Best BuyDoes Best buy fail in China?

Mei Meng( Melody): 311066615Xilin Wang(Lin):310071992Yizhuo Wang( Bill):311289959

Outline

• Company profile• Does it fail• Problems• Failure diagnose• Possible solutions

Best Buy review

• 2003, the first office in Shanghai

• 2006 May, acquire shares of Five Star appliance

• 2007 January, the first brand store in Shanghai

• 2011, announced to close the 9 branded stores in China

Five forces model

• Existing competitive rivalry between supplier- strong

GOME, SUNING • Threat of new market entrants- strongCircuit city of USA, Yamada and Island appliance from

Japan• Bargaining power of buyers- strongLittle differences in products, prefer more familiar and

local brand• Bargaining power of suppliers- complex• Threat of substitute products Easily to be replaced

by appliance department of stores, supermarkets and shopping web sites, such as TAOBAO, EBAY and 360buy

SWOT model

• StrengthGood customer service, good quality, rich management

experience in Europe • WeaknessHigh retail price and cost, weak market share• OpportunityForeign brand effect, new categories• ThreatStrong local competitors and new entrant, little

familiarity with local customer, cultural difference

Key issues1. Slow expansion strategy

Primarily open stores by acquiring the real estate, not renting and leasing

Before fully expanding, the main domestic competitor, Suning & Gome had controlled

China market

2. Lack of retail experience and research in China

Environment change, culture difference, product preference

Price too high, focus on product diversity rather than brands and

quality

3. Lose location advantage

Local competitors have dominated valuable location, and set up barriers

to Best Buy

Other Problems

1. Local political issue :examination and approval issue by Chinese government

2. Lack of supplier relationships and network support

3. Low- efficient communication system between China and US headquarter

Solutions

1. Change the expansion strategyOpen the new stores in small cities rather than

big citiesRent stores rather than acquisition2. Offer free high quality after-sale services3. Reposition of price strategy4. Strengthen local supplier network

Any Questions?

Thank you!