Best Buy in China

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Case Details:

Case Code : BSTR299
Case Length : 20 Pages
Period : 2003-2008
Pub Date : 2009
Teaching Note :Not Available
Organization : Best Buy Co. Inc. Industry : Electronics / Consumer appliances Retail
Countries : China

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

On the reasons for this, Robert Willett (Willett), CEO Best Buy International and CIO, said,

"In China, the earthquake and the major decline in the Chinese stock markets had a major effect on the psyche of the country, leading to a dramatic impact on the economy and retail sales. Our comparable store sales in China declined by the high single digits."6

Best Buy ventured into China in September 2003 by opening a sourcing office in Shanghai. Through this office, it also studied the Chinese market, which it eventually intended to operate in.

Best Buy entered the Chinese retail market in May 2006 by acquiring a majority stake in Jiangsu Five Star Appliance Co. (Five Star)7, the fourth largest electronics retailer in China. Five Star operated around 136 stores across the country.

The acquisition was a part of Best Buy's 'dual brand' strategy - with Five Star stores and the Best Buy stores intended to cater to different segments of customers.

Best Buy opened its first store in Shanghai in December 2006. The store, which occupied an area of over 87,000 square feet, was its largest in the world. It showed a marked contrast to stores operated by Chinese retailers, which were often dingy and badly maintained.8 At the Best Buy stores, customers could try out the products9 and employees helped them to decide on the products that would suit their needs...

Excerpts >>

6] "Best Buy Reports Second-Quarter Diluted EPS of $0.48,", September 16, 2008.
7] Five Star Appliance was founded in 1998 as a wholesale business. It opened its first store in 2001. The products it sold included air conditioners, video and audio products, appliances, and communication devices.
8] "Best Buy Opens First China Outlet,", December 26, 2006.
9] In almost all the other stores in China, the products were displayed in glass cases and the customers could touch and try them only with the assistance of sales personnel.

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