B&Q's Strategies in China
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Case Code: BSTR245 Case Length: 11 Pages Period: 1999-2006 Pub Date: 2007 Teaching Note: Not Available |
Price: Rs.300 Organization: B&Q Industry: Retail Countries: China Themes: International Business, Globalization |
Abstract Case Intro 1 Case Intro 2 Excerpts
"This is a state-controlled economy. Price fixing is endemic. Retailers are at the bottom of the food chain in China. They have far less power than manufacturers. It is the opposite of the rest of the world."
- Steve Gilman, B&Q's CEO for Asia, in 2003.
Introduction
For the financial year 2005-06, B&Q China, a UK based home improvement retailer and a subsidiary of Kingfisher Plc., generated revenues of GBP 312.8 million and net profit of GBP 5.6 million. The company's revenues increased by 44.7% from GBP 211.7 million reported in financial year 2004-05 while its net profit increased by 65.7% from GBP 3.68 million reported in the previous financial year.
B&Q said it was bullish on its growth prospects in China. In February 2006, the B&Q's management announced that it would be increasing the total number of stores in China to 100 by the end of year 2010. B&Q China's sales revenues accounted for 4% of the total sales of B&Q.
The company was a pioneer in launching the Do-It-Yourself (DIY) concept in the retail stores in China. The company skillfully adapted its products and services to the changing needs of its Chinese customers and grew its operations rapidly during the 2003-06 period. In the year 1999, B&Q opened its first store in Shanghai, China, through a joint venture with Home Decorative Building Materials Limited, a Shanghai based property developer. The company faced challenges initially as the Chinese home improvement retail sector was traditionally a low margin business. However, with time B&Q was able to build its brand successfully through its quality products and by developing a relationship of trust with its customers. The company generated awareness about the DIY concept by arranging workshops and providing free demonstrations in its stores.
In December 2001, China began to implement WTO requirements and so the Chinese government introduced policies allowing in foreign investments in industrial as well as retail sector. Realizing the huge potential of the Chinese home improvement market, B&Q went on an expansion spree from 2002 onwards. As of November 2006, the company had 52 stores across China.5 However, industry analysts have expressed doubts as to whether B&Q's expansion in China will be successful as the company faces fierce competition from domestic as well as foreign retailers in the home improvement industry. As of late 2006, B&Q was broadening its product portfolio to include home appliances and soft furnishings, in an effort to maintain an edge over its competitors....
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