‘Toys “R” Us’ is the world’s leading devoted toy and baby products retailer, having 1500 toy and baby specialty stores worldwide. Toys “R” Us is a well known toy store chain based in the United States, Australia, Canada, the Netherlands, South Africa, Hong Kong, the United Kingdom and India. The company has about 585 stores in the United States and in 34 other countries, it is having 716 stores. Flagship store in New York City’s Times Square is the biggest toy store in the world. Its Internet site is at www.Toysrus.com. From 1978, until July 2005, it operated as a public company (Introduction of Toys “R” Us, 2008).
Responsibility centre: These centres play an important role in managing the core activities of the company. The major problem which the company is facing today is building the confidence among the investors, establishing the transparency in the reporting procedures and promoting honesty in the workplace (Responsibility Center, 2008).
In Toys “R” Us, the responsibility centre played a vital role. These centers provided a tool to build the confidence among the stake holders. The responsibility centers in Toys “R” Us comprises of the following:
Cost centers: for any company, cost plays a significant role. In this company, the cost center played an important role in quantifying and identifying process waste and providing a vehicle for continuous improvement of process through cost reduction. Theses centers helped the management in determining the appropriate level of value added services. These centers helped the company in identifying the limiting factor that can meet the required production level. This limiting factor includes labor, materials and machine hours. These centers help the Management in deciding the best possible way to allocate the limited resource among various product range in the most efficient and effective manner so as to maximize the profits. Apart from this, these centers helped in testing the new and innovative format for its flagship Toys “R” Us outlets. These formats were based on the principle of cost effectiveness, customer friendliness and also on the long term vision.
Revenue centre: these centers focused on bringing the revenue for the company. Toys “R” Us gives prime importance to the market share. So, revenue centers planned the way of increasing market share. For this purpose, these centers adopted ultimate marketing research tool and also adopted computerized merchandising system. To earn more revenue, these centers suggested the use of colorful signage all over the store and opening of new department focusing on product range broadening. These centers also designed the format, which has reduced the stock room by one third and resulted in 20% more floor space.
Profit center: these centers form the back bone of the company, which aimed at maximizing the profit. In case of the Toys “R” Us, the profit center played an important role as they focused on the long term profitability of company. That’s why on their advice, the company recalled 16,000 units of toys because of high lead content levels. This move of the company created a good image in the minds of customers and also saved the company from negative consequences (Mathew, 2003).
Interaction of responsibility centers: the responsibility centers like cost, revenue and profit are interlinked with each other. These centers are equally important for a company. All these centers revolve around the profit maximization and cost reduction through proper allocation of resources. In Toys “R” Us, the cost will be minimized by the cost centers. Plans related to the revenue maximization are formulated by the revenue center and profit maximization will be looked after by the profit center. These centers can not operate in dependently on their own. The company allocates the cost to each department and cost is utilized in such a manner that it can generate revenue for the company and in turn bring profit for the organization. Hence, their strategies are interrelated. The cost center deals with the study of budgets, budget variances, and performance evaluation at numerous levels (Henry, 2002). Revenue center focuses on the marketing activities, which will go in accordance with the cost centers and the profit will depend on the activities performed by both these centers.
- Henry, G. (2002). Budgeting and Performance Evaluation. American Accounting AssociationVol: 15 (2)
- Introduction of Toys “R” Us Retrieved April 22, 2008 from http://www.toysrus.co.uk/
- Responsibility Center. (2008). Retrieved April 22, 2008 from http://www.answers.com/topic/responsibility-center?cat=biz-fin
- Mathew, M.J. (2003). Management Accounting. (5th edition). Jaipur: RBSA publisher