Analysis of Best Buy's Business Foundation in the China Market

This report provides an analysis of Best Buy's business foundation as it pertains to targeting the Chinese market. It includes a SWOT analysis outlining the company's strengths, weaknesses, opportunities, and threats in the Chinese market, with specific details on factors such as customer loyalty, cas...Read More

Running Head: BUSINESS FOUNDATION 0
Business Foundation
(student name)
12-4-2018

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Contents
Introduction......................................................................................................................................2
SWOT analysis of Best Buy China.................................................................................................3
The strategy of Best Buy to target China.........................................................................................6
Target market...................................................................................................................................6
New product development...............................................................................................................7
Pros of new product development...............................................................................................8
Cons of new product development..............................................................................................8
Conclusion.....................................................................................................................................10

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Introduction
This report will discuss upon analysis of internal and external factors, to determine appropriate
new product development, and managing marketing. For this, the Best Buy organizational case
will be analyzed to target the China market.
Best Buy Co. is a multinational retailer of consumer electronics, based in America and
headquartered in Minnesota. James Wheeler and Richard M. Schulze founded the company in
1966, as a specialty store of audio, also known as Sound of Music. The company operates
internationally in various countries. It was formally operational in 2011 in China, and the major
products that the company is dealing with are related to electronics like appliances, computers,
televisions, cameras, home theater, audio devices, car GPS system, health, beauty and fitness
devices, cell phones, wearable technology, drones, security Wi-Fi, and smart home devices
(bestbuy, 2018). It is considered to be one of the largest consumer electronics store operators in
the United States a major player of e-commerce worldwide.
The brand with the objective to grow and targeting China market would preferably introduce
with new product development. This could be the entire new product line ranges. For a new
product to develop, it is important to analyze the company’s own strengths and weakness to gain
opportunity or to avoid the threats. The suitable strategy of the company will also be further
analyzed.

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SWOT analysis of Best Buy China
Strengths
 Goodwill
 Customer loyalty
 Strong marketing
 Economies of scale
 Relationship building
 E-commerce
Weakness
 Cash limitation
 High store dependence
 The dependency on supplier credit
 Store operating expenses
 Change in the trend of luxury products
Opportunities
 Growing market
 Product innovation
 More brand relations
 Increase online sales
 Popularity sales
 Product differentiation
Threats
 Competitive e-commerce companies
 Aggressive discounting
 A lower visit to stores
 Customer perception
 Direct retail sales
 Customer loyalty decline
 Technological change (Bull & Sitas,
2016)
Strengths
 Goodwill – one of the strengths of the company is good reputation and positive
perspective of the customer for the company

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 Customer loyalty – the customers are very much loyal to the company since the company
is existing for a long time now, the loyalty of the customer's increases. And the customer
instead of purchasing directly from the bran, like to purchase from this company
 Strong marketing – the marketing of the company seems to be very strong, and this can
be observed by the result of customer loyalty
 Economies of scale – since the company is working on such a large scale, the economies
of scale is one of the advantages for the company that leads it to the profit maximization
and cost reduction
 Relationship building – the company has strong relations with other brands that it is
selling products. The company is good in building a relationship, not only with the brands
but also with customers
 E-commerce – another plus point of the company is that is selling goods online as well,
which needs fewer resources like locations to reach out to the customer. And because of
this, the company can go global easily (Bao & Xia, 2015)
Weakness
 Cash limitation – the limitation of cash has been observed while considering the statistics
and figures of the cash flow of the company in many countries
 High store dependence – the dependency of the trading through stores is very high of the
company, which is one of the weaknesses for the company
 The dependency on supplier credit – it was observed that a large percentage of purchases
from suppliers are on a credit basis. That is they pay to the manufacturers after the goods
are sold

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 Store operating expenses – the operating cost of the store is very high as compared to an
online sale. Which leads to competitive advantage for other e-commerce sites like
Amazon
 Change in the trend of luxury products – the luxury products like smartphones and
smartwatches, tends to change very quickly, which leads to a loss for the organization
Opportunities
 Growing market – the market is growing very rapidly due to the adaptability of
technology
 Product innovation – the product diversification and innovation leads to expansion
opportunity for the firm
 More brand relations - building relations with more number of brands lead to a better
opportunity to gain
 Increase online sales – this will be helpful for the company to decrease the number of
stores and stores operating costs
 Popularity sales – this include sales with discounting offers through online
 Product differentiation – introducing a new range of products by the company is a great
opportunity in the near future
Threats
 Competitive e-commerce companies – competition is high, for example, Amazon, eBay
etc.
 Aggressive discounting – due to an increase in the trend of online shopping, the
discounting can be aggressive

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 A lower visit to stores – due to the increase in e-commerce selling, the visit to the stores
could decrease
 Direct retail sales – the companies that the company is associated with can directly sell
the products to the market
 Customer loyalty decline – customer loyalty can be declined in the near future
 Technological change – technology is changing very rapidly, which leads to
technological up gradation timely (Hunt & Bicen, 2017)
The strategy of Best Buy to target China
The most relevant strategy that the company can adapt to target new market is S-O strategy.
According to this strategy, the strengths of the company is utilized to gain future opportunities
recognized by the company. In the case of Best Buy, the strengths that can be used to gain
respective opportunity are. Gaining the growth of the market, through an increase in relationship
with more and more brands, or the company can even use economies of scale strength for market
growth and increase in the sale through online goods, the reason being the heavy cost of stores
and physical resources like location, electricity etc. Moreover, with the company’s good
reputation and goodwill, the company can gain the opportunity of introducing new product and
product innovation (Liu, 2018).
Target market
The target market for Best Buy is China, as this country is very popular for its capability of
electronic market. The market is growing every day in this country. The company can gain
opportunity while targeting this market. The brands of China can be part of the company for
trading because the company has a strong ability to build relationships, this would be beneficial

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to attract more and more brands to sell in China and building relationship with customers,
through e-commerce site as well (Gay, 2016).
New product development
For this target market, the development of a product can include a completely new product line.
The company is always working with all the possible electronic devices, and due to saturation of
this market, the company can expand their business through product diversification and enter
into the fashion industry by introducing products like clothes, footwear, watches, and
accessories. A completely new range of products is idea generation, which for execution needs to
be designed and structured (Hult & Wowak, 2016). This development can be done with
following a process of new product development:
 Research and analysis
As the name suggests, this is the first step to design a product that is investigating the
issues that could be the reason to influence the designing specification of the product and
analyzing the feasibility of the product while studying market analysis
 Product concept design
This includes studying the function and formation of the idea. The idea generated is to be
executed and need a structure and design for this. At this stage, the range of product is
innovative designs are made, developed and reviewed, allowing the company to observe
the direction of movement of the product progress.
 CAD development ‘
Once the function and formation are confirmed, the development of technical designing
of the product decided. Computer-aided design is developed at this stage of development,

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where the manufacturing feasibility is tested and the system design and integration of
internal component are also validated.
 Product design visualization
This step involves consulting product design, and images for the product that is
photorealistic images are produced professionally, that is illustrating the function and
design of the product (Kaynak, 2018).
Pros of new product development
 Saturated market – one of the major advantage of the development of the new product is
to overcome a saturated market. In China, the electronic market is being saturated due to
the already large existence of such sellers in the industry. The company need to focus on
a new product which can be offered by Best Buy to the Chinese market (Hoegi &
Muethel, 2016)
 The growth of the company – the introduction of new product ranges leads to growth
opportunity for the company. Therefore, this is considered to be another opportunity for
the company to establish relations with fashion related companies and sell goods online
or through stores
 Product innovation – the development of the product range leads to one of the
opportunity to capture that includes product innovation
 Competitive advantage – one way to gain a competitive advantage for the company is
new product development. Therefore, it is one of the great advantages of the company
(Cooper, 2016)

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Cons of new product development
 Management – one of the issue while introducing a new product range to capture China
market is that the management has to be very strong and the task of management
increases to an extent
 Initial cost – another disadvantage is the initial cost of the product designing and
introducing to the market is very high. The return to investment is not certain, and can
lead to loss to the company, in case the idea generated is not helpful to the company to
grow (Anokhin & Morgan, 2015)
 Human resource requirement – the requirement of additional human resource and a
separate team will be required to perform the task of a new range of products. This could
lead to a disturbance in managing human resources and another task in the organization
 Additional resources – additional resources like location, warehouse space, and many
more resources are required for new product development. Moreover, this will include
not optimum utilization of resources (Du & Bstieler, 2016).

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Conclusion
Best buy is one of the greatest electronic retailers, selling its products are services through brick
and motor and e-commerce internationally. The company builds a relationship with various
brands and sells their goods from a single platform. The target market for the company in China
because this country is considered the hub of the electronic market and manufacturing.
To target the China market, new products are developed and introduced to that market. For this,
the internal and external factors were studied, which included SWOT analysis. The major
strength of the company observed was customer loyalty, goodwill, strong marketing, e-
commerce economies of scale, and relationship building. Major weakness observed were cash
limitation, high store-dependence, store operating expenses, the dependency on supplier credit,
and change in the trend of luxury products. Opportunities observed were growing market, more
brand relations, product innovation, popularity sales, product differentiation, and increase online
sales. Lastly, the threats to the company include competitive e-commerce companies, a lower
visit to stores, customer perception, aggressive discounting, customer loyalty decline, direct
retail sales, and technological change.
After the analysis, the most relevant SWOT strategy observed for the company was the S-O
strategy that is gaining opportunity while using the strengths of the company. This assessment
and relevant target market to be China market, the new product that will be responsible for the
growth of the company in a completely new range of products that is expanding the company
production to fashion related products that are clothing, watches, footwear, and accessories.

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