Toys R Us Case Study

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1) What is happening in toy retailing in the late 1990s? Is this an attractive industry from the perspective of incumbents?

Toys ‘R’ Us enjoyed a large market share of the toy retailing industry up to and through the 1980s and the toy industry in general experience a phenomenal annual growth of up to 26 percent, but this was to change in the following decade. In the late 1990’s the toy retail industry gained new entrants, among them Wal-Mart. Wal-Mart stocked the top twenty percent of the hottest-selling toys on the market and sold them at a very low price, considerably lower than Toys ‘R’ Us. In 1998, Wal-Mart successfully took control of the toy retail business in the United States by becoming the biggest toy seller. At this point, Toys ’R’ Us had lost its large market share to Wal-Mart and the industry was be highly competitive – there was no room to allow Wal-Mart to establish itself at the top, for Toys ‘R’ Us to recover its position or an entirely new player to join in and cash in on the market instability set by Wal-Mart. It is an attractive industry from the incumbent’s perspective. The market as it is has no particular participant who enjoys the largest market share consistently such that getting a bit of the market share would be difficult and there is still energy among the consumers for a new player in the market. Many of them are still open to the presence of another industry player who may offer even more competitive prices that Wal-Mart. The industry is anyone’s game at this point in time and the best player with the best of everything will get the biggest market share.

2) Describe and evaluate Eyler’s strategy for turning Toys’R’Us around.

John Eyler’s business strategy was simple. He had noted that Toys ‘R’ Us had lower in-store stock levels than usual (stores consistently ran out of stock on 30 percent of its items) and also that the customers were unhappy with regards to the customer service at Toys ‘R’ Us (ranked tenth out of...
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