Case Study of Best Buys Inc Expansion

Case Study of better(p) Buys Inc ExpansionBest Buys, Inc has emerged as a special electronic retailer in US and other areas operate from Richfield, Minnesota. The main strategy for international expansion used by BBI is MA with dual pocking by creation of competition between acquired stores and Best Buys. The campaign study shows that the strategy has been successful and workable in western world. Within reduction of trade barriers by China and allowing 100% FDI in retail segment, BBI is move to follow same strategy in China. But Chinese market being totally different from the Western context, BBI has faced challenge to cut crossways the dual tainting strategy. The report highlights the main strategic issues raised followed by recommendations.PESTEL FrameworkThe PESTEL framework is devised to understand the strategic issues underpinning the business from external sources (Johnson, Scholes Whittington, 2008)Figure A-1 PESTEL psychoanalysisPEST Factor discern PointsImplication s for BBIPOLITICAL( probability for BBI to expand in different Chinese market.)Liberalization in Chinese retail market from 2004Reduction in entry barriers like compulsion of domesticated partners.Big market for imported product.(www.Businessinasia.com)Increase in competition from untouchableer global players of retail business.Growing knowledgeable domestic retail players.ECONOMICAL(Constrains from free directive growth in China)Shift to market oriented economy.Relatively high domestic savings rate.Uneven stinting development among different states of nation.Growth in manufacturing sector.(CIA, 2010)MOST IMPORTANTNeed for appropriate market segmentation to target specific people and Chinese province. posit to restructure its appeal base to suit by sourcing its materials from China to satisfy the cost conscious needs of small towns and cities.SOCIAL(Opportunity for BBI for establishing its brand in strong position on client mind.)Increase in middle class people.Rising income of n ewly educated class.Focused on functional aspects of products.(CIA, 2010)Potential probability of making profits by targeting young educated individuals in metro cities.TECHNOLOGICAL(Threat for BBI due to unprotected IPR.)No laws on Intellectual property rights (IPR).better technological due to spillover effect from other MNCs.ENVIRONMENTALLEGAL(Opportunity for BBI to keep away potential entrants.)High legalities for land acquisition.Procedural delays to grant permission.Being prototypal international company in retail segment gives advantage to earn profits and create efficiency (Kotler, 1997).3.0 PORTER FIVE FORCESBy analyzing the competitive record of Chinese retail market, market position of BBI can be assessed to formulate strategy to neutralize these forces (Porter, 1985 Lynch, 2007).Force effectiveness and Implication for BBICompetitive RivalryBBI furnishs lone(prenominal) to CE retailing.Consolidation of retail segment has increased challenge.Emerging establish domesti c players.HIGHInnovative marketing is the key strength for BBI.Well know for its customer centricity. plys of SuppliersIncreasing domestic electronics suppliers.Global suppliers with high bargaining power.LOWBBI presence established with sourcing office developed good relationship with local suppliers.Power of BuyersLow brand recognition while buying product.Consumers preference for national brands.Products bought on basis of legal injury and functionality.MEDIUMAlthough the power of buyers is medium BBI should make genuine that it should reach its distributed customer through its distribution channel due to presence of vast regional difference.Threats for New EntrantsHighly fragmented Chinese retail market. foundation of global retail players.Newly emerging domestic players.HIGHConcentrate to differentiation from others.Focus on targeting both segments of customers.4.0 SWOT analysisFactorsImplication for BBIStrengthPresence in China for sourcing electronic products since 2003.Inn ovative marketing skills.Established brand in US and surrounding regions.Developing and maintain relationship with established suppliers. Personal relationship is basis of business in China.WeaknessBeing a foreign MNC.Lack of knowledge for operating in Chinese customer segments.Lack of quality human resources.Acquisition of Five supporter has reduced the foreign liability and increased local knowledge.Retail training of International Standards for employees.OpportunityHighly fragmented market.Increased demand for branded products in Tier 1 cities.Income growth in Tier 2 cities.Establish retail chemical chain to create brand awareness.Need for creation of robust distribution network.ThreatsRampant price wars.Entering global players.High domestic savings rate.Consumers differing away to leveraging on credit terms.Cost focused strategy for price sensitive segment and focused differentiation branded products in Tier 1 segments (Johnson et. al., 2007)5.0 let on Strategic IssuesAnalyz ing internal and external factors various key findings have been listed below with their strategic implication on BBI.Key strategic findingsAnalysis toolKey findingsStrategic Implications on BBIPESTEL AnalysisHuge differences in living standards.Increase in disposal income.High savings rate among middle income group.Establish stores to cater both segments to maintain both requirements Functionality for cost focused and Differentiation for Tier 1 segment.PORTER FIVE FORCESStrong domestic competitors.Global competitors entering the market. supplement on first mover advantage, establish relationship with suppliers and buyers.SWOTLack of local knowledge of different Chinese regions.Domestic retailers driving on price wars.Consumers buying less on credits.MA can fulfill local knowledge and developing relationship with established with local suppliers can cut cost low.6.0 Strategy FormulationTOWS MatrixDifferent strategic options are formulated using TOWS matrix to address the strategic i ssues highlighted in analysis.INTERNAL FACTORS IN chinawareStrengthsWeaknessEstablished brand name Best Buys.Relationship with Chinese suppliers.International player.Well versed with new innovative technology.Acquisition of Five Star (75% Share).Experience in retail segment.Small depend of BBI stores.Lack of retail skilled employees.Lack of local knowledge.Foreign liability.EXTERNAL FACTORSOpportunitiesCompetitors lack of International retail standards and technology.Emerging marketsIncreasing young educated preferring branded goods.SO Strategic optionsDual brand strategy Five star for cost focused and Best Buys for focused differentiation.Influencing young customer segment in Tier 1 market.WO Strategic optionsIncrease on developing retail skilled employees.Increasing promotional packages.Reducing cost using technology.ThreatsGlobal economic crises.Legal regulations.Lower cost competition.High savings rate.Low credit purchase.ST Strategic optionsDeveloping brand recognition.MA wi th domestic retailers.Leveraging on suppliers potential.WT Strategic optionsGood product offerings Zero percent interest rate on EMI credit purchase.(Source Johnson et al., 2008, p367)7.0 RecommendationA detail explanation and classification of strategies on basis of Ansoffs Matrix is detailed in appendix A. A primary analysis has been carried out using number of performance indicators to eliminate options which may not be suitable for BBI, leaving the 3 most appropriated strategies which can be followed. A combined approach of incremental market development and penetration followed simultaneously.First StageCreate brand awareness and recognition among Chinese customers.Influence young educated customer segment. game StageUse of dual branding strategy for two different segments Cost focused for customers believing in functionality and cost Focused differentiation for brand conscious customers.