Toys R Us Marketing

1. Introduction

Toys R Us is an international brand that currently runs in 38 stores across the globe. They have recently had an interest in further expansion. This essay will analyse the current global positioning of the industry and aid in refining some key relevant points as to why they should progress into India. Competitor strength will be analyzed alongside the global situation analysis. Furthermore, an evaluation of mode of entry and socio cultural aspect will be considered in order to verify and back up my recommendation as to why they should expand into India.

Question 1a)

Political: At the current moment, approximately 75% of the worlds toys is made in china. Over the past few years research has shown that more countries have begun to introduce new regulations and stricter safety guidelines on specific toys. By this being said, if those countries were to implement strict denial barriers on the large percentage of toys it would hugely impact global distribution.

 Economic: the toys industry had a big impact in 2015 totalling an estimated value of $84 billion. The oil price has a direct relative connection to the toys industry and they are constantly changing. Therefore there is always  fluctuation in price for the production to the sale of toys globally. One example would be, the stability of Asian countries in terms of the economic factors linked to the political factors. This will lead to an increase in oil as they may pause oil trading across the continent.

Social: The main aspect of social association to the toys industry which is one of many variables is the licensing factor. Different companies have different licenses for different toys. Many toys in today’s time derive from films, TV shows and mobile digital apps targeted for the kids. This has been the case since the early 2000’s. current statistics show that social popularity of toys come from top 5 out of 10 leading countered are from the Asian peninsula and for that reason they have the most power within the global toy industry.

Technological: As the years have gone, technology has immensely had an impact on toys around the world. With more technological advancements some toys have become technologically advanced. This is a key variable when discussing the toy industry. Since the release of Computers and internet, technology has doubled in growth every two years. This has impacted the toys industry as they have needed to overcome any difficulties and learn how to adapt with the fast change. The toys industry has therefore had to consider electronic toys from the traditional physical toys. Digital companies across the world have developed a connected with the toys industry in order to introduce electronic game platforms such as the PlayStation and Xbox.

Environmental: the toys industry association is an ethical/environmentalist group that acts upon any issues faced from the global toys industry. They have recently promoted that they want more toys produced from recycled materials in order to have a more eco-friendly affect globally. TIA have also heard from people across the continents that many consumers are interested in eco-friendly toys for young children between the ages of 4-11  in order to keep their children future safe and healthy. From their research TIA have concluded that after the age of 10-11 children are progressing onto electronic toys and some of their toys either end up in storage or thrown away. Because of some of the materials used on toys most toys are not bio-degradable and often  end up ending to polluting factors and also decrease the chance of them being recycled.

Legal: around the world there are many laws and regulations that all toy manufacturers have to adhere to.  The United states of America currently is the strictest in terms of its laws. All there toys go through testing whether they are for the American market or for the rest of the world. Currently there are 100 tests that each and individual toy go through in order to test its safety for the children.

Question 1b)[pic 1]

(Source: Competitors factors, 2017)

Threat of new entry: The toys industry is very consolidated and contains high brand recognition. There are several entry barriers such as economies of scale, slow market growth and fixed costs of retailers. By this being said, there are also many opportunities available for to enter and establish a new market within the industry to satisfy either a niche market or a new wide spread scale. To enter this industry is a high threat as it is easily accessible by outsourcing a toy manufacturer. By this being said it does not mean they will be successful as  producing toys at a lower quantity means higher production costs, which inevitably will increase the retail price of the product.

Threat of Substitution:  According to historical evidence children do not have a brand preference, non-brand loyal. This means that they will buy what they like whatever the brand is. Since switching brands does not have many repercussions, the threat is fairly high. In addition current technology nowadays can be seen as a threat. Research has shown that in the future toys may be obsolete and toys will mainly want technological toys to go down the virtual route of gaming.

Supplier Power: within the last few years, there has been  high increase in the use of plastic resin in the manufacturing process. A key chemical component of plastic resin is petroleum and therefore oil prices have a direct impact on profits of  toys. One advantage of suppliers would be their cash flow, a high cash flow would mean they are able to purchase oil at current low prices in order to increase their raw materials and stock up. This will give them an advantage because competitors may not be able to purchase oil currently which means they have to purchase raw materials in the future which may be at a higher price and this will likely to affect the company’s profit margin.

Buyer Power: depending on the retail store, buyer power can fluctuate depending on various factors. Current statistics highlight that Walmart and Toys R Us accounted for over 40% of sales. By losing either of these stores would hugely impact on the sales of toys in the future. According to the laws of supply and demand, when a key toy is in high demand usually retailers take advantage of this and increase the price of the product. By this being said some consumers may go to a competitor charging a lower price for the toy.

Competitive rivalry: since the toy industry is mostly dominated by a few major players, competition can be intense. This has proven a very strong factor and is continuously intensifying due to recent trends and the shorter life cycle of toys.

Question 2:

Value chain Toys R Us[pic 2]

[pic 3][pic 4]

The above diagram illustrates the chain of primary activities in Toys R Us. These include, inbound logistics, operations, outbound logistics, marketing/sales and Service. Within the value chain, there are three parts. Primary Supportive and Margin activities.