Toys R Us Critical Analysis

1. Was Japan an attractive market for Toys “R” Us? Do you think there were any cultural obstacles to product acceptance? Strong competitors? a. Japan was a very attractive market for Toys “R’ Us. While there are cultural differences between the United States and Japan, the United States and our products are generally accepted by the Japanese. The use of McDonalds in the transition into Japan also helped Toys “R” Us. Toys “R” Us faced a few competitors when they entered Japan, but there was no strong competitor. In Japan at the time there was no such thing as a “toy superstore” so they quickly dominated the market.

Toys “R” Us only faced competition from other popular brands producing toys and selling them in specialty shops. Some brands were Bandai, Nintendo, Sony and Koei. 2. What were the entry barriers into Japan? Any culturally based barriers, in terms of how to do business? a. There were a few entry barriers into Japan, first being that although there was not a toy superstore already in existence, there were tons of small toy stores in operation. Toys “R” Us was unsure how they would be met by the public. There were also high import barriers.

Japan also held the market in characterized toys as well as video games. When they entered Japan, they were met with strong opposition from Japanese toy manufactures who were petitioned by the small shop owners to boycott Toys “R” Us. 3. How did Toys “R” Us manage to cross the entry barriers into Japan? What alternative modes of entry could they have tried? a. Toys “R” Us managed to cross the entry barriers into Japan by importing their own product from the United States. They also were able to gain customers by carrying multiples of the same products.

The Japanese were use to the small retailers running out of a product, but Toys “R” Us promised to have the product in plentiful stock. The import barriers were met by creating a distribution house in Japan where inventory was sent and counted rather then it being delivered directly to the store. This also took a turning point when Nintendo decided to distribute through Toys “R” Us Japan. This was a he turning point because a Japanese product known to the people was being sold through this giant toy distributor. Soon other brands followed suit.

They could have tried the alternative route of connecting with the Japanese toy manufactures in a way that would not seem so industrialized. 4. What were the problems in transferring the Toys “R” Us competitive advantages to a foreign market? Why did Toys “R” Us internalize the firm-specific advantages rather than license another retailer abroad? a. Transferring the Toys “R” Us competitive advantage to a foreign market was a problem because in the United States Toys “R” Us was the largest toy retail store, but in Japan they had their own system for selling toys.

They also faced the issue of how the Japanese value quality over value. The “low prices” approach wasn’t going to work because they were worried about the quality. Toys “R” Us had to rethink their major competitive advantage that was such a success in the States. Toys “R” Us decided to internalize rather then license another retailer because in the States Toys “R” Us was a huge success and before open the Japanese location, Toys “R” Us was already operating in eight other countries. They were not afraid to expand, not to mention they have their own system of success, licensing would jeopardize that success plan. . Given Wal-Mart’s threat in the US market, what should Toys “R” Us future strategy be? a. Toys “R” Us future strategy should be to maintain its name as the “Toy superstore” by providing a wide range of toys and electronics, it does not matter if Wal-Mart carries toy products for a lower price, in Japan they are more interested in quality, which is not a concern for Wal-Mart. By Toys “R” Us continuing to import American goods and sell the product the Japanese are looking for they should be able to continue their success in Japan.