Toy R Us Analysis: Five Forces.

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When people here the name Toys "R" Us, they think back to when they were kids of going into a store made with bricks and mortar and leaving with mom in one hand and the latest toy in other and a great big smile from cheek to cheek. As time passed the pressure for companies to enter the "clicks" of e-commerce became strong. In 1998 Toysrus.com, a subsidiary of Toys "R" Us opened in attempts to "be wherever our customers are, and that includes the Internet." Having a strong brand recognition, there were no doubts that Toy "R" Us could continue their successful tradition by holding on to their vision, which is to "put joy in kids' hearts and a smile on parents' faces", even on the on the Internet.

Being in the specialty online retail industry of toys and hobbies, firms within this industry must analyze various parameters that could influence their attractiveness in the market. Once a firm understands their own specific industries environment, they can make strategies that will ultimately provide them with a competitive advantage to outperform their rivals. In order to understand the online toy retail industry, John Barbour, the CEO of Toyrus.com must look at the various factors that could influence the online toy store "titian".

The degree of competition within the industries looks at the external environment and the number of firms, size of firms and concentration in the industry. Some of Toysrus.com's competition within its industry of online toy retail includes Etoys.com, and Toysmart.com. When looking at some of the competition it's as though Toyrus.com is all alone. Toysmart.com despite being part of Disney Empire closed down after being in service for only one year. Etoys.com, which had snuk up on Toyrus.com became their main rival, but they suffered a large stock price plunge from $86 to $7 during an eight-month period. These competitors are much smaller in size compared to Toysrus.com, who is not under any pressure to turn a profit rapidly since they have such a tremendous brand backing their success. On the other hand, these smaller online toy retail companies are under a lot of pressure to make profits. In response to the demands from online consumers on the online toy industry, Toysrus.com is doubling its web-based workforce to 600 full-time and 800 seasonal employees by this Christmas season. In regards to concentration, the intensity of competition is close to none because the online toy industry is fairly new and there are not very many companies to compete with. In this case, the competitors that are present do not have as wide a variety of products to offer the consumers compared to Toysrus.com who affiliates directly with the toy retail giant Toys "R" Us. The intensity of marketing competition among the few firms who are present within this industry is high because the online toy retail industry is an emerging industry. Smaller online toy firms, such as Etoys.com have to spend a lot more money on advertising to get the publics awareness of the new company. Toyrus.com has a competitive advantage in this area because they already have the parent name backing them and the convenience of land-based stores that offer the ability to return an online purchase at the store instead of having to go to the post office to return purchases. This past year Toysrus.com spent .18 cents per dollar of revenue, whereas Etoys.com spent .37 cents per dollar on marketing. Looking at the degree of competition within an industry's environment is simply the beginning to analyzing industries attractiveness.

The CEO can next look at the life cycle of the industry in respect to the environment. The online toy industry is in an emerging market, leaning towards growth. Most of the players in this industry were recently introduced to the market within the past two years. Before they emerged, the retail industry did not include toy web sites. Most of the online retail industry included apparel, computer software and entertainment...
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