Abstract
Global firms such as Toy “R” Us Inc. have to content with several factors that shape their operations among them political, trade and economies, quality and safety as well as cultural factors that determine the uptake and performance of their brands in varied market segments. Each of the identified factors needs careful considerations if the multinationals are to make successful penetration into desired international markets. Understanding cultural values and norms is important since acceptance of any product is determined by the ability of the firm to understand consumption habits of foreign consumers. It is also appropriate to comply with regulatory procedures in terms of safety and quality of products with high-quality control processes to ensure zero incidences of product recalls. Global firms also have to undertake measures to assure locals of their fulfillment of CSR through taking care of the environment and providing incentives that build trust among community members. This paper, therefore, relies on the case of Toys “R” Us to discuss the impacts of various global forces and strategies that can be used to maintain relevance in the international market.
The Impact of Toys R Us Inc. in the Global Market
Just like multiple other multinationals, Toy “R” Us Inc. has its home in the United States but also operates in other nations. The expansive operations in foreign nations have been contributed by the recent unprecedented growth and advancements in communication, transportation and technology sectors that has effectively made the world a global village. The distance between nations has become smaller with geographical barriers broken through advanced forms of transport and the rise of the internet. Additional motivation to the establishment of multinationals is because of increased interdependence among nations. Multinationals contribute largely to the improvement of the welfare of nations by creating wealth through employment and enabling competitive average prices for consumers. Also, they ensure that customers have the security of what to expect when they travel to other nations, thereby reducing the need for customers to switch their brands. However, firms such as Toy “R” Us Inc. have to face several factors that shape their operations among them political, trade and economies, quality and safety as well as a culture that determine the way consumers adopt the products and services offered. The paper, therefore, relies on the case of Toys “R” Us to discuss the impacts of various global forces and strategies that can be used to maintain relevance in the international market.
Background of Toys “R” Us
Toys “R” Us Inc. was founded in 1948 and has over the years transformed itself into a global leader in the toys industry with over 3000 stores globally. The company has a specialty in toys as its main products but deals in entertainment, juvenile and learning products as a way of diversifying its portfolio. Through its global expansion operations, the company operates in North America, Europe, Asia and Africa but has its headquarters in Wayne, New Jersey. Its ability to sell its products online has been key to expanding its market scope such that Toys “R” Us Inc. is able to reach out to more customers across the globe. Due to its global operations, a significant share of its revenues comes in the form of foreign currency with the baby category proving to be an important portfolio for the organization. However, with recent events of financial difficulties, measures have been taken to design and implement strategies that could help restore and stabilize the earnings and enable the firm to compete effectively in the global market.
Factors in the global environment that regulate Toy R activities
Culture
Recent market trends prove that culture has a lot of impact on an organization success such that a slight mistake could be catastrophic for a company in a foreign segment. It is important for companies to evaluate and understand the habits and trends of the foreign nation before opting to expand their operations into such territories. With a range of needs and tastes shaping different markets globally, blending with the local customs provides an easier ways of identifying what to bring into the market and what to do away with. In most cases multinational would be tempted by the growing populations and the promising shifts in consumptions but neglect to take time and avoid the rush in penetrating high potential markets. The result is a decline in revenues and overdependence of the foreign subsidiary on the parent firm to cater for most of its operating expenses. However, choosing the most suitable entry leads to avoidance of obstacles and a clear understanding of the nation’s tastes, behavior, values and laws. With a comprehensive knowledge, the initial advantage is that there will be minimal friction with the local consumers and authorities.
Toy “R” Us has been a victim of frustrations from cultural assumptions that since its marketing strategies have work in the United States, then the same will replicate in the foreign markets. The reason for such belief is that children are the same everywhere and hence no need to change entry strategies. However, the case of Mattel penetration into the Japanese market proves a different story and a lesson for Toy R Company. In spite of Mattel being the maker of the best Barbie Doll in the United States, it had to make some physical changes to its products for it to be allowed into its new territories. Such example proves that culture defines the ability of an organization to be successful in the foreign market. Culture determines consumers acceptance of a product such that in the case where there exist a collectivist society, then everyone in the nation tends to disapprove existence of certain products in their markets. It is, therefore, wise for an organization like Toy “R” Us to consider taking an effective assessment of the culture of new markets instead of going ahead and implementing inappropriate and unproductive strategies that in the end contributes to huge financial losses for the company.
Product quality and safety
Priority for Toy “R” Us is to ensure that safety of children come first and that parents are assured that they can trust the company when purchasing toys for their kids. The fact that the company is a global leader in toy and baby products manufacturing implies that it cannot tolerate incidences where it loses its customer's loyalty base as a result of unsafe products. Products especially those made for children are always safety such that any mess during the production process could have catastrophic effects on the organization's operations in the foreign market. In almost all countries, commercial toys have to undergo thorough testing procedures and must pass safety tests before they are released to the market.
It is important to avoid incidences of product recalls as they are destructive to the reputation of Toy “R” Us and contribute to loss of financial resources in the form of legal charges and customers compensation. Global compliance procedures are concerned with the need for organizations to consider safety as a corporate social responsibility and work closely with the governments, states, industry regulators in identifying key areas for improvement regarding safety. Major emphasis is on the need to work closely with partners such as suppliers in learning about the latest version of product safety and compliance manual and upgrading the organization’s manual to concur with the latest regulations. Suppliers whose products do not meet the recommended safety level need to be notified as fast as possible and actions taken to investigate the root cause of such issues and ways to avoid similar situations in future. Incidences of unsafe products need not be tolerated especially in the event where such errors are a result of negligence from those responsible for ensuring only high quality and safe products are released from the production plants.
Those responsible for testing need to have accurate results with testing quotas provided to every partner that are in line with Toy “R” Us standards. Performing tests and risk assessments is important since it reduces incidences of liability from injuries and fatalities as a result of design flaws or use of unsuitable materials in the production process. Global safety compliance standards are also centered on the need to taste samples of products in government laboratories and seek appropriate actions in case the company’s products do not meet the criteria. Potential hazards that children could be exposed to include swallowing of small components such as buttons, ingestion of magnetic toys, cuts by sharp parts of the toys and chemical compositions that are destructive to the health of the child.
ISO 8124-1: 2000 is clear on the mechanical and physical properties of products meant for young children. Every national and regional law would want to protect their future generations from early deaths and disabilities caused by accidents from toys hence strict procedures followed when approving children products. In the European Union nations, for instance, there is a specific law, that is, the Toy Safety Directive of the European Union that provides a comprehensive list of regulations as provided by the members states. The laws govern toys manufactured within the EU and those that are imported into the regional bloc.
Regulations by International and Regional Codes
As companies such as Toy R Us engage in expansion plans, they are often affected by issues of regulations in terms of laws that govern property rights and competition. The regulations to a larger extent restrict the control of foreign firms on natural resources of the foreign nations such that it becomes difficult for the companies to go through processes such as land ownership. Most nations are aware of the effects of unfair trading practices and would, therefore, want to protect their people from various products that could interfere with their health and safety. For the reasons of unfair operations, multinationals such as Toy “R” Us Inc. are expected to comply with consumers protections laws which to some extent could be strict in regions like the European Union. Other nations have restrictions on the hours of operations such that it is impossible for the firm to have twenty-four hours services if it intends to do so. Failure to comply with such regulations lead to close monitoring of the forms operations and could create conflicts with the local authorities.
The option, therefore, remains on the need to assess the effects of the regulations on the company’s activities and determine if the organization could cope with them. Laws on the environment are of great importance in modern business practices with internationals, regional, and state laws focused on the need to enhance a sustainable society. Organizations are therefore required to reduce their footprint by implementing eco-friendly sources of energy to reduce reliance on fossil fuels that are major emitters of carbon gasses. Such laws require that the company conducts environmental impact assessments and provide accurate details on its efforts regarding reducing waste disposal, pollution, and chemical use in products manufactured. Such regulations could in some cases be costly for the organization or could be very strict in a way that it is hard to operate within the territories. Other regulations are in line with the need to comply with employees’ rights in the form of minimum wage and working hours as established by the region or nation.
Such regulations are brought about by the fact that multinationals are believed to benefit from cheap labor such that in the end, the living standards of the workers are never improved. While it is the duty of the governments to protect their people, they make sure that they have laws in place that lobby for favorable conditions for their people working at the multinational corporations. Nations such as China have been under the spotlight where those working in the toy industry were subjected to harsh labor conditions. Such acts lead to criticism from the International Labour Organization and regional codes with adverse effects of the reputation of the company. Human Rights Watch is particularly concerned with the rights of employees such that any violations is confronted and the multinationals required to maintain a balanced working atmosphere.
Incidences of child labor are strongly discouraged. Toys R Us is particularly concerned with the issues of child abuse and would not want to associate with any partners who shows some kind of violations on the need to comply with the recommended age for employment.
Impact of politics on the operations of Toys R Us
Political risk is among the most common forms of barriers that limit successful penetrations of the firm into the global markets. The reason is because while some nations may be politically receptive to the operations of the business, some would implement political decisions that give less room for successful establishments of multinationals within their territories. Creation of laws that limit movement of capital, corruption and prejudicial actions against global companies like Toy “R” Us are among the factors that hinder successful penetration. Corruption is a major concern in many nations such that Toy “R” Us may be forced to part with large sums that it has not prepared to lose. Frequent changes of governments and political instability is also a concern for Toy “R” Us since it leads to disruptions of its operations from the wars and security threats posed to its employees and consumers, such political risks therefore limit the company’s ability to improve its earnings hence interfering with the growth objectives.
Toy R Us Strategies to minimize the impact on global markets
The company has already implemented the ERP system that is key to helping it improve its planning since recent poor financial performance is linked to weak decisions. To help it improve efficiency and effectiveness, Toys “R” Us identifies the fact that it requires building its workforce through attracting the right employees and giving them the right incentives to keep them motivated. Having a dedicated staff, therefore, implies building their skills and engaging them in the running of the organization. Toy “R” Us also recognizes the need to appreciate diversity and give the opportunity to all employees regardless of their cultural affiliation. Such are the steps to building an innovative and creative organization capable of responding to the changing global consumers tastes and preferences and helping the company understand the cultural aspects in the foreign territories.
Toys R Us is also keen on improving its supply chain by considering ethical aspects and engaging with partners who identify the need to take care of the interest of consumers. Such ethical alliances are generated to ensure that products manufactured are of the highest quality and that they are safe for use by children. To build trust among its global consumers, Toys “R” Us realizes that it has to improve quality and safety throughout the product's lifecycle and adhere strictly to the regulations and standards set by the European Union and other international, regional and state codes. Policies on zero product recalls are already underway since the organization identifies the need to protect its reputation and reduce financial losses due to legal issues or compensations for defective or unsafe products. Toys R Us is focused on the maximizing value of its products by improving customers experience through classic toys that provide a fun and learning experience for the kids.
The company also acknowledges the need to implement CSR structures that include taking care of the needs of the society and improving the sustainability of communities by taking care of the environment. The company already has LED lighting projects in its efforts to reduce carbon emissions. Waste management programs and education of employees on the need to have positive behavior by protecting the environment have been initiated to prove that sustainability is a priority for Toys “R” Us.
Conclusion
Expansion into foreign territories is contributed by growth in communication, transportation, and technology that makes the world a global village. However, multinationals like Toys R Us Inc. face several factors that shape their operations among them political, trade and economies, quality and safety as well as culture. Such forces determine ease at which the companies establish themselves in the global markets and readiness by consumers to adopt the products and services offered. It is important for companies to evaluate and understand the cultural habits and trends in the foreign nation before opting to expand their operations into such territories. With a range of needs and tastes shaping different markets globally, blending with the local customs provides an easier way of identifying what to bring into the market and what to do away with. Priority for Toy R is to ensure that safety of children come first and that parents are assured that they can trust the company when purchasing toys for their kids. It is important for an organization to understand the various international and regional codes that have an influence in their operations and be able to design strategies that show compliance with such standards. Effective strategic and appropriate decision making are key to making multinationals cope with global situations and be able to identify markets that offer safe environments for expansion purposes.
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