Every firm in the market tends to locate an area of focus that gives it an upper hand in its operation. A competitive advantage allows the industry to have access to resources either by law or depending on the size of the company. To be at the top of performance, it is appropriate for the management team to formulate and evaluate the customer’s specific needs and develop criteria for satisfying them (Cheah, Ho & Li, 2018, p. 3952). Unlike TRU, the management body did not take keen measures to come up with ways to fit in the growing toy market in the US. In an environment with several well-established players like Amazon and Walmart, TRU should have examined the trend and changes and then form its unique specialization to counter competition from other firms.
Lack of competitive advantage made TRU lag behind in terms of technological development, usage of eCommerce, quick delivery of products to consumers, and pricing format. The changing generation of kids required the firm to be on its toes, with current developments to suit the needs of its customers. Failing to have a strategy to secure resources at an affordable rate than other retailers in the market would signify poor ability to compete. Limited ability to produce marketable products made TRU generate less revenue, which resulted in its weak financial performance.
TRU did not maintain the value of products it offered into the market. As changes in technology and innovation engulf the market, the management board did not act quickly to update their goods as per the market demand. This slow approach allowed Amazon, Target, and Walmart to win over the value of toys taken to the market (Śmigielska & Oczkowska, 2017, p. 181). Additionally, resources for producing the merchandise were easily available to all the competitors, thus did not make the company have more rights over related firms. It was also possible for the toy industries to produce almost similar products that would bring the same level of satisfaction to the consumers. This restricted TRU from having imperfect imitability as a source of competitive advantage. The toy products from all other related firms were more alike and could be used in place of another. The homogeneity of goods created the possibility of substitution in the market, rendering substitutability as a competitive advantage insignificant.
Porters Forces Analysis
Porter’s analysis is a method developed by Michael Porter as a tool for evaluating and assessing the competitive position of a given industry. This framework allows the business organization to recognize its economic strength and position within the market. The concept is based on five forces that determine the firm’s chances of generating good returns from the business (Pádraig, 2017, p. 96). They include industry rivalry, the threat of substitute commodities, and the bargaining power of buyers, the threat of new entrants, and the power of suppliers.
In the market, the number of competitors and their capability in the industry determines the level of competitive challenge. A large number of related firms will result in the production and supply of undifferentiated goods in the market, increasing production concentration, therefore, lowering the desirability of the market for the products. When firms are competing, they apply tricks such as low prices to raise their market position. Any move by one company will generally create a counter-response hence increasing the intensity of the competition.
Threats of New Entrants
TRU did not address the issues of incoming new firms that joined the industry to provide toy products. Failure to have strong barriers like the cost of production, patent rights that control the entry makes companies face sudden competition from the organization that is able and willing to provide the commodities at a relatively cheaper cost. Such arrivals would then flood the market, making the supply exceed demand resulting in low prices of the goods. As a result, the enterprises make less profit.
Threats of Substitute Products
The existence of close substitute products in the toy industry made customers have the power of switching from buying in one retail shop to another depending on the price range offered by the various competitors. TRU did not have enough standby products to counter the influence of other goods from its opponents. The continuous shift in buying patterns is likely to lower the competitive strength of the firms.
Bargaining Power of Buyers
The power of buyers is assessed based on their population in the market and the ability or cost to switch from one vendor to the next. If the marketplace consists of several shoppers, it will not be easier for them to develop pressure that will influence the firms. Due to a large number of baby boomers, TRU had strong force over the purchaser; thus, it felt the insignificant weight. It, therefore, implies that a big population dilutes the bargaining power of the buyers.
Bargaining Power of Suppliers
Suppliers influence the price increase of the products. To establish their impact, firms must consider the uniqueness of the inputs they provide, their strength, and the cost of changing suppliers. Following easy access to most of the materials used to manufacture the toy products, vendors have narrow power over the retail firms. It then means the dealers played a limited role in influencing the product prices in the market.
Cheah, S., Ho, Y.P. and Li, S., 2018. Business model innovation for sustainable performance in retail and hospitality industries. Sustainability, 10(11), p.3952. Web.
Pádraig, B., 2017. An Analysis of Michael E. Porter’s Competitive Strategy: Techniques for Analyzing Industries and Competitors. Macat Library. Web.
Śmigielska, G. and Oczkowska, R., 2017. Retailers’ competitiveness in global markets. International Entrepreneurship Review, 3(1), pp.175-196. Web.