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International Business - BSM933

   

Added on  2020-03-04

12 Pages4073 Words49 Views
Running head: INTERNATIONAL BUSINESSInternational businessName of the studentName of the universityAuthor note

1INTERNATIONAL BUSINESSQuestion: 1Home Depot is one of the leading and prominent players From America inproviding retailing home decor items and tools. Currently they are having their presencein various countries around the world. In 2006, they have the entered the China withhaving 12 stores. This is due to the reason that China is most populous country in theworld along with having a huge and growing middle class section. Moreover, with therapid growth in the Chinese economy, the purchasing power of the customers is alsoincreasing. Thus, Home depot saw a huge potential in making entry in the Chinesemarket. However, by 2012, they closed off all their stores in china due to lack incustomer interest. It came as a huge surprise due to the reason that Home depot beingone of the leading players in this sector and China being one of the leading developingcountries in world cannot got complied with one another (Forbes.com, 2017). On theother hand, it is been seen that IKEA, the Swedish firm and the prime competitor forHome depot is growing their market share in China and they are planning to double uptheir stores there. Thus, the market is equally potential as it was estimated, but theapproach initiated by Home depot was not appealing to the Chinese customers. One of the key considerations for the international business is the cultural aspect.Organizations entering in the global market and more specifically to a foreign countryshould adopt and accept the cultural differences between their home and hostcountries. The approach taken by the organization in their home or parent country maynot prove successful in the host country due to the social and cultural change. This isthe area where Home depot got wrong in their marketing policy in china. According toVaara, Sarala, Stahl and Björkman, it is important for the organization to consider thecultural aspect of the country they are operating. In addition, organizations have toadopt the culture of the host country and have to offer customized service or productwhich will attract the local customers (Vaara et al. 2012). This will help in gaining thefoothold in the foreign country. However, on the other hand, Home depot tried to implytheir American culture in marketing their products in China. They offered their globalproducts to the Chinese customers without being customize them according to theirrequirement. Thus, the customer did not found any utility from their products.

2INTERNATIONAL BUSINESSIt is the failure of the market research for Home depot of determining the needand requirement of the Chinese customers. Americans are more preferably stays insingly family apartments or homes, while on the other hand, majority of the Chinesepeople stays in condominiums (Theweek.com 2017). Thus, they do not have thebackyards or garage for their tools and supplies to decorate their own homes. While, onthe other hand Home depot offered them tools to decorate their own homes. Thus,Home depot failed to identify the gap between the American and Chinese customers.Another reason being identified for the failure of Home depot in the Chinese market isthe preference pattern of the Chinese customers. As being told by Dunnings,determining the preference pattern of the host country customers is important to survivein the international business. The preference pattern of the customers in the homecountry may not get matched with that in the host country. Thus, it is the responsibilitiesof the organization to identify the requirement of the host country customers. In the caseof Home depot, they failed to determine the preference pattern of the Chinesecustomers. American customers tend to do their household activities by their own due to thehigh labor cost involved there. However, on the other hand, Chinese customers preferto hire a person to do their job on the behalf of them. It is due to the reason that thelabor cost in china is much lower and it is more preferable for the Chinese people to payfor their job rather than doing it by their own. Thus, this is the area that Home depotfailed to indentify. Home depot initiated their core business model of “does it yourself”for the Chinese market also. However, Chinese people are comfortable in do it yourselfmodel. Thus, the tolls and supplies sold by them in the Chinese market were not foundenough takers. Another issue being identified for the failure of Home depot in the Australianmarket is the absence of guiding the customers in experiencing the new service orproduct. According Peppers and Rogers, customer experience is important for thecontemporary business organization. This is due to the fact that any new product orservice in the market will not get accepted by the customers unless they are given thehand on experience (Peppers and Rogers 2016). Home depot failed to provide the

3INTERNATIONAL BUSINESSexperience and awareness about their new concept to their customers. Thus,customers do not gained any idea about their product concept. This is the place, whereIKEA got their hold right. IKEA designed their stores in such a way that the Chinesecustomers will get the live experience regarding various types of home decoration whichwill further motivate them to opt for their products. However, Home depot does notprovided any such experience to their customers rather than just offered them theirproducts in the stores. Thus, the connection to be created between the organization andthe customers did not succeed. Apart from the failure in identifying the cultural gap in the Chinese market,various other reasons such as economic slowdown is also responsible for the failure ofHome depot in the Chinese market. Though the Chinese economy is growing and theyare one of the most prominent developing economies in the world, however, globaleconomic crisis in the recent past had adversely affected their economy also (Lewis2013). This crippled the domestic demand of the customers which eventually negativelyimpacted the demand in the housing sector also. Home depot also failed to identify thiseconomical aspect before entering in the Chinese market. According to Cavusgil,Knight, Riesenberger, Rammal and Rose, in the international business, economic factoris one of the key factors to be considered by the business organizations (Cavusgil et al.2014). The economy and the growth rate of the host country are important for theorganizations to determine their viability of entering the particular market. With thereduction in the demand of the housing sector in china due to global economic crisis,the demand for the home decor also reduced. Moreover, it is also been seen thatmajority of the existing buyers in the housing sectors are not actually buying the homefor their living rather than they are just using it as mode of investment. Thus, decoratingthe house in this case is not applicable which further affected the business potential ofHome depot. Thus, it can be recommended that customization or personalization option for thecustomers will be beneficial for the organizations entering in a new market. Beforeentering in the global market, it should be considered that the taste and preferencepattern for the customers is not similar in very region. Thus, organizations have to

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