Downfall of Toys R us

Downfall of Toys R US Author’s Name The Institutional Affiliation Course Number and Name Instructor Name Assignment Due Date Abstract This paper explores how the downfall of Toys R Us can be attributed to several key factors. These include increased competition from online retailers like Amazon, changing consumer preferences towards digital entertainment, and the debt burden resulting from a leveraged buyout. Ultimately, a failure to adapt to the evolving retail landscape and financial constraints led to the demise of this once-iconic toy store. When executives discovered that the stores were growing even with tile or concrete floors and unorganized merchandise layouts, they felt the need to continue expanding. The model of selling thousands of different toys was effective until the new era of online shopping and stiff competition from stores such as Walmart and Target. Management is the leading cause of the failure, as it could not adapt to the new market with the introduction of Amazon’s front-door delivery. Leadership on multiple levels failed to recognize that the stores were too large and merchandise was poorly maintained and inventoried. By not implementing changes to customer services, people, mainly the younger generations, would not return to purchase anything elsewhere at a lower price and with a better return policy. Another cause of the downfall is that leadership failed to hire current experts to help develop new e-commerce and in-store strategies to maintain a healthy competitive market value. By not defending themselves from numerous external threats, Toys R Us lost momentum and could not find investors to bail them out of their negative state. In conclusion, research and findings will show that Toys R Us’ downfall was caused by failures at different leadership levels and a lack of strategy to keep up with the new internet economy. Keywords: leadership, organizational change, supply chain, economic impact Table of Contents TOC \o "1-3" \h \z \u Abstract PAGEREF _Toc165449680 \h 2Introduction PAGEREF _Toc165449681 \h 4Problems Leading to the Toys ‘R’ Us Downfall PAGEREF _Toc165449682 \h 4Problem Evaluation and Analysis PAGEREF _Toc165449683 \h 5Impact of Online Competition PAGEREF _Toc165449684 \h 5Shift in Consumer Preferences PAGEREF _Toc165449685 \h 6Financial Overreach and Leadership Shortcomings PAGEREF _Toc165449686 \h 8Personal Perspective and Strategic Recommendations for Toys’ R’ Us PAGEREF _Toc165449687 \h 10Strategic Redirection PAGEREF _Toc165449688 \h 10Leadership and Cultural Change PAGEREF _Toc165449689 \h 10Operational Efficiency PAGEREF _Toc165449690 \h 11Conclusion PAGEREF _Toc165449691 \h 11References PAGEREF _Toc165449692 \h 13 Introduction Toys R Us was founded in 1948 and maintained its ranking as the global leader in the toy industry through continuous modifications in its product line, from baby furniture to baby-related products and toys. Hence, the brand is known for its childhood fun, attracting customers' attention. However, the company failed to evolve its operations in the transforming retail industry, leading it towards a downfall. Therefore, the research critically investigates the problems Toys R Us faced in its downfall with a focus on the organizational theoretical perspectives. Besides, the study proposes strategic recommendations to support the firm in making adequate decisions to attain a competitive edge in the toy industry. Problems Leading to the Toys ‘R’ Us Downfall The primary reasons for its collapse are changing consumer behavior, lack of effective leadership, growing rivalry in the retail sector, and the debt burden (Furr, Ozcan & Eisenhardt, 2022). Lee and Raziff (2021) assessed that with evolving trends in the consumer market, consumers prefer digital solutions for shopping and shift toward e-commerce, which creates a gap for Brick-and-mortar companies. Indoor games further changed children’s perceptions of playing and shifted their behavior towards video games and digital entertainment options. Other than that, intense competition from the leading retailer Amazon is another threat to retailers globally, as it offers one-stop solutions with a wide variety (He, Reimers & Shiller, 2022). In that case, Toys R Us faced complications in adapting those trends due to a lack of leadership and financial hitches, leading to the buyout that restrained the investment in strategic change. In response to growing trends, the company expanded its physical stores but left them behind because of inefficient supply chain practices compared to the giant rivals Walmart and Target (Morgan & Nasir, 2021). Considering the case of Toys ‘R’ Us, weak leadership is the prime concern of the business, as it faced complications due to the absence of such expertise and capabilities to evolve the business model. Problem Evaluation and Analysis Focusing on that complexity, further analysis and evaluation of the causes of Toys ‘R’ Us’s downfall is supported by the theoretical frameworks. Impact of Online Competition By evaluating the competition in the toy retail industry, the giant retailers, including Amazon and Walmart, are raising the standards with diversified products and adapting to the changing trends. Therefore, intense rivalry is observed in the retail setting, which further affects the market share of Toys ‘R’ Us in the toy industry. According to He, Reimers, and Shiller (2022), Amazon evolved the shopping experience for consumers, allowing them to be flexible in their purchases with enhanced accessibility. Scott and Davis (2015) assessed the open system theory, which encourages organizations to interact with the external environment and transform their processes and models based on changing consumer demands and technological progress. However, Toys ‘R’ Us failed to meet this and faced consumer backlash. Also, the competitor outpaces its position with its satisfactory e-commerce model and innovative toys. From the rival’s perspective, Amazon sets competitive prices with various delivery options to enhance the retail value for customers. Comparatively, Toys ‘R’ Us faced complications in meeting the set standards and loss of control over its customers, as they demanded new and innovative toys. Further, the company relied on Amazon for e-commerce based on its partnership in 2000, making it dependent, which affected its market share and diverted its customers to Amazon (Abdulrahman & Oreijah, n.d). This case is related to the open system theory, where Toys’ R’ Us lacks control over meeting the customer’s expectations. According to the institutional theory, Toys ‘R’ Us focused more on the systematic approaches they consider their consumer prefer, which restrained the business from transforming its model to innovation (Scott & Davis, 2015). Based on its traditional success, the brand extended its physical stores and considered that paramount, but it failed to maximize outcomes, as it is not meeting the changed trends in the consumer market. Focusing on the rational system theory, organizations must have clear and specific goals to attain high efficiency in the organizational setting, where businesses assign the functions accordingly within the firm to manage the specified goal (Scott & Davis, 2015). However, Toys ‘R’ Us failed to achieve efficiency by outsourcing its e-commerce to Amazon. Correspondingly, assigning this function to its rivals allows the other brand to take over its consumer share from the market, activel...