Analysis of the Macro and Competitive Factors Impacting the Global Toys Industry

Toys “R” US, Inc. is an extremely famous private retailer of toys, games and other baby products. Basically, it deals in variety of toys, entertainment products, juvenile, learning games and other seasonal categories through its retail locations. It has its business operations worldwide like North America, Europe and Asia and the headquarters of the company is located at Wayne in New Jersey. It operates with the help of two business segments namely domestic and international and it does not only conduct its business activities offline but also, it has its own online presence through internet sites like Toysrus.com, Babiesrus.com, eToys.com, FAO.com, toys.com and many more.

Global macro- Toys industry

Running or conducting business in the world of toys and games is very famous as children are extremely important part of modern society. This industry competes in a fierce market as there are many players who are present in the market to attract huge traffic towards them. In this regard, Pest analysis of toy industry has been given in the below section:

The toy industry is quite stable but low growth industry due to different kinds of political obligations in various countries. It is apparently true that the industry is highly competitive with low barriers of entry as toys are the generic need of each country (Toy Industry Association, 2016).

The domestic retail toy market is extremely competitive due to the evolution of online retailers that has created a new era of toy production. Also, the sales of toys are seasonal as Toys R Us generated an approximate of 43% of its total annual revenues between the year 2010 and 2012. It is the largest toy retailing company followed by Wal-Mart, Target and other national as well as global chains (Toy Industry Association, 2016).

The profits of toy industry have declined as women are having less children and at older ages. As per the reports of specialty website BabyCenter.com has revealed that in the U.S. the approximate age of first-time mothers in the year 1970 was just 21 that had risen to 25 by 2008. This shows that the birth rate has declined due to various reasons (Hernandez, 2016).

The toys of modern era differ a lot from the previous generation as young children are becoming addicted to digital media at a very young age. This is the main reason that firms are trying harder to involve techno savvy features in their toys (ECSIP, 2013) (Refer Appendix 1)

SWOT Analysis of Toys “R” Us

To understand the global competitive factors, the porter’s five forces analysis has been discussed in the below section:

Competitive rivalry: Some of the key players of toys and games industry may include Mattel, Hasbro, JAKKS, Leapfrog and many more and this shows that the rivalry among the competitors is extremely high as this kind of industry is quite consolidated The rivalry among the competitors is extremely high due to the presence of giant players like Wal-Mart, Target and Amazon. Wal-Mart is providing the same kind of products at very minimum prices while Amazon has a huge traffic of online customers towards it.

Threat of new entrants: The threat of new entrants in this industry is medium as the set up of a new firm in any country requires huge amount of capital and legal constraints. This makes the entry difficult for the new entrants in this kind of industry. The threat of new entrants is low due to high start up costs and neck to neck competition among the several major key players. There are already numerous established brands which are running its business operations successfully and this makes the entry of new players highly difficult (ECSIP, 2013).

Threat of substitute products: The threat of substitute products in this industry is highly strong as toys and games are contemplated as good source of entertainment. In this regard, many companies are trying their best to provide the best kinds of toys and best features in games at nominal prices. The threat of substitute products is low as there are very minimum numbers of comparable substitutes which are available in the market. Also, stubbornness comes in the nature of children and they are very particular about their choices and desires. If they like something, they will stick to it unless they get it and the products of company are usually loved by all the children (ECSIP, 2013).

Bargaining power of buyers: The bargaining power of buyers is low as there are numerous numbers of channels of distribution for companies in toys and games industry. This is a price sensitive industry and this shows that the bargaining power of buyers is quite high as Toys “R” Us faces intense competition from small and domestic low cost leaders (Hernandez, 2016).

Bargaining power of suppliers: Suppliers do not play a key role when it comes to the global toy industry which proves that they do not have much bargaining power (Toy Industry Association, 2016). The bargaining power of suppliers is low due to the presence of long established relationships and the company makes sure to buy in bulk from its permanent supplier (Refer Appendix 2).

Primary activities

Inbound logistics

Effective warehousing

Ethical production activities

Attractive packaging

Physical stores

Online platform

Internet marketing

Holiday sales

Easy maintenance

Handy toys

Purchase raw materials from permanent suppliers

Follow labor laws (Toys R Us, 2016)

Hires creative employees

Follow employment laws

Brings innovative toys timely

Innovations can also be seen in baby products (Toys R Us, 2016)

It is the world’s leading dedicated toy and juvenile products retailer

It basically follows bricks and mortar strategy

Strengths	Weaknesses
· The company provides wide range of products. · It is a highly recognized brand. · It has its online presence too.	· It highly relies on seasonal sales. · The company is required to promote non- holiday shopping to attract customers in masses. · Losing stronghold to innovative companies like Disney.
Opportunities	Threats
· The charity deeds of company have helped it to earn a lot of reputation. · The company has a great opportunity to expand its profit margin as well as market share by planning its expansion into India and china along with various other emerging economical nations.	· Wal-Mart is one of the biggest competitors of company. · Earlier, the company was juggling with the pay disputes by employees as it ruined its reputation because the media has highlighted the case in a negative manner. · Unforeseen closing of its 87 stores and firing of employees revealed the unreliable aspect of company.

In nutshell, it has been found that the company is doing great in its field but the cessation of large number of employees without prior knowledge has really impacted its image. It should work harder to improve its image and goodwill that has been hampered by the media and it can make the use of online marketing and social media to regain that reputation. The company has numerous opportunities of expansion and it should look forward to get the advantage of those opportunities. Also, it must focus on its technical part to become technically stronger so that it may enhance its market share without any kind of major difficulty.

India is a big South Asian country with different kinds of individuals following different religions and customs living in one country. Sri Lanka is an island with diverse landscapes as well as it is neighboring country of India. Nigeria is an African country that has numerous natural landmarks and wildlife reserves. At last, Russia is the world’s largest nation and its capital is Moscow (Lee and Carter, 2012).

In India, cheap and unbranded toys are more famous than branded and expensive toys while Sri Lanka is very famous for wooden toys (Barlas and Wanasundera, 2007). In Africa, the children are very much fond of African themed toys where as Russia is famous for branded toys but safety is the biggest concern here as people first think of safety while buying children’s stuff (Shelley, 2004).

Indian customers are very price sensitive but the current demand of toys in India has enhanced demand for quality and luxury goods. The Sri Lankan population is highly educated and parents ensure that the toys which they are buying must have some educational value (Barlas and Wanasundera, 2007). This is the reason that the country manufactures toys that can combine learning with play. In Russia, online shopping is given utmost importance and more emphasis is laid on e- commerce customers (Shelley, 2004).

Indian population is full of sentiments and they relate everything with sentiments and make sure to provide such toys to their children that may provide family ethics and moral values. The people of Sri Lanka look for toys which are of great quality while people in Nigeria look for fun related toys (Barlas and Wanasundera, 2007). Russian population is highly fond of education based toys and they are ready to pay any premium price if they feel that these toys can provide the best education value to their children (Shelley, 2004).

The growth of toy industry in all the four countries is very high but it is quite higher in India as it is highly populated country as well as the birth rate is better than other three nations.

Indian and Nigerian customers are price sensitive while Sri Lankan individuals are not highly price sensitive while Russian customers are ready to pay any premium price to buy the perfect product.

Presence of exchange controls is good in all the four nations except Nigeria due to the depreciation of its local currency.

In India and Nigeria, people like to visit the stores with their children to buy their favorite toys while online shopping is preferred in Russia and Sri Lanka.

The potential of the Russian toy market is enormous and is likely to grow further in the near future (Shelley, 2004). On the other hand, the Indian toy market is likely to enhance without major tariff barriers as compared to other two nations.

Use of online platform is the basic marketing paradigm which is used in all the four countries to attract huge traffic. In India, television commercials are also of utmost importance to attract the attention of toddlers and other children.

When it comes to legal obligations, Russia is a tough country as it requires lot of legal legislations to be followed to start up a new business as compared to other three nations (Terterov, 2004).

Special precautions must be taken in India as companies must not manufacture toys that may hurt their sentiments or hamper their family values. In Russia, special attention must be laid on quality assurance (Terterov, 2004).

From the above discussion, it is advisable for Toys “R” Us to choose India as it would be quite easy to start its business operations in India. Also, the company has a great growth in the same sector and it can earn a great market share by commencing its business operations in India (Rößiger, 2008).

The company can enter into Indian market by choosing the paradigm of joint venture as it is an equity based aspect in which a new company is set up with parties owing a proportion of the brand new business (Buckley and Casson, 2014). The entry in India through joint venture would be extremely lucrative due to access to technology, core competence and managerial skills. In this regard, the company can plan to expand its business operation in India through joint venture with any Indian toy company (Ekeledo and Sivkumar, 2004).

Earlier, Indian customers did not go for branded toys but now, they prefer high quality as well as branded articles. Though, price is still the major dominant factor in the Indian toy market but it can be ignored when it comes to well known branded toys (Javalgi, et al., 2010). In India, the children use to accompany their parents to purchase toy for them which shows that they have a direct influence on the decision to buy their favorite toys. In this regard, television commercials play a key role as Indian children are mostly influenced by animated and non animated videos (Bijoor,, 2011). The most renowned product categories in Indian toy industry may include electronic toys, soft toys as well as hard toys. Indian toy companies have started to shift their attention towards branded toys to stay competitive with international companies (Bagla, 2008).         

Indian customers mainly lay emphasis on high quality products and they pay more attention on toys that may provide family ethics and moral values to their children. Hence, it is recommended to company to manufacture such toys in India that may have some spiritual or moral values (Cant, Strydom and Jooste, 2009).

Indian customers are quite price sensitive when they buy toys for their children but this can be ignored in case of high quality and well known as well as renowned branded toys (Doole and Lowe, 2008).

Online stores can be a great option as well as physical stores at shopping malls and super markets can be really very lucrative for the successful business operations of company (Richter, 2012).

Fancy and attractive packaging of toys can be of great importance with the main aim to attract young children. It has been discussed in the above mentioned section that television commercials are very supportive to get the attention of young children. Therefore, the company must use online platform and TV commercials to enhance its promotional strategy with the main aim to gain huge traffic (Vinson, Scott and Lamont, 2007).

Conclusion 

From the above discussion, it can be concluded that the company is doing great to enhance its revenues and to win the hearts of its customers. It has been recommended that it should expand the online streaming experience by introducing exclusive series of toys as well as enhanced marketing of series. The company should also continue to expand overseas to conduct its business operations across the globe. It has been highly recommended to company that it must choose India to expand its business operations and the selection is done on the basis of proper and appropriate justification.

References

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