MGMT1101 | Business | External Business Environment of Toys R Us

Introduction

Charles Lazarus was the son of the local entrepreneur and Lazarus’s father was instrumental in operating a bicycle shop. Lazarus wanted to grow the business of his father and he wanted to have his own store. Charles Lazarus had the dream of opening a business that was child-oriented and he turned it into a reality. Lazarus was instrumental in filling the store with crib along with baby furniture and he was responsible for overseeing everything from that of book keeping to the delivering of merchandise to the homes of the customer. After staying in the business for around 2 years, Lazarus brought out an assortment of the toys with that of the baby furniture. Lazarus learnt in the early stage that toys often fell out of fashion with the children unlike that of furniture (Winkler et al., 2016). The parents of the children made return visits to store that helped in positioning toy as a lucrative commodity. Lazarus followed the supermarket store format helped Lazarus in stocking broader assortment pertaining to the products. The iconic logo was created that had an “R” that was featured backwards that gave the impression that it was a child who was responsible for writing it down. The Toys R Us stores in Australia will be shut down as the administrator failed to find buyer and the pulling out of the potential buyers will lead to the failure of the company (Prajogo et al., 2016). This report provides the background information in relation to Toys R Us company and analyses the external environment that lead to loss of revenue for that of Toys R Us. It discusses about the competitor strategies and the public opinion that made the firm shut down after incurring losses due to forces prevailing in the environment. . Toys R Us did not provide a good shopping experience to the customers and this provoked the customers to go for other brands. Toys R us did not make any kind of effort of bringing experiential opportunity to the stores.

Background Information

Toys R Us has entered into the Chapter 11 bankruptcy that lead to the closing of 1000 stores within US and that of UK. The effect of the e-commerce retailer called Amazon led to the decline of business of Toys R Us. It was also losing the customer confidence that paved the path for the destruction of the company. Private equity was another compelling reason that destroyed Toys R Us and the company had to face huge amount of debt that made it impossible for the firm to sustain itself in the market. The company was snapped by a consortium in the year 2005 that sealed the fate of the company (Hamilton & Webster, 2015). The company which is bought has to pay debt which can be used for buying it. Exit strategy is required that can help in paying off debt and collect that of the gain.

Toys R Us had to face a debt of around AU $ 6 bn after its purchase that cost it around AU $ 320 within a year for the service. This sapped out a lot of cash from the company. Toys R Us did not make any kind of investment in the online mode or generate attractive customer experience. Toys R Us had to pay $ 600 million to consortium who had bought it (Kew & Stredwick, 2017). Toys R Us failed in innovating the business model that paved the path for the destruction of the fortunes of the company. It is important for retailers of the present age to modify themselves so that they can sustain themselves within the present market. Toys R Us with the help of the products have to represent changes taking place within the market place and that of the customer behaviour. The Toys R Us was filled with inventory and the customer service was not existent of the company.

Analysis of External Business Environment

Competitor Strategies

There are different toy companies in Australia that acts as the competitor for Toys R Us. Amazon, K-mart and Target are the companies that were responsible for the decline of the fortune of Toys R Us. Amazon continuously innovates the products so that it can cater to the changing tastes of the customers. The company has R & D department and they have engineers and product designers to take care of the fact that the toys suit the taste of the children of the present age. Amazon takes excruciating amount of care to make the products as desired by the modern day consumer. Toys R Us could not stand up to the innovations of Amazon that led to the eventual decline of the company (Smith, 2016). Ken O Rafferty along with Bob Harvey together work under K-Mart and the toy fairs that they attend in helps them in developing unique products that can suit the children of the present age. The price of toys at Amazon starts from a minimum sum of $ 7 thereby making it affordable for a large section of people. The pricing of toys at K-Mart starts from that of $ 8 and thus it can even be bought by the people coming from the lower income group (Winkler et al., 2016).Target has toys priced at $ 9 thus making it convenient for people to buy from. The pricing of the toys of Toys R Us are a lot more than these three companies that led to the decline of the company. Amazon, K-Mart and Target have different segments or categories that can satisfy the diverse needs of the children (Gray, Harymawan & Nowland, 2016). Amazon have toys that are suited for the children of different age groups and it has got different brands like angry birds, my fairy garden, poppit, sea monkeys and shopkins. K-Mart have rights to brands like that of American Plastic Toys, Casdon Toys, Fisher Price, Hasbro and Britz n Pieces that is a dominant reason for the popularity of their toys. They have got different categories like educational games, craft items, dinosaur toys and early childhood toys. Target on the other hand has different categories like educational toys, magnetic product, visual effect product, retro range and special needs toys that help the company in rising above the competitors (Prajogo et al., 2018). Toys R Us did not offer these kinds of innovative categories to the consumer.

Figure: Comparison of Toys R Us with the Competitors

Source: Created by the author

Public Opinion

Public opinion is indicative of the desire and want of a large number of people.  It refers to collective opinion of people living within a society. K-Mart has been instrumental in making products that are of unique quality and has distinct characteristics. K-Mart supplies quality exclusive products at a price that is reasonable (Jackson, 2016). K-Mart has toys of minimum price range and thus they can be easily bought by the people. They are instrumental in making toys that are safe and the toys are moulded with the help of polypropylene along with polyethylene plastic (Holloway, 2017). The toys go through safety-testing lab that helps in ensuring that the toys comply with that of applicable safety standard (Holloway & Green, 2016). Toll free number is provided to the consumers who can make a complaint if they have any kind of question regarding the products. This helps in the creation of high opinion about the products of K-Mart in front of the public. Amazon also ensures that they maintain safety standards that helps in maintaining high public opinion in front of the consumers (Walden, 2017). They have implemented a product safety program that is rigorous so that they can meet the safety standard that is expected out of them. The toys have all been tested for ensuring that they comply with that of international toy standard of United States, Canada, Australia and New Zealand (Tariq Anwar, 2014).

The high opinion of the public about Amazon is created owing to the fact that the toys maintain strict requirement in relation to toxicology, heavy metal and that of microbiological contamination. The products of Amazon are continuously assessed and they are also reviewed by the team of the quality compliance professional that suggests the fact that the safety of the children are their primary consideration. The Amazon QA team engage themselves in inspecting the factories along with products to ascertain that the toys are all quality products (Almeida, 2017). Target is instrumental in making learning fun with the help of learning toys that can make the process of learning entertaining. The children can have fun while playing with the science kits, magnetic chart and the construction toys. The different segments of toys of K-mart like educational games and craft items helps in endearing it in front of the people. Amazon have toys suited for children of varying age groups that helps in the creation of high opinion pertaining to the brand before the consumers. Target has various categories like visual effect and retro range product that makes it a favourite among the consumers. The toys of Toys R Us do not go through any kind of safety test and strict requirement is not maintained that can harm the health of the children (Huang, 2014).

Conclusion

Toys R Us was instrumental in getting into Chapter 11 bankruptcy that caused many stores to close down. Advent of e-commerce retailer called Amazon paved the path for the destruction of business of Toys R Us. Toys R Us lost customer confidence that led to the decline of fortune of the company. Private equity also led to the failure of the company and the company had to incur debt that made it lose the trust of the people. A consortium snapped the company in 2005 on account of the declining fortune of company. Toys R Us had to face a large amount of deficit of AU $ 6 bn that made it lose around AU $ 320 within the span of a year. The company was cash-strapped on account of the debt that it had to face. The different competitors of Toys R Us are Amazon, K-mart and that of Target. The intense competition that Toys R Us faced from these quarter led to the eventual decline of the company. These companies make safe toys that undergo through that of safety-testing lab and these makes these brands popular in front of the customer. These companies take into cognizance customer satisfaction that caused these companies to perform better as compared to Toys R Us. The customers can call the companies in a toll free number in the event of having any problem. K-Mart has various segments like educational games along with craft items that has made it popular among the people. Different kinds of toys are made that suit the various ages of the children by the companies that has helped these companies in rising above Toys R Us. The toys suit the taste of the children of the present age and these helped these companies in beating Toys R Us.

References:

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