Toys R Us

1a. Analyze the macro-environmental and competitive environment (including strategic groups if appropriate) of Toys R Us in the brick and Mortar and on line segments.

The toy and hobby store industry is highly concentrated. It includes about 12,000 stores and combined their revenues are at almost $20 billion. Young children (under the age of 12) are the drivers of the toy store industry and this specific population is growing at exponential rates. In order to produce profit, you must be able to generate store traffic and effective merchandising. The general mass-market merchandise retailers are huge competitors and they continue to grow. As these mass-market merchandise retailers continue to grow, their toy departments are growing as well. This market also has the smaller toy stores, such as KB Toys, that are working really well in the ever-growing mall industry. Another competitor of the individual toy stores is the electronic store. Because the popularity of electronic toys and video games continues to increase, the electronic stores pose a threat to the individual toy store. As far as the online segment goes, everyone is online now, but ToysRUs.com has the competitive advantage – it has its parent company’s name to back it. Also, the competitors that are present do not offer as wide a variety that ToysRUs.com offers. Although the online segment is doing well, the actual brick and mortar stores are still a threat. Wal-Mart will always be a competitor in the brick and mortar segment as well as the online segment.

1b. How has Wal-Mart changed competitive conditions?

Wal-Mart came into this market and is selling toys at extremely low prices. They are able to do this because they “use toys as loss leaders, selling them at rock-bottom prices, and making up the profit on sales of other items.” Specialty stores do not have this option therefore; Wal-Mart still has the competitive advantage.

2. Conduct an internal analysis of Toys R US using the value chain to explore strengths and weaknesses in the brick and mortar and on line segments. Do the firm’s current resources and capabilities allow it to successfully compete? What resources or skills will it need (if any), and how might they be obtained?

Toys R Us has a huge distribution network that runs smoothly due to a superior logistical system. The company has a strong bargaining position when it comes to buying prices from manufacturers because it has so much shelf space with the large number of stores. Also, Toys R Us sells many different product ranges. There are benefits and disadvantages to this. However, a key strength