Best Buy’s
overseas strategy failure in 2011 relates to what is discussed in the “7 Ways
to Fail Big” paper by Paul B. Carroll and Chunka Mui. As per Pseudo-Adjacencies
discussed in the paper, adjacent market strategy attempts such as expanding
into a related business can lead even well established companies to failure.
Best Buy’s
expansion strategy to the international markets turned out to be a failure.
Although the company blames it to the recession but analyst attribute its
failure to doing wrong thing at the wrong time and in the wrong market. It disclosed
its plans to enter the foreign markets too early and gave its competitors a
chance to react back. They failed to understand their customers in china as
they were selling too expensive products then what their Chinese customers were
willing to pay. This explains the role of getting timely feedback from the
customers and partners before starting a venture.
What can be
inferred from Best Buy’s strategy is that rather than actually expanding its
business in the global markets, it was actually trying to cover up for its
declining business in the U.S itself which is its core market. The reasons for
the declining business were the decreasing credibility, consumer confidence and
continued unemployment. Expanding to markets abroad seemed like a poor capital
allocation decision.
Referring to
the blog post “Types of Strategy: Which fits your business” by Patrick Bertschy,
Low-cost leadership and customer relationship are an integral part of a company’s
success. And I believe that is exactly where Best Buy failed to hit the mark.
It went out for an expensive expansion strategy without knowing who its
customers were. These self-inflicted painful and high risk moves lead it to
declining profits and eventually to the closure of many of its stores in the new
markets.
Now the
thing that would be really interesting to know will be that was it a deliberate
move on Best buy’s part to move into a high risk market which traditionally favored
smaller high street electronic stores with big-box store?
References:
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.