Joe Walsh gazed out the window of his office. He was pondering the major strategic decision...
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Joe Walsh gazed out the window of his office. He was pondering the major strategic decision facing his small chain of toy stores. Joe had opened his first "Fun 4 U" toy store just 10 years ago and today he had a chain of 15 stores. In order to keep costs down somewhat, he chose to locate all his stores in the main shopping streets of large suburbs, rather than in major shopping complexes. Fun 4 U stores were unique in the retail toy market. They had to be! With the enormous buying power of the leading toy retailer, Toys R Us, there was no way that he could possibly compete on price. Even the major discount and department stores (like Walmart and Kmart) could buy toys on far better terms. Joe decided to enter the toy retailing market after reading about the success of Toys R Us in a business magazine. He figured if the market was large enough to support a category killer as well as discount and department stores, then there were probably some opportunities for a new player like his Fun 4 U store. While Joe didn't have a background in retailing, he knew that competing on price just wasn't a sensible option for a small player in a big market. He knew he had to find a point of difference in the marketplace. Joe explains it well himself, "I knew I couldn't be a discounter, and I knew that I couldn't just be another 'me-too' store, but I felt that there was a good opportunity in the marketplace. Therefore, I set out to make toy shopping a magical experience for all the family. When I did my market research, I noticed that families shopping in Toys R Us sometimes had very upset children. It could be very stressful experience for everyone. So here was my opportunity I thought to myself - to make toy shopping a fun, enjoyable adventure for all the family members." Just ten years later and the dream has become a reality. Fun 4 U now offers a very broad range of merchandise, ranging from games and toys, to software, to sweets and drinks. They have an "adventure" section with rides and a soft playground for young kids, with video games and a basketball hoop for older kids. They charge an average of $5 per child for unlimited playtime in these special areas of the stores (and they refund the $5 if the parents buy more than $20 in toys). However, despite his "success", Joe has been concerned with the overall level of profitability and where to take the business from here. Much of his concern had been generated by Susan, his new marketing manager. Fun 4 U never had a marketing manager before, but Joe was finding the environment more competitive and volatile. He was facing many challenges, in particular: A broader range of toy retailing competitors (many supermarkets now had small toy sections, many stores were selling low priced imported toys) • There were more 'experience' competitors (more soft indoor playground outlets had opened and many McDonald's stores had a playground) • Technology was moving faster (particularly for software, smart phones and game consoles) • Consumer toy spending was shifting away from traditional toys and towards electronic devices (such as MP3 players, game consoles and mobile phones) • Families were becoming increasing time-poor (less time to shop), which is a key factor for his competitive offering Young families with children were slowly declining as an overall percentage of the population. Susan's background was in retailing. In fact, she was the marketing manager for a major hotel chain. She had a number of differing views to Joe and was concerned with many areas of Fun 4U's operations. After her first three months at Fun 4 U, she had written a report outlining her analysis and putting forward a number of strategic recommendations. Some of her findings included: 1. "It is apparent that the Fun 4 U stores are dramatically under performing financially. The return on investment is quite low as compared to other retailers. This is primarily driven by the significant asset investment in each store (i.e. playground, broad product selection, coffee shop). Therefore, it is recommended that the investment in these assets be progressively scaled back." Joe Walsh gazed out the window of his office. He was pondering the major strategic decision facing his small chain of toy stores. Joe had opened his first "Fun 4 U" toy store just 10 years ago and today he had a chain of 15 stores. In order to keep costs down somewhat, he chose to locate all his stores in the main shopping streets of large suburbs, rather than in major shopping complexes. Fun 4 U stores were unique in the retail toy market. They had to be! With the enormous buying power of the leading toy retailer, Toys R Us, there was no way that he could possibly compete on price. Even the major discount and department stores (like Walmart and Kmart) could buy toys on far better terms. Joe decided to enter the toy retailing market after reading about the success of Toys R Us in a business magazine. He figured if the market was large enough to support a category killer as well as discount and department stores, then there were probably some opportunities for a new player like his Fun 4 U store. While Joe didn't have a background in retailing, he knew that competing on price just wasn't a sensible option for a small player in a big market. He knew he had to find a point of difference in the marketplace. Joe explains it well himself, "I knew I couldn't be a discounter, and I knew that I couldn't just be another 'me-too' store, but I felt that there was a good opportunity in the marketplace. Therefore, I set out to make toy shopping a magical experience for all the family. When I did my market research, I noticed that families shopping in Toys R Us sometimes had very upset children. It could be very stressful experience for everyone. So here was my opportunity I thought to myself - to make toy shopping a fun, enjoyable adventure for all the family members." Just ten years later and the dream has become a reality. Fun 4 U now offers a very broad range of merchandise, ranging from games and toys, to software, to sweets and drinks. They have an "adventure" section with rides and a soft playground for young kids, with video games and a basketball hoop for older kids. They charge an average of $5 per child for unlimited playtime in these special areas of the stores (and they refund the $5 if the parents buy more than $20 in toys). However, despite his "success", Joe has been concerned with the overall level of profitability and where to take the business from here. Much of his concern had been generated by Susan, his new marketing manager. Fun 4 U never had a marketing manager before, but Joe was finding the environment more competitive and volatile. He was facing many challenges, in particular: A broader range of toy retailing competitors (many supermarkets now had small toy sections, many stores were selling low priced imported toys) • There were more 'experience' competitors (more soft indoor playground outlets had opened and many McDonald's stores had a playground) • Technology was moving faster (particularly for software, smart phones and game consoles) • Consumer toy spending was shifting away from traditional toys and towards electronic devices (such as MP3 players, game consoles and mobile phones) • Families were becoming increasing time-poor (less time to shop), which is a key factor for his competitive offering Young families with children were slowly declining as an overall percentage of the population. Susan's background was in retailing. In fact, she was the marketing manager for a major hotel chain. She had a number of differing views to Joe and was concerned with many areas of Fun 4U's operations. After her first three months at Fun 4 U, she had written a report outlining her analysis and putting forward a number of strategic recommendations. Some of her findings included: 1. "It is apparent that the Fun 4 U stores are dramatically under performing financially. The return on investment is quite low as compared to other retailers. This is primarily driven by the significant asset investment in each store (i.e. playground, broad product selection, coffee shop). Therefore, it is recommended that the investment in these assets be progressively scaled back."
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Analysis of Fun 4 Us Situation Joe Walsh faces a crucial strategic decision for his chain of toy stores Fun 4 U While the concept of providing a unique adventurefilled shopping experience initially se... View the full answer
Related Book For
Organizational Behaviour Concepts Controversies Applications
ISBN: 9780134048901
7th Canadian Edition
Authors: Nancy Langton, Stephen P. Robbins, Timothy A. Judge
Posted Date:
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