Toys R Us Japan

            
             This case analysis gives background on Toys R US's choice to enter the Japanese market. Toys R Us when making the decision to enter this market encountered numerous barriers to entry. Japan's social and political differences, coupled with the difficult retail environment, proved to be challenging to Toys R US. Unique country problems with suppliers, local regulations, and interest groups compounded the difficulty. Entry would have high costs, but the benefits of "cracking" into Japan's toy market proved appealing, since Japan had grown to the 2nd largest toy market worldwide. .
             Toys R US could not enter this huge market by running their business like they did in the United States. For instance, Japanese consumers prefer personal selling, yet Toys R US has traditionally had a reputation for having very few employees on the floor to assist customers, coupled with centralized cash wraps. Distribution problems also proved important, as Japanese retailers deal with a number of middlemen and maintain high prices. Toys R US's competitive advantage lies in their ability to deal directly with manufacturers, buy in large quantities, and pass the savings onto consumers. Toys R US had to find a way to overcome these and other barriers discussed below in order to be successful. .
             Political issues within the retail field made the Japanese market difficult to enter, including the power given to local shop owners to approve the entry of new businesses into the market. Known as Daitenho, these retail laws would prove challenging for Toys R US to overcome. This "Big Store Law" went into effect in 1974. It stated that local storeowners must give their consent before a retail outlet with floor space larger than 5400 square feet can be opened in their locale. This law allowed small, local businessmen the authority to force new competitors, namely Toys R US, into a review process that could last years. .
             Most shop owners in Japan had an understanding with suppliers that the manufacturer's retail price was not to change, and in return the supplier would give special privileges such as allowing shop owners to return unsold merchandise, or sending shop owners free display items.