Toys “R” Us Expansion in Japan: Development of the Strategy

Toys “R” Us Expansion in Japan
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Introduction
One aim that propels any business organization to grow its business functions regionally and internationally remains in increasing its profits. It is necessary for any organization to command a wide consumer base so as to reach a large number of customers who will stay loyal to a certain product/brand. Without these factors, a business will surely fall and will no longer exist in the market CITATION Hua07 \l 1033 (Huang, 2007). Multinational companies are quite persistent in their pursuit to control foreign markets by gaining new customers. This is not always easy though, because they have to overcome a variety of factors which hinder them from entering such markets. They first need to appeal to the intended customers in a way that relates to their needs CITATION Hua07 \l 1033 (Huang, 2007). In order to fulfill these needs, they need understand their consumer’slanguage and culture. Not only should they be able to fulfill their needs, but they should also present their products or services at favorable prices.
These are some of the driving factors that determine a company’s success in a foreign market, especially where the environment is new to them. Toys “R” Us is one such example of a company whose intention to enter the Japanese market was plagued by several challenges CITATION Cro05 \l 1033 (Cross, 2005). This paper therefore seeks to conduct an analysis of Toys “R” Us company in its efforts to expand its business operations in Japan, an aspect that will determine the firm’s communication styles and methods within the medium of domestic and global contexts. On the other hand, the paper will conduct an analysis on the firm’s leadership approach in the domestic and global context and the manner in which communication methods can be designed to support effective leadership, decisions and conflicts in the firm.
Development of the Strategy
In 1991, Toys “R” Us purposed to extend its international stores to Japan. The company had already commanded a significant market share both in the United States of America and Europe at the time (Huang, 2007). The odds were against the company at the time because it was difficult for any American company to enter the Japanese market. McDonald's had penetrated the Japanese market initially through collaboration with Fujita and Company, which is based in Japan. Every step that the U.S based company employed in its pursuit of the opportunity to join the Japanese market faced some difficulty. One of the factors that hindered the company’s penetration into the market was Japan’s multilayered distribution system (Dawson, 2004).
Various critics disputed the move proclaiming that the cultures between Japan and the U.S were entirely different and that there was no chance of them entering the Japanese market. Where there were critics, there were optimists too who saw a chance of the company entering the Japanese market. To bypass the restrictions present at the time, Toys “R” Us’ leader collaborated with McDonald’s Japan (Dawson, 2004). This move was made since McDonald’s Japan already had a joint venture with Fujita and Company. McDonald’s success was attributed to the presence of the joint venture, thus Toys “R” Us had to follow the example presented to them at the time. This would prove to be beneficial to Toys “R” Us because of the vast knowledge that McDonald’s had regarding the Japanese culture. The agreement between the leaders of the two companies was a good step towards their expansion. This pact would result in McDonald’s owning 20% of Toys “R” Us Japan while the parent company retained the remaining 80% (Cross, 2005).
Breaking the Ice
Toys “R” Us had to first break the ice by searching for space in which they would locate their stores. The limitations presented by Japan’s rules on the matter were strict considering that no foreign company was allowed an area of 2800 sqft in its premises (Dawson, 2004). Toys “R” Us’ required a space of 3000 sqft for any of their stores. Another hindering factor was the fact that the sale of toys in Japan had to be done through an intermediary person to sell toys to customers. No form of transaction was done directly with the toy company. Some of these rules were what the joint venture between McDonald’s and Toys “R” Us brought to light (Dawson, 2005). By learning these laws and regulations, they were able to know how to approach the Japanese market with more ease. The leaders from Toys “R” Us eventually developed a relationship with the Japanese government. This was part of a strategy that they would use to convince the Japanese government to change their laws to favor their entry into the Japanese market (Dawson, 2005). Through the development of the company’s leaders and the government, they managed to convince them to alter policies regarding the size of their stores. With that in place, persuading the government about other laws became possible over time.
Major Stakeholders Involved in Toys “R” Us Expansion
Toys “R” Us Executives
Despite all the challenges they faced, Toys “R” Us’ executives believed that they would be successful in Japan. The confidence they had in their plan was the primary contributor to the development of their strategy. Research conducted by Toys “R” Us confirmed that one of the wealthiest markets for toys in the world was Japan (Cross, 2005). This fact undoubtedly spurred their interest more in venturing into their market. Opening a store owned by Americans in Japan would also prove to be beneficial because it would pave the way for other American companies willing to enter into that market. Apart from that, Japan’s distribution system would also be disrupted thus creating an opportunity for change that would revolutionize the distribution system in Japan. It would also present an opportunity for new toy retailing methods.
Japanese Consumers
One constant factor that determined the success of Toys “R” Us in Japan was the Japanese customers (Cross, 2005). Getting to know their values was significant because they were the most important stakeholders in the strategy implementation process. Without them, there would be no business for Toys “R” Us in Japan. One of the beliefs that the Japanese customers had regarding products is that they valued quality more than price. In their opinion, things which had low rates were of low quality (Toys”R”Us.com n.d.). It would take much convincing to prove to them that low priced goods could also have high quality. To pass this message to the Japanese, Toys “R” Us included it in their campaign slogan for promoting their products, thus eventually the Japanese consumers believed all that they were being told. It later sank into their minds that low priced goods could be of good quality.
The Japanese people greatly treasured their heritage. This was a characteristic that was inbuilt within them. Through their efficient upbringing, they learned how to have good morals throughout their lives. Such morals included empathy, loyalty, and dignity (Cross, 2005). The effect of these teachings was also shown in the decisions made by the government. The qualities of an average American did not showcase these qualities, though, hence there was a disparity in the types of decisions that people from the two nations made. This brought about conflict within the deal-making process, and a lot had to be done for the discussing parties to come to a conclusion. With time, the discussions brought solutions which eventually led to the allowance of Toys “R” Us having stores larger than 2800 sqft.
Japanese Authoritative Agencies
It was evident that the gap in the disparity of the two cultures came about as a result of the way through which people from the two cultures were brought up. The orientation, they got over the long term period of their growth, was a crucial factor in the way that they purchased goods (Cross, 2005). As described before, the Japanese were more attached to their culture and traditions. Thus they had no need of focusing on their past to determine their future. They focus on the present and figure out how to deal with future events.
This ideology is translated into the policies formed by companies in the country (Cross, 2005). It is then used in developing the policies that govern the company in its entire lifetime. The Ame...