Since Toys R Us was first opened in 1948, it has been striving to be the market leader in whatever category they competed in. Whether selling toys or baby clothes, Toys R US" market share flunctuated greatly throughout time. There were times where Toys R US owed the toy market with sales reaching 530 million in earnings. More recently, they reported their first loosing year with a total of 132 million lost. After reviewing this information, the obvious question comes to mind: Why is Toys R Us experiencing difficulty in maintaining a competitive advantage in the market.
When trying to figure out a strategy of a firm, we have to look at a company's internal and external environments. There are several things that help us analyze the external environment. Some of the more important are Scanning, Monitoring, and Forecasting the industry. SWOT analysis also plays a big role in figuring out a company's strategy. Toys R Us is in a very competitive industry where the entry barriers are low and new competition can come from any direction. Toys R Us constantly needs to analyze the industry in order to try to maintain their competitive advantage. There are several steps that are involved in figuring out your external environment: Environmental Scanning involves surveillance of a firm's external environment to predict changes and to detect changes already on the way. As an example, Toys R Us saw falling birth rate numbers in the United States and wanted to come up with a way that that can still same sales and profits even though the market significantly shrunk. Toys R Us said they would offer infant supplies (e.g., diapers) near cost to encourage mothers with young children to shop there and to form a favorable opinion of the store (including its pricing). This showed that Toys R Us monitored the new baby market and wanted to adjust its marketing and business strategies to adjust for those changes.