Sarah

MGT
Case Study One

Oumnad
3301

MAKING TOUGH DECISIONS

John Eyler is the CEO of Toys R Us, a retailer of toys, childrens books
and
childrens clothing. Over the years the company has prospered as it became
the number one toy seller in the United States and a number of international
markets.

Recently however Wal Mart passed Toys R Us to become the number

one toy
retailer in the US and with its emergence as the toy selling superpower Wal
Mart
has forced Toys R Us and its executives to change the way it operates. In fact,
Eyler has made two daring decisions that are beginning to pay off.

His first decision entails differentiating Toys R Us as a toy seller.

Although Wal
Mart routinely offers lower prices than Toys R Us, Eyler has decided to use the
companys position as a toy seller to its advantage. The differentiation
strategy
involves remodelling a large number of stores including widening aisles and
presenting toys in a more attractive way. This will cost the company a lot of
money.

Eyler has also invested in Toys R Us employees through training and

development hoping staff can help customers in ways Wal Marts employees
cannot. To highlight the differentiation Eyler has also opened a new store
in Times Square, New York. While these decisions may ultimately improve
performance it is important to note that investments it should be noted they
are
costly decisions.

His second big decision involves selling online. When the company
began
selling online it faced difficulties in maximising sales on the internet. As a
result
they failed to deliver many Christmas toys that customers ordered not a
good move. To overcome this problem Toys R Us formed a partnership with
Amazon.com using the online retailers website to sell to customers, they
provide
Amazon.com with their product. This decision enables the company to access
Amazon.coms enormous customer base 1.8 million people visit Toys R Us
locations during the holiday period compared to approximately 23 million
visitors
to Amazon.coms site over the same period.

It is clear that Eyler has made some courageous decisions to improve

his
companys performance by remodelling stores, training employees and
partnering with Amazon.com. He hopes his company will soon overtake Wal
Mart
as the number one toy seller. He knows that Wal Mart will not go down
without a

fight and he will have to make even more tough decisions.

Questions
1. How do you think good decision making has contributed to the
development or otherwise of Toys R Us?
2. Could Eyler have used other decision making options to help make
these
decisions?
3. What criteria do you think would be most important to Eyler as he
makes
his decisions about the companys future?
4. Would you characterize the conditions surrounding Toys R Us as
conditions of certainty, risk or uncertainty? Explain your choice

Answers
"Toys

Us"

in

brief:

In order to perform a better research and study about Toys R Us

management strategies and decisions making, let's learn a bit more about
the company:
Toys "R" us, is one of the biggest retailers in the world specialized in toy
and juvenille products. It is an international company that owns 873 stores in
the USA and Puerto Rico, and more than 600 stores around the world.
It was founded by Charles Lazarus around 1957 in Rockville, Maryland.
It is now headquarted in Wayne, New Jersey. In 2011, it employed around
71,000 employees world wide, and made $13,864.0 million of
revenue/turnover.
From 1978 to July 2005, Toys "R" us was a public company. After that, it
was
bought
completely
by
an
investment
group.
Also, the company launched its first online shopping website,
toysrus.com,
in
1998.
In August 2000, Toys "R" us and Amazon engaged an alliance for 10
years. Indeed, they united their online stores that sell toys and videogames.
In November 2001, Toys "R" Us's most important store, "the
international flagship of their retail chain" was openned in NYC, Times
Square.
It
occupies
1110,000
square
feet.
Toysrus.com was re-launched at the end of 2008 to provide enven more
interactive services; for instance, rotating images, in addition to further
product
addition
on
a
more
regular
basis.
In fact, Toys "R" us chose the European datacenter and colocation
center provider Telecitygroup not only to host their website, but also to
ensure a full management os security, back up, infrastructure design and
implementation with all what it requires as: connectivity, load ballancing,
backup,
firewall
and
intrusion
detection
prevention.
Moreover, Toys "R" us has lauched many other online shopping
websites besides toyarsus.com, such as: Babiesrus.com, etoys.com, toys.com

and

others.

(referenceforbusiness.com; ebscohost.com; Toysrysinc.com; telecitygroup.se)

1. How do you think good decision making has contributed to the

development
or
otherwise
of
Toys
R
Us?

As mentioned, the 2 most important decisions taken by Eyler are:

using the differentiation strategy to make an advantage of Toys R us being
known as a toy seller, and the second decision is establishing a partnership
with
amazon.com
by
providing
them
with
their
products.
Of course making theses risky and courageous decisions involve:
remodelling stores, training employees (which is very costly) and partnering
with
amazon.com.
Actually, Toys "R" Us went through a more complicated and long
procedures of restructuration and hazardous decision making process
throughout
the
years.
The Business website referenceforbusiness.com gives a very detailed history
of the changes in the company. Here are the most important decisions made
and applied according to referenceforbusiness.com:

By early 1998, most of the recent initiatives--the exception being

Babies "R" Us--had proven to be failures. By that time, only 15 percent of
Toys "R" Us units had been converted to the Concept 2000 format, which had
not led to the gains in sales that were expected. The Kids World superstores
proved to be too large for the sales they were generating, and the format was
soon abandoned. In addition, the 200-plus-unit Kids "R" Us chain was
struggling in the face of stiff competition from department stores, specialty
retailers, and the discount chains. At the same time that the company
reported lackluster earnings for the fiscal year ending in January 1998, it also
announced a management shuffle. Goldstein was bumped up to the
chairman's seat, while Nakasone was named CEO; Lazarus remained on the
board as chairman emeritus.


Now that Nakasone was named CEO, the company started its largest
reoganization. In September 2008, the restructuring involved a stellar
reduction of the inventory, the shutdown of 59 toys R us stores and 31 Kids R
us units. The workforce itself was reduced by 3000. Theses restructurations
costed $353 million, which was a loss of 132 million in the year 1999.

The company also began testing another new format for its flagship
Toys "R" Us outlets, this one dubbed C-3 (the three C's being "customer
friendly," "cost effective," and "concept with a long-term vision"). This format
featured the racetrack-like style prevalent at discount chains, doing away
with the aisle after aisle of ceiling-high warehouse shelving. There was
colorful signage throughout the store and a number of new departments that
were aimed at broadening the product range. These included deal/seasonal;
baby apparel; Animal Alley, showcasing a large selection of private-label
stuffed animals; the Learning Center, which featured educational and
developmental products for young children through the kindergarten age;
and the "R" Zone, a glass-enclosed section with computer, electronic, and
video products for children aged nine and above. The format also had 20
percent more floor space thanks to a one-third reduction in the stock room.

There were other new initiatives as well. In 1998 the company joined
the online retailing boom with the launch of the toysrus.com web site, and
the firm also produced its first mail-order catalog. In August 1999 the
company spent $43 million to purchase Imaginarium Toy Centers, Inc., a
specialty retailer focusing on educational toys with 41 stores in 13 states. The
deal provided Toys "R" Us access to the higher end of the market, which
carried higher profit margins and was growing at a rapid clip; it also led to the
opening of Imaginarium departments within remodeled Toys "R" Us stores.
Just days after this acquisition was finalized, Nakasone was forced to resign
after clashing with the board of directors--particularly with his two
predecessors, Goldstein and Lazarus. Further bad news came on the
competition front that year as Wal-Mart surpassed Toys "R" Us as the leading
U.S. toy retailer. In addition, the Christmas season was a near-disaster as the
toy stores ran out of stock on some of the season's most sought-after items
and toysrus.com failed to deliver a number of online orders by December 25.

In 1998, the company launched its first online retailing website:

toysrus.com and produced its first mail-order catalog. Also, the company
bought Imaginarium Toy Centers, Inc., a specialized retailing store in
educational toys In 1999. This decision made the company carry higher profit
margins, and enabled it to grow quickly. It also permited to the start of
Imaginarium departments in the remodelled Toys "R" Us stores.
Unfortunately the same year Wal-Mart became the leader in toys retailing,
forcing Nakasone to resign from his position of CEO

Stepping in to attempt to turn around the company's flagging fortunes

was John Eyler, who was named president and CEO in January 2000 (and

chairman in June 2001). Eyler was hired away from specialty toy retailer
F.A.O. Schwartz, where he had served as CEO and chairman for nine years.
The new chief continued the rollout of the new C-3 format. By early 2001,
165 Toys "R" Us stores had been converted, and initial results showed an
increase in sales. One year later, 433 of the U.S. toy stores featured the new
format, now dubbed "Mission Possible." At the same time, new "combo"
stores were being created--essentially Toys "R" Us outlets with a select
assortment of Kids "R" Us merchandise; there were 273 of these combo
stores by early 2002. Eyler also began working with toy manufacturers to
secure more exclusive products for the Toys "R" Us shelves. Sales of exclusive
products soon rose from 5 percent to 12 percent of overall revenues,
reaching 20 percent in 2002.

Meanwhile, in April 2000, Toys "R" Us Japan was taken public through
an Initial Public Ofeering that raised $315 million for the company and took
the division's large debt off the parent company's balance sheet. The
transaction reduced the company's stake in the Japanese affiliate from 80
percent to 48 percent. In August 2000 Toys "R" Us entered into a ten-year
strategic alliance with Amazon.com whereby the two firms united their online
toy and video-game stores. Amazon.com took responsibility for web site
development, customer service, order fulfillment, and warehousing of goods,
while Toys "R" Us would handle purchasing and managing the inventory. The
following year, babiesrus.com was shifted into the Amazon.com alliance
platform, and imaginarium.com was launched.

In November 2001 Toys "R" Us opened its international flagship store in

New York City's Times Square. Occupying 110,000 square feet, the threestory store featured, in addition to a huge assortment of merchandise, a 60foot Ferris wheel, a 20-foot-tall animatronic T-Rex dinosaur from Jurassic Park,
and a two-story, 4,400-square-foot doll house filled with Barbie gear. The
flagship store was intended to revitalize Toys "R" Us by providing a new
image for what was widely considered to be a tired chain. Toward this same
end, the company launched an advertising campaign featuring a new
animatronic Geoffrey the Giraffe, the longtime Toys "R" Us mascot who had
made his first appearance in 1960. In another 2001 initiative, the company
began testing out small Toys "R" Us Toy Box sections at Giant supermarkets
run by the Dutch firm Royal Ahold.

While the remodeled Mission Possible stores were generating positive

results, a new Kids "R" Us format was not proving so successful. Thus as part
of a broader restructuring announced in January 2002, the company closed
an additional 37 Kids "R" Us outlets, bringing the unit total for that chain
down to 146 at the end of fiscal 2002. Twenty-seven Toys "R" Us stores were
also closed, and about 1,700 jobs, or 5 percent of the U.S. workforce, were
eliminated. Restructuring charges of $213 million were recorded, resulting in
anemic net earnings of $67 million for fiscal 2001 (compared to $404 million

for the preceding year).

By late 2002 the conversions of the Toys "R" Us outlets had been
completed, and the company launched a new type of store aimed at smaller
markets where the company had not previously operated. The 42,000square-foot stores were to be named Geoffrey, after the company mascot,
and were a hybrid format offering products from Toys "R" Us, Kids "R" Us, and
Babies "R" Us. Four of the new stores opened in late 2002. That same year,
the company said that it wanted to add Toy Box sections to another 40 Giant
supermarkets. Following a disappointing 2002 holiday season, Toys "R" Us
announced that it would lay off 700 management and supervisory personnel.
In June 2003 the company reached an agreement with Albertson's Inc. to set
up Toy Box sections in more than 2,300 grocery and drugstores. The
burgeoning Toy Box concept was giving Toys "R" Us another channel to reach
customers and another way to increase its revenues in the increasingly
competitive
toy
retailing
industry.
(www.referenceforbusiness.com)

We can conclude that the changes, restructurations and decisions

making processes were very tumultous, risky, hazardous and not always
rewarding. Some of the decisions lead to an increase in sales, even if they
seemed "suicidal". Some other decisions just made sens like the partenership
with Amazon.com. Throughout history, the company had to close stores
around the world and fire employees a lot of time in order to avoid a
bankrupcy, also they had to perform many restructurations that cost heavy
charges.
The decisions made by Eyler were rewarding at most, since the
company did not sink and is able to increase its revenues in some periods.
But
is
it
enough?
In a nutshell, even if Toys "R" us as concidered by many as one of the biggest
retailers of juvenille products, it is clear that the company is still facing some
difficulties and thus has not achieved a state of maximizing profits. According
to the article "DATAMONITOR: Toys "R" Us, Inc." in EBSCO electronic
ressource:
"The company recorded revenues of $13,864 million during the financial year
ended January 2011 (FY2011), an increase of 2.2% over FY2010. The
operating profit of the company was $646 million in FY2011, a decrease of
17.6% compared with FY2010.The net profit was $168 million in FY2011, a
decrease
of
46.2%
compared
with
FY2010."
(Ebscohost)
We can see that the company has a cut of 46.2% in their net profit from the
year 2010 to 2011, which is huge. We can't really say that these decisions
made brought Toys "R" Us to the top of the toys retailing market.

2. Could Eyler have used other decision making options to help make
these
decisions?
In fact, in orther to fulfill his decisions, and increase the company sales,
Eyler could have evaluated other options that could have been more
effective. The partnership with Amazon.com and the remodeling of stores
were
great
ideas
but
not
enough.
What made Wal-Mart the number 1 in retailing toys was their
competitive
prices.
Indeed, when bying products that are not basic needs as toys, one is not
ready to buy expensive products when he or she can afford to buy at a lower
price.
We know that, according to Management Arab world Edition (Robbins et
al) that making decisions has to go through a process wich is:

Identification of a Problem

Identification of Decision Criteria

Allocation of Weights to Criteria

Development of Alternatives

Analysis of alternatives

Selections of an alternative

Implementation

Evaluation
(Robbins,

of

decision

Effectiveness
129)

It is obvioud that the company has certainly used the eight-step

decision-making process in reaching the decisions they applied later. Yet, in
their Identification of a problem, they should have Identified their problem as
high prices in comparaison to the market. And rather than trying to promote
by always opening new stores, a flagship in NYC, launching new brands as
Babies R Us, the decision criteria should have been reducing the cost of
goods sold. And then after allocation a high weight to this criterion, a study to
develope
alternatives
should
have
been
impplemented.
Among their options they could have chosen: changing their raw materials in
order to find lower price raw material, decentralizing facturies overseas to

find cheaper workforce.

3. What criteria do you think would be most important to Eyler as

he makes
his decisions about the companys future?
In these times of financial crisis when thousands of people are jobless
and struggle to subsist their families with their basic needs, if they are willing
to pay an amount occasionally in birthdays or christmas for toys that are
supposed to be luxaries, these people won't go to the most fancy and
expensive
store.
The criteria that would be most important to Eyler in this era of time is not
only to keep the company's advantage of specialty in toy retailer, keeping the
advantage of remodelled and attractive stores and flagship, but also to
combine this competitive advantage with another even more competitive
advantage which is affordable prices.

4. Would you characterize the conditions surrounding Toys R Us as

conditions of certainty, risk or uncertainty? Explain your choice
I would characterize the conditions surrounding Toys R Us as very
uncertain. First, the company has a decrease in income, second, the
company is behind wel-Mart, third the financial crisis a very difficult condition
to prosper in an industry of toys. Yet, there is another element that makes
Toys R us's situation even more uncertain: the raise of the asian toy industry
and
especially
the
chineese
toy
indutry.
As a mather of fact, the combination of words the most read around the
world
is
probably
"
Made
in
China".
The figures only prove it:
According

to

researchinchina.com:

In the domain of toy manufacturation, China is recognized to be the

largest toy manufacturer and exporter. In fact, 2/3 of the toys in the world are
made in China. Moreover,in 2009, the Chinese toys exported reached a value
of
7.8billion.
Guangdong, Jiangsu, Zhejiang, Shanghai, and Shandong are the foremost

production and export bases of toys in China, accounting for more than 90%
of the annual sales of Chinese toys, of which, Guangdong gives priority to
electric toys and plastic toys; Jiangsu and Shanghai are mainly engaged in
plush
toys;
Zhejiang
gives
first
place
to
wooden
toys.
(www.researchinchina.com)
We can only see how the chinese industry is prolifirating. They are toys
of all kinds, woden, electric, plastic and plush. In addition, Chinese toys are
the most competitive, and had already gained the reputation of being the
cheapest.
Who could compete with Chinese companies that developed the
concept of creating manufacture chains on ships, so that they can
manufacture products while crossing the seas? Probabely not Toys "R" Us.

Works Cited
Electronic
ressources:
Datamonitor, (Sept 29, 2011). Toys "R" Us, Inc. Company Overview. Retrieved
Feb 20, 2012, from http://web.ebscohost.com/bsi/pdfviewer/pdfviewer?sid=8fc3c23f7c87-4054-994a-80a361e6e3af%40sessionmgr112&vid=2&hid=126
Inline Citation -- (Datamonitor, Sept 29, 2011)

Web sites
Toys "R" Us, Inc. - Company Profile, Information, Business Description, History,
Background Information on Toys "R" Us, Inc. Read more: Toys "R" Us, Inc. - Company
Profile, Information, Business Description, History, Background Information on Toys
"R"
Us,
Inc.
http://www.referenceforbusiness.com/history2/2/Toys-R-UsInc.html#ixzz1nHfMo9Au.
Retrieved
Febuary
20th,
2012,
from
http://www.referenceforbusiness.com/history2/2/Toys-R-Us-Inc.html
Inline Citation -- ( Toys "R" Us, Inc. - Company Profile, Information, Business
Description, History, Background Information on Toys "R" Us, Inc. Read more: Toys
"R" Us, Inc. - Company Profile, Information, Business Description, History,
Background
Information
on
Toys
"R"
Us,
Inc.
http://www.referenceforbusiness.com/history2/2/Toys-R-UsInc.html#ixzz1nHfMo9Au., )

ABOUT
TOYS"R"US,
INC..
http://www.toysrusinc.com/about-us/
Inline
Citation
-(

Retrieved
ABOUT

Feb

20,

2012,

TOYS"R"US,

INC..,

from
)

ToysRUs. Retrieved Feb 20, 2012, from http://www.telecitygroup.se/toys-rus-case-study.htm

Inline Citation -- ( ToysRUs., )

flagship.
Retrieved
Feb
http://dictionary.infoplease.com/flagship
Inline Citation -- ( flagship., )

21,

2012,

from

Global and China Toy Industry Report, 2010. (2010). Retrieved Feb 20, 2012,
from
http://www.researchinchina.com/Htmls/Report/2010/5923.html
Inline Citation -- ( Global and China Toy Industry Report, 2010., 2010)

China's
Toy
Industry.
(2008).
Retrieved
Feb
20,
2012,
http://business.ezinemark.com/china-s-toy-industry-16a586644c3.html
Inline Citation -- ( China's Toy Industry., 2008)

from

Books:

Robbins, S, Coulter, M, Sidani, Y, & Jamali, D (2011). Management Arab world

Edition.
Edinburgh
Gate:
Pearson
Education
Limited.
Inline Citation -- (Robbins, Coulter, Sidani & Jamali, 2011