STRATEGY AND MARKETING MANAGEMENT

1

• STRATEGY AND MARKETING MANAGEMENT
• presented by
• Phillip Beattie, David Beatty, Barry Magee,
  Therese McKinney, Peter OReilly

2
Contents

• Introduction
• History and Ownership
• SBUs
• Market and Financial Analyses
• Market Segmentation
• SWOT
• Market Strategy
• Conclusions

3
Toys R US Mission Statement

• Our Goal is to be the Worldwide
• Authority on Kids, Families and Fun
• Our Vision is to put joy in kids hearts and a
  smile on parents faces

Source Toysrus.com
4
Executive Summary

• Market Situation
• Highly differentiated competitive market
• Many market drivers e.g. decreasing child
  population, increasing PDI
• Demand for consoles computer games growing
  faster than for traditional toys
• ToysRUs Response
• Build robust and enduring strategies
• Diversification of products to maintain its
  position
• Emphasis on customer satisfaction customers
  believe that Toys R Us are the best at what
  they do

Conclusion Toys R Us are the largest toy
speciality retailing chain. The key to their
success is widest choice and everyday prices. At
Toys R Us customers can feel confident of
finding a suitable toy and paying a price which
is unlikely to be beaten a rival outlet.
5
History

• 1948 - Charles Lazarus opens Baby Furniture Store
• 1957 - Lazarus opens first toy supermarket - Toys
  R Us
• 1978 - Toys R Us becomes a Public Company
• 1983 - Kids R Us clothes shops open
• 1984 - First international stores open in
  Singapore and Canada

• 1985 - Toys R Us opens in the United Kingdom
• 1996 - Babies R Us is born
• 1998 - toysrus.com is launched
• 1999 - Imaginarium joins the R family
• 1999 New CEO John Eyler
• 2001 - Japan, Germany and The Center of the Toy
  Universe

6
Ownership

• Publicly Owned
• Shareholders of Record
• Beneficial Owner in Street Name
• Trade as TOY on the N.Y.S.E.
• American Stock Transfer and Trust Company
• www.amstock.com
• Re-invest profits - no dividends
• Bonus Issues used to reward Shareholders
• Eight share splits between 1980 and 1990
• 451 million Shares _at_ 20.17 a Share
• As at close 17/12/2001

7
Strategic Business Units

• Toys R Us
• 704 stores, Net Sales of 1,226 million
• Toys R Us International
• 496 stores, Net Sales of 316 million
• Kids R Us
• 185 stores, Net Sales of 103 million
• Babies R Us
• 151 stores, Net Sales of 341 million
• toysrus.com
• Net Sales of 35 million
• Imaginarium
• 42 stores

8
PEST Analysis

• Political
• Regulatory Requirements
• Economic
• Increasing Grey Purchasing Power
• Impact of Changing PDI levels
• 234 Avg Uk vs 32 World spend/child
• Seasonality
• Pocket Money Issues
• Character Merchandising
• Taxes

9
PEST Analysis

• Social
• Kids growing older younger declining Child
  population
• Pressure on Leisure time
• The more mature mother
• Pester Power and Peer group pressure
• Technology
• Wide-ranging technological changes
• On line Sales 1999 1.2, 2000 2.1 of World
  Sales
• Demise of etoys.co.uk
• Point of sale barcode scan Link with Suppliers,
  the E-Supply Chain Management

10
Financial Ratio Analysis - Profitability
11
Financial Ratio Analysis - Liquidity
12
Financial Ratio Analysis - Efficiency
13
UK Sales by Distribution Channels
14
UK Competitor Analysis - RMS
15
Segment RMS
16
PMP Toys R Us UK market
17
The Future - 2005 Toy Sales Forecast
18
SWOT ANALYSIS - Strengths

• A strong brand name within the toy industry
• Employing John H .Eyler as President and C.E.O.
• A solid financial foundation
• One stop store for all the family needs
• Forecasting and inventory replenishment
• In store developments
• Continuing to grow
• Unbeatable range of toys
• Use demographic data
• Worldwide research programme

19
SWOT ANALYSIS - Weakness

• Selling culture
• It has not maximized the potential of the new C3
  and Concept 2000 format
• A bruised and battered chain
• Use of CP market for its funding

20
SWOT ANALYSIS - Opportunities

• Innovation of exclusive products
• Maximise the potential of the new C3 and Concept
  2000 format stores
• Demographic data
• Consoles games are high growth market
• Market Share
• On-line retailing

21
SWOT ANALYSIS - Threats

• Competitors
• Disenchanted customers
• Traditional toys is low growth market
• Public perception of financial performance
• Seasonality of Sales
• Declining child population

22
Strategy the Past

• Pre 1998 - Dispersed S.B.Us
• R Us label only linkage between Brands
• Exclusivity - 5 of products
• Customer satisfaction levels not impressive
• Price Skimming - reliance on Hot Products
• 1998 - 59 Toys R Us 31 Kids R Us Stores
  Closed

23
Four Current Strategic Approaches

• GROWTH
• Growth by acquisition - Imaginarium (1999)
• Internal Concentric Diversification
• Beginning of new C3 Combo concept
• 60 of all stores to be C3 by Christmas 2001

24
SBU Growth by store
Excludes toyrus.com!!!
25
Internal Concentric Diversification
Imaginarium
Related Businesses
Kids R Us
Toys R Us
Core Business
Babies R Us
26
Four Current Strategic Approaches

• 2. DIFFERENTIATION
• Collaboration - Universal Studios, Amblin
  Entertainment, Scholastic, Animal Planet, Home
  Depot, Amazon
• Exclusivity
• 20 by end 2001
• Building relationships with vendors
• lack of intermediaries
• strong In Stock Position
• Strong Core Business - no reliance on Hot
  Products
• Improvements in Guest Service
• World-wide research into customer needs (2001)
• Training of staff in Face to Face interaction

27
Tommys Campaign
TOYS 'R' US VOTED MOST PARENT FRIENDLY TOY STORE
.. FOR THE 5TH YEAR RUNNING!Parents voted
Toys 'R' Us top for families because of
its "good quality and well priced toys"
"safe toys that you can rely on". "wide
range of toys available under one roof "
space in the store that makes shopping more
comfortable ".
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Four Current Strategic Approaches

• 3. PRICING
• Penetration
• Medium Price
• Superior Promotion
• Superior Distribution
• Superior Quality
• Superior Service
• 4. MARKETING
• Emphasise Differentiation
• Profitability
• Strengthen reputation of R Us Brands
• Send signals of high quality

29
Future Strategy

• Our goal is to help Mom successfully complete her
  mission by having the products she wants, and by
  providing information and services she needs to
  enhance our position as the authority on
  childrens merchandise.
• We are also working to ensure that Mom has a
  good environment in which to shop when she visits
  an R Us store, making the process as easy and
  convenient for her as possible.
• And finally, we are going to communicate the
  changes taking place within the R Us family of
  brands through a strategic marketing campaign
  beginning later this year, and by building a
  lasting relationship with Mom.

30
Conclusions

• The key to Toys R Us success is satisfying the
  customer
• They are endeavouring to convert their weaknesses
  and threats
• They are responding aggressively to the changes
  in the market e.g. e-tailing.
• They need to maintain their focus on computers
  and consoles
• Toys R Us are implementing strong robust
  strategies which are increasing their RMS
• Toys R Us are in a strong financial position
  which supports their expansion program.

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The End
32
References

• Web Addresses
• Online Toy Market Continues rise', CyberAtlas,
  www.cyberatlas.internet.com/markets/retailing.
• International Council of Toy Industries,
  www.toy-icti.org.
• British Association of Toy Retailers,
  www.batr.co.uk.
• Toys 'R' Us, www.toysrus.com.
• The Toy Industry in Europe, www.tietoy.org.
• The Eurpean Commission, www.europa.eu.int/comm/ent
  erprise/toys.
• Toy Industry Association, Inc., www.toy-tia.org.
• Articles
• 'Toys and Games', 2001 Market Report, Key Note
  Ltd., Seventeenth edition.
• 'Home Shopping', 2000 Market Report, Key Note
  Ltd., Eighth edition.
• 'Electronic Games', 2000 Market Report, Key Note
  Ltd., Third edition.
• 'Video Retail and Hire', 2000 Market Report, Key
  Note Ltd., Sixth edition.
• 'Toys and Games', Mintel, June 2001.
• 'Toy Industry', ICC Business Ratio Plus, 22nd
  edition, 2000.
• 'Toys and Games', Market Research GB, August
  2001.
• Toys R Us 2001 Dun and Bradstreet Report
• Books

33
Appendix
34
World Toy Sales - 2000
35
Child Population
36
PDI
37
Distribution Channels
38
2005 Forecast
39
Tommys Campaign
TOYS 'R' US VOTED MOST PARENT FRIENDLY TOY STORE
.. FOR THE 5TH YEAR RUNNING!Parents voted
Toys 'R' Us top for families because of
its "good quality and well priced toys"
"safe toys that you can rely on". " wide
range of toys available under one roof "
space in the store that makes shopping more
comfortable ". The awards run by national baby
charity, Tommy's campaign, encouraged parents to
have their say on which organisations offered a
family welcome and made life easier for parents.
This year over 300,000 votes were made by
parents - a record number of votes since the
awards began nine years ago.
40
Financial Ratio Analysis
Source Key Notes 2001
41
Financial Ratio Analysis Employee Performance
42
Financial Ratio Analysis
Source Key Notes 2001
43
Traditional Toy Sales - UK
44
UK Competitor Analysis - RMS
45
UK Traditional Toy Sales by Market Segments
46
Share Graph
47
UK Traditional Toy Sales by Market Segments
48
Toy Game Sales by Retailer