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International Business

Essay by   •  March 30, 2013  •  Research Paper  •  4,493 Words (18 Pages)  •  1,063 Views

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Situation analysis (SWOT):

Opportunities:

1. 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. A major economic power, Japan has the world's third-largest economy by nominal GDP and by purchasing power parity. It is also the world's fourth-largest exporter and fourth-largest importer

2. Demographics : 98.5% ethnic Japanese, with small populations of foreign workers. Zainichi Koreans, Zainichi Chinese, Filipinos.

3. Religion : 84-96 percent of the Japanese population subscribe to Buddhism or Shinto, including a large number of followers of a syncretism of both religions

4. Culture: combines influences from Asia, Europe and North America

5. Children products accounted for a significant proportion of consumer spending in Japan.

6. Economic potential of Japan

7. Growth in retail outlet by format and size

Strength:

1. 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.

2. The company is incomparable with its diverse range of toys and baby amusement product.

3. In united state it's the second largest retailers.

4. Its very well developed e-commerce site facilitates the customer to the full. These sites are very well managed and include .............

Weakness:

Threats:

1. Culture: Japanese lifestyle

Problem Question:

The main issues that face Toys "R" Us to enter to Japan were three Entry Barriers, Customer behavior, and Japanese Culture and life style.

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. 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.

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 section of the contract stated that McDonald's Japan could place a restaurant anywhere a Toys "R" Us Japan was located. Toys "R" Us Japan hired almost solely Japanese employees. There were also no foreign employees at their headquarters. The combination of these two companies' skills would prove to be heavy competition for local businesses. Toys "R" Us knows how to successfully enter foreign markets and they also have a remarkable marketing strategy. With the combination of McDonald's Japan's know-how of the Japanese market Toy "R" Us Japan was set in motion.

When McDonald's expanded to Japan they changed their restaurant to suit Japanese rules but kept their innovative nature (Johansson 183). Toys "R" Us learned from McDonald's and realized that they would have to change their company to suit this new market without changing their style of store. Toys "R" Us kept their slogan, "Everyday Low Prices." This turned out to be a very beneficial decision. When their first store opened in 1991 there had been a recession in the Japanese economy. The Japanese consumer was looking for low prices but also wanted good quality in their products. Therefore they found this slogan to be very appealing. They also made some changes to their policies. As stated earlier, one of their policies doesn't allow any stores to be less than 3,000 square feet. When entering the Japanese market they had to change this rule, since some of the stores in Japan are less than 2,800 square feet.

Their transition was also assisted by the Japanese government. They waived laws which prohibited larger retailers from coming into the area. With this help the first store that Toys "R" Us opened in Japan was 3,000 square feet. It was opened outside of Niigata in Ibaraki Prefecture in December 1991. By 1993 the company had opened 15 more stores in Japan (Johansson 184).

Japan is a country on a relatively small island with over 127 million people whose ancestors have been living there for centuries. Japan's culture embodies peace and harmony, and is very collectivistic relying heavily on the tradition of its people for centuries. "Japan has formed a distinct model of hierarchy, honor, and etiquette that is still reflected in many social and business practices today" (communicaid.com). Japan's culture relies on three basic values and principles: the concept of "wa," or harmony; the concept of "kao," or saving "face" which stems from pride; and the concept of "Omoiyari," which relates to a sense of empathy and loyalty (communicaid.com). These values and principles shape the way that almost all business is conducted and to successfully

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