International Business Chapter 4 Best Buys Entrance Into China Our Intention That Integrating Knowledge The Chinese

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Chapter 4: TEACHER CASE NOTE

Best Buy: Is China Ready for the Big Box?

TEAC

Case Overview:

With a population of 1.3 billion people and a growing economy, China presents an attractive

market for retailers looking to expand. Best Buy is no exception, and in 2003 they opened

operations in China. By 2011, Best Buy was operating nine of their “Big Box” stores throughout

Teaching Objectives:

Intercultural Communications:

The case is designed for the Intercultural Communications course at the University of Notre

Dame. The objective of this course is to examine the concepts associated with culture and

communications and how this relates to global leadership.

By taking this course, students

By reading this case, students should be able to:

• Understand the cultural differences that exist between US consumers and Chinese

consumers. This understanding of cultural differences should allow them to evaluate the

causes for Best Buy’s failure in China.

Case Analysis

This case is designed to address the cultural and infrastructural challenges that were present in

Best Buy’s entrance into the Chinese market. These challenges are centered on the

implementation of Best Buy’s “Big Box” model and differences between Best Buy company

values and their customers and suppliers.

• Big Box Model: Students will be able to understand the nuances of implementing a

business model in a foreign market. This case cites real estate, competitors, and

shopping culture as significant failures in Best Buy’s strategy in entering China.

• Customers: This case also cites differing values between Best Buy and its customers.

Customer service has been the source of the company’s growth and success in the

United States because Americans value receiving expert advice and service when

Country Analysis: China vs. the United States

High Context vs. Low Context: China is a high-context society, meaning in general there is a

large emphasis on what is not explicitly being said, but rather on the hidden meanings in words

and actions. On the other hand, the United States is a low-context society, meaning that US

Particularistic vs. Universalistic: The Chinese culture has a tendency toward a particularistic

orientation, while the United States tends to be universalistic. In the United States, there tends

to be a set of rules that govern individual decisions, regardless of the circumstances. In China,

while these general rules may exist, whether they are adhered to or not depends on the

situation. In the case of Best Buy, while as a general rule Chinese consumers will look for the

Discussion Questions:

1. What are the cultural differences that may have led to the Best Buy’s failure in China?

2. Given what you have learned in this course, what information or study would you have

done before entering the Chinese retail market?

6. What cultural dimensions (e.g., Hofstede) are particular to Chinese culture?

Conclusion

Best Buy’s initial move to China failed because the company failed to account for the various

social and cultural nuances of Chinese consumers. Best Buy tried to implement its existing

business model in China rather than adapting their style to meet the needs of Chinese

consumers. This led to substantial losses for Best Buy. But on the bright side, it has given Best

References

1Best Buy attempts new strategy for China via mobile channel. (2012) ChinaTechNews.

https://www.chinatechnews.com/2012/07/01/16447-best-buy-attempts-new-strategy-for-

china-via-mobile-channel.

HANDOUT for DISCUSSION

Best Buy: Is China ready for the Big Box?

Background:

With a population of 1.3 billion people and a growing economy, China presents an attractive

market for retailers looking to expand. Best Buy is no exception, and in 2003 it opened

operations in China. By 2011 Best Buy was operating nine of its “Big Box” stores throughout

Best Buy’s Second Chance?

In July 2012, Best Buy decided to make another attempt at entering the Chinese market. This

time, it would do so with only its Best Buy Mobile brand. Best Buy will enter through fourteen

Five Star Appliance retail stores in Nanjing. By doing this, Best Buy will attempt to take

Discussion Questions:

1. What are the cultural differences that may have led to the Best Buy’s failure in China?

2. Given what you have learned in this course, what information or study would you have

done before entering the Chinese retail market?