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Toys R Us Goes To Japan

3363 words - 13 pages

Toy's "R" Us Goes To JapanS. Hart ShowalterAnthony SpencerAmy GomezSection I: Relevant FactsToys "R" Us first told the public about their decision to enter the Japanese toy market in 1989. A lot of critics worried that Toys "R" Us would not be successful in this new and foreign market. They raised several issues that they believed proved the Japanese market was not ready for the marketing and retailing strategy that Toys "R" Us offered. They stated that the Japanese culture and beliefs were too different from that of the United States and Europe for Toys "R" Us to be successful. Toys "R" Us incorporates a "category killer" strategy (Johansson 181). In this marketing strategy they use mass advertising in order to make brand recognition, which in turn helps consumers remember and want to shop at their store. They also discount some of the popular items at certain times which give the consumer the impression that everything at their store is inexpensive or discounted. Some critics said that this strategy would clash with the Japanese consumers, since Toys "R" Us competes on price and the Japanese culture links quality with price. Another concern was that Toys "R" Us Japan would not be able to get ample permission and space to build their large toy stores. Toys "R" Us has a policy that none of their stores can be less than 3,000 square feet. This is a problem when entering the Japanese market because they have laws against big stores and land is so expensive. Also some Japanese toy manufacturers said that they would not sell directly to Toys "R" Us, but instead would only deal through middle men.Even with the critics telling them everything that could be standing in their way, Toys "R" Us saw a great amount of opportunity in the Japanese market. Japan is one of the top three wealthiest markets in the world for leisure products, United States and Europe being the other two (Johansson 183). Seeing as Toys "R" Us had already successfully dominated the market in the United States and penetrated the European market they saw that it could be beneficial for them to expand to Japan.In 1991 Japanese people spent $25 billion dollars on leisure products. Their toy market was dominated by small specialty toy stores and small general retailers. Only 500 larger general retailers made a significant portion of their income from toy sales. On the other hand, U.S. stores like Wal-Mart and K-mart had a significant percentage of sales. By seeing this they realized that Japanese consumers shop mainly at specialty stores for their toy purchases, not at general retailers. This was a huge upside to the Japanese market.In order to penetrate the Japanese market Toys "R" Us signed an alliance contract with McDonald's Japan. Being that they knew little of this foreign market, the signing of this contract was an enormous aid. In the contract it stated that McDonald's Japan would own 20% of Toys "R" Us Japan, while Toys "R" Us would control the other 80% (Johansson 183). Another...

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