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 founded in 1948. Its headquarters are based in New Jersey, the metropolitan area of New York. The retail company’s number of locations is 1,600; its major 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 major cities like Dubai, and countries like the United Kingdom and Canada.
This paper will study the company from different perspectives and provide a company description and current business assessment. Furthermore, it will analyze the external environmental analysis, including the affecting variables. Besides this, the paper will also address the competitive and market analysis, current business-level strategy assessment, and 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 its career. Some of the Times Square store launch events and Ocean Terminal in Hong Kong were very successful. The 110,000 location of the New York Times Square flagship store led to the feature of an animatronic robot known as T-Rex, the life-size dream house of Barbie, and the Ferris wheel inside the store. Some of these company innovations have led to attracting a large audience. Moreover, throughout the company’s progress, it has expanded its trade-in event, including 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, another famous company’s club is the “Geoffrey’s Birthday Club.”
Regarding stakeholders, the company has trade unions, the supply chain, lenders, major customers, HMRC, and even pension regulators. However, Brandon has shown negligence towards the company’s conduct, and therefore, for a while, the company has been unable to manage the stakeholders’ management effectively and efficiently. For this 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 companies for toy and juvenile products, it has more than 520 international stores, 200 licensed stores in 33 countries, and the jurisdictions it still faces legal issues. This specifically occurred when the CEO, Brandon filed for bankruptcy protection. As stated by the researcher, the company has said it will secure a $1.3 billion debtor-in-procession that will finance the infrastructure and maintenance of the 1600 stores. Even though the long-term debt of $5 billion is restricted, the stores continue their operations. Further statements of the 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.”
The report also stated, “The filing is the latest in a grim year for traditional retailers ravaged by the rising popularity of e-commerce, 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, which stated that the company was looking for a law firm to hire for its bankruptcy problem. Basically, the company was looking to fix and protect their long-term debts or just debts in general. However, the company faced severe legal issues that could have led to the shutdown of the business. However, since Toys R U has a rich history of serving in the toy industry, the company was given a chance to speak and resolve its 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 shapes the company and keeps the check and balance of 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 why Toys R Us lost its competitive advantage, competitive edge, and uniqueness in its products. The company is facing economic problems, and for that purpose, it is constantly accusing Walmart and Target of intense competition.
On the other hand, according to Porter’s Five Forces, Toys R Us is in a critical position when competition rivalry is the company’s major concern. Due to the bankruptcy incident, the company unintentionally mentioned their weaknesses, which the other participants like Walmart and Amazon could avail. As stated in 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 beat the toy retailer with aggressive pricing on the most popular items during the holiday seasons. Amazon hasn’t helped either.”
Some of the company’s most influential stakeholders were 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. So, competition rivalry is a major issue in accordance with 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 in mind is the threat of new entry. There are several competitors, such as the Original Toy Company and Wal-Mart’s toy company, so the threat of new substitutes and entrants can easily replace them. Basically, the issue is that the company is undergoing many major problems such as closing a few of its retail stores. Forbes has reported it, “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 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 intense competition, the analysis from the help of Porter’s Five Forces made the business analysis easier, and more evident according to the recent news.
Market & Competitive Landscape Assessment
As studied previously in 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 other participants like Wal-Mart and Amazon could avail themselves of.” In addition, “The bankruptcy incident is one of the reasons why 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 of the intense competition.”
The drivers of the competition now are the company’s unique products, sense of innovation, use of technology, the stakeholders, the retail stores in the international landscape, and the company’s position as 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 filed for bankruptcy.
Current Business-level Strategy Assessment
In terms of the customers, and relationships held with them the company has remained highly and consistently successful. It has a history of providing popular children’s toys and even being able to stand out among them due to its constant innovation, unique products, and smart use of 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 as a toy company, the customers are highly loyal, and the company’s marketing strategies show how to keep their customers interested through the efficiency shown in the technology. The company has several existing locations worldwide, and approximately 25 percent of the market share of the toy industry is earned by the wholly owned global stores of the company. 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, Minecraft, and Teenage Mutant Ninja Turtles. In terms of tangible and intangible services, the company has gained the utmost trust of its customers. Global-owned retail stores’ Value chain activities also help support the current strategy. (Becker-Olsen, 2006)
SWOT Analysis
Strengths
The company’s biggest strength is its product retailing strategies, which are highly attractive in the category. The company offers a wide range of children’s toys, including cooking, electronics, action figures, video games, bikes and scooters, building blocks, and crafts.
Besides this, the company has been serving the landscape of the toy industry since the 1960s, which is why it has been able to attract a large number of customers, build credibility over a long period, establish prospects, and eventually gain trust. (Kalakota, 1999)
Moreover, the company’s constant innovations in many toys have also generated sales and helped it attain a reputable status. As stated earlier, “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, Minecraft, and Teenage Mutant Ninja Turtles. In terms of both tangible and intangible services, the company has gained the utmost trust of its customers.”
Weaknesses
The issue of bankruptcy has already been discussed in the previous assessments. This specifically occurred when the CEO, Brandon, filed for bankruptcy protection. As stated by the researcher, the company has said to secure a $1.3 billion debtor-in-procession that finances the infrastructure and maintenance of the 1600 stores. Due to the bankruptcy issue, the company could result in a decrease in sales.
Opportunities
In order to compete with intense competition, the company needs to further work on its own niche marketing and toy innovation. The company is already well-acknowledged in terms of innovation and technology; therefore, instead of focusing on intense competition, it must put effort and thought into using technology.
Blue Ocean Strategies
Some of the company’s blue ocean strategies involve using Amazon’s “non-traditional” marketing tactic, which describes the process of delivering toys to customers from Amazon.
Another market the company could enter is children’s innovative and technological toys, such as a virtual reality book program for kids. This program basically involves launching digital books in software or a USB and then plugging them into the computer, and the children can only view them through virtual reality or 3D glasses.
This way, certain leading children’s books of the publishers could be gathered, and these digital books would be available only on Amazon. With the help of Amazon, the company must also prepare a tutorial that could help children use digital reality books. The virtual reality must be specifically designed for the children at a low cost, which could be further sold for free along with the purchase of the “digital reality books.” Further research could help the company establish and renew its image regarding market value, customer value, and stakeholders. The company has to regain its 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.
