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
Excerpts
The Initial Years in China
While planning its entry into China, B&Q initially considered one of the three major Chinese cities - Shenzhen, Beijing and Shanghai - for the opening of its first store. In 1998, the company finally decided to set up a store in Shanghai mainly because of its diverse population and as it was the commercial capital of the country. B&Q then looked for a potential partner to form a joint venture based on certain criteria (Refer to Table I for B&Q's criteria to set up the joint venture). In 1999, B&Q formed a joint venture with Home Decorative Building Materials Ltd. - a Shanghai based property developer, which offered land in Shanghai. The joint venture was named Shanghai B&Q Decorative Materials Company (Shanghai B&Q)...
B&Q's Growth Strategies
The public housing system in China underwent a huge change in the late 1990s. The Chinese government introduced new policies for the development of urban areas. Earlier, most of the houses of state employees were owned by the Chinese government. In the year 2000, 60% of all public houses in almost all the provinces, autonomous regions and municipal cities were sold to individuals. Ex-government employees were given the opportunity to buy their rented homes. Also, a large number of new houses were built in urban areas to meet the demand of first-time buyers...
Success Factors
The exterior and interior design of the B&Q Shanghai store was done in white and orange colors, typical of its stores in the UK. The store was big with vast ceilings, high racking and was well lit with bright lights. Each department had instruction boards explaining how to assemble and use the products. The floor employees gave vivid product demonstrations to the customer. The stores had a special children's corner where children could play and construct houses using small pieces of wood (Refer Exhibit II for a photograph of a B&Q store (exterior) in China). B&Q faced some initial problems due to its unconventional merchandise display. Initially, the Shanghai store displayed electrical merchandise like sockets, cables, conduits, switches etc., according to the quality and functionality of the products...
Retail Expansion
In late 2002, the Chinese government announced the introduction of new Foreign Direct Investment (FDI) policies allowing more MNCs to enter China. Earlier, foreign firms operated in a restrictive environment with limitations on the opening of new outlets and scale of operation. The new policy allowed MNCs to open shops anywhere in China from December 2004 onwards. It also allowed in wholly-owned foreign enterprises side by side with joint ventures with local firms. In October 2003, B&Q opened a store in Beijing and after this, two more stores were opened in Shuangjing and Laiguangying in 2004...
The Challenges
By late 2006, the home improvement industry in China had become highly competitive. China's acceptance of WTO directed trade practices on December 11, 2001 encouraged a number of foreign retailers to set up more and more retail outlets. The competition increased further as the Chinese Ministry of Commerce also allowed foreign investment into small and medium sized retail operations from March 01, 2006 onwards...
The Road Ahead
Another way in which B&Q decided to compete effectively with domestic as well as foreign retailers was through a widening of its product range. In September 2006, B&Q inked an agreement with the Haier Group to sell Haier's kitchen appliances in its stores. Wei commented, "The partnership with Haier is a milestone for B&Q in its efforts to broaden its product range. We will continue working with Haier and other potential domestic appliance suppliers to provide more of our customers with more products."...
Exhibits
Exhibit I: B&Q Store (Interior)
Exhibit II: B&Q Store (Exterior)
Exhibit III: Leading Retailers in China (December 2005)
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