Best Buy's Dual-Branding Strategy: Best Buy With Canada

The dual-branding strategy Best Buy created with Canada was a new venture for them. Their plan to go with Canada first was that is was close to their current territory and they felt they could understand their market a quicker. But as with any new strategy comes with learning curves and Best Buy found some along the way. They needed to understand how to incorporate their current business structure and align it with Future Shop’s operating processes in order to avoid cannibalization between stores and blurring the brands identities in the eyes of the consumer (Ferrell & Hartline, 2011). Some of the lessons learned during the dual-brand strategy with Canada was, how to keep the two brands distinct between the Best Buy brand and Future Shop’s, how to build international leadership teams, share infrastructure and capabilities, utilize a private label to improve margins and differentiation, and focus management attention around core/optimize/transform (Best Buy, 2008).

Best Buy knew they needed to move outside the US market in order to expand their competitive advantage. The Canada strategy proved to be very successful and provided the leadership of Best Buy a road map to follow, allowing them to feel more confident moving into other

foreign markets. Their next sights were on moving into the China market. But although they learned lessons from the first dual branding effort, the China market showed some differences, which Best Buy had to work into.

China has always been know to be a very technical savoy country and it made sense that Best Buy would want to increase their competitive advantage in that country.

Best Buy chose them because of their market opportunity, consumer fundamentals, and macro-economic factors (Ferrell & Hartline, 2011). But the cultural from the US to China is very different and can provide many obstacles when organizations try to compete within their structure. Best Buy knew they needed to team up with a company that was well established in order for them to make that move. And although they had already created a dual-brand strategy outside the borders of the US, the move into China would present different situations for the leadership of Best

Buy.

Some of the differences they encountered between their first strategy with Canada to moving into China were, the China consumers buying behaviors were different so Best Buy had to re-visit their pricing, the spending cultural in China was different in terms to their spending behaviors, they are very brand loyal, their store training and selling strategies (Best Buys Centricity Strategy) had to be adjusted to the market, and they are very brand loyal which bringing in a US company could hurt the brand (Best Buy Case, 2014). The Best Buy Centricity Strategy was created in 2001 and it was based on four elements: Identifying customers generating the most revenue, segmenting these customers, realigning the stores to meet the needs of these customers, empowering the store sales staff, known as Blue Shirts, to steer these customers towards products and services that would encourage them to visit more often and spend more on each visit (Ferrell & Hartline). This concept is one of the foundations that Best Buy uses to establish its core competitive advantage and needs to adjust when looking to move into international markets.

References:

Best Buy International Strategic Update, (2008). Retrieved October 25, 2014, from http://www.slideshare.net/finance7/best-buy-international-strategic-update

Ferrell, O.C. & Hartline, M. (2011). Marketing Strategy, (5th ed.). South-Western/Cengage Learning.

Jone, R, (2014). The Best Buy Case. Retrieved October 25, 2014, from http://prezi.com/zj17etuvitjx/best-buy-case/

The Best Buy organization has shown exceptional growth in the US market since they were founded in 1966 (Ferrell & Hartline, 2011). They saturated the US markets and began to move into International markets by creating a dual-brand strategy with Canada. But as Best Buy is starting to see, working to build an international brand in foreign markets is much more complex than they counted on. With their struggles to keep key Best Buy leaders in China and competitor’s sales far exceeding Best Buy, they must decide to continue their up hill climb in the foreign markets or put more focus on the competitors in the US markets that are knocking on their back door. In 2012, competitors like Suning and Gome had 10.6 percent and 10.3 percent, while Best Buy only held 1.8 percent of the Chinese market (Jeffery, 2012). In order to understand their market competition they must adjust their strategy to compete with the other businesses within the international markets.

Although it is a smart move for businesses to increase their growth and competitive advantage by moving into international markets, they must weigh the threats and opportunities that can potentially cause their strategy to fail. Best Buy fully understands their strengths and continues to work them, but what works for a business in one cultural will not work the same in others. Which is exactly what they are discovering in the China market. If they cannot get any traction in that market they need to make the determination how large of presence they want to create without causing their current market strengths in the US to falter. Best Buy has already established a footprint in the China market. They must revisit their strategy and focus on the threats and opportunities they have in order to create success. Many business have tried to gain market ground in foreign countries and were able to achieve success, once they understood how to strategically align their core competencies with the operation of those markets. Companies like McDonald’s and KFC were able to grow successful brands in the China market because they understood what the cultural was looking for in a business (Hsu, 2012). Best Buy will always have competitors in their US markets. But they need to ensure they stay focused on their current strengths within that market while also pursuing their footprint internationally.

References:

Ferrell, O.C. & Hartline, M. (2011). Marketing Strategy, (5th ed.). South-Western/Cengage Learning.

Hsu, R. (2012). What Types of Business Succeed in China? Retrieved October 26, 2014, from http://investorplace.com/2012/06/what-types-of-businesses-succeed-in-china-gps-wmt-lmvu-mr-mcd-yum/#.VE14CRbd7eI

Jeffery, A. (2012). Wall Street to Best Buy: Get Out of China, Now. Retrieved October 25, 2014, from http://www.cnbc.com/id/1006