Porter's Five Forces

Topics: Retailing, World population, United States dollar Pages: 8 (3266 words) Published: October 1, 2012
Tom: “I have a huge Cars collection!!”
John: “I have a huge Lego collection!!”
The conversation among the kids goes on this way at most of the times about their toys collections. A piece of toy can make or break the relationship among the kids. Toys make kids world colourful right from the birth till their adolescence. One of the well-established and successful transnational firms in the Toy Industry is Toys”R”Us; the name itself brings the Stars, Smiles, Delights among the kids. Kids across many countries worldwide are lucky enough to have Toys”R”Us at the next door, but Indian kids are still longing for Toys”R”Us to be their next door. This essay analyses the positives and negatives of India using Porter’s Five Forces and concluding whether Toys”R”Us can consider stepping into the country or not. About India

Here is the statistical analysis done by World of Toys (Undated) on Indian toy industry: India’s population is around 1.23 billion people and ranked as the second largest nation in the world. The average population growth is about 1.6 per cent per year. A particularly remarkable feature is the enormous population density in the cities: 40 cities had more than 1 million inhabitants in 2011. More than 10 million people live in each of the three largest metropolises of Mumbai, Delhi, Chennai, Bangalore and Kolkata. Since 1991, numerous reforms have transformed the country into one of the fastest growing economic powers. India emerged from the strained world economy as one of the winners due to its strong domestic market. Between 2003 and 2011(except 2008-09), India’s Gross Domestic Product grew constantly by about 8.8 per cent annually (shown in Figure 1) and amounted to some 1.68 trillion US dollars in 2011.

Figure 1, GDP growth in India and other large emerging economies, OECD, 2011 India has the fifth largest retail trade in the world. Experts expect this to grow from 385 billion US dollars in 2007/08 to 405 billion U.S. dollars in 2009/10, and it is even forecast to rise to 573 billion US dollars in 2012/13. The tremendous growth of the Gross Domestic Product and the organised retail trade increases India’s consumer spending and offers attractive opportunities for international companies to enter the market. It is a trend in Indian families to focus on their children’s fulfilment. About 20 per cent of the global population under 25 years of age lives in India. Children under 14 years account for 29.7 per cent of the total population. A slight decline in the average number of children per family and rising income mean that Indian families have more money available for goods for the more wealthy. Appreciable growth of the middle class and the rich and very rich increases the sales opportunities for high-priced products. Toy Industry in India

Toy industry in India is estimated at about 850 million US dollars and until now it has generated only 0.5 per cent of the global market. However, the growth of around 15 per cent promises to rapidly raise this figure, especially in the context of the growing middle class and the increasing willingness to spend money on luxury goods. Figure 2 shows the Top 10 countries in the global toy market, India ranked 9th and 8th during 2010 and 2009 respectively with highest kids population but with the less contribution globally Figure 2, Top 10 Countries, ICTI, 2010

India itself has more than 800 toy manufacturers, exporters and suppliers, which means that 60 per cent of the market is handled by Indian manufacturers and foreign companies with subsidiaries in India. The Toy Association of India estimates that about 90 per cent of the toy industry in India belongs to the non-organised sector. The figures for the retail toy trade are similar: As much as 65 per cent, i.e. 547.4 million US dollars, is handled by the non-organised sector, but a shift towards the organised retail trade is clearly recognisable. Indian consumers pay more and more attention to high-quality products and...
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