Case Analysis of Best Buys Inc Expansion

Best Buys, Inc has surfaced as a special electronic store in US and other areas operating from Richfield, Minnesota. The main technique for international expansion utilized by BBI is M&A with dual branding by creation of competition between acquired stores and Best Purchases. The case study shows that the strategy has been successful and workable in girl. Within reduction of trade barriers by China and allowing 100% FDI in retail segment, BBI is trying to follow same strategy in China. But Chinese language market being completely different from the Traditional western context, BBI has encountered challenge to minimize over the dual branding strategy. The statement highlights the key tactical issues raised followed by recommendations.

PESTEL Framework

The PESTEL platform is devised to understand the strategic issues underpinning the business enterprise from external sources (Johnson, Scholes & Whittington, 2008)

Figure A-1: PESTEL Analysis

PEST Factor

Key Points

Implications for BBI

POLITICAL

(Chance of BBI to broaden in different Chinese market. )

Liberalization in Chinese retail market from 2004

Reduction in admittance barriers like compulsion of local partners.

Big market for imported product.

(www. Businessinasia. com)

Increase in competition from more powerful global players of retail business.

Growing knowledgeable local retail players.

ECONOMICAL

(Constrains from free directive growth in China)

Shift to market oriented overall economy.

Relatively high local personal savings rate.

Uneven monetary development among different areas of region.

Growth in making sector.

(CIA, 2010)

MOST IMPORTANT

Need for appropriate market segmentation to focus on specific people and Chinese province.

Require to restructure its cost platform to match by sourcing its materials from China to fulfill the cost conscious needs of small cities and towns.

SOCIAL

(Chance of BBI for building its brand in strong position on customer head. )

Increase in middle income people.

Rising income of recently educated school.

Focused on practical aspects of products.

(CIA, 2010)

Potential opportunity of making profits by targeting young educated individuals in metro metropolitan areas.

TECHNOLOGICAL

(Risk for BBI due to unprotected IPR. )

No regulations on Intellectual property protection under the law (IPR).

Improved technological credited to spillover result from other MNCs.

ENVIRONMENTAL

--

LEGAL

(Chance for BBI to keep away potential entrants. )

High legalities for land acquisition.

Procedural delays to grant permission.

Being first international company in retail section gives advantage to earn gains and create efficiency (Kotler, 1997).

3. 0 PORTER FIVE Pushes:

By examining the competitive character of Chinese retail market, market position of BBI can be assessed to formulate technique to neutralize these forces (Porter, 1985; Lynch, 2007).

Force

Strength and Implication for BBI

Competitive Rivalry

BBI caters only to CE retailing.

Consolidation of retail portion has increased challenge.

Emerging established local players.

HIGH

Innovative marketing is the main element power for BBI.

Well known because of its customer centricity.

Powers of Suppliers

Increasing domestic electronics suppliers.

Global suppliers with high bargaining electricity.

LOW

BBI presence proven with sourcing office developed good romance with local suppliers.

Power of Buyers

Low brand recognition while buying product.

Consumers' choice for countrywide brands.

Products bought on basis of price and features.

MEDIUM

Although the energy of clients is medium BBI should make sure that it will reach its distributed customer through its distribution channel anticipated to existence of vast regional difference.

Threats for New Entrants

Highly fragmented Chinese language retail market.

Entry of global retail players.

Newly emerging local players.

HIGH

Concentrate to differentiation from others.

Focus on concentrating on both segments of customers.

4. 0 SWOT examination:

Factors

Implication for BBI

Strength

Presence in China for sourcing digital products since 2003.

Innovative marketing skills.

Established brand in US and encircling regions.

Developing and keep maintaining relationship with established suppliers. Personal relationship is basis of business in China.

Weakness

Being a foreign MNC.

Lack of knowledge for operating in Chinese customer segments.

Lack of quality recruiting.

Acquisition of 5 STAR has reduced the foreign liability and increased local knowledge.

Retail training of International Expectations for employees.

Opportunity

Highly fragmented market.

Increased demand for top quality products in Tier 1 cities.

Income expansion in Tier 2 metropolitan areas.

Establish retail string to set-up brand awareness.

Need for creation of robust syndication network.

Threats

Rampant price wars.

Entering global players.

High domestic cost savings rate.

Consumers differing away to purchase on credit terms.

Cost focused strategy for price sensitive segment and concentrated differentiation branded products in Tier 1 segments (Johnson et. al. , 2007)

5. 0 Key Strategic Issues:

Analyzing internal and external factors various key conclusions have been listed below with their proper implication on BBI.

Key strategic findings

Analysis tool

Key findings

Strategic Implications on BBI

PESTEL Analysis

Huge dissimilarities in living standards.

Increase in removal income.

High personal savings rate among middle income group.

Establish stores to serve both segments to keep up both requirements: Features for cost focused and Differentiation for Tier 1 portion.

PORTER FIVE FORCES

Strong domestic challengers.

Global competitors getting into the marketplace.

Leveraging on first mover edge, establish romantic relationship with suppliers and customers.

SWOT

Lack of local understanding of different Chinese locations.

Domestic retailers travelling on price wars.

Consumers buying less on credits.

M&A can accomplish local knowledge and expanding relationship with established with local suppliers can lower cost low.

6. 0 Strategy Formulation:

TOWS Matrix

Different proper options are formulated using TOWS matrix to handle the proper issues outlined in analysis.

INTERNAL FACTORS IN CHINA

Strengths

Weakness

Established brand "Best Buys".

Relationship with Chinese language suppliers.

International player.

Well versed with new ground breaking technology.

Acquisition of Five Star (75% Show).

Experience in retail portion.

Small range of BBI stores.

Lack of retail skilled employees.

Lack of local knowledge.

Foreign responsibility.

EXTERNAL FACTORS

Opportunities

Competitor's lack of International retail expectations and technology.

Emerging markets

Increasing young educated preferring top quality goods.

SO Strategic options

Dual brand strategy - Five star for cost centered and Best Buys for targeted differentiation.

Influencing young customer portion in Tier 1 market.

WO Strategic options

Increase on expanding retail skilled employees.

Increasing promotional plans.

Reducing cost using technology.

Threats

Global monetary crises.

Legal polices.

Lower cost competition.

High savings rate.

Low credit purchase.

ST Strategic options

Developing brand identification.

M&A with home retailers.

Leveraging on suppliers potential.

WT Strategic options

Good product offerings - Zero percent interest rate on EMI credit purchase.

(Source: Johnson et al. , 2008, p367)

7. 0 Advice:

A detail reason and classification of strategies on basis of Ansoff's Matrix is complete in appendix A. A primary analysis has been carried out using variety of performance indicators to remove options which may well not be suitable for BBI, departing the 3 most appropriated strategies which is often followed. A merged strategy of incremental market development and penetration adopted simultaneously.

First Level

Create brand awareness and acknowledgement among Chinese language customers.

Influence young informed customer segment.

Second Stage

Use of dual branding technique for two different sections - Cost focused for customers believing in functionality and cost; Centered differentiation for brand conscious customers.

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