- April 16, 2020
Best Buy Failure in China
BestBuy Failure in China
BestBuy Failure in China
Themultinational retailer, Best Buy Company, sells home officeappliances, customer electronics, and entertainment merchandisesamong other services. It decided to pursue an international strategyfocusing on China. Consequently, it acquired Jiangsu Five Star in2006, which was the number three Chinese retailer (Best Buy, 2008).The company then went ahead to open its first store in Shanghai,China and by 2011 it had eight branded stores in the nation. However,the company attracted a loss of $1.7 billion (Shuguang, 2012)resulting in the closure of all eight branded stores, as well asother big-box stores. In this paper, I will identify the primaryissues associated with product failure differentiating between thereasons and implications.
Uponentering the Chinese market, Best Buy adopted similar operations andmanagement styles as those in Canada and the United States, with thecorporate manager controlling all the store’s activities (Shuguang,2012). The employees were trained to deliver a service-centeredbusiness model approach in a friendly manner. It sold repair work,guarantees, and installation services like those found in the U.S.They also advocated for a fixed-pricing strategies, which collidedwith Chinese consumer buying behaviors that are dependent on lowerprices. The employees did on get commissions on their sales aspracticed in other Chinese stores making them less motivated to pushsales despite the overreliance on commission.
Further,Best Buy aimed to open up big-box stores for their operations withinurban regions (Shuguang, 2012). However, they sold products withsimilar prices to those found in local stores in the area that wereconvenient to locate. Due to this, it became hard for them to reachall clients ensuring that they loose sales. Further, they did notoperate in business models similar to Chinese retailers, whichallowed them to gain more revenue by renting segments of their storesto major electronic brands like LG (Shuguang, 2012). These revenueswere in form of rentals and commission money on all of the brandsprofits. Best Buy discouraged the use of commission strategies, whichdemoralized their workers ensuring the loss of sales making this anunprofitable venture.
Accordingto Boscor, Bratucu & Baltescu (2013), self-reference criterioninvolves unconsciously referring to one’s individual culturalexperiences, knowledge, and values as decision grounds. Under thiscriterion, Best Buy should have assumed that the Chinese managementteam knows best the manner by which to carry out the business. Theyshould have engaged their staff and ensured that they learn from themways to integrate their company into the market instead ofrestructuring the organizational personnel in accordance with theUnited States and Canada. These employees would have educated themabout the Chinese consumer buying behaviors allowing Best Buy toadopt acceptable selling models.
Toattain success in the Chinese market, Best Buy should adopt newlocation strategies that will allow easier consumer contacts comparedto the large urban-centered big box stores. They should also aim toincrease revenue by renting out sections of their stores to brands.Subsequently, Best Buy should evaluate the Chinese market on a widerscale by involving their local employees to find a differentiationstrategy that works in this nation (Boscor, Bratucu & Baltescu,2013). They can also adopt multiple training sessions to ensure thatall staff members work in accordance with the Chinese clientexpectations.
BestBuy. (2008). Fiscal 2008 Annual Report. BestBuy,retrieved online on 16 Nov 2016, fromhttps://s2.q4cdn.com/785564492/files/doc_financials/2008/annual/BestBuy_Fiscal08_Annual_Report.pdf
BOŞCOR,D., BRĂTUCU, G., & BĂLTESCU, C. (2013). DRIVERS OF THEINTERNATIONAL EXPANSION OF EMERGING-MARKET MULTINATIONALS. BulletinOf The Transilvania University Of Brasov. Series V: EconomicSciences,6(1), 9-14
SHUGUANG,W. (2012). THE SETBACK OF BEST BUY IN CHINA. RetailDigest,20-25