|Type of paper:||Case study|
|Categories:||Branding Strategic management SWOT analysis Business strategy|
Strategy plays a significant role in business operations and the ability to gain a competitive market advantage. Toys "R" U.S. is one of the successful business stories which started as an individual hobby to successful children toys retail. Strategy dominates a strategic business direction and can be instrumental in the overall success of the business. This research paper will develop a strategic analysis of Toys "R" U.S. which is one of the most controversial business success stories to assessing the implications of business decision making and the overall success.
Business Brief History
Toys "R" U.S. was founded in 1948 by Charles Lazarus shortly after returning to the United States after the Second World War (Blakemore, 2019). The business was based on the inspiration that many war returnees wanted to settle down and have families after the devastating war experience which Lazarus capitalized upon to create a company that aimed at providing children utilities. However, after the store opened its doors in Children's Bargain Town in Washington D.C., the entrepreneur decided to change the business because the strollers did not result in return sales which were bad for the business (Blakemore, 2019). In 1957 Lazarus ceased from selling furniture and instead specialized on toys, later in 1966 Lazarus sold his company to Interstate Sales and he remained as the head of the toy division. However, interstate Sales filed for bankruptcy in 1974 and Lazarus was put in charge of restructuring, and the unprofitable business divisions were disposed of. In 1978 the business became a publicly traded company in the New York Stock exchange. Upon stepping aside in 1994, Toys R Us started experiencing problems which were the beginning of its downfall. Competition from Walmart as a toy seller in the United States led to the decline of the business market share. In 2005, Toys R Us was acquired by Bain Capital, Vornado, and Kohlberg Kravis Roberts Realty Trust and took the business private. In 2009, the business bought etoys.com and Toys.com and the retailers K.B. Toys and FAO Schwalz, and in 2010 the business had its first initial offering in May. However, the decline in sales led to the withdrawal of the IPO. The business started closing its significant stores such as Times Square Flagship and FAO Schwarz store located in the 5th avenue close due to high rent (Blakemore, 2019). Despite hiring a law firm to help in restructuring, the debts weighed down the business and eventually filed for bankruptcy in 2018, ending the business legacy. After going out of business in 2018, Toys R Us has been trying to make a comeback in 2019.
Operating in a large market. The toy market is large, which makes it appealing for businesses and competitors all alike. The demand for toys and children items continues to be a significant sensation in the United States and Europe (Blakemore, 2019). The enormous market potential is a considerable strength and organizations such as Toys R Us can capitalize on the market by creating unique products that reflect the markets trends at the time as well as aggressive marketing and friendly pricing (Green, 2017).
Finance advantage and working capital. The retail industry possesses a significant advantage due to the ease of accessing capital and bank loans. This will be an instrumental aspect in helping the brand to come from its current solvency and reestablishing itself as a brand. Despite the business exit from the market in 2018, the toys market has a significant gap that the business can use as a comeback advantage. Working capital plays a vital role in a business stability because, in the retail business, companies receive money from their customers before the firm pays the suppliers.
Demand seasonality. Toys R Us has to grapple with the market seasonality, which is a significant challenge. The toys market highly depend on the December holidays where the products have high demand and critical celebrations throughout the year, which makes demand highly dynamic.
Consumer preference fluctuations and spending patterns. One of the significant challenges that Toy R Us has to contend with if the company returns to business this year is the consumer preference fluctuations which is caused by changes in consumer preferences and spending patterns (Green, 2017).
High employment rate and strengthening the United States economy. Today, there is a high employment rate in the United States, and the economy is doing well, which is a significant opportunity for Toys R Us to make a comeback in the American babies' toys market.
Ecommerce growth. Electronic market sales of toys is an essential opportunity that Toys R Us can take advantage of to reduce the cost of running brick and mortar operations. Walmart and Amazon have emerged as significant competitors of the business due to their online sales capabilities which have been instrumental in their ability to set low prices and also to improve the consumer convenience (Hirsch, 2019).
Birth rate. Hard economic times and family planning plays a significant role in influencing the overall demand and dynamics of the toys industry (Hirsch, 2019). This means that any decline in the number of births will significantly affect the demand for toys which can have a significant detrimental impact on Toys R Us business sustainability.
When Mr. Brandon entered Toys R Us, a new strategic direction was established, which involved four significant initiatives that aimed at promoting business growth. They include;
Gaining Competitive Advantage through Culture and Talent
Culture and talent play a significant role in improving the overall business success by facilitating creativity, innovation, and growth in the process. Toys R Us new strategy aimed at helping the business gain a competitive advantage by leveraging on talent to create new products (Hirsch, 2019).
Expansion of Toys R Us and Babies R Us Brands
Another essential element that Toys R Us capitalized on was the improvement of the current brands by channeling more investments. This strategy was made practical through an increase in capital and leveraging on e-commerce which improves consumer convenience.
Innovation is an essential strategic tool, especially in toys where the consumer preferences change with time. As such, the new management wanted to make innovation as a crucial tool in creating diverse and creative product content.
The primary advantage of improving financial backing of Toys R Us is by availing more significant financial support which is instrumental in facilitating marketing and innovation to promote business sustainability.
In the United States toys market, Toys R Us faced significant competition from Walmart and Amazon due to their ability to offer meager prices on products (Hirsch, 2019). Amazon e-commerce business model is an essential advantage due to the absence of operational costs which is a similar case for Walmart (Blakemore, 2019). Target is also another significant competitor in the American toy business due to the business emphasis on expanded toy catalog and use of holiday discounts as a means of increasing the overall sales (Green, 2017).
Final Recommendations and Conclusions
The toys market is highly competitive and unpredictable due to the changing economic times, consumer preference, and competition which significantly make it a difficult market for any business to survive. There is significant market potential that can be capitalized through the investment in innovation and changing the business model to e-commerce which will be instrumental in reducing the operational costs and increasing the consumer confidence and convenience. The high market competition for toys and baby products requires businesses such as Toys R Us to capitalize on research which will be instrumental in identifying consumer specific needs and trends which will help the business to make proactive decisions. Toys R Us should take advantage of the improving economic environment in the US to market its products aggressively because of the high employment rate which increases the consumer potential to spend. Besides, digitization of the firm sales instead of overreliance on brick and mortar sales will be instrumental in helping the business to grow.
Blakemore, E. (2019). Inside the Rise and Fall of Toys 'R' Us The retailer turned everyone into a "Toys 'R' Us kid by driving its competitors out of existence. History. https://www.history.com/news/toys-r-us-closing-legacy
Green, D. (2017). Walmart and Amazon are already picking at the carcass of Toys R Us. Business Insider. Retrieved from https://www.businessinsider.com/walmart-amazon-beat-toys-r-us-online-sales-2017-9?IR=T
Hirsch, L. (2019). Toys R Us tries for a comeback a year after going out of business. CNBC. Retrieved from https://www.cnbc.com/2019/02/11/toys-r-us-executives-plot-retailers-comeback-with-tru-kids.html
Appendix 1. Toys R Us Financial Statement 2012 to 2017
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