The External Environmental Analysis for Toys R Us - Case Study Example

Table of Contents Introduction 2 Description about the company 2 Overseas market for business 3 PESTEL Analysis 3 Marketing Strategy 7 Conclusion 7 References 8 Introduction Organization looking to be successful in the international arena has to develop strategies so that they are able to understand the international environment and based on it develop their strategies so that the chances of being successful increases. This requires that organizations understand both the internal and external environment and the manner in which it will have an impact on their performance. Understanding the environment and its role will help to develop strategies through which the resources will be in the best possible manner and will provide an opportunity for growth. This report evaluates the external environmental analysis for Toys R Us which is looking to perform in the Asian markets and specifically India & China. This paper looks into the different environmental factors which Toys R Us has to consider while developing its strategies and the manner in which the performance will be impacted. This will thereby help to give a sense of direction and provide the required directives through which the chances of being successful will increase and will thereby ensure an easy presence in the country. Description about the company Toys R Us as the name suggest deals in different varieties of toys which includes wooden toys, educational toys, staple toys, electronic toys to name a few. The organizations started its operation in 1948 and since then have grown its business to different parts of the globe. The organization is further looking at increasing it business to Asian countries and predominantly India & China (Toy, 2013). The organisation operates above 875 stores of Toys R Us and Babies R Us in United States alone and above 625 international stores covering around 35 countries around the globe with above 140 licensed stores (Toys, 2013). The organisation deals in products related to toys, kids clothing and baby products and achieved success in all the three segments of its products both locally and internationally. The desire and hunger to further expand its business has made Toys R Us look towards different destination and aims at India & China so that they are able to improve their global presence and gain a strong foothold in Asian markets. Overseas market for business As already discussed Toys R Us had set up a benchmark in the international market of toys, however the company in its recent past owing to certain major issues and problem of decentralization had led to slowdown of the expansion strategy globally and as per reports the company in its recent past had made no announcements of further international expansion. The company has huge market for its products in the Asian market and management should definitely take this opportunity to capture the Asian markets before their competitors in order to skim the profits so available in the Asian Toy Market. This has been further aided by the fact that Toys R Us has done well in its expansion strategy of European market however, conditions differ greatly when it comes to the Asian markets and need to understand the environment by conducting an external environment analysis so that the impact it will have on the business can be identified. This will thereby help to formulate strategies to combat with those factors and provide an opportunity to be successful. PESTEL Analysis This analysis identifies the different factors which are external to the organization and have an impact on the performance of the toy industry in Asia especially India & China. The analysis further looks at different factors like political, economic, socio-cultural, technological, environmental, legal, demographics and so on. Analyzing the factors will help to develop strategies based on which Toys R Us will be able to reduce the risk and increase the chances of being successful and is as Political: The political situation of an economy has an impact on the strategies formulated by an organization. The political situation in India is stable which has provided an opportunity for the government policies to be implemented in the best possible manner. This has thereby ensured better reforms and opening of the economy for international players. This provides an opportunity for the different players to enter the Indian market as the policies are in favor of growth (Verma & Rathore, 2013). This has been aided by the different incentives and low taxes which have been imposed on products which are environmentally sound and provides an alternative through which chances of being competitive and sustainable for a long term increases. Economic: India is witnessing a growth in the disposable income which has increased the spending power. This has been matched by the fact that economic recession which had impacted the world economy had little effects on India. With the global economy slowly reviving and a growth being witnessed in the employment rates has helped to increase the consumption of different consumer items. This provides an opportunity for Toy R Us as they can look towards tapping the consumer through their products because a growth in income has resulted in an increase in spending on toys as well. Further, the economic scenario also shows that the population rate is growing at an exponential rate which has increased the number of children. This has ensured that the demand for products by children remains high and has made an increase part of the income to be spent in that direction. This provides a strong foothold and direction as Toys R Us based on it can look at exploring the different avenues which are present before them and can look at improving their presence in the market. Socio-Cultural: India is also witnessing a change in the culture as it has been influenced by the Western world. This has been matched by the fact that the local culture is still being preserved. The integration of culture has thereby transformed the manner in which things were purchased and has shifted the focus on toys which are trendier and sophisticated compared to the normal and traditional ones. This provides an opportunity where Toys R Us with the different varieties of offerings can look at tapping the market and create a demand for their products (PEST, 2013). In addition to it India is witnessing a change in social outlook as the preference for branded products have grown in all direction. This thereby ensures that customers will look at purchasing toys which are branded and healthy. This provides an opportunity for Toys R Us as the quality products and brand name will help them to establish a good rapport with the customers and ensures that they are able to attract a section of the people towards their offerings. Technological: The growth in technology has enabled both the suppliers and customers to garner the required information and to be able to develop the required dimensions based on which better needs can be satisfied. Technological advancement in India is high and uses the latest technology which will provide an opportunity to deliver the products to the customers at the desired place and at the quickest possible time (PESTEL Analysis, 2013). The use of different technology will also ensure that monitoring of the movement of products is easy and will provide an opportunity through which the different areas which are of prime importance can be managed. Toys R Us through the technological advancement can ensure proper services and ensure that they are able to develop a mechanism through which the different needs of the customers can be met. Since, India is moving quickly and is developing at a rapid pace technology has grown at the same pace and thereby provides an opportunity through which Toys R Us can use the same and bring about the required change in carrying out the different activities so that better needs can be satisfied. Environmental: This is another important aspect which has increased its importance as economies look at having products which are environment friendly. The Indian government is strict in this regard and looks at ensuring that products which are supplied to the economy has environment friendly and has no impact on the society or the health of the person using it. Toys R Us has an advantage in this area as the products which have been supplied by them matches the requirements and are environment friendly (PESTEL, 2013). Care has been taken to ensure that non toxic materials are used and the product has been developed and designed from raw materials which have no impact on the health of the children using it. This will ensure gathering the required permission and will be able to supply product according to the environmental requirements. Legal: The Indian government has framed different legal rules regarding the percentage of holding that the foreign players can have. This has been matched by the fact that products supplied have to be environment and eco friendly. Along with it the different license and permission that has to be acquired from the different government bodies have been provided. Toys R Us has to look at obtaining the required permission and license to be able to perform effectively so that are able to obtain the necessary documents and bring the required changes through which they will be able to perform without any hurdles. Marketing Strategy Toys R Us has looked at developing their marketing strategies by working on the brand image which they have created. The organization while looking to work in India looks at using different forms of advertising. The company proposes to use audio, video, social networking sites, shopping malls and other promotional events to capture the attention of the audience. Toys R Us also proposes to use different schemes and promotional offers so that they are able to attract customers. In addition to it the organization looks at having loyalty points and cards for their regular customers so that they can be updated on the new developments at the same time can be provided with the opportunity to avail different offers that the stores will have. The company also searches for the opportunity of having exclusive stores of the company at different shopping malls and locations so that people can be attracted. This has been matched by the point that the organization will use internet as a medium of both attracting and selling their products to the customers all over the country. The overall developments have thereby been made keeping in mind the impact it will be able to create and the manner the organization will be able to garner the required response from the customer. Conclusion The report thereby presents the manner in which Toys R Us looks at evaluating the external environment and looks at identifying the strategies which will be developed by the organization to ensure maximum customer satisfaction. The overall proposal to expand its business in India seems to be a good prospect due to the wide opportunity that India presents and will help to improve their reach and ensure growth in the future. References Toys. 2013. Tous R Us. Retrieved on June 15, 2013 from http://www.toysrus.com/shop/index.jsp?categoryId=2255956 Toy. 2013. Toys R Us. Retrieved on June 15, 2013 from http://blackfriday.com/stores/toys-r-us Verma, R. & Rathore, S. 2013. PEST Analysis of Indian Market. International Journal of Management & Social Science Research. 2 (1). Retrieved on June 15, 2013 from http://www.irjcjournals.org/ijmssr/Jan2013/5.pdf PEST. 2013. India PEST Analysis. Retrieved on June 15, 2013 from http://professionalpersonalstatement.blogspot.in/2012/07/india-pest-analysis.html PESTEL. 2013. PEST Analysis: India. Retrieved on June 15, 2013 from http://newsfan.typepad.co.uk/pestle/2009/03/pestle-summary-india.html PESTEL Analysis. 2013. PESTEL Analysis of India. Retrieved on June 15, 2013 from http://www.lucintel.com/press/pestle_analysis_india_2012.aspx Read More