Business Case Analysis
“Toys“R”Us, Inc. is the world’s leading dedicated toy and baby products retailer” (About TRU). It has more than 1800 stores in the United States and other 37 countries worldwide.
The history of the company began in 1948 when Charles Lazarus started his business as a baby-furniture retailer and opened Children’s Bargain Town, in Washington, D.C.
In 1958 the store was given a new name - Toys“R”Us. In the same year a second store was opened and “a supermarket model” was adopted. Since than people were able to choose products themselves and “pay for them at a checkout stand” (Our history).
In 1978 Toys”R”Us became a public company “with established community roots and a loyal customer base from coast-to-coast” (Our history).
1983 - the beginning of diversification era. First clothing stores were opened in Paramus, New Jersey and Brooklyn, New York and got Kids“R”Us name.
1984 – the beginning of international expanse. The first wholly-owned store was launched in Canada and licensed operations were started in Singapore.
1989 – a joint-venture with McDonalds Japan with their 20%/80% relationship was established.
1991 – the first store in Japan.
1996 - first Babies“R”Us® location in Westbury, New York. Since that year all the Toys”R”Us stores offered cloths for the customers.
2000 – online shops Toysrus.co.jp and Babiesrus.co.jp were established.
2010 – a new format of “Holiday Express” store was opened in Japan (Cheddar Berk,2009).
Now it is interesting to analyze how it is became possible for the toy American giant to build a successful business in Japan.
First of all, it is necessary to say that opening business in a new market is a very risky step in any company strategy. Especially it is true when we speak about such opposite in culture in doing business countries as the USA and Japan. It is a well-known fact, that Japanese culture seems mysterious and not always clear for European and American citizens. Together with the fact, that the culture strongly influences business proceeding in Japan, it became obvious that starting business here for Americans it is not an easy task.
Now I would like to point out what lead Toys”R”Us to the success in Japan. To my mind, one of the most important key to Toys”R”Us’s success in Japan lies in the establishment of an alliance with McDonald’s Japan. This alliance was of the mutual interests for both companies: Toys”R”Us got the experience in doing business in Japan while McDonalds got the opportunity to increase its market share by opening a restaurant in every Toys”R”Us store. Moreover, the time for the store opening was more than perfect. In 1991, when the first store began its work in Japan, the Japanese economy felt recession. 1990’s are called Lost Decade in Japan. Many Japanese families were suffering from losing their jobs. In this case, Japanese people were looking for the opportunities to save money. At that time Toys”R”Us with their slogan “Everyday low prices” looked very appealing on the market. Japanese people had never before chased the cheapness because one of their strong belief was that the quality is more important than price. All Japanese companies worked according to this theory. But economical sufferings made people withdraw from their beliefs. And Toys”R”Us price policy played into the company’s hands while domestic companies needed time to meet new customers’ expectations. Frankly speaking, I am not sure that in the prosperous time of Japanese economy Toys”R”Us price policy had attracted so many customers. Nevertheless, 1991 was the year when Japanese Lost Decade began while Toys”R”Us penetrated in so desired market. One more important factor to Toys”R”Us success was the help of the government. And again the difficulties in the Japanese economy helped the American company. The story is that in Japan it was a law according to which it was prohibit opening very big stores. It was a protective step against world transnational corporations. Toys”R”us strategy, in its turn, presupposed the existence only of stores more than 3,000 meters. The conflict of interest was on the face. As we have already mentioned, economic recession helped Americans. “In 1991 land prices in Japan reached their peak” (Nielsen, 2008). Domestic companies could not afford them. The Japanese government had to permit Toys”R”Us opening a store of their original format in order to fill coffers. As a result, three main parts led the American toy giant to the success in Japan: McDonalds Japan, Japanese people in need and the Japan government. Nevertheless, the main role, of course, played the economic recession.
Let us resort to the Hofstede research in better understanding of our topic. “Geert Hofstede is a professor who researched how people from different countries and cultures interact based on six different categories of cultural dimensions” (Geert Hofstede). These cultural dimensions are:
“ Power Distance
Individualism vs. Collectivism
Masculinity vs. Femininity
Uncertainty Avoidance
Long-term vs. Short-term Orientation
Indulgence versus Restraint” (Wengrzyn, 2010).
The comparison of japan and the USA according to this theory can be seen on the figure1 – Japan VS United States cultural dimensions. From this figure, we can make many important conclusions:
“Japan is a borderline hierarchical society” (The Hofstede Center )with “business experience of painstakingly slow decision making process: all the decisions must be confirmed by each hierarchical layer and finally by the top management” (The Hofstede Center).
“Japanese society shows many of the characteristics of a collectivistic society: such as putting harmony of group above the expression of individual opinions and people have a strong sense of shame for losing face” (The Hofstede Center).
Masculine society is “driven by competition, achievement and success, with success being defined by the winner / best in field” (The Hofstede Center). Japanese want to be the best while Americans prefer liking what they do.
“In Japan anything you do is prescribed for maximum predictability” (The Hofstede Center). Americans like to rely on chance.
The best way to describe this point “the companies are not here to make money every quarter for the share holders, but to serve the stake holders and society at large for many generations to come” (The Hofstede Center). Americans prefer to make money here and now.
Japanese live with “the perception that their actions are Restrained by social norms and feel that indulging themselves is somewhat wrong” (The Hofstede Center). .
Fugure 1 - Japan VS United States cultural dimensions (The Hofstede Center).
After analyzing Northouse “Leadership”, it can be made a conclusion that Toys”R”Us effectively implements Contingency Theory of Leadership. According to this theory, “effectiveness of the leadership is dependent on matching a leader’s style to right situation” (Northouse, 2013). The good example is the situation in 2011. After the Fukushima Daiichi nuclear disaster “sixty Toys”R”Us stores were damaged and 30 closed” (Betros, 2011). For just over a month, all except one were reestablished. Moreover, the company and its employees made charitable assistance they “donated urgently needed baby products” and “employees around the world donated over 20 million yen to assist employees in Japan” (Betros, 2011). This example is a good illustration of the social orientation of the company and its strong brand awareness. Moreover, Northouse says in his book that leadership style depends on the culture of the company’s activity. In order to succeed in Japan it is recommended to use Servant Theory of Leadership which is “both a leadership philosophy and set of leadership practices such as: shares power, puts the needs of others first and helps people develop and perform as highly as possible” (Northouse, 2013).
Since the first store was opened in 1991 in Japan Toys”R”us continues to develop and improve its strategy. Nowadats Japanese market is the second largest market after the USA for the company. This fact means that the company have chosen the right strategy for the expansion in the Japanese market. The background of the strategy is taking into account all the features of Japanese culture. For example, the difference in color preferences. In Japan colors mean not the same as in American or European cultures. In Japan, the sympathy color is white, not black as in many other countries. In this case, toys producers are to reduce the usage of white color if they want to make them attractive for Japanese customers. Moreover, it is necessary to meet the latest tastes of Japanese. It is a well-known fact, that anime and its heroes are very popular in Japan. From this statement does another peculiarity of Japanese toy market: high popularity of dolls – prototypes of anime. Toys”R”Us successfully uses this peculiarity and offers a wide variety of such toys for its customers in Japan while in other countries they are not so popular.
What else tells us that Toys”R”Us does its best to improve its business as its implementation of new formats for their stores. As it has been already mentioned, the American company usually opens big stores no less than 3,000 meters. In 2010, it has implemented new store format called Toys”R”Us Express which are “pop-up stores nationwide in malls and other shopping centers” (Official website) opened only for rough period if Christmas. This attempt was made in order to give the opportunity for customers to buy Toys”R”Us products not in special locations but in the nearest shopping center. This step was highly appreciated by the customers. As a result, the number if Toys”R”Us Express stores increased to four and six stores in 2011 and 2012 respectively.
References
ABOUT TOYS"R"US, INC. Official website. Retrieved from http://www.toysrusinc.com/about-us/
Our history. Official website. Retrieved from http://www.toysrusinc.com/about-us/history/
Cheddar Berk, C. 2009. Toys 'R Us Plans to Open 350 'Holiday Express' Stores. Consumer Nation, 15 September 2009. Retrieved from http://www.cnbc.com/id/30090042
Nielsen, B. 2008. The Lost Decade: Lessons From Japan's Real Estate Crisis. Investopedia, April 2008. Retrieved from http://www.investopedia.com/articles/economics/08/japan-1990s-credit-crunch-liquidity-trap.asp
Geert Hofstede. The Hofstede Center. Retrieved from http://geert-hofstede.com/geert-hofstede.html
Wengrzyn, R. 2010. Hofstede's Cultural Dimensions Theory. Chapter 17 / Lesson 7. Retrieved from http://study.com/academy/lesson/hofstedes-cultural-dimensions-theory.html#transcriptHeader
Northouse, P. G. (2013). Leadership: Theory and practice (6th ed.). Thousand Oaks: SAGE.
Betros, C. 2011. Toys“R”Us Japan. JapanToday, 3 October 2011. Retrieved from http://www.japantoday.com/category/executive-impact/view/1677606
Toys "R" Us, Inc. - Company Profile, Information, Business Description, History, Background Information on Toys "R" Us, Inc. retrieved from http://www.referenceforbusiness.com/history2/2/Toys-R-Us-Inc.html
