Short question! Best Buy\'s original entry in China was for sourcing goods to su

Question

Short question!

Best Buy's original entry in China was for sourcing goods to supply their stores. Eventually, they turned and saw China as a consumer market, not just a supply market. They utilized an M&A strategy, along with a dual branding concept. Make comments on at least two questions:

1. Discuss your thoughts on this strategy and approach Best Buy took.
2. How might an M&A strategy protect your IP, such as a trademark?
3. What was the ultimate fate of Best Buy and do you believe it was related to this market entry approach?
4. Discuss how Best Buy approach doing business in China in two different ways: 1) sourcing and 2) selling

Explanation / Answer

1) The approach taken by Best Buy was a sensible and logical one as they realised that sourcing from China would reduce their cost of goods procured and thus would be able to survive in the tough retail industry by having a cost advantage. Also once they had few years of experience in the Chinese market, they delved into establishing a brand in the Chinese market and setting up retail outlets in that location. Thus they tested the market first through sourcing and once realizing and gauging the potential of the Chinese market set about to establish sales outlets there so that they can increase their sales. Thus this was a prudent strategy for Best Buy to expand into China.

3) Best Buy ultimately failed in China in the retail industry and was forced to quit the market. This happened primarily because Best Buy could not compete with cheaper local Chinese retailers and also they focussed on creating bigger stores which was not suited to the taste of Chinese customers, who preferred convenience stores nearby. Thus due to mismatch in preferences and price, Best Buy could not succeed in China. This was not really related to their decision to transform China from a supplier source to also a consumer but due to a general lack of alignment of the requirements of the customer in China and the offerings provided by Best Buy.

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