In the present globalize business environment, establishing footprint in the global market has emerged as one of the objectives of the organization. Particularly, increasing competition in all sectors has induced organizations to expand its reach in the global market for fulfilling all the business activities in an appropriate manner. However, international business expansion also come up with several challenges that business entities need to counter for fulfilling all the aims and objectives. In this study, the focus will be on assessing all the initiated international strategies by one of the most popular toy manufacturing organizations of the world namely Toys “R” US. The focus company was developed in 1948 with the objective of providing superior quality of newborn products and toys for capturing the major share of the world market (toysrus.com 2017). It has influenced Toys “R” US to increase the provided products diversity in an effective way.
Toys “R” US has included products like toys, constructive games, pre-school merchandise and creative activities for enhancing the revenue level. It has also focused on including different types of seasonal products for children to remain popular in the global market. However, Toys “R” US has faced drop in revenue level by 5% due to unfavourable foreign exchange rate (Baker 2014). In addition, increasing popularity of supermarket giants such as Wal-Mart and Tesco also has increased the challenges for Toys “R” US in maintaining revenue at the desired level. For that reason, the study would look to provide effective recommendations for Toys “R” US so that it can manage all the barriers within the international business expansion path.
Figure 1: Company logo
(Source: toysrus.com 2017)
As emphasized by Armstrong et al. (2012) in-depth evaluation of macro and competitive factors is crucial for understanding the business environment in an effective manner. The case study has highlighted the fact that Toys “R” US is facing challenges in keeping the revenue at the desired level due to fluctuating foreign exchange rate. However, the study has also mentioned that Toys “R” US has able to increase the overall sales volume by the amount of 3.2% that is expected to create positive impact on popularity of the market. Now, foreign exchange rate refers to the exchange rate between currencies of two economies (Berthon et al. 2012). Hence, it evaluates the value of a particular currency compared with the value of another currency. Fluctuating value of currency can actually have major impact on the revenue level of the organization. Now, US is facing continues growth in the value of money, which is likely to affect the revenue level of toy manufacturing organizations in a major way. Increasing value of US currency has influenced organizations to charge higher price for achieving desired goals in a comprehensive way. Otherwise, companies need to enhance the sales volume in a huge manner to eliminate all the challenges associated with the unfavourable foreign exchange rate.
On the other hand, the case study has also mentioned that increasing competition in the toy manufacturing and selling sector increased thereat level in the market. Majority of the popular retail supermarkets like Wal-Mart and Tesco have included various types of toys and infants products to grab the attention of the customers. Moreover, as these supermarkets provide several other consumer daily use products, it will increase the convenience level of the customers at the time of purchasing toys and infant accessories (Djelassi and Decoopman 2013). Thus, increasing competition in toy market has created direct adverse impact on the business level of the Toys “R” US. As a result, Toys “R” US needs to focus on developing effective counter strategies for all the competitors for fulfilling all the business objectives in an appropriate manner. In addition, inclusion of e-commerce and online selling technique has also enhanced the challenges for Toys “R” US in maintaining the revenue at the desired level. For that reason, Toys “R” US will have to focus on providing value added services for keeping the customers associated with the organization for long period of time.
Development of effective internal environment is crucial for the organizations in achieving success in the global market. Specifically, increasing competition level has influenced retail sector organizations to maintain the quality of the provided products and services. Therefore, Toys “R” US will have to focus on infrastructure, human resource management, procurement and operational services for achieving all the goals and objectives. Foxall (2014) have highlighted SWOT and Porter Value Chain analysis as the two most popular tools for evaluating the internal business environment comprehensively. Porter value chain analysis and SWOT analysis of Toys “R” US are as follows:
In this analysis, all the internal activities of the organization are segregated into two parts categories supportive activities and primary activities. Toys “R” US has tried to perform all the activities in the following way:
Primary activities:
The prime objective of Toys “R” US focus on maintenance, physical creation, support and sale of products or services. For that reason, the primary activities of Toys “R” US focus on operation, market & sales, inbound and outbound logistics and services.
Inbound logistics:
The case study has highlighted the fact that Toys “R” US is focusing establishing its presence in the Southeast Asia and China market. For that reason, it is essential for Toys “R” US to enhance the efficiency level of stock management for eliminating any possibility of out of stock or unavailable in the market (Foxall 2014). Toys “R” US has focused on channel development, ship to store delivery and in-store pickup for enhancing the satisfaction level of the customers.
Operation:
The operational procedure of Toys “R” US will have to focus on providing more variety in toys and infant products so that it can grab the attention of the customers. In addition, Toys “R” US would also have focused on developing innovative designs for providing value added services to the customers (Gilligan and Hird 2012). In addition, Toys “R” US will also have to focus on the development of customer centric approach for resolving any issues or problems in an effective way.
Outbound logistics:
Porter value chain analysis highlights the importance of outbound logistics for performing all the provided responsibilities in an effective manner. Now, Toys “R” US has look to open retail outlets in different parts of the world. For that reason, it will have to ensure that all the activities associated with the outbound logistics process are performed effectively (Gummesson, Kuusela and Närvänen 2014). Therefore, Toys “R” US will have to focus on developing strong logistic network all across the globe. Moreover, it will also have to develop strong relationship with distributors and suppliers for reducing the cost associated with the operational procedure.
Marketing and sales:
In this competitive environment, Toys “R” US will have to use different types of marketing tools and techniques for grabbing the attention of the customers (Yi and Gong 2013). For instance, it will have to use social media and other online platforms to communicate with the customers. Moreover, it will have to use television, radio and newspaper advertisements for creating maximum impact on the business level.
Service:
Toys “R” US will also have to ensure that all the customers receive specific level of service for keeping the satisfaction level at the desired order. For that reason, Toys “R” US has developed mobile applications and different form payment offering (Gilligan and Hird 2012). It has also focused on providing value added services like free Wi-Fi so that it can retain customers for longer timeframe.
Supportive activities:
The supportive activities of Toys “R” US have primarily focused on fulfilling all the operational responsibilities of the operational process. The supportive activities are as follows:
Procurement:
The organization has focused on constructing long-term relationship with different suppliers and distributors for fulfilling all the responsibilities in an effective way (Hollensen 2015). Moreover, Toys “R” US has focused on using transformational strategy so that it can maximize the utility of all the available resources.
Technology:
Utilization of advance technology has become essential for all the organizations, to improve the efficiency level of the operational process (Gilligan and Hird 2012). For that reason, Toys “R” US has looked to utilize powerful website, email marketing and mobile application for creating major impact on the overall revenue level.
Human resource management:
In order to fulfil the requirements of international business expansion, HR management of Toys “R” US has focused on recruiting people with superior knowledge and skills. Moreover, it has focused on using expats for creating maximum impact on the host country (Kapferer and Bastien 2012). Therefore, it can be mentioned that HR management of Toys “R” US has played a crucial role in enhancing the revenue level of the organization.
Infrastructure:
In order to expand business in the global market, Toys “R” US has looked develop proper infrastructure for fulfilling all the organizational responsibilities (Kim et al. 2012). It has also focused on developing effective departments for performing all the provided responsibilities in an appropriate manner.
Figure 2: Porter value chain analysis
(Source: Helm and Gritsch 2014)
|
Strengths |
Weaknesses |
|
· Strong brand value · Strong presence all across the global market · Availability in the online e-commerce platforms |
· Limited retail outlets outside the USA market · Overall sales volume heavily depends on the population rate or birth rate |
|
Opportunities |
Threats |
|
· Opportunity to expand business in the European and Asian market · It has the opportunity to create business collaboration with prime e-commerce companies like amazon.com for increasing the revenue level |
· Increasing popularity of the retail superpowers like Wal-Mart and Tesco · High competition in global market · Availability of low price alternative products in China market |
Table 1: SWOT analysis
(Source: Kumar and Rajan 2012)
As per the article by Pulizzi (2012), 12C framework is among the most popular tools for identifying best-suited international market for business expansion. Therefore, Toys “R” US has looked to utilize 12C framework for assessing the best alternatives among Sri Lanka, India, Russia and Nigeria.
|
Consumer behaviour, Channel and commitment |
12C framework has focused on proper understanding of consumer behaviour, commitment and channel, as it is crucial for expanding business in the international market effectively. It has been assessed that birth rate is comparatively high in India. Therefore, it is expected to provide larger potential market for Toys “R” US. Therefore, Toys “R” US would have to focus on developing strong distribution channel across the Indian market so that it can keep all its commitments comprehensively. Moreover, Toys “R” US would also have to analyze the behavioural pattern like taste and preferences of the customers in India. |
|
Currency, communication and capacity to pay |
Currency is another significant factor that can have impact on the revenue level. Now, Russia and India have relatively high currency value. Therefore, Toys “R” US needs to target one of these two countries for international business expansion. Moreover, Toys “R” US would also have to analyze communication and capacity to pay of the people living in different economy, as it can have major impact on the revenue level (Sheth and Sisodia 2015). |
|
Caveats, Choices and consumption |
12C framework also has focused on factors such as choice consumption and concentration, as it allows Toys “R” US to assess the areas where business expansion opportunity is higher. Therefore, it would help to initiate effective marketing strategies for creating desire impact on the market. It would also help Toys “R” US to counter different contractual obligation in an effective manner. |
|
Contractual obligation, concentration |
Historically, Russia has relatively higher legislative and contractual guidelines that can restrict several business activities. Therefore, businesses are likely to concentrate on alternative economies. |
|
Country |
For that reason, it can be mentioned that India is best suited for the business expansion of Toys “R” US. |
Figure 2: 12C framework
(Source: Morgan, Katsikeas and Vorhies 2012)
As highlighted by Shih, Chen and Chen (2013) appropriate understanding of socio-cultural factors is important for fulfilling all the objectives related to the international business expansion strategy. It helps organizations to identify the best possible way to enter and conduct business within the economy. For that reason, Toys “R” US will have to focus on several socio-cultural factors like age, ethnicity, education and disposable income for assessing the demand of toys and infant products with certain timeframe. Effective evaluation of ethnicity would help Toys “R” US to understand cultural believes and values of the targeted economy. Therefore, it would help to position all the products of Toys “R” US uniquely in the host country market. On the contrary, disposable income would help to identify the purchasing power of the people whereas age would provide an idea about the potential market share in host country.
As per the article by Singh (2012) effective utilization of marketing mix technique would help organizations to fulfil all the business aims and objectives in an effective manner. For that reason, Toys “R” US would focus on following marketing strategy:
Product:
Toys “R” US has focused on providing variety of products like toys and electronic games for the children up to 4 years age. It has also developed several attractive newborn accessories for enhancing the market share effectively (Wilson and Gilligan 2012). In addition, Toys “R” US also included constructive games and pre-school merchandise. It has also focused on providing seasonal products like outdoor products, sporting goods and play sets.
Price:
The organization has focused on utilizing economic pricing strategy for capturing prime share of the toy market (Foxall 2014). However, prices of Toys “R” US are still relatively higher in comparisons to the toys provided by the retail superpowers like Wal-Mart and Tesco. Therefore, it is expected to create more challenges in future as well.
Promotion:
Toys “R” US will have to focus on using aggressive promotional technique for enhancing the brand value in new market. Therefore, it will have to utilize social media, television, radio and newspaper for promotional activities (Kim et al. 2012). It would also have to focus on direct marketing activities for enhancing the sales volume in a major way.
Place:
In order to establish business in the new country, Toys “R” US will have to select prime areas where customers can reach easily (Yi and Gong 2013). Therefore, it will have to target prime areas of major cities like shopping mall and multiplex for opening retail outlets. As a result, it would create positive impact on the convenience level of the customers.
In order to establish business in new country, Toys “R” US will have to identify a particular festivals season like Christmas and Diwali, as people tend to spend more on luxurious products at this time. Toys “R” US will also have to focus on developing retail outlets in prime cities of India like Chennai, Bangalore, Kolkata, Mumbai and Delhi, as it would increase the sales volume in a major way. In addition, Toys “R” US would also have to focus on understanding the culture, values and beliefs of Indian people in order to provide products as per the needs and wants of the market.
Conclusion:
The study has highlighted the fact that international business expansion is essential for increasing the revenue level in an appropriate way. In fact, it can help organizations to achieve sustainable growth in the global market. However, the study also mentioned that Toys “R” US would have to face several challenges at the time of expanding business in different countries. Therefore, it would have to focus on developing effective strategies for fulfilling all the aims and objectives in an appropriate manner.
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