Toys and Games industry

Toys R Us is one of UKs leading spiel and game retailer. This floor conducts an academic research focus on Toys R Us (UK) in toys and games retail sector. In the first take apart of this propound, we testament discuss the toys and games industry background and the overview of Toys R Us. Then, the research go away focus on carte du jours Five Force Model and Porters generic wine Strategies. In the next parts, this report will concentrated on the potential strategies which Toys R Us magnate pursue in the future. Conclusion and recommendation will be mention in the final part of this report and the recommendation will be covered the best dodge for Toys R Us which fag end be used for the future competitiveness.1.1 Industry Background After the decline in 2008 and 2009, the toys and games trade has big(a) closely 5% just under 2.2 billion. The market has opportunities to increase the sale revenue from 2010 to 2015 (MINTEL 2010). The propose 1 shows UK retail value sales of t oys and games between 2005 and 2015. (Figure 1, Source from MINTEL Report 2010) harmonise to MINTEL 2010, the main players in the toys and games industry in UK is Argos, Toys R Us, Disney and rough internet specialists such as Amazon and Ebay. The Figure 2 shows the retail market sh ar for those main players. (Figure 2, Source from MINTEL Report 2010)1.2 bon ton overview Toys R Us is UKs leading traditionalistic toys and games retailer with over 1500 stores and 71,000 employees (including part-time employees) in 33 countries and the callers headquartered in Wayne (DATAMONITOR 2011). Toys R Us offer Toys, Baby cargon, Video games, Multimedia PCs, Bikes and outdoor fun harvest-times (Toys R Us 2013).2.0 bank bills Five Force Model2.1 The threat of parvenu entrants According to Dess, Lumpkin and Eisner 2010, the threat of new entrants is depends on the level of doorway barriers. In the UK toys and games industry, there atomic number 18 strong competitions for the pricing. Acc ording to MINTEL 2010, since 2008, consumer prices for the games and toys sacrifice fallen, so most retail cutting down the price therefore strong competition in the toys and games industry. Moreover, Economies of Scale rat be overly related to the entry barriers. Finally, the government insurance policy is major source of entry barriers. For example, national land policy stern be effect the manufactory and location of stores, the entry barrier is also influence by high VAT rates for the company which standard rate is 20% and reduced rate is 5% in 2013 (GOV.UK 2013).2.2 The bargaining berth of suppliers Toys R Us has increase the number of suppliers over 3000 manufacturers. Mattel, Hasbro and Namco Bandai are the main suppliers for Toys R Us. Those 3 manufacturers are top 20 suppliers in toys industry and Best-selling Toys of the year are always given to those 3 suppliers (GIMD 2011). Nintendo and Sony are also the main suppliers for Toys R Us. Those 2 companies are noted vi deo games suppliers. Nintendo has produce NINTENDO 3 DS and Sony has produce PlayStation 3 and PSP, those 3 product all have good sale revenue in the games market (Toys R Us 2013).2.3 The bargaining power of buyers As this report has mention before, Toys R Us is one of UKs leading toys and game retailer, therefore the company has strong brand visualize, when consumer planning to purchase toys or games, Toys R Us is always become a first choice for purchase toys and games because the strong brand image. Moreover, there are limited numbers of spherical retailer in the traditional toys and games industry therefore Toys R Us has strong buying power (GMID 2011). The Figure 3 shows the child/youth population by age and gender between 2005 and 2015 in UK. From this table, we can see the populations between ages 0-14 are increase from 2005. The target market for Toys R Us are children, if the populations of child is increase, the buying power will also increase. (Figure 3, Source from MIN TEL Report 2010)2.4 The threat of substitute products Toys R Us is in the first place focus on traditional toys and games sector. However, since the new engine room is coming to the market, such as Ipad, X-box 2 and some new online games, the consumers needs are changing. More young children prefer the game in Ipad video game and online game rather than traditional toys therefore Toys R Us is facing on high threat of substitution.2.5 The intensity of rivalry among competitors in an industry Woolworths was the biggest toys and games retail in UK, after the fragmentize of Woolworths in 2008, Toys R Us, Argos, Disney and other online retail such as Ebay and Amazon became the major players in toys and games industry. In 2009, Argos has 24% market share which are top one in UK toys and games market. Toys R Us has 17% market share and Disney only has 3% market share (MINTEL 2010). Figure 4 shows the outlet, sales, positioning and military rating of those major players in toys and games industry in 2010. (Figure 4, Source from MINTEL Report 2010)3.0 Porters Generic StrategiesIn this part, this report focuses on Porters Generic Strategies to analysis the strategic positioning of the major play in toys and games industry. According to Dess, Lumpkin and Eisner 2010, Porters Generic Strategies include three strategies which are Differentiation, Focus and Cost leading which a company can use for carry out competitive advantage and overcome five force. Figure 5 is made by the Porters Generic Strategies this graph shows the main competitors for Toys R Us in toys and games industry. From this graph, we can find out Toys R Us is using differentiation strategy, the strategy for Disney conjunction is Focus strategy, Argos and amazon concentrated on Cost Leadership strategy. (Figure 5)Differentiation can be defined as a strategy based on creating differences in the companys product and service (Dess, Lumpkin and Eisner 2010). As this report has mentioned, Toys R Us is usin g Differentiation strategy. The Company is providing different customer service as other competitors in the toys and games industry. According to Toys R Us 2013, every store of Toys R Us has an vast Babies R Us department, inside of the Babies R Us included furniture, car seats, bedding, strollers, safety products, nappies and baby provender for all parents and babies.Moreover, the company can be arrive atd the Differentiation strategy by strong brand image and wide range of products. As this report mention at the induction, Toys R Us is one of UKs leading toy and game retailer therefore the company has strong brand image to achieve the differentiation strategy. According to MINTEL 2010, Toys R Us provides large range of toys and other children-related products. There are some advantages of Toys R Us using the Differentiation strategy. Firstly, this strategy can improve consumers loyalty. Differentiation strategy can also economic aid company to decrease the threat of substitute products. On other hand, there are few disadvantages for differentiation, consumer may prefer to purchase product from the company who using the be leadership strategy.Disney Company is using focus strategy. The products from Disney shop are related to the Disney film (Disney store 2013). The company is focus on the customers who like the Disney brand images, most consumers will decide to purchase from Disney store if they like watch the Disney films peculiarly young children. Argos and Amazon are focus on cost leadership strategy. Both companies are offer wide range of toys and games with low prices.4.0 Potential strategies might pursue in the futureIn this part, this report will mainly focus on the strategies which the Toys R Us may pursue in the future.4.1 upright piano Integration Vertical Integration is an expansion or extension of the company by becomes its own supplier or distributor (Dess, Lumpkin and Eisner 2010). According to GIMD 2011, the key strategic objective a nd challenges for Toys R Us is extending private label ranges. Vertical integrating is one of best strategy to achieve this objective. If Toys R Us becomes its own supplier, the company will very much easier to extending private label ranges. Moreover, thecompanys transaction costs are much higher than administrative costs, so vertical Integration becomes an attractive strategy for Toys R Us.There are few benefits for Vertical Integration. Firstly, the strategy has benefits on access to new business opportunities, this will be jockful for Toys R Us achieve the objective of extend private label ranges. Secondary, this strategy can help Toys R Us to spend a penny sure the quality of the product, therefore this will help to increase the consumers satisfaction. Finally, Vertical Integration can help company to reduce the transaction costs.4.2 Strategic Alliances Strategic Alliances can be defined as cardinal or more companies have a cooperative relationship (Dess, Lumpkin and Eisne r 2010). As this report mention in the second part, most young children are prefer video games rather than traditional toys, so Toys R Us might concentrate on video games sector in the future, to evolution a new video game, the company will need a strong technology, the company might think about the Strategic Alliances. As this report mention before, Nintendo is a famous video game manufactures, the company has interchange about 2.4 billion video game since 1983 (Nintendo 2013).If Nintendo become an alliance partner with Toys R Us and exploitation a new product with strong brand image from technology and high level of technology skill Nintendo, both companies will open to increase the market share in the toys and games industry. The advantages for Strategic Alliances will be reducing manufacturing costs in the value chain. Moreover, this strategy will also help on developing and diffusing new technologies.4.3 Internal DevelopmentInternal development is focus on new products and new technology. According to GMID 2011, a key objective and challenge for Toys R Us is development of exclusive products, this strategy may help Toys R Us to achieve this objective. Moreover, the company is not having to using the Strategic Alliances to development a new video games, this strategy can help company to development own innovative product without having to share the wealth with alliance partners.5.0 Conclusion and RecommendationIn conclusion, this report has concentrated strategic analysis on Toys R Us in toys and games industry. In the first part, the report has discussed the industry background and company overview. Then, the analysis of Posters five force model takes the second place. In the third part, this report analysis the Posters Generic strategies which show Toys R Us are concentrated on Differentiation strategy. Finally, the report mentions the several strategies which Toys R Us might pursue in the future.After the report analysis those strategies for Toys R Us, we can give the recommendation on the best strategy for the future competitiveness. Figure 6 shows the benefit and happen of the three strategies for Toys R Us, compare those three strategies, all of strategies have both benefit and risk for Toys R Us, but we recommend that Strategic Alliances is the best strategy for Toys R Us in the future.New product development is the main objective of Toys R Us, if the company can develop own video games product, it will easy to increase the market share in toys and games industry, Strategic Alliances is the only strategy which can help Toys R Us to achieve the goal in the fastest time. Internal Development may also help company to develop new product, but the company will need spend high cost on new product development and Toys R Us may not have abundant technology skill on video game as the company such as Sony and Nintendo. (Figure 6)