Best Buy in China
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Case Code: BSTR299 Case Length: 20 Pages Period: 2003-2008 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: Best Buy Co. Inc. Industry: Retail Countries: China Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Going International
Initially, in 2001, Best Buy began looking at options to expand its operations internationally. But company also went about transforming its US business at around this time and the international plans were put on hold. It transformed its US business based on 'Customer Centricity'...
Best Buy Moves to China
After tasting success in the Canadian market, Best Buy planned to move beyond North America, to take advantage of the growing markets in other regions of the world. According to Patel, "If Best Buy is going to be the leading or biggest player globally in an industry that is already global, it's our inevitable destiny to be in international markets."...
Entry through Acquisition
In May 2006, Best Buy acquired a stake of 75% in Jiangsu Five Star Appliance Co. (Five Star), the fourth largest electronics retailer in China, for US$ 180 million. Five Star operated in the country through 136 stores in eight of the 34 provinces and its revenues were around US$ 700 million in 2005...
Best Buy Opens its Store in China
For its first store, Best Buy found a property owned by Feidiao Electrics Co. Ltd. in Shanghai. It bought four floors of the building for around RMB 250 million...
Initial Response is Positive
In a country like China, where the consumers were bombarded with options by the vendor representatives and where the prices could be brought down through negotiations, analysts were not sure of Best Buy's prospects. But surprisingly, Best Buy performed better than expected. Analysts expressed the view that the customers were happy with Best Buy as they did not have to worry about the authenticity of the products or about warranties. On the whole, there were none of the uncertainties that shopping at other malls involved...
Challenges
In China, Best Buy had to contend with a number of challenges. In addition to strong local competition, it had to contend with price-conscious shoppers in a market where margins were very low compared to that in the US...
Looking Ahead
Some analysts were of the view that the Chinese venture might not prove profitable for Best Buy. Due to its China operations, the gross profit rate of the company went down by around 0.2% during the year ending March 01, 2008...
Exhibits
Exhibit I: Best Buy Logo
Exhibit II: Best Buy's Customer Centricity
Exhibit III: Best Buy - Statement of Earnings
Exhibit IV: Consumer Electronics Retail in China
Exhibit V: Consumer Electronics in China - Main Players
Exhibit VI: Operations - Five Star and Best Buy Stores in China
Exhibit VII: Top 11 Chain Retailers in China - 2007
Exhibit VIII: Training at Best Buy China
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