Melody will begin our presentation with a personal anecdote.
Mike will continue with the introduction and will introduce each individual member.We will talk about (1) how China’s culture compliments BBBY and how it will be easy to adapt to China’s culture, (2) current economic trends and how they are indicative of future success in China, and (3) social responsibility that BBBY will assume upon entering the Chinese market.
Cultural Fit Equals Success:For Bed Bath & Beyond (BBBY), any further international expansion must first take into account the cultural fit. If the company’s ideals, store structure, and product line does not connect with a country’s culture, the company will not be able reach its maximum financial potential. Expanding Bed Bath & Beyond into China will bea seamless transition and revenue generator because there is a perfect fit between the company’s marketing strategy, product lines, and China’s high-context, family-oriented culture.
A Perfect Cultural Fit: Product LineCultural differences will always be a risk in international expansion, but for BBBY, expanding into China will actually be less risky than going into other countries because it can easily store merchandise to fit the cultural needs. For the most part, BBBY will instead be able to capitalize on its brand perception with its stores and individual product lines. Not only will BBBY be able to offer its current Americanized products, like those pertaining to student life or home organization and design. It will also be able to tailor its product lines to what Chinese consumers want. In Hong Kong, for example, there is an increasing demand for products that encourage family gathering, as well as storage units for organizing home hobbyists’ tools and accessories. Products featured in BBBY’s Chinese stores have the ability to reflect both the Chinese and American cultures, which will appeal even more to Chinese consumers and will lead to overall monetary success.
A Perfect Cultural Fit: Marketing StrategiesWhen it comes to expanding into China, BBBY’s current marketing strategies will mesh very well with the Chinese consumers. In the U.S., BBBY typically relies on its “word of mouth advertising”, reputation for offering a wide assortment of quality merchandise at everyday low prices, and some paid advertising. Though paid advertising generally has more of an impact in the U.S., BBBY’s word-of-mouth marketing strategy will actually be successful in China because of the culture’s high-context, indirect communication. The graph above shows that Chinese shoppers rely mostly on trusted friends, relatives or coworkers to learn about products. The bars indicate each information source’s range of use among six countries (U.S., Germany, France, Japan, Korea, and China), while the dot highlights a percentage of Chinese that use a particular communications channel. BBBY has the ability to position itself as the next “hottest” export to China. It has the financial support and marketing capabilities to reach out to the Chinese customers in a very personal way. BusinessWeek suggests that companies wanting to be successful with Chinese consumers need to “tailor their strategies to fit in with China’s unique values, beliefs and love of status.”
A Perfect Cultural Fit: Brand PerceptionMoreover, BBBY’s reputation as a high-quality, mid-priced brand will be enhanced by China’s positive perception of international brands. Research shows that Chinese consumers tend to prefer international brands versus those that are local; there is a general perception that international brands, especially those that are American, are higher quality. The graph above shows this trend throughout various industries: 53% of respondents are willing to buy foreign consumer good brands, and 46.3% willing to buy foreign home appliance brands.
Indicators of Economic Success: Current Consumer Spending TrendWith a population of 1.3 billion and an estimated GDP of more than $7.8 trillion in 2008, China has established itself as the most attractive emerging market in the world. While recessionary effects are being felt globally, China’s consumer spending in the area of House-wares and home furnishings remains the largest in the world and is projected to increase 19% by 2011. Within this consumer demographic, there are specific segments unique to city and region that Bed Bath & Beyond will target to yield the greatest returns on sales, ultimately increasing value for the shareholder.
Indicators of Economic Success: DemographicsThe largest and most prevalent of these groups are the Aspirationals: a mix of young male and female consumers who are highly brand-conscious, but favor brand names that are affordably priced and a good value. They are generally open to international brands. This includes one of our most important target audiences: the Chinese University student. As space is scare in many Chinese dormitories and apartment complex units, BBBY’s diverse product offering will allow consumers to maximize space efficiently, while also providing quality brand-name products to meet the consumer’s image perception needs. The next segment BBBY will target are the Young Royals: professional men and women in their 30’s who have the highest disposable incomes of all Chinese. This group is highly brand-conscious and typically the most open to international brands. Understanding these characteristics, BBBY can structure its marketing strategy to position itself as a quality, international company whose products successes and quality standards will enhance the consumer’s living space and are translatable to the Chinese market. Another important target segment are the Established Money: typically older men and women with above-average incomes who want the latest in technology and high-end, exclusive products. However, they also value well-established brands. They are least likely to say they prefer to buy brands manufactured in China over those that are imported. The last target segment are the Patriots, who are more likely to buy Chinese products out of what appears to be loyalty to their country and native companies. They are middle-income consumers who eschew the latest-generation of products for long-established local brands in some product categories. BBBY will highlight the fact that it carries locally manufactured Chinese goods in it’s stores, and purchase of such products will not only support the locally markets and industry producers, but stimulate the economy as a whole.
Real Estate Market and Regional CompetitorsOne current risk that we face is the real estate market. There is not one market that has not been financially affected by the current economic crisis that threatens the entire global market. The thing to note is that while growth has significantly slowed, especially at the beginning of the fiscal year 2009, real estate value has not. Thus people are buying fewer homes and property by the values of those homes and property remain relatively high. Thus, China differs from America because they are not suffering nearly as much as the American economy is. China’s GDP and overall economy continue to grow at a rapid pace and this offsets the slowing down of the real estate market. Economists predict the Chinese real estate market will bounce back near the end of 2009. Also, since BBBY leases their property, we will have no problem finding affordable leases on high valued properties.With similar products and little product differentiation, the main force driving competition is price. In addition, as most domestic manufacturers are located in the same place, information about competitors is easy to come by, further fuelling price competition. This ultimately led to a disparity between manufacturers and quality of products. For instance, in order to remain competitive there are companies like IKEA, who undercut prices but sacrifice the quality of the goods. On the other end of the spectrum, companies like locally based manufacturers and retailers such as Franc & Franc, charge higher prices for highly specialized luxury goods to perpetuate the perception that their products are far superior. As domestic manufacturers adopt their own brands instead of manufacturing solely for others, the number of Chinese home furnishings brands increased quickly in a short amount of time. However, most provide customers with homogenous products. As many of them have no clear orientation, their product range is very wide – from some cheap to luxury products. However a lack of strong design means that these products are less competitive than famous, well-established international brands. There is an opening for Bed Bath & Beyond to come in and be successful, as they have positioned themselves as the “one stop shop” medium to high quality carrier of house-ware goods at discount prices.
Corporate ResponsibilityBBBY should penetrate the Chinese markets because of the fitting social trends and BBBY’s opportunity to improve social conditions in the country. The social improvements that BBBY will have on China will immediately establish positive feelings for BBBY among the Chinese. Strong relationships and a liking for one another are especially important in the social aspect of business relationships in China. BBBY’s main goal will be to promote higher “guanxi,” or personal connection, between the company and the local community.China is one of the world’s leading manufacturers, but because of the economic recession taking place across the globe, Chinese manufacturers are losing customers and are having trouble turning over their inventory. BBBY’s expansion into China would include the employment of local manufacturers for the production of both the normal American-known BBBY products as well as traditional Chinese home products. The Chinese will more than welcome BBBY’s purchasing of their goods.BBBY will benefit from working with the local Chinese community because this strategy will increase its target Chinese market. BBBY’s potential customer base will be very large because of the availability of traditionally American products and traditional Chinese products produced by the local manufacturers that will be available in BBBY stores. Including local manufacturers in our expansion plans will greatly reduce the shipping costs BBBY usually incurs; thus, improving profit. The local Chinese markets will benefit from BBBY inclusion in their communities. Local manufacturers will be happy to have a buyer for their products and hopeful to establish business relationships with BBBY far into the future. The community will also be excited for the job opportunities within the store that BBBY will offer. BBBY will stimulate the local economies and increase the employment levels and therefore, the standard of living of the Chinese communities they plan to join.
Corporate Responsibility (continued)If we want to appeal to the local Chinese population, we must consider brand loyalty. Brand loyalty is an important factor to take into account when looking to expand into foreign markets. The relative lack of brand loyalty in Chinese culture is directly beneficial to BBBY in that the consumers will accept the new company more willingly. The newest, trendiest products are the most desirable in China and BBBY plans to cater to this demand. With the stocking of both traditional Chinese furnishings and trendier, exotic products, all consumer groups will find value in what our company has to offer. This situation is fortunate for us, since other areas such as Latin and South America display much higher levels of brand loyalty. Their stubbornness to begin spending money at a brand new Bed Bath and Beyond store would cripple sales. One of the most advantageous aspects of international expansion into China is the sheer amount of consumers in its rapidly growing market. China is the most populated country on Earth with 1.3 billion citizens, which constitutes 20% of the entire globe’s population. Although Bed Bath and Beyond targets consumers from all different sectors and social classes, there are some positive projections for one of our most profitable consumer groups: the middle class. The global middle class is expected to grow from 430 million in 2000 to 1.15 billion by 2030, according to WorldBank projections and studies. In 2000, developing countries constituted about 56% of the global middle class, but this number is expected to dramatically increase to a staggering 93% by 2030. Of this entire middle class growth, China and India are expected to account for two-thirds, with China contributing 52% and India contributing 12%. These statistics depict the enormous amount of growth China is expected to endure in the new future, and are extremely positive figures for a company like BBBY that’s looking for a growing marketplace and consumer base to infiltrate. Within China, the middle class is expected to grow from 43% to 76%. Such a huge increase represents seemingly endless opportunity for expansion as one of our primary consumer groups is almost doubling in size. BBBY understands that a country’s viability depends on the middle class, and BBBY directly fosters the middle class.
Tom & Kelly will conclude and summarize our main points. This time is allotted for a questions and answers period.
Bed Bath & Beyond China
Expansion Into China<br />
Bed Bath & Beyond’sDepartment of International Expansion <br />