Toys R Us

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Case: Toys R Us Japan

1. Key features of the Japanese distribution system
The distribution channel in Japan has a high number of intermediaries when compared to the United States. Nintendo, for example, uses a network of 70 affiliated distributors to distribute its products. It is based on long-term personal relationships. This system developed because in Japan “the merchants were restricted by law to their local patch, and retailers were encouraged to mop up labor from the land”. An additional reason is the preference for fresh food and small quantities due to small kitchens and little storage space. Even until today, the small mom and pop shops are higher valued by society than the mass discount retailers. Profit is not the highest priority of a shop owner but rather personal loyalty to his or her distribution keiretsu. 2. Japan as a market for Toys “R” Us

Given the differences of doing business in Japan from the United States and the specific business strategy that Toys “R” Us uses in all of its worldwide markets, I would not consider Japan a good market. The company’s strategy and objectives do not agree with the values of Japan’s society. First of all, Toys “R” Us is a foreign company and therefore, does not have any long-standing personal relationship with Japanese businesses. Secondly, it is able to sell toys at a discounted price because it buys these in bulk. Due to the high rents in Japan, it might not be able to have a large selling space as it is available in its other markets. Consequently, these discounts will be unavailable and Toys “R” Us has to compete with well known Japanese toy stores, providing toys at the same or at an even higher price.

3. Adaption of the business model to the Japanese Market
Toys “R” Us would have to adjust its business model closer to the Japanese model of smaller stores and the building of its own distribution keiretsu through loyalty and personal efforts to attend to Japanese customers, which will...
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