 2012). . This suggests that the company have the potential to start a joint venture as well with the relevant industry companies that can help Toys”R”Us to cater more and more customers.

Evaluation of Potential Target Markets and Recommended Country

Competitor: It is the most common threat for every company. Toys”R”Us is the company that has many competitors such as Wal-Mart, Kb toys, target etc. Wal-Mart is considered as the biggest competitor for the company because Wal-Mart has shifted the place of Toys”R”Us from first to second so it is the closest competitor (Wales, Gupta, and Mousa, 2013).

Low switching cost: In toy industry, the switching cost is very low. The brand selected by the customers is totally depends on the choice of the children and the purchasing power of the parents.

Value chain can be defined as the system or the set of activities that are associated with each other. These activities need to be conducted by any of the firm to operate its functions. There are two main activities in porter’s value chain analysis. The first is the primary activity that involves inbound logistics, outbound logistics, marketing and sales, services and operations. The other one is secondary activities that involve HRM, procurement, infrastructure and technology (Trompenaars and Hampden-Turner, 2011). Aligning and combining these activities help the companies like Toys”R”Us to work effectively. It has been analyzed that in Toys”R”Us, all the activities are inter-linked with each other but still have separate departments to perform the functions. This suggests that the company can easily differentiate between the different activities. As far as the primary activities of Toys”R”Us is considered, it has been analyzed that the logistics of the company is very efficient (Chang, Van Witteloostuijn and Eden, 2010). The marketing and sales team of the company adopts many advertising channels and media sources to reach the target customers. Different methods used by Toys”R”Us are direct ails, magazines, advertisement etc.

In the toy industry, it is very easy to substitute the products as the brand that producer the toys have similar kind of designs and customers to serve. Thus, there is not scope of very much differentiation.

It is very difficult to compete with the established brand in the toy industry. This is because Toys”R”Us is the company that serves the customers with around 6000 items. It is a challenge for the new entrants to reach up to that level.

The major competitors for the company are Toy Wizard, Hasbro, Fisher-price etc. the competition is high as the switching cost of products in this industry is very low. The customers are not very much brand loyal.

The bargaining power of buyers I high because there are lost many competitors in the industry as well as presence of local seller made its difficult for the top players to bargain. Thus, the competitors or the companies need to put competitive prices of the produces.

Recommended Mode of Entering the Chosen Country

Toys”R”Us is a very well-known brand name. Thus, suppliers have to keep their bargaining power low s that they can sell their materials to such a big company.

After analyzing the internal and the external factors that affect the operations of the company, it has been identified that the company is performing well in almost all the areas such as marketing, sales etc. but it needs to bring some of the innovation in their process and products to train a competitive advantage over others. Company has to compete with its greatest competitor Wal-Mart in attracting the customers with different offers and great shopping experience. The company has the opportunity and the potential to go global and internationalization strategies of the company will give success to the company in future. To get back its first position in the market, expansion and innovation are the two key recommendations for the company to implement.

Understanding the internal business environment and the market is very essential for the companies before entering into it. This is done by a 12c; s framework analysis model.

According to the above analysis of the environment of different countries, it has been identified that n all the sections of 12C’s, India is the country that is having favorability for opening an international business. This is because India is the country that supports the activities of the foreign companies to enter into the market in every context whether it is economical or legal. The growing economy and the growing birth rate in the country support the toy company to enter into India (Ilmberger, 2002. The legal and the governmental framework also help the companies of international market to enter because Indian government wants to earn high revenue from foreign direct investment. If the sending power of Indians is considered, it has been analyzed that the customers are growing their spending power (Owen, 2008).

Below are some of the important elements that support the entry of the international companies into India.

• Disposable income growth rate
• Support by government
• Visibility of labor in cheap rates
• High customer’s base

Some of the challenges have also been faced by the companies that set up their business I India. These challenges are:

• Local businesses in India
• Competition from china
• Lack in technological acceptance
• Entry of the foreign companies
• Cultural aspects of Indians in their buying behavior

As per the discussion in the above section, It has been analyzed that India is considered as the potential market for the company like Toys”R”Us to set up its business operations. (Powell and Ghauri, 2008).

As far as the mode of entry is considered, the mode of entry can be defined as the channels that are required by the international firms to enter into a new and untouched market. For Toys”R”Us, India is the country that is still untouched and thus have to choose appropriate channels to enter the market (Hill, Cronk  and Wickramasekera, 2013). The channel of entry is also very important for company’s success because it is the only way to reach the customers. There are many modes of entry available for the international companies to enter Indian market. Some of them are internet, distributors, agencies, franchises, sales subsidiaries, licensing, joint ventures, strategic alliances etc. Toys”R”Us can opt for any of the above mentioned ways to enter the Indian market.

Developing Appropriate International Marketing Mix Strategy

In accordance with the market of India, it has been recommended that the company should opt for following two modes of entry:

Joint ventures: This is because it helps the company to join the business or sell the products in the name of another established company. This also help the business with the established brand imagined the new company does not need to make efforts in developing of making the brand image in the country (Guinness, 2003).

Internet: Online selling helps the company to reach large masse of customers. With the advancement in the technology in India, people are becoming addicted to online shopping which is benefit for the company like Toys”R”Us to reach the customers.

Socio-cultural factors can be defined as the factors that are related to the beliefs and the values of the communities living in the country. India is the country that follows its traditional customs and believes in the cultural aspects of the country. The diversity in the culture and the community in India lead to difference in the culture the people according to the place and the community they belong to. Therefore, socio-cultural factors act as the challenge for the international firms (Kolk and Van Tulder, 2010). Toys”R”Us is the company that deals with baby products and toys and Indian people are very much possessive for their babies so the company needs to provide the market with the products that attracts the parents of the kids. Before entering the Indian market, the company needs to consider all these things and should party its image as the company that relates to India culture (Bhattacharyya and Nain, 2011).

The recommended marketing mix is as follows:

Product: The products that company already deals with are the baby profits and toys. In accordance with the Indian market, the company has to modify its products a little bit according to the Indian culture.

Price: As India is a developing country and not the developed country, so the paying capacity of the people is increasing gradually but they are not much capable to pay premium prices (Helms and Nixon, 2010). Penetrating pricing is the strategy that should be perfect for Indian market at initial stage of the business.

Place: Place should be the supermarkets in metro cities of the country.

Promotion: Promotional activities that can be used by the company are advertising and print media.

The above marketing mix that has been recommended for the company is very appropriate according to the Indian market. The link of culture among the product processes help the company to relate with the Indian customers. Penetration pricing help the company to penetrate into the market at initial level of its business (Zavadskas, Turskis and Tamosaitiene, 2011). Supermarket is considered as the best place because it attracts the relevant customers for the products that visit the supermarkets frequently. Advertising and the print media should be opted as the medium for promotion because; it facilitates the company to reach large masses.

Targeted Country’s Socio-Cultural Factors

Conclusion:

This report concludes that the companies like Toys”R”Us can internationalize their business in India because India is analyzed to be the most favorable country for the same. This suggests that every company should analyses the environment of the international country before entering its market and should select the country only if it is feasible and favorable for their business. It is very important for the success of the business at global level.

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