Widgets R Us Case Study

SWOT Analysis Toys "R" Us

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Strengths.

  • Toys "R" Us has in excess of 1500 superstores in the United States and Worldwide. It also owns the baby brand, Babies R Us which adds another 200 + stores. Toys "R" Us also markets successfully on the Web (in collaboration with Amazon.com). It has a huge distribution network that benefits from advanced logistical systems. Having so much shelf space means that the company has a strong bargaining position when it comes to buying prices from manufacturers. It turned over more than $11 billion in 2005.

Threats.

  • There is strong competitive rivalry in the toy market, not only form Wal-Mart, but also from KB Toys and Target. The toy brand is often not associated with the retailer. So if a particular kid’s toy has grabbed the imagination and the spending power of its target consumer, any retail outlet is as good as another. Differentiation is difficult, and toy retailers often have to compete on price, range or availability.
  • Let’s face it today China and similar low cost manufacturing paradises are where toys are made. Low manufacturing costs are important if margins are to be retained. The problem, and potential weakness, is that countries and trading communities tend to impose quotas and tariffs in order to protect local manufacturing. All countries do it. However, Toy R Us could potentially be left without the toys people want to buy if embargoes are implemented on countries such as China.

In 1948, at the young age of 25, Charles Lazarus began a business totally dedicated to kids and their needs just in time for the post-war baby boom era. He had no idea that his first baby furniture store in Washington D.C., would evolve into an $11 billion dollar business with approximately 1,500 stores worldwide! Read more…

Disclaimer:
This case study has been compiled from information freely available from public sources. It is merely intended to be used for educational purposes only.

  • The company sells many different product ranges. There are benefits and disadvantages to this. However, a key strength is that the company has a diversified portfolio of products, which means that while some ranges are underperforming, others are out performing. As long as technology allows them to spot successes and then to focus upon them, they have a competitive strength.

Weaknesses.

  • These days, Toys “R” Us has no single and sustainable competitive advantage, other than brand. In the US, its traditional stronghold, the company has lost its number one positions as toy retailer to Wal-Mart. Being large may not be enough, when customers can go to another large retailer and buy the same and similar goods, sometimes getting a better deal.
  • As with all retailers in Western society, Toys “R” Us is heavily dependent upon successful sales during the final quarter of the year. They need to make profit from Christmas. Retail is notoriously seasonal and Toys “R” Us is no different to other retailers. In fact it could be argued that toys are a key Christmas present product, so are even more likely to be dependent upon seasonal sales.

Opportunities.

  • There are opportunities for joint ventures and strategic alliances. Toys "R" Us works closely with Amazon.com and its baby products category. This not only plays to the strengths of both companies, but also provides opportunities. Amazon is strong at the online part of the business, creating the web site, warehousing products and delivering them to customers. Toys "R" Us will use its buying power, but ultimately carries the inventory risk (i.e. if it doesn’t sell, its money is tied up in physical stock).
  • Toys "R" Us is a good neighbour. For example, in 2005 it went out of its way to help the Louisiana victims of hurricane Katrina. Toys "R" Us donated six trucks full of toys and baby supplies including diapers, wipes, and formula, as well as batteries and water to multiple locations that were housing evacuees. Babies "R" Us has also donated over 17 pallets of baby and children’s clothing to the national charity Kids In Distressed Situations (KIDS). Such associations will help to sustain its brand with key consumers.
  • As with many of the brands considered by MarektingTeacher.com’s FREE SWOT analyses, the International market is very important to Toys "R" Us. The citizens of emerging nations such as China and India are getting wealthier and better educated. Consumers have more disposable income and leisure time, and both of these could increase over coming years. The types of goods and services retailed by the company could be marketed more aggressively overseas. Toys "R" Us could look out for strategic partners, or indeed go it alone.

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Tim Friesner

Marketing Teacher designs and delivers online marketing courses, training and resources for marketing learners, teachers and professionals. View all posts by Tim Friesner

Case Study 3.1: Kefavik Paper CompanyIn recent years, Kefavik Paper Company has been having problems with its project management process.A number oF commercial projects, For example, have come in late and well over budget, and product perFormance has been inconsistent. A comprehensive analysis oF the process has traced many oF the problems back to Faulty project selecTon methods.Kefavik is a medium-sized corporaTon that manuFactures a variety oF paper products, including specialtypapers and the coated papers used in the photography and prinTng industries. Despite cyclical downturns due to general economic condiTons, the ±rm’s annual sales have grown steadily though slowly. About ±ve years ago, Kefavik embarked on a project-based approach to new product opportuniTes. ²he goal was to improve pro±tability and generate addiTonal sales volume by developing new commercial products quickly, with be³er targeTng to speci±c customer needs. ²he results so Far have not been encouraging. ²he company’s project development record is spo³y. Some projects have been delivered on Tme, but others have been late; budgets have been rouTnely overrun; and product perFormance has been inconsistent, with some projects yielding good returns and others losing money.²op management hired a consultant to analyze the ±rm’s processes and determine the most e´cient way to ±x its project management procedures. ²he consultant a³ributed the main problems not to the project management processes themselves, but to the manner in which projects are added to the company’s porµolio. ²he primary mechanism For new project selecTon Focused almost exclusively on discounted cash fow models, such as net present value analysis. EssenTally, iF a project promised pro±table revenue streams, it was approved by top management.One result oF this pracTce was the development oF a “Family” oF projects that were o¶en almost completely unrelated. No one, it seems, ever asked whether projects that were added to the porµolio ±t with other ongoing projects. Kefavik a³empted to expand into coated papers, photographic products, shipping and packaging materials, and other lines that strayed Far From the ±rm’s original niche. New projects were rarely measured against the ±rm’s strategic mission, and li³le e·ort was made to evaluate them according to its technical resources. Some new projects, For example, Failed to ±t because they required signi±cant organizaTonal learning and new technical experTse and training (all oF which was expensive and Tme-consuming). ²he result was a porµolio oF diverse, mismatched projects that was di´cult to manage.¸urther, the diverse nature oF the new product line and development processes decreased organizaTonallearning and made it impossible For Kefavik’s project managers to move easily From one assignment to the next. ²he hodgepodge oF projects made it di´cult For managers to apply lessons learned From one project to the next. Because the skills acquired on one project were largely nontransFerable, project teams rouTnely had to relearn processes whenever they moved to a new project.

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