E-Toys: The Bubble Economy

Dembosky, A. (2012). Ebay moves beyond its dotcom roots. Available:http://www.ft.com/cms/s/0/df3723ca-1773-11e2-8cbe-00144feabdc0.html#axzz2EbzDqb5Y. Last accessed 10th Dec 2012

Organizational Hierarchy Structure- Toys R Us was a decentralized organization, which had a leadership type setting from country to country. This type of structure was difficult because all the leaders from different countries were not communicating effectively. The company knew they had to make some changes to the system, if they wanted to be successful. Therefore, after careful consideration, the company decided to move to a more centralized structure. This change was needed to strengthen their business with regards to their compatibility amongst countries and creating a more efficient workplace in the United States and abroad. In the company’s business in Europe, instead of their being different leaders across the continent, there will

In 2007, the U.S. fell into a deep financial recession. One of the main causes of this was the bursting of the housing bubble, which lead to a housing crisis. What is a housing bubble? A housing bubble is defined as “a temporary condition caused by unjustified speculation in the housing market that leads to a rapid increase in real estate prices” (businessdictionary.com 2014). When the bubble bursts, the result is a quick decline in home prices (businessdictionary.com 2014).

Further to the argument that agents were ignorant of and failed to engage with new information, the formation of asset price bubbles has been offered as a cause for the GFC. Ball argues that it is inherently difficult to recognise the presence of an asset price bubble until after the event has affected the market and even by recognising that prices did not accurately reflect true value, this could never have indicated a nearing price bubble burst to investors because EMH suggested that all then available information was

Read the case carefully and answer the following questions: 1.Till 2005, eBay EachNet was the leader in the Chinese e-commerce market, controlling more than half of it. But eBay EachNet soon lost its market leadership position to Taobao.com (Taobao). In this context, analyze the reasons that can be attributed to Taobao’s edge over eBay. 2.a. To enable people to trade with each other, Pierre Omidyar created a marketplace in September 1995 which was later called eBay. By mid 1997, eBay received one million page hits per

Throughout the text of the book, you will read about different bubbles that occurred in history. Some of these bubbles have happened in the last ten years and some have happened in the last three hundred years. One of the most interesting bubbles that I read about was “The South Sea Bubble”. The South Sea Company in England was formed in 1711 to create confidence in the government’s ability to meet its debts and promises. This company took a government debt (IOU) for ten million pounds. In return, the government was given monopoly over all trade to the South Seas (Malkiel, Page 41). People thought there would be a lot of opportunity to make money during this time. In 1720, the entire national debt, which was thirty one million pounds, was capitalized. The stock rose from 130 pounds to 300 pounds when the bill was introduced to Parliament. After bill became the law, the South Sea Company sold a new issue of stock at 300 pounds. There were fights that broke out by investors who wanted to purchase this new stock price at a proposed installment offer.

There are many barriers to new organizations in the toy industry, making the threat of new entrants low. Lego and other big toy companies like Mattel benefit from economies of scale. An economy of scale is achieved by lower costs through large volume production (Textbook glossary). Economies of scale can occur in many departments within the organization including production, marketing, research and development, and finance. Some manufacturing of Lego products was shifted to Central Europe and Mexico in order to benefit from lower wages and to shorten product supply chains (p. 13 of case). The management of Lego additionally holds expertise on production, distribution and customer needs; which are absent in a new organization. To enter the toy sector a potential entrant needs to calculate the start of production at a level that will give a competitive position and production costs lower than the market.

1. Why did Irving Fisher believe that stock prices had reached a permanently high plateau?

Now that the two theories have been explained, let’s look at some historical examples from Malkiel that really paint the picture in chapter 2. The first speculative craze noted was over tulips in the seventeenth century in Holland. The tulips were brought from Turkey and the Dutch valued the beauty and rarity of the new flowers. Thus the prices for the flowers inflated. As the prices rose merchants would by stockpiles to sell to the public. The more expensive they got the more the public believed they were making smart investments. People would sell off the personal belongings to get their hands on the bulbs. The mania surrounding the bulbs created a bubble that would soon burst. The prices got so high some people decided to cash in and sell them to make a handsome profit. Soon others joined in causing a snowball effect and the prices tumbled. Eventually there was no demand and they were worthless. Many went

By definition a housing bubble is a temporary condition caused by unjustified speculation in the housing

There are different ways how Toys “R” Us can reach profitability by obtaining customers year-round. The company should appeal to its established historic customer base that will respond to its stores because of their loyalty to the company. The company can do this by opening new product lines. They can focus on obtaining products that are high in demand by their competitors. They can use their already established company popularity to obtain strong supplier relationships for the additional products. These will supply the company with an additional source of income and the

Retronics, a software engineering firm located in Silicon Valley, was founded in 1990s. Many internet-based companies were founded at that period since a new economic sector grew up and it attracted many investors. With the new economic sector and its privileged geographic location, Retronics could easily attract a tremendous amount of capital funding and investments, as well as a long list of big clients. Owing to the high interest rate, many people invested in the dot-com companies and their stock prices had risen sharply. The bubble burst when it hit the peak. Millions of investors and companies suffered from the dot-com bubble. Retronics, one of the suffering companies, had to lay off employees for survival in the extreme environment. In 2003, the board of director fired the founder of Retronics and hired George Latour, who was experienced in enterprise-scale systems and operations as the new CEO.

This study will prove that e-commerce has grown because it adds value to people’s lives. It will show that e-commerce will not disappear but evolve into something even greater than what it is right now.

The company was profitable once again by the third quarter of 1985. To maintain market share, the company invested heavily in research and development in 1987 and was ranked by a leading trade journal, Electronic Business, as second in R&D spending, based on a 131.7% increase from 1986 to 1987. The company’s share price bounced back from a low $1 in 1985 to $13 in July 1988. With all these developments, it seemed that the company had indeed made a comeback and was on its way to becoming a billion-dollar company.

The company’s total debt is in the billions, which was gained because of a buyout in two thousand and five. Repaying that debt has become increasingly difficult because business has been declining. Boomey, (2017) states: Toys R Us recently had to shut down some of its stores and let go some of its corporate employees. The company’s competition, which includes Amazon and Walmart have had an advantage over Toys R Us because they mark down toy prices to attract their customers. But the competition was only part of their problem. The main cause of the company’s debt was the inability to transform its company digitally. In 2009, the company’s e-commerce sales amounted to only 4%. The company’s failure to properly set up a digital strategy was their main downfall (Lashinsky, 2017).