Business Analysis of Toys R Us
Introduction
This paper aims to provide a detailed business analysis of the Toys “R” Us. It is an American toy and juvenile products retail company that was founded in the 1948. Its headquarters are based in New Jersey as well the metropolitan area of New York. The retail company’s number of locations till now is 1,600 and it’s major and parent organization is the KKR & Co. L.P, Vornado Realty Trust. And, its other subsidiaries are Toys R Us AG, FAO Schwarz thus the retail stores are situated in one of the major cities like Dubai, and countries like United Kingdom and Canada as well. This paper will study the company from different perspectives; it will provide a company description and current business assessment. Furthermore, it will analyze the external environmental analysis which will also include the affecting variables. Besides this, the paper will also address the competitive and market analysis, current business-level strategy assessment, SWOT analysis and eventually the company will discuss blue ocean strategies for Toys “R” Us.
Company Description and Current Business Assessment
In terms of providing its products, the company has made some strategic choices throughout their career. Some of the launch events of the Times Square store, and store of Ocean Terminal in Hong Kong store were very successful. Especially, approximately the 110,000 location of the New York’s time square flagship store led to feature an animatronic robot known as T-Rex, the life-size dream house of Barbie as well as the Ferris wheel inside the store. Some of these company’s innovations led to attracting a large number of audience. Moreover, throughout the progress of the company, the company has expanded their trade-in event that also includes clothing. This is one of the blue ocean strategies, according to personal knowledge. Besides, the company has also launched events for children 2-up, and some of them gifted LEGO gifts, and another famous company’s club is the “Geoffrey’s Birthday Club.”
In terms of stakeholders, the company has trade unions, the supply chain, the lenders, major customers, HMRC, and even pension regulators. However, Brandon has shown a negligence towards the company’s conducts, and therefore since a while the company has not been able to do the stakeholders management effectively and efficiently. For the purpose, the company even filed a bankruptcy due to intense competition of Walmart and Target. (Schmenner, 1986)
External Environmental Analysis
Even though the company, Toys R Us Inc. is one of the world’s leading company for toy and juvenile products, and it has more than 520 international stores, as well as the 200 licensed stores in 33 countries, along with the jurisdictions it still faces legal issues. This specifically occurred when the CEO, Brandon filed a bankruptcy protection. As stated by the researcher, the company has said to secure a $1.3 billion of debtor-in-procession that finances the infrastructure and maintenance of the 1600 stores. Even though, the long-term debt of $5 billion is restricted, the stores are still continuing their operations. Further statements of Financial Times address, “Toys R Us filed for bankruptcy protection late on Monday as the storied US toy retail chain, which has been wrestling with a heavy debt load, grapples with a shift towards online shopping.”
And the report also stated that “The filing is the latest in a grim year for traditional retailers ravaged by the rising popularity of ecommerce, particularly among companies that took on large debts in the years leading up to the financial crisis.” Eventually, another report of the extended information was shared by CNBC, when they stated that the company is looking for a law firm to hire for their bankruptcy problem. Basically, the company was looking for to fix and protect their long-term debts or just debts in general. However, the company faced severe legal issues that could have been led to shutdown of the business. But, since Toys R U has a rich history in serving in the toys industry, therefore the company was given a chance to speak and resolve their issue. From these examples, it can be extracted that the company is facing severe legal, financial, economic and eventually social factors that will affect the reputation of the company. Each of these stated factors shape the company, and keep the check and balance whether the company is compliant with the current laws, rules and regulations. The projected basics of these elements also show the negligence of the CEO, and his ways of financial management of the toy business. This incident is one of the reasons when Toys R Us lost its competitive advantage, competitive edge and uniqueness of products. The company is facing economic problems, and for that purpose it is constantly accusing Wal-Mart and Target for the intense competition.
On the other hand, according to the Porter’s Five Forces, Toys R Us is in a critical position when the competition rivalry is the company’s major concern. Due to the bankruptcy incident, the company unintentionally mentioned their weaknesses which the other participants like Wal-Mart and Amazon could avail. As stated in a research, “When Toys R Us filed for bankruptcy protection on Monday, the easy culprit to blame was Amazon. But long before Amazon battered Toys R Us with a much deeper selection, Wal-Mart was beating up the toy retailer with aggressive pricing on the most popular items during holiday seasons. Amazon hasn’t helped either.”
One of the company’s most influential stakeholders was the Bain Capital, KKR and Vornado Realty. And, the company’s core business actually functions on the billions of dollars in debt which further results from the 2005 leveraged buyout from the. So, the competition rivalry is a major issue in accordance to the Porter’s five forces. Supplier and buyer power has always been effective and efficient in the case of Toys R Us; however, there is a great chance of the threat of substitution. Another important aspect the company needs to keep is the threat of the new entry. There are several competitors like the Original Toy Company, Wal-Mart’s toy company, so they can easily be replaced by the threat of new substitutes as well as new entrants as well. Basically, the issue is that the company is undergoing a number of major problems such as closing few of their retail stores. It has been reported by Forbes, “Toys R Us on Monday night asked federal bankruptcy court in Richmond, Virginia for permission to close those stores, saying it has faced a challenging commercial environment” made worse, it claimed, by consumer preferences to online stores from brick and mortar stores.” This shows that the consumer preference can shift easily due to the company’s current status in the market. (Grant, 1999)
Another report states that “the company had been weighed down by enormous debt levels – $5 billion pre-bankruptcy, and years of weak sales as business did indeed defect to Amazon.com (AMZN, -2.28%), but also to major chains like Target (TGT, +0.76%) and Wal-Mart (WMT, +1.99%), which have proven far more adept at withstanding competition from Amazon but also made their toy offerings far more enticing.” This shows the company has an intense competition, the analysis from the help of Porter’s Five Forces made the business analysis easier, and evident according to the recent news.
Market & Competitive Landscape Assessment
As studied previously in the Porter’s Five Forces, the company has a major competition rivalry at this point. As mentioned, “Toys R Us is in a critical position when the competition rivalry is the company’s major concern. Due to the bankruptcy incident, the company unintentionally mentioned their weaknesses which the other participants like Wal-Mart and Amazon could avail.” In addition to this, “The bankruptcy incident is one of the reasons when Toys R Us lost its competitive advantage, competitive edge and uniqueness of products. The company is facing economic problems, and for that purpose it is constantly accusing Wal-Mart, Amazon and Target for the intense competition.”
The drivers of the competition now are the company’s unique products, sense of innovation, use of technology, the stakeholders, and the retail stores in the international landscape as well as the company’s position of a pioneer. However, the issue of bankruptcy to the management of store locations is being done highly in an ineffective manner. Due to the long-term debt situation, and mismanagement of the finances the company rather filed a bankruptcy.
Current Business-level Strategy Assessment
In terms of the customers, and relationships hold with them the company has remained highly and consistently successful. It has a history for providing popular children’s toys, as well as even be able to stand out among due to their constant innovation, unique products as well as a smart use of the technology. For example, the store initiated by the company named “Children’s Bargain Town” does not actually have the similar ring that Toys “R” Us will have. Besides this, due to its leading image of the toy company the customers are highly loyal and the company’s marketing strategies knows how to keep their customers interested by efficiency shown in the technology. The company has a number of existing locations all over the world, and approximately 25 percent of the market share of the toy industry is earned by the wholly owned global stores of the company. Their one of the most important and innovative features of the toys are the Disney Frozen, Barbie, My Little Pony, Monster High, Doc McStuffins, Disney Princesses, Hot Wheels, LEGO, Transformers, Mine craft and Teenage Mutant Ninja Turtles. In terms of their both tangible and intangible services, the company has been able to gain the utmost trust of their customers. Value chain activities of the globally owned retail stores also helps in supporting the current strategy. (Becker-Olsen, 2006)
SWOT Analysis
Strengths
The company’s biggest strength is their product retailing strategies that contains a huge attraction in the category. From their cooking, electronics, actions figures, video games, bikes & scooters, building blocks, to crafts. The company offers a multitude range of children’s toys.
Besides this, the company has been serving the landscape of toy industry since 1960s, and this is why it has been able to attract a large number of customers, build credibility through the long span of time, establish prospects, and eventually gain the trust. (Kalakota, 1999)
Moreover, the company constant innovations in a multitude range of their toys have also generated their sales, and have them attain a reputable status. As stated earlier, “Their one of the most important and innovative features of the toys are the Disney Frozen, Barbie, My Little Pony, Monster High, Doc McStuffins, Disney Princesses, Hot Wheels, LEGO, Transformers, Mine craft and Teenage Mutant Ninja Turtles. In terms of their both tangible and intangible services, the company has been able to gain the utmost trust of their customers.”
Weaknesses
The issue of bankruptcy has been already discussed in the previous assessments. This specifically occurred when the CEO, Brandon filed a bankruptcy protection. As stated by the researcher, the company has said to secure a $1.3 billion of debtor-in-procession that finances the infrastructure and maintenance of the 1600 stores. Due to the bankruptcy issue, the company could result in decrease of sales.
Opportunities
In order to compete with the intense competition, the company need to further work on their own niche marketing, and the innovation of toys. The company is already well-acknowledged in terms of innovation and technology, therefore instead of focusing on the intense competition the company must rather put efforts and thinking in using the technology.
Blue Ocean Strategies
Some of the blue ocean strategies of the company consist in terms of Amazon that a “non-traditional” marketing tactic must be used that describes the process of delivering the toys to customers from Amazon.
Another market the company could enter is the children’s innovative and technological toys such as a virtual reality book program for kids, this is basically the use of launching digital books in software or an USB, and then plugging into the computer and the children can only view it through the virtual reality, or the 3d glasses.
This way certain leading children’s books of the publishers could be gathered, and then these digital books must be available only at Amazon. With the help of Amazon, the company must also prepare a tutorial that could help in guiding the children to use the digital reality books. The virtual reality must be specifically designed for the children under a low cost, that could be further sold in free along with the purchase of the “digital reality books.” Further research as well as that could help the company in establishing and renewing their image in terms of market value, customer value and their stakeholders. The company has to regain their image. And this is why this is an important strategy. (Baron, 1995)
References
Kalakota, R., & Robinson, M. (1999). e-Business. Roadmap for Success: Addison Wesley.
Schiffman, C. (2001). Toys R Us. The Southern Review, 37(3), 572.
Schmenner, R. W. (1986). How can service businesses survive and prosper?. Sloan Management Review (1986-1998), 27(3), 21.
Becker-Olsen, K. L., Cudmore, B. A., & Hill, R. P. (2006). The impact of perceived corporate social responsibility on consumer behavior. Journal of business research, 59(1), 46-53.
Grant, R. M. (1999). The resource-based theory of competitive advantage: implications for strategy formulation. In Knowledge and strategy (pp. 3-23).
Baron, D. P. (1995). Integrated strategy: Market and nonmarket components. California management review, 37(2), 47-65.
