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Toys “R” Us SWOT & PESTLE Analysis

ID : 52220853 | Jun 2017

OVERVIEW

Name of the Company: Toys "R" Us

Business Sector: Retail, Toys

Operating Geography: North America, United States, Global.

About the Company: Toys "R" Us is an American Toy company based in Wayne, New Jersey. It was founded in the year 1948 by Charles P. Lazarus. It was initially started with the name of Children's Supermart with a focus on baby furniture. But as requests for toys for toddlers and older children bean to grow the brand shifted its outlook to producing more toys and renamed the brand to Toys "R" Us in 1957. The company mascot Geoffrey the Giraffe was also launched in 1957 was an important “spokes animal” for the firm, helping in promotions. The first international store was opened in 1984.

Revenue: USD11,540 million (Consolidated net sales for FY 2016)

SWOT & PESTLE Analysis

The SWOT analysis for Toys "R" Us is presented below:
Strengths
Weaknesses
1. Reach
2. Company’s popularity and efficient distribution network
3. Baby Brand
4. Strong web presence
5. Employment provider and revenue
6. Buying power
7. Toys for differently-abled kids
8. Associations with special needs organisations
1. Lacks competitive advantage
2. Heavy dependence on seasonal sales
Opportunities
Threats
1. Joint Ventures and Strategic Alliances
2. Charitable associations
3. International market exposure
4. Expansion to emerging economies like India
1. Strong Competitive Rivalry from Wal- Mart etc.
2. Low cost manufacturers like China
3. Social Networking Sites

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Strengths

1. Reach: Toys "R" Us has more than 1500 superstores in the United States and worldwide like Europe, Asia, Africa, Oceania and Canada. The store’s first retail outlet in New York is the largest toys store in the world. The company has its operations since 1948.

2. Company’s popularity and efficient distribution network: Company chain holds 840 stores in the U.S, operating in 34 other countries with 716 stores. The company’s popularity is also because of its amazing chain of franchises and licenses. It has a huge distribution network that derives benefits from advanced logistical systems.

3. Baby Brand: It also owns the baby brand, Babies R Us which adds another 200 + stores. It operates as a speciality retailer of baby products offering an assortment of products for new born, infants and toddlers.

4. Strong web presence: The brand has a strong market presence on the Web in collaboration with Amazon.com. Its well-developed e-commerce website facilitates people to purchase online (toysrus.com, babiesrus.com, etoys.com, fao.com and babyuniverse.com).

5. Employment provider and revenue: The company is providing employment to around 70,000 people around the world. Toys R Us is a high revenue operating company touching approximately $11.8 billion in 2016.

6. Buying power: Having so much shelf space implies that the company has a strong bargaining power when it comes to buying prices from manufacturers.

7. Toys for differently-abled kids: As the company is committed to all kids and families, it has published the latest edition of its Toys “R” Us Toy Guide for differently-abled kids (to stress that all children have unique skills and abilities), an easy to use toy selection resource guide featuring some special selected toys that aid in the development of children with physical or cognitive disabilities.

8. Associations with special needs organisations: The company has also partnered with several special needs organisations like Autism speaks, National down Syndrome Society etc.

Weaknesses

1. Lacks competitive advantage: Toys “R” Us lacks sustainable competitive advantage, other than the brand. In the US, the company has lost its number one position as the largest toy retailer, to Wal-Mart offering attractive packages to its customers. Being large is not enough when customers can go to another large retailer and buy the same or similar goods, sometimes getting a better deal.

2. Heavy dependence on seasonal sales: Toys “R” Us is heavily dependent upon successful sales which in turn depends on the season. They aim to make profit from Christmas. Retail is seasonal. In fact, it could be argued that since, toys are a key Christmas present product, so the company is even more likely to be dependent upon seasonal sales.

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The PESTLE analysis for Toys "R" Us is given below:
Political
Economical
1. Safety Measures
2. Brexit
3. Counterfeiting
4. High Labour Cost
1. Increase in Chinese Economy
2. Translation of Currency
3. Economy Health and Diversification
Social
Technological
1. Decline in Birth Rate
2. Decline in children’s play time
3. Products to increase profitability
1. Need to Innovate
2. Usage of Predictive Analysis
3. Manage their own website
Legal
Environmental
1. Rules and regulations 1. Eco-friendly toys
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Economic

1. Increase in Chinese Economy: Toys “R” Us outsources Chinese factories to manufacture their products. The combination of cheap labor and undervalued currency has been a very attractive recipe for keeping production costs as low as possible. Although this arrangement has been profitable, it has also made the toy companies susceptible to problems within China itself. China’s up and coming working class is demanding more pay and benefits as China’s economy grows. Sometimes these changes are explosive and can result in an increase in product cost.

2. Economy Health and Diversification: Toys “R” Us has diversified and established its presence across several countries. International presence reduces the business risk as the company is not exposed to the vagaries of a single economy. Additionally, it provides a global scale, increases the overall customer base and diversified revenue stream.

Technological

1. Need to Innovate: Fad toys come and go often and quickly in the marketplace. This cuts into the sales of larger retailers like Toys R Us with legacy toy lines that have been around for years. Toy fads can be the rage for one season and then disappear. Retailers need to innovate continuously hoping to find that next big breakthrough.

2. Usage of predictive analysis: Toys are also as much a victim of the vagaries of demand as any other products. Thus, there are certain toys that are in greater demand during specific times of the year than otherwise. Toys R Us has been countering this using predictive analysis which helps it to stock up the stores before the holiday season, making sure stores do not run out of inventory.

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Copyrights and Disclaimer

Toys "R" Us SWOT and PESTLE analysis has been conducted by Himani Wadhwa and reviewed by senior analysts from Barakaat Consulting.

Copyright of Toys "R" Us SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.