Best Buy China

After reading the case study for next week’s class I went searching online for Best Buys in China.  I was curious to see whatever happened with the dual-branding strategy that they were talking about.  The first article that showed up was an article in February of 2011 on Best Buy closing down all their stores in China.  Here’s the link.

http://www.bloomberg.com/news/2011-02-22/best-buy-s-china-stores-shut-as-retailer-focuses-on-more-profitable-brand.html

I can tell from the article that Best Buy definitely went ahead with the dual-brand strategy and wasn’t quite as successful as they were in Canada.  Their decision was to close down all the existing Best Buys in China and to focus on expanding the Five Star retail stores.  I think that the Best Buys didn’t do as well in China compared to Canada because there were already a few strong competitors in China in the CE category.  The case study mentioned that the Chinese has a lot of pride in their country and has a tendency to stick to local brands.  This might be another reason why Best Buy failed in China. Not only are they a foreign brand that people in China has never heard of before, they do not have a working relationship with vendors in China.  As we’ve learned in last week’s class, the Chinese put a lot of weight on relationships with the people they do business with.  They are buying the people, not necessarily the product.

I believe that the dual-brand strategy worked well in Canada for Best Buy because there was only one other major competitor and both their core competencies were different.  They offered 2 different buying experiences for customers so they can co-exist and not cannibalize each other too much.  I think Best Buy might have been able to succeed in China if they had a competitive edge over the other 3 major competitors; Gome, Suning and Five Star.  Their distinction from the other 3 competitors was probably not big enough for Chinese customers to break loyalty from their usual brand.  All in all, I think it’s probably wise for them to focus on building the Five Star brand and expand from there to gain more market share.