Best Buy, eBay, Home Depot failures in China highlight need to adapt
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Best Buy, eBay, Home Depot failures in China highlight need to adapt
- 2. Best Buy in China
- 3. History Opened its first store in Shanghai in 2003 Spent 8 years expanding to big cities In 2011, shut down all nine stores in China
- 4. Why it failed ? Sticking to American Business model Differing market philosophy: Best Buy promoting high-end value to low-end consumers Always playing by the rules and morals
- 5. What Best buy can learn from succesful companies Walmart adapted to Chinese market philosophy KFC matched consumer’s taste & preferences
- 6. 2002 - Entering China by acquiring EachNet, a chinese consumer auction site The largest e-commerce play in China 2003 – competitor (taobao) 2005 – failed to attract chinese consumers 2006 – joint venture with TOM Online Inc 2006 – Shutting Down
- 7. Strategy Bringing in US-based technology to China Global platform Centralized decison making Complexity of Ebay’s global platform affected the speed of decision makin in China’s operation
- 8. Ebay vs Taobao EBAY TAOBAO Advertising on busses, subway platform Advertising on TV channels Fees for quality service Free services 40% for auction Majority are for sales, 10% for auction Online Auction Market in China
- 9. Why Ebay Failed ? Failed to understand the Chinese market No adaption Lack of customer focus
- 10. Home Depot US based home improvement retailor founded in 1979 Its second largest American retail store In 2006, announced its acquisition in Chinese market as ‘The Home Way’, present in 6 cities with total of 12 store In 2009, they closed 5 of their stores, and announced to introduce in e-marketplace soon In 2012, they closed all remaining of 7 big box stores from China Home Depot adapted wait-and-see policy in Chinese marketplace Home Depot lack of success is frequently attributed to its business ethos
- 11. What failed Home Depot Do-It-Yourself (DIY): A model that wasn’t meeting the needs of Chinese consumers The market trend says it is more of a Have-it-done-by-others culture (HIDBO) Young Chinese look to acquire Western lifestyles. Home ownership 15 years ago was non-existent. Now, Chinese prefer small apartments The quality of service was also not appreciatable
- 12. IKEA Strategy IKEA is also a furniture, home improvement, and do-it-yourself company, but it provides assemble-for-you policy Its setup and stores are what Chinese look forward to End product information helps Chinese to make up their mind A furniture store or a colorful theme park? Whatever! as long as there are customers
- 13. A furniture store or a colorful theme park?
- 14. Lessons to be learned Chinese consumers need to be educated as they have no role models. They are eager to learn but they need guidance. Companies that invest in educating the market can expect to reap handsome rewards. Pay attention to local customers’ preferences. For example, the kitchen is usually small and considered secondary in a Chinese home. Chinese cooking usually blackens the kitchen with soot and grease and is the domain of an ayi, or household helper, who cooks for the family. Most Chinese homeowners live in condominiums rather single family homes. They do not have a garage that can store tools and ladders. A more appealing package would be pre-designed interiors with installation included.
- 16. Automotive Competition in China
- 18. Volkswagen Group China Achievement the sales forecast for 2010 was 900,000 units, VW China sold more than twice that amount at 1, 971,000 vehicles. In 2009, as part of a global VW strategy, VW China announced a growth plan called “Strategy 2018” with goals in four business areas: Sales and customers: Improve customer satisfaction and brand image through enhanced dealer networks and upgraded service. Products and technology: Combine VW’s most environment-friendly technologies with local R&D to generate products that perfectly meet customers’ needs. Production and supply: Contribute to China’s automobile industry. Responsibility and Partnership: Strive to be an excellent corporate citizen and create a long-lasting partnership through the integration of European andChinese cultures
- 19. Volkswagen Group Strategy In March 2011 – VW China opened a sales and service academy in Beijing, where trainers will be trained to instruct service and management staff VW the number one manufacturer of fuel-efficient vehicles in China. Volkswagen is successful in developing fuel Efficient cars which is the future of automotive industries. Adapting Chinese consumer needs, Volkswagen makes their vehicle more spacious.
- 21. Volkswagen Sales in 2012
- 22. Conclusion..!!! THANK YOU FOR YOUR ATTENTION
Editor's Notes
- 2. it spent three years preparing for its market entry and five years expanding itself to nine stores located in Shanghai, Beijing, Suzhou and Hangzhou. 3. also showed a meager 4 percent sales increase in the Chinese market, among its total US$38.5 billion global sales during the same period, an over 100 percent increase from a year earlier. The other part of Best Buy’s business, the Chinese electronics brand Five Star acquired in 2006, also only opened around 30 new stores between 2006 and 2010, a very small number compared to other Chinese electronics retailers that are seeing rapid expansion.
- 1. . Many people believe it expanded way too slow to survive in the face of severe competition from other Chinese electronics giants such as Gome and Suning, both of whom currently boast over 1,000 stores nationwide. Experts say that Best Buy’s decision to stick to its American business model brought about its failure in the Chinese market, although the model has been working very successfully in Western markets. Different from its major Chinese competitors, who lease separate parts of a store to retailers of distinct brands and earn profits from the so-called “entrance-fee” and take a portion of every retailer’s sales profit, Best Buy purchases all of its products directly from suppliers and prices them independently. Also, while the majority of sales people in most Chinese stores come from the supplier side, Best Buy hires a whole staff as its own sales team. The American company also utilizes a non-commission policy for its sales staff in order to avoid biased promotions that will disturb customer decisions. 2. Best Buy did not please its customers. In an immature market like China with a massive portion of low-end consumers, the price advantage seriously outshines any advantages in management. Many consumers even commented that the Chinese name of Best Buy – Baisimai – as a bad one for marketing. Baisimai literally means “to buy after thinking 100 times.” Ironically, its business model, just as its Chinese name, tries too hard to educate consumers about high-end service value when lower price is typically the only value that motivates them to make quick decisions. The electronic giant’s overconfidence in transforming the Chinese consumer philosophy finally hurt its overall performance in the Chinese market. 3. When Best Buy first entered the Chinese market, many people hoped it would successfully replace the prevailing, yet widely-criticized Chinese business model that focuses on price-centered competition, squeezing suppliers’ profit margins, and conducting promotions on questionable legal footing. However, the more moral and advanced “good company” did not survive long, leaving the ones with the traditional Chinese business model still prospering in the market. A recent commentary piece by Xin Haiguang on the Financial Times refers to the current Chinese market as a “swamp” with low-end consumer awareness, a relaxed legal environment, and a low bottom line of business ethnics. Xin pointed out that “good companies” like Best Buy, who still insist on playing by the rules of mature commercial markets, easily fail because they have given up a significant amount of available business resources compared to their Chinese competitors. Xin sees Best Buy’s withdrawal as a failure in its business value, rather than its profit model.
- Walmart has pledged to adapt to the rapid consumer market changes by making adjustments to its current operations and becoming more innovative; this includes putting a greater emphasis on better quality fresh food and groceries. By October of next year all Walmart stores in China will have access to fresh and dry distribution centers with quality controls and compliance oversight. Greg Foran, President and CEO of Walmart China, stated that the company will improve operations and customer experience; establish best-in class food safety practices; and eliminate costs, in order to build an even stronger business. Walmart sells cheap products that are affordable to chinese consumers, who mostly prefer low-end products. Pork is a favourite meat for the Chinese. Before, Mcdonald’s only serve chicken but now in order to match chinese consumers’ tastes, they also serve Spicy Pork Mcbites which share a resemblance to the popular Mcnugget.
- Multinational internet C2C corporation It’s an online auction and shopping website (buy & sell goods and services worldwide) EachNet : a leading auction site in China and was successful in capturing a considerable share of the Chinese e-commerce market