Best Buy’s case in regards to its attempts to implement a dual branding strategy in China demonstrates the importance of taking into account the local consumer population behavior. The latter was the main factor in determining the overall success or failure of such an approach because, ultimately, it is consumers who determine whether or not a business will be profitable. Dual branding in itself is a strategic measure, which focuses on collaborating and acquiring one of the leading companies in a new market and utilizing this new brand as well as the old one, where the market is served by two brands. For example, Best Buy entered a Canadian market after it experienced major success in its home country, United States, by acquiring Future Shop, a Canadian top consumer electronics store. However, instead of entering the market as Best Buy, the management decided to utilize dual branding, where they entered the Canadian market both as Best Buy and Future Shop (Dawar & Ramasastry, 2009). Such a strategy was a success in terms of being able to offer a wide range of services through different templates and formats. Although both shops were owned by Best Buy Inc., the shops were contrastingly different in a multitude of areas.
It is important to point out that the distinctive elements between Best Buy and Future Shop were manifested in 13 major categories. Firstly, Best Buy shops were considerably larger and primarily focused on consumers who prefer self-service, whereas Future Shop accentuated the relevance of outstanding service. Best Buy workers were called “Blue Shirts,” but Future Shop hired product experts, who were more knowledgeable on products and provided attentive and personalized service. Target groups also differed because Best Buy focused on females and younger consumers, who simply want to grab a product and leave since they are more accustomed and well-informed about electronic goods. Future Shop was more male-oriented, targeting older individuals who are not familiar with electronic products, which is why they want tech-savvy experts who can guide them through the products. However, the key similarity was rooted in the fact that both stores offered, for the most part, a similar product mix (Dawar & Ramasastry, 2009). In other words, Best Buy sought to provide a more relaxed shopping experience with no one to point to a specific product, and thus creating a sense of freedom and ease. Future Shop was better suited for people who desire and want help from knowledgeable and attentive experts.
Therefore, after major success in Canada with dual branding, Best Buy decided to expand to the next largest economy, China. The main reason was manifested in the fact that Chinses economy was and still is booming, whereas its consumer electronics market was highly fragmented. Best Buy Inc. saw it and decided to seize this opportunity in order to become a dominant market share owner. On the basis of its Canadian experience, it decided to enter China with a dual branding strategy in mind, which is why it began with a search for existing Chinese companies in the industry to acquire. It is important to note that the top five competitors owned only approximately 20% of the total market share (Dawar & Ramasastry, 2009). The caveat was found in the notion that local consumers exhibited a different set of behavior compared to western consumers because they were more prudent with their disposable income, and they had less of the latter.
Since the Chinese market was vastly different from the Western one, the recommendation would focus on reconsidering the decision of implementing a dual branding strategy. The suggested approach does fully dismiss the dual branding strategy but rather advises postponing it. It seems that one Canadian success is not sufficient to serve as evidence of the notion that the Chinese market will respond in a similar fashion. Best Buy needs to spend more time and resources to properly understand the local market, which was not as mandatory in regards to Canada. Although both US and Canada are different nations, they are much more alike culturally and ethnically than China with any of them. In addition, both Canada and the United States are more prosperous countries with citizens having higher wages and higher disposable income, whereas Chinese citizens are not at the same level. The dual branding could have been utilized as aggressively as it was used in Canada if Best Buy had implemented it as an Asian nation or market prior to China since Asian culture in its complexity and diversity still share many key characteristics. Therefore, dual branding should be either postponed or modified in order to reduce the cost of failure and ensure that Best Buy’s growth is sustainable and probable.
Since customers generally do not care about a company’s dual branding strategies because they are either not aware or not interested in two brands being owned by a single company, Best Buy should enter the Chinese tech-savvy on its own. The company should not expand aggressively but rather start operating and serving Chinese consumers as well as research and learn about the local market dynamics. It is evident that such knowledge will only be obtained through experience and failures because competitors will not be able to share their knowledge both due to conflict of interest and not knowing how different Best Buy strategies were before entering China. Thus, Best Buy Inc. should only consider using dual branding after it experiences some form of success and understanding of the local market, which will require more time and effort rather than recklessly using dual branding as the company did in Canada. One should note that it is worth the time and resources to proceed slowly in China since the latter is not only rewarding due to its available market and money but also due to prospects of future growth and access to cheaper manufacturing.
Moreover, Best Buy Inc. should acquire a competitor after the company firmly succeeds at delivering its services and products in a specific format, such as relaxed shopping. After it established itself as a solid market share holder in few major Chinese cities, it should look for competitor companies, which provide their services in a different format. Therefore, the Canadian concept can be realized in China since the company will have a firm grip on the market through its own brand and will be able to target the same market differently through a different brand. This will ensure that Best Buy’s cost for potential failure will not as significant as it would have been. Dual branding is a highly stressful and challenging endeavor since one company needs to manage two brands, two cultures, and two strategies. In addition, acquiring a competitor is evidently a costly action, which is why postponing it will result in smaller losses for Best Buy if the company fails.
Reference
Dawar, N., & Ramasastry, C. S. (2009). Best Buy Inc. – Dual branding in China. Harvard Business Review. Web.