International Business

International Business Case Studies CASE STUDY (20 Marks) The case focuses on US based electronics retailer Best Buy Co. China was Best Buy's second international venture, after its successful operations in the Canadian market. Best Buy ventured into China by opening a sourcing office in 2003, and at that time it planned to study and understand the Chinese market and also recruit talented employees locally in order to open its stores in China. Before it opened its own brand stores, Best Buy acquired a majority stake in Jiangsu Five Star Appliance Co., (Five Star Appliance) in May 2006 and began operating 136 Five Star Appliance stores in eight provinces across the country as part of its 'dual brand' strategy. Best Buy opened its first 'Best Buy' store in December 2006, in Shanghai. The store was Best Buy's largest, and was spread across four floors.

According to analysts, The 'Best Buy' store was a new model of electronics stores in China and was in contrast to other stores in China. The store was brightly lit and carpeted ; the sales assistants at the stores were noncommissioned, and did not hard sell the products ; and customers were provided with ample freedom to test and try the products. Though analysts were initially skeptical about Best Buy's prospects in the country, the store received a good response and went on to become one of the top ten revenue generators for the company. However, the going did not remain smooth. Best Buy could not open its second 'Best Buy' store in China as planned due to problems and delays in getting the required permission. The company also faced problems as it could not find trained manpower and had to contend with price conscious shoppers. Moreover, it faced intensified competition from well entrenched Chinese electronics retailers such as Gome and Suning and also from Western retailers such as WalMart and Carrefour that sold electronics items in their stores.

Answer the following question. Q1. Analyze the entry and expansion strategies of Best Buy in China. Q2. Discuss the other issues and challenges faced by foreign retailers in China. Q3. Explore strategies that Best Buy could adopt to tap the opportunities in the Chinese retail industry while mitigating the risks of operating in China.