Business Strategy study guide

Position remained highly fragmented and locally

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position – remained highly fragmented and locally-focused 1-2k SKU’s o Nearly all retail shops were domestically owned and bought their toys from local wholesalers o Japanese toy industry was fragmented and had long-standing relationships o Oys “R” us: establish large-scale stores and use the buying power created by these stores to negotiate lower prices from toy manufacturers - The Structure of Japanese Retail - A “Nation of Shops” o Three and five layers of intermediaries o Subsidiary, regional, etc o Inducements of credit and genersous payment terms o Merchants were restricted by law to their local patch, and retailers were encouraged to mop up labor from the land o 26% of shopkeepers reported “security in old age” – opened a shop because their husbands would soon retire (1/4 owners were 60+)
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o small stores were a natural reflection of Japanese way of life o Japanese consumers would accept less service in exchange for lower prices - Keiretsu Stores o Related groups of companies - The Role of Regulation o Large, non-specialized, low price stores - Innovations - MITI’s “Vision for the 1990s” o Fought distribution system - Structural Impediments Initiative o Japan opened its markets to foreign investors o Imbalance in investment levels was evidence that the Japanese market remained unfairly close to US investors - Toys “R” Us: The Move into Japan - Den Fujita o President of McDonald’s Japan – lots of retail experience – bicultural and bilingual - Criticism and Opposition o Other retailers thought Toys “R” Us Japan was doomed for failure o Chain had to directly buy from manufacturers - Cultural barrier (small stores valued family orientation) - Size barrier (had to cut the building) Otis Elevator Company: China Joint Venture - Pacific area – Japan, India, Thailand, Taiwan, and China - Elevator business’s three areas: new equipment, modernization, and maintenance and repair - Modernization – renovation (interior and exterior) - Maintenance accounted for 60-70% of prices - Different product types - Competitors: Otis and Schindler, Kone, Mitsubishi Electric Corporation - Strategy: to invest aggressively in R&D, to form joint ventures with powerful local companies, and to acquire small, well-run, high-potential local elevator manufacturing and servicing companies - Otis had been the first elevator company to establish sales and manufacturing operations - Mao Zedong – communist China - Reconstructed national company - Movement collapsed, facing severe economic dislocation - Eventually, reforms affected controlled pricing system (Deng) - Not many companies would form a joint venture (government restrictions, generating export, exchange rate) - CITIC – manufacturing to merchant banking to issuing bonds at international capital markets - Schindler came to China first
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- 2 nd time, CITIC approached Otis – geographical distance, language barriers, inexperienced personnel from the Chinese side
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