toys r us
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TOYS “R” US JAPANCASE PRESENTATION
ByD PRADEEP (10AC21)
SNV PRAVIN (10AC22)
R RAJA SUGIRTHA (10AC23)
K RAJESHWARAN (10AC24)
SURESH KUMAR (10AC38)
A VIVEK (10AC44)
INTRODUCTION
Documents the American retailer´s process of entry into the Japanese toy market.
Discusses the history of Toys “R” Us in the US as well as the history of the Japanese toy market, distribution, wholesaling, and retailing systems.
Setbacks due to Japanese store-size regulation, application procedures, and a long-standing multi-layered distribution system.
Continued effort and the acceptance of a Japanese partner enabled the company to open a Toys “R” Us outlet in 1991.
TOYS “R” US JAPAN 1991 – Toys “R” Us entered the second largest toy
market. Category Killer – great success in US and Europe. Japanese Media – Black ship of Kawasaki Nintendo refused to deal directly with US retailer. But with local partner Den Fujita- Toys “R” Us
succeeded- won the approval of Ministry of International Trade and Industry.
TOYS “R” US COMPANY
Toys “R ” Us was started by Charles Lazarus in 1957.
Lazarus father was doing cycle business After war they got into post war baby boom. And children's furniture were not so
successful . Recommendations came for toy shops .
DEVELOPMENT
Then they started self service children's supermarket .
Soon they developed the store in 4 chains . Was sold to interstate store in 1966 for $7.5
million . 1978 Lazarus get back the company . Next decade each year it developed about
26%.
EXPANSION
In 1988 it captured around 20% of the us market
Sourcing directly from manufacturers. In 1984 it started its first foreign outlet in
Canada. Then it moved to Europe,Hongkong and
Singapore. It followed a good discounting schemes.
GLOBALIZING TOYS “R” US Whenever it expanded it took the ire of local
retailers . In 1987 German refused to sell toys r us where it
may break the relations with local retailers . Later united kingdom refused as there was decline
in British toy stores from 3500 to 2000. But toys r us overcame the foreign problems . By 1991 it operated 97 countries abroad
THE JAPANESE MARKET…
Extremely attractive Market for Toys. 2nd Largest Market in the world. Isetan - Dr. Kids Town Seibu’s – Kids Farm As of chain’s management Japan’s retail
industry was difficult for Retailers. Locally Focused Market.
JAPAN’S LOCAL MARKET….
Domestically Owned. They can return the unsold goods. Chiyoda – through Hello Mac and Ace. Ban Ban through Discount Format. Fragmentation and Long standing Relation
ships.
STRUCTURE OF JAPANESE RETAIL..
Nation of small shop keepers. 50 % of outlets – one or two people. 15 % of outlets – more than 5 people. Sold the products through Complex
Distribution System. Japanese are sentimental about their Tiny
shops.
COMMERCIAL FUNCTIONS…
Safety net for retirements. Retail sector was filled with lower skilled
labours. Prefers for small quantities of fresh goods. Small Stores were Protected from efficient
Competitors by law restricting the construction of large stores.
KEIRETSU STORES….
Retail goods in some sectors was strictly restricted by the activities of some companies.
Some giant companies supported thousands of stores to stock its product and selling it at the company’s specified price.
Japanese preferred attention and service from the shop owner.
Store operator gets financial and marketing advises from the manufacturers.
KEIRETSU STORES
Storekeepers were forced to sell the products at the company specified price.
In 1991 over 20,000 keiretsu stores still existed .
The principle of loyalty to manufacturers remained strong in retailing and wholesaling.
THE ROLE OF REGULATION….. Japan’s retail structure restricted the entry of
large retail stores. Japan’s shopkeeper’s association has more than
1.4 million store owners with them. They can get concessions and protection with this strength.
There is one departmental store for every 75000 people.
Then developments came through the super markets.
THE ROLE OF REGULATION….. But in 1973 Ministry of International Trade and
Industry (MITI) tightened its rules for the big retailers due to the demand from small retailers.
Then in 1982 MITI asks large retailers to explain their plan to small retailers and get their suggestions.
These rules has made the powerful supermarket chains also to find it difficult to enter in Japan's market.
RISE OF CONVENIENCE STORES
Major change – Convenience Stores 1982 – 2.3% of total sales 1992 – 8% of total sales
Small enough to slip past laws and establish in neighbourhood
Most successful – 7-Eleven Chain It was licensed from US parent Southland in 1974
by Ito-Yokado
7-ELEVEN CHAIN
At first glance – small, locally-focused, “open all hours” shop
Information Oriented Strategy Close inventory control
Cut its whole salers from 80 to 40 Point of sales tracking Shopper specific information – shopping habits
Refine the product offering and inventory replacement.
THE CHANGE
7-Eleven management to bargain with manufactures to deliver according to their precise requirement
Chain’s own elaborate regional distribution system
A series of imitators sprawled after the success of the 7-Eleven chain
MITI’S VISION FOR 1990S
Following the convenience stores, all formats placed under pressure
Young Japanese wanted to take bold ventures Great international exposure
Realized the high inflationary cost for many consumer goods.
Demands influenced the political process.
MITI’S STATEMENT - 1989
It defended the existing distribution system while stressing that nevertheless the reforms were essential
Proposed significant changes to Large scale retail stores laws
Amend the system to reflect the socio-economic changes Reduce the time between the pre-notification
and approval as 18 months Re-examine the opening hours.
THE STRUCTURAL IMPEDIMENTS INITIATIVE
Revaluation of Retail System by MITI Japan opened their markets to Foreign Investors
due to demand. But also Foreign Direct Investments were low. In 1988, Foreign companies accounted for
Total Capitalization
Sales
Japan 2.1% 2.3%
US 14.7% 12.2%
THE STRUCTURAL IMPEDIMENTS INITIATIVE
Imbalance in investment levels – Japanese markets remained closed to US investors.
1989 – Negotiation to reduce imbalance.
Consumer price in Japan remained high –Japan’s distribution system to remained impediment to US export sales.
TOYS “R” US: MOVE INTO JAPAN
Domestic development in Retail Sector – large barrier for chain’s entry.
Changes in distribution sector & legal restrictions made Toys “R” Us confident to succeed in Japan market.
Entry by alliance with a strong local partner.
Two ideas by executives1. Using wholesalers2. Alliance
DEN FUJITA
1950 – started Fujita & company – to import items.
1971 – McDonalds approached Fujita – to introduce US style fast food in Japan.
By Fujita’s efficient marketing, McDonalds reached Y50 billion in 1980 & Y208 billion ($1.6 billion) in 1991.
DEN FUJITA 1989 – Joseph Baczko, Head- Toys “R” Us – met –
Den Fujita – President of McDonalds, Japan.
Toys “R” Us & Fujita became partners.
1989 – Toys “R” Us called Fujita for a Japanese Joint venture .
McDonalds – 20% stake in the new subsidiary.
CRITICISM AND OPPOSITION
Manufacturers claim -Japanese consumers would not like warehouse stores and unrealistic to consider bypassing wholesalers
Niigata warned - “if toy r us comes in, Japanese toy shops will be wiped out”
Fukuoka Toy retailers ‘s petition –one year to the opening of toys r us
Japan association of Specialty toy shops emerged
Effect of toys r us on long standing ties between manufacturer and retailers in Japan
CRITICISM AND OPPOSITION
Faced the problem of obtaining suitable real estate
Hard to find labor and competition for top male graduates was intense
Also had problem with the company’s choice of partners : Maverick Fujita
Criticized Fujita’s well known claim: Osaka born Japanese are more business oriented than Tokyo cousins
As a result of these resistances, schedule of opening six stores slip steadily with a notable delay.
COMMENT
Financial statements helps to understand the performance of the company.
Statistical data gives an overall idea about the following Global presence of Toys “R” Us Land Price and monthly living expenditure in Japan Total sales in World Outlets in Japan Foreign Retailers and FDI in Japan
QUESTIONS
1. Why specifically Japan Market was chosen?2. What are the entry barriers Toys “R” Us
faced?3. How were the barriers resolved?4. Is Den Fujita the right partner?5. What were the alternate modes of entry
available for Toys “R” Us?
WHY SPECIFICALLY JAPAN MARKET WAS CHOSEN? Along with the US and Europe, is one of the 3
largest and wealthiest markets in the world for leisure goods.
Second largest Toy Market in the world next to US.
94% retail sales growth and 7% GDP Falling birth rate.
WHAT ARE THE ENTRY BARRIERS TOYS “R” US FACED?
Japanese toy retail dominated by small specialty stores and general retailers
Wholesalers deal almost exclusively in Japanese-made products
Loyalty of suppliers Developed/Industrialized country Behaviour of customers
HOW WERE THE BARRIERS RESOLVED?
Revaluation of the Retail systems. Market opened to foreign investments. Changes in distribution sector & legal
restrictions. Alliance with local partner- Resolved the
cultural differences.
IS DEN FUJITA THE RIGHT PARTNER?
Yes Experience – McDonald’s Japan Fujita has build one of Japan’s strongest
Import business. Marketing Strategy – US style fast food
introduced in Japan Since target market is the same for both
companies, Fujita was chosen
WHAT WERE THE ALTERNATE MODES OF ENTRY AVAILABLE FOR TOYS “R” US?
Exporting : High Shipping Cost
Foreign Direct Investment: Culture Difference
Licensing : Wage policy and working condition
Thank You
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