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Toys “R” Us goes to Japan
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
Toys “R” Us Geography
Geert-Hofstede Framework Comparison: Japan v/s USA
Source: Geert Hofstede 2012 http://geert-hofstede.com/japan.html
Japanese Consumer Behavior & Impact on Culture
High uncertainty avoidance
Sensitive nature/Obstacles
Demand and PreferenceQuality a “watchword” than PriceCheaper goods = InferiorityLocally Made ProductsAdapt to local conditions and tastesEstablished brand nameLoyalty to Japanese existing stores
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.
Doing Business Index
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
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.
Toys “R” Us overcoming Barriers to entry
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.
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.
Alternative modes of entry?
Proposal
Competitive & Firm specific advantage
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
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
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
Toys “R” us future strategies in Japan
Establishing a Keiretsu network
http://nikhilsinghal27.files.wordpress.com/2011/07/picture1.jpg
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)
Increasing presence of Toys “R” Us in metropolitan (key) areas
Bring Toys “R” us to metropolitan areas
Very high density clusters around major cities
High usage of trains and subwayIn 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
Reference List
Keiretsu. 2009. The Economist. http://www.economist.com/node/14299720 (accessed April 24, 2012)
http://www.toukei.metro.tokyo.jp/tnenkan/2010/tn10q3e004.htm