Global Competitive Study of Best Buy - Example

Global Competitive Study of Best Buy Table of Contents Table of Contents 2 Chapter Introduction 4 1 Background of Best Buy 4 2 Rationale for selecting Best Buy 7 1.3 Research aim 7 1.4 Structure of the project 7 Chapter 2: Comparative Analysis of the company’s competitive position 8 2.1 Porter’s Five Forces 8 2.1.1 Threat of rivalry: High 8 2.1.2 Threat of new entrants: Low 9 2.1.3 Bargaining power of suppliers: High 9 2.1.4 Bargaining power of Buyers: Low 10 2.1.5 Threat of substitute products 10 2.2 Porter’s Generic Strategy 11 Bowman’s Strategy Clock 13 Chapter 3: Trading across borders and cross culture management 14 3.1 International cultural management and Hofstedes model 700 15 3.2 Cultural approaches to internationalization and Trompenaar’s seven dimensions 19 Chapter 4: Enhancing business through theories 21 4.1 Enhancing business through adaptive theory and corporate strategies 21 4.2 Enhancing business through Uppsala internationalization theory 22 Chapter 5: Conclusion 22 Bibliography 27 Chapter 1: Introduction 1.1 Background of Best Buy With the growing convergence of communication, information and entertainment over the past few decades, there has been tremendous growth in global consumer electronics market. It forms the largest segment in global manufacturing industry and thus has the potential to grow in the emerging markets (Consumer Electronics Association, 2015). There are many companies, which have ruled the market globally and contributed towards the development of this sector. One such leading global consumer electronics company is Best Buy. The company was founded in 1966 by Richard Schulze and was called Sound of Music; however, it was renamed to Best Buy during 1983 (Best Buy, 2015a). Best Buy owns more than 1400 stores located in the United States and over 200 stores in Mexico and Canada. It offers products and services at unbeatable prices to the small business owners, consumers and the educators, who visit the stores at a regular interval. Best Buy recycle sits products and collects about 409 pounds of electronics every minute the store is opened (Best Buy, 2015a). It had incurred sales revenue of $ 40.6 billion and profit $53 million during 2014 (Yahoo! Inc., 2015b). From the company perspective, it can be stated that Best Buy is performing well in the global context; however, it had failed to continue its business in China and Europe due to individual reason (USAToday, 2013; Rein, 2011). Moreover, competition had also challenged its global operation. The following table highlights important facts regarding the level of competition that the company encounters in the global market in financial perspective. Table 1: List of competitors and its statistics (Source: Yahoo! Inc., 2015a) From the table, it can be stated that though Best Buy has succeeded in maintaining industry average but failed to compete with the strong competitors of global consumer electronic market such as Amazon.com Inc., Apple Inc. and Wal-Mart Stores Inc. Moreover, the following table highlights the decrease in financial health of Best Buy during the past four years from 2011-2014. Figure 1: Financials of Best Buy (2011-2014) (Source: MarketWatch, Inc., 2015) The figures provided in the table indicate towards the fact that its financial income is unstable over the past four years and it has failed to generate enough profit for its future development. Figure 2: Global computer and electronics sector value (2007-2011) (Source: MarketLine, 2012) The global consumer electronics market has grown over the years from 2007 to 2011 due to the outstanding performance of leading electronics companies. 1.2 Rationale for selecting Best Buy It is quite interesting to study the performance of an electronic company, which had experienced rise and fall during a period of five years. Best Buy is such a company, which has expanded its business quite fast globally and have also encountered closure of many stores in the international grounds as it could not meet the needs of consumers. 1.3 Research aim Best Buy has experienced downward competitive growth in the consumer electronics market during the past five years due to the closure of many stores internationally. The company exited its business from Europe and China, which obviously affected the sales revenue and profit of the group (O’Brien, 2011). Hence, the research aims at deciphering the competitive attitude of the company in the global context and why it failed to continue its business in China and Europe. 1.4 Structure of the project The project is divided into five chapters. The first chapter gives a brief description about the research topic and the chosen company. The second chapter lays emphasis on the comparative analysis of the company’s competitive position by highlighting the theories such as Porter’s Five Forces, Porter’s Generic Strategy and Bowman’s Strategy Clock. The third chapter highlights the international cultural management and the forth chapter identifies the scope for Best Buy for enhancing its business through different theories. Lastly, the fifth chapter concludes the important findings of the project. Chapter 2: Comparative Analysis of the company’s competitive position This chapter gives emphasis on the comparative analysis of Best Buy’s competitive position. This is done with the help of number of theories such as Porter’s Five Forces, Porter’s Generic Strategy and Bowman’s Strategy Clock. 2.1 Porter’s Five Forces The five forces that affects competition in an industry is established by Michael Porter. According to Porter (2008), the five forces helps the company in understanding the structure of the industry it is operating in and find out its position, which is profitable for it to survive in the long run. 2.1.1 Threat of rivalry: High Rivalry among the competitors are severe when the companies in the same industry competes with each other’s through various price discounting, introducing new products, attractive advertising campaigns and by exercising service improvements (Porter, 2008). The threat of rivalry in the consumer electronic industry is high. Yahoo Finance had revealed that there are about three major companies in the consumer electronics industry, which are strong enough to compete with Best Buy (Yahoo! Inc., 2015a). Apart from that, there are numerous other private held retailers that aim at serving the niche markets. Though Best Buy has occupied a significant position in the US market, but its indirect competitors such as Wal-Mart, Target and Costco has challenged their business through overwhelming discounts. During 2013, Wal-Mart had generated revenue which is ten times the sales revenue figure of Best Buy (Yahoo! Inc., 2015a). It is not correct to compare the financial performance of the two companies i.e. Best Buy and Wal-Mart as the latter does not divide the sales of the products into several categories. However, even if the sales revenue collected by Wal-Mart from electronic section be 1% then it will also surpass the overall revenue of Best Buy (MarketLine, 2012). Therefore, competition in this industry is high as the switching cost is low and the products are not differentiated (Lewis, 2014; Plastow, 2013; Seeking Alpha, 2015; Loeb, 2014). 2.1.2 Threat of new entrants: Low According to Porter (2008), new entrants in any industry bring in new capacity and products, which have the ability to meet the needs of customers. They have the desire to capture the maximum share of the market and increase its profit by minimizing the cost of production and rate of investment (Porter, 2008). The threat of new entrants in the consumer electronics industry is low as the market capitalization and profit of the electronic companies are quite high. This implies that it will be hard for new entrants to compete with such large electronic giants. Best Buy has established its brand quite successfully in the market with the mid-to-high end products and outstanding customer services (MarketLine, 2012). In such a case, it is difficult for a new entrant to challenge the reputation of Best Buy (MarketLine, 2012). 2.1.3 Bargaining power of suppliers: High The powerful suppliers capture a market by charging high prices and also limit the quality of the raw materials or products. If there is large number of suppliers in an industry, their bargaining power decrease as the companies can switch the suppliers. Nevertheless, if there are limited numbers of suppliers in the industry then the bargaining power of the suppliers increases (Porter, 2008). The bargaining power of the suppliers in consumer electronic industry is high because of the limited or small number of suppliers from where the market demands for raw materials. The limited number of suppliers is Sony, Samsung, Panasonic and Toshiba (MarketLine, 2012). The suppliers believe in technological upgradation and thus manufacture electronic good, which have the latest version. Hence, companies such as Best Buy purchase products from these suppliers in order to keep fresh products that have the ability to satisfy the needs of the customers (MarketLine, 2012). 2.1.4 Bargaining power of Buyers: Low The bargaining power of buyers in the consumer electronic market is extremely low as the layers of consumers are fragmented and weak individuals. The purchase volume for this type of product is low; hence, the consumers cannot influence the price of the electronic items. The electronic products are regarded as luxury items and thus the consumers do not question its price (MarketLine, 2012). 2.1.5 Threat of substitute products If the threat of substitute is high, then the industry profit is low as it limits the profitability of companies by placing a ceiling on price. It aims at offering price-performance trade-off to products of the industry (MarketLine, 2012). If the relative value of the substitute is high, then the industry profit is limited. The threat of substitute product in consumer electronic market is low. There are no direct substitutes for electronic items; however, newspaper, books can be regarded as the substitute to some extent. 2.2 Porter’s Generic Strategy Porter’s Generic Strategies aims at describing the process through which a company pursues its competitive advantage in a chosen market place (Murray, 1988; Harvard Business School, 2010). There are basically three strategies such as cost leadership, differentiation and focus (Miller and Friesen, 1986). Hence, a company selects any one of the strategy for pursuing its competitive advantage in the industry. This concept was established by Michael Porter during 1980. When a company is targeting its customers with low prices it adopts cost leadership strategy. In case of Best Buy, it follows cost leadership strategy by offering lowest possible price to the customers. It has focused on efficiency and operates with the help of non-commissioned sales force. It concentrates on the low cost-structure, which is an ideal strategy for the company to gain higher profit. Its present business strategy is based on offering products to the customers at the lowest possible price and also expands into international markets (Burlitt, 2014; Gruenwedel, 2014; Bose and Iyer, 2014). Though Best Buy has adopted cost leadership strategy as it is competitive advantage, but it has experienced several challenges. It is observed that the customers browse in stores, try the products and get their questions answered. However, they do not purchase from the stores; rather they chose to buy online at a lower price from its competitors. This is called showrooming, which had increased the cost of Best Buy and this does not offer low prices to customers (Loeb, 2014; McDuling, 2014). Moreover, Best Buy has also employed focused differentiation strategy. It has leveraged Geek Squad expertise and knowledge; this is quite difficult for Amazon.com Inc to imitate (Gulati, 2010a). Geek Squad includes a group of technicians those who visits the customer’s house for installing the purchased electronic items. The team also provide free information to the customers and educates them regarding the usage of the electronic product. The company extends zero financing for a period of 1-2 years for selecting the consumers. Therefore, the lower price reduces the cost of acquisition of customers with the help of repeat purchase and retention. It can be stated that Best Buy employs hybrid strategy such as combination of cost leadership and focus differentiation (Loeb, 2014; McDuling, 2014). There are two strategies that are usually employed by companies for increasing customer value. These are outside-in and inside –out strategy. The premise where the companies start with the external market, study the demands and necessities of the consumers; thereafter, devise their strategies according are known as outside-in strategy (Tanaka, 2010); these are more customer-centric approach. Conversely, inside-out approach is producer centric, which relies on internal orientation. In case of Best Buy, it follows a customer-centric or outside-in approach for designing their strategies. It increased the customer service value by surveying the market needs with the help of Geek Squads. This approach helped them to survive in a turbulent environment in the consumer-electronics industry. Best Buy took time for understanding their customers and their need; hence they started to sell solutions rather than products. Hence, the customer-centric approach has encouraged Best Buy to perform well in the market; until they fail to meet the needs of the customers in China and Europe (Coughlin, 2013; Tanaka, 2010). Due to increase in competition from Amazon.com and Wal-Mart, Best Buy experienced decline in sales in 2012 and 2013, which affected the profit automatically. Apart from competition, the interest of the customers also changed to a great extent (Loeb, 2014). They were not interested in large television sets and smart phones. However, the company was confident about the fact that, with the introduction of new technology the sales will improve. There were several issues that cropped up following the decline, making the situation graver for Best Buy. The company failed to provide beautiful and well managed stores to the customers; rather, they were dirty and messy, thus it needed better supervision. Moreover, showrooming also affected the business of Best Buy (McDuling, 2014). Therefore, it can be stated that the performance of the company was poor during the past few years due to a number of reasons; the most important one was competition (Team, 2014). Bowman’s Strategy Clock In addition to Porter’s Generic Strategies, Cliff Bowman and David Faulker established Bowman’s Strategy Clock (Utrilla, 2012). This model extends Porter’s three strategy model to eight. In case of Best Buy, the model can be defined with the help of international extension. Apart from its main operation in the US, the company had opened a number of stores in China and Europe. The customer-centric approach of Best Buy was not followed in international expansion. Best Buy dreamt of opening 200 stores in Europe but later cropped it to 100 and at last it decided to exit the UK because of its declining sales and increasing operating expense. The reason behind the failure of Best Buy is depicted henceforth. The big box stores in Europe did not do justice to the taste and preferences of the Europeans (O’Brien, 2011). Best Buy marketed the products as Americans and could not help the consumers to identify the products. Moreover, the company failed to understand that the electronic market in the UK is small with three retailers and among them; Dixons and Comet challenged the immature business of Best Buy (Gruley and McCracken, 2012). Above all, the company failed to understand the customers in Europe. The Europeans are not similar to Americans; the former purchase electronic goods few times in a year and thus prefer a small stores rather than big box like Best Buy. Therefore, the failure indicated towards the fact that Best Buy could not understand the need of Europeans and could not make customer –centric decisions (Gorth, 2011; Berg, 2013; Gulati, 2010a). Best Buy’s entry in China and its desire to become successful remained a dream. The company has ruled the market for five years with nine brands. The main reason behind their failure is that the products are priced higher than the local markets. The Chinese consumer found it too expensive to purchase any electronic items from Best Buy when they can obtain local products at a cheap price (Feng, 2013; Skarichan, 2013). The difference between the American and Chinese culture is that the big stores in America offer products to the consumers at a cheaper price than the niche companies; however, the Chinese local retailers undercut the prices of the products as the salaries of the employees are low. Hence, the consumers could not focus on the products offered by Best Buy when they are getting cheap products from local Chinese retailers (Gruenwedel, 2014; Bloomberg News, 2011; USAToday, 2013). Moreover, Best Buy did a big mistake by building flagship stores in China like they did in the US. In China, the consumers are accustomed with small local retail outlets. Hence, it can be stated that Best Buy failed to fulfil the demands and needs of the Chinese consumers and thus it had to exit the country (Burlitt, 2014; Rein, 2011; Feng, 2013; Skarichan, 2013). The two instances in Europe and China portrayed the fact that Best Buy could not follow its low price attitude or cost leadership strategy in global context. It also could not stick to the customer-centric approach and that is why the company had to experience huge loss following the year of exit in both the two countries. Chapter 3: Trading across borders and cross culture management From the above discussions, it is evident that Best Buy had expanded internationally in Europe and China; however, it is noticed that in both the markets, the companies could not make successful business because they failed to understand the culture and demands of the consumers. In such a case, international expansion appeared to be costly; even though it did not bring good results to the company, Best Buy had to expand internationally in order to stay competitive in the global market. In order to do so, Best Buy has to give emphasis on characteristics of the international market and do thorough research regarding the taste and preference of the markets. The main issue that was encountered by Best Buy in China and Europe was related to cultural difference. Hence, the company has to understand the culture of the international market and adopt them so as to deal with the cultural difference and continue a successful business in the long run. Hofstede’s five dimension model is employed to understand how Best Buy will deal with the difference in international cultures (Soares, Farhangmehr and Shoham, 2006). Moreover, Trompenaar’s seven dimension model is also used for investigating that how Best Buy will approach a new international culture. The discussion regarding the cultural difference is centred on two diverse cultures i.e. European and Chinese culture as against the American culture. 3.1 International cultural management and Hofstedes model 700 Hofstede’s five cultural dimensions is a model framed for discussing cross-cultural communication. It actually aims at describing the culture of a society on the basis of value of the members and the way this value affect the behaviour of the individuals (Soares, Farhangmehr and Shoham, 2006; E. Bergiel, B. Bergiel, and Upson, 2012; Mooij and Hofstede, 2010). The following two figures highlight the cultural difference between Europe and the US (Figure 3) and between UK and US (Figure 4). Figure 3: Cultural difference between UK and US (Source: Geert Hofstede, 2015a) Figure 4: Cultural difference between China and US (Source: Geert Hofstede, 2015a) Power distance (PD): It refers to extent to which the members of a particular company can except and accept that the unequal distribution of power. Society with high degree of PD accepts the hierarchies, where the individuals have separate place and there is no need for any justification (Mooij and Hofstede, 2010). Best Buy is an American company, thus, according to Hofstede’s Model, it has low PD i.e. power is distributed unequally among the employees; however, in China there is high degree of PD, hence, Best Buy has to concentrate on developing a hierarchical structure in the management, where everyone has equal power to take any decision. As compared to PD in the UK, it is observed that the China has low PD like the US (Geert Hofstede, 2015a; Geert Hofstede, 2015b). Hence, in order to survive in the UK, Best Buy has to adopt the culture followed in the UK companies. Individualism: It refers to degree to which the individuals are integrated in groups. In an individualistic country, emphasis is given on individual achievements and their rights (Mooij and Hofstede, 2010). In China, the degree of individualism is very low as compared to high degree in the US. Thus, it can be identified that the US is an individualistic society; here, the employees and managers work for individual goal. On the other hand, the employees and managers in China work for the achievement of group goal. Hence, Best Buy has to adopt collectivist culture in China so as to maintain a good relationship with the local employees and consumers. Like the US, the UK is also an individualistic society; however, the individuals in the UK are not as friendly as in the US (Geert Hofstede, 2015a; Geert Hofstede, 2015b). Therefore, if Best Buy gives effort to identify the characteristics and demand of the UK market, then it can establish a successful business in the UK. Masculinity: It refers to distribution of the emotional roles that exists between the genders i.e. male and female. The masculine culture indicates assertiveness, competitiveness and materialism, power and ambition; whereas feminine culture places more value on the quality of life and relationship (Mooij and Hofstede, 2010). Both China and the UK are masculine society i.e. success driven. Conversely, the Americans are also ambitious, success driven and believe in hard work (Geert Hofstede, 2015a; Geert Hofstede, 2015b). Hence, it is easy for Best Buy to tap the markets of China and the UK as it can understand the mentality of the individuals. Uncertainty Avoidance: It refers to the degree to which the individuals can tolerate ambiguity and uncertainty (Mooij and Hofstede, 2010). The Chinese people are comfortable with uncertainty and ambiguity and they can adapt to any changes that are taking place in the society. This is quite a good sign for Best Buy, since being an American company; it can adapt to the changes very easily and are quite comfortable with innovation and production of new ideas. Both China and the US do not abide by rules and regulations, instead they are free and liberal. Hence, Best Buy can expand their business in China by concentrating on the taste and preferences of the individuals. In the UK, the people are happy to wake up with new things in their life. Like the US and China, they are free to adapt to the changes. Nonetheless, the main difference in this context is that the British society follows several rules and regulations, which are concerned with everyday life. The British people are very cautious about creativity and innovation (Geert Hofstede, 2015a; Geert Hofstede, 2015b). Therefore, it can be stated that Best Buy have to follow the rules and regulation of the country in order to set its business in the UK. Long term orientation: It describes the time horizon of the society; here, the long term oriented societies always think of the future. This societies aims at fostering rewards, which are value oriented; whereas, the short term oriented societies follow the values, which are set up in the present or past. China follows pragmatic culture i.e. the people in the society believes truth is dependent on the context, situation and time. However, the Americans look for evidences that can describe the truth. Hence, Best Buy has to adapt this culture so as to continue a successful business. Best Buy should concentrate on long term goals like the Chinese culture so that it can understand their exact need. With respect to the UK, the society possesses dominant culture, which helps in determining the long term goals (Geert Hofstede, 2015a; Geert Hofstede, 2015b). Therefore, Best Buy should concentrate on long term gaols apart from their short term plan. Indulgence: It refers to the degree which a society controls their impulse and desires. China is observed to be a restrained society as the score is quite low; hence it has the tendency to pessimism or cynicism. China does not focus on leisure time and this control the gratification of desires. The people in China have the perception that actions are restrained by the social norms. Nevertheless, the Americans believe in hard work and thus Best Buy can make changes in their operation in China so as to include the social norms followed by the society. The British culture is described as indulgent. Hence, the people in this society realise the desire and impulse of fun and life. They have quite a positive attitude towards optimism and they give high level of importance to leisure times and spend money the way they wish (Geert Hofstede, 2015a; Geert Hofstede, 2015b). From the discussion it can be summarized that Best Buy should have adopted the above mentioned culture in order to sustain in the Chinese and European market. 3.2 Cultural approaches to internationalization and Trompenaar’s seven dimensions Best Buy should understand the cultural aspect of any country before entering the market for setting up business. Trompenaar’ Seven Dimension is employed for distinguishing one culture from another (Ahlstrom and Bruto, 2009). Universalism versus particularism: The society in the UK abides by the laws, rules and values; on the other hand, China and the US do not follow any rule or regulation. Being an American company, Best Buy have to follow the rules and regulations, which are followed by the people in the UK (Ahlstrom and Bruto, 2009). Individualism versus Communitarianism: China is a communitarianism country, where individuals work for the achievement of goal of group; on the other hand, the UK and the US follow individualistic culture as they are ambitious and believe in freedom in work. Hence, Best Buy should adopt the culture of working for success of group rather than focussing on individual achievement (Ahlstrom and Bruto, 2009). Specific versus diffuse: China and the UK follows diffusive culture, where the employees overlap their organisational and personal engagements. Similarly, in the US, the individuals are ambitious and hard working like the other two; but it is significant for Best Buy to concentrate on the cultural difference that exists between the two companies (Ahlstrom and Bruto, 2009). Neutral versus emotional: All the three countries are neutral regarding their feelings. This makes them ambitious and they do not reveal their thinking or get influenced easily. Hence, Best Buy has the option of focussing on the details of consumer preference so as to meet their demand effectively. Achievement versus ascription: In China, the employees concentrate on group achievement but in the UK, the managers and employees are concerned about their personal goal. On the other hand, the managers and employees in the US are also self-achievement oriented. Therefore, apart from the organizational perspective, Best Buy should strategize according to needs of the customers rather than concentrating on big stores in China and the UK. The big stores culture is not apporpriate in China and the UK. Sequential time versus synchronous time: The American companies do not have flexible working hours rather they concentrate on the schedules and maintain punctuality. In case of China and the UK, flexible workings are encouraged. Hence, Best Buy should adopt the flexible working culture in order to survive in the mentioned markets in the long run (Ahlstrom and Bruto, 2009). Internal direction versus other direction: The Americans and British people like to encounter the uncertainty with confidence as they feel that nature controls them; any uncertainty in the environment leads to changes in the organization. Chapter 4: Enhancing business through theories This chapter aims at describing the ways for improving the business of Best Buy and help them in becoming competitive in the global context. 4.1 Enhancing business through adaptive theory and corporate strategies Best Buy failed to succeed in China and Europe because they could not adopt the culture of the two markets. It followed the standard culture that Best Buy follows in the US i.e. big box stores. The Europeans do not prefer to go to big stores for purchasing electronic items once or twice a year rather they prefer small retailers or even online purchase. Hence, the big box stores strategy did not go well in the market. Likewise, the company failed to capture the Chinese market as it is ruled by local retailers, which offer the electronic items, which is half the price offered by Best Buy. Hence, the Chinese people prefer to buy from local retailers at a cheap rate. It is observed that Best Buy is too expensive of the Chinese market. It is recommended that the customer-centric approach of Best Buy is apporpriate for the company though it failed to apply in the above mentioned market. In order to do so, the company has to study the characteristic of the international markets very carefully. It has to examine the taste and preferences of the customers; make customized products rather than standardised electronic items for the international markets. Hence, it should adapt the culture and working pattern of the country where it expand its business rather than following the American culture. 4.2 Enhancing business through Uppsala internationalization theory Uppsala Internationalization theory aims at explaining the activities adopted by the firms for intensifying their business in the foreign markets. The main feature of the model is that the firm first gains knowledge from domestic market and then move to the international grounds. Secondly, the companies expands in geographically close countries, so that the cultures are almost similar (Digipro, 2015; Margardt, 2009). With the help of this theory, Best Buy can expand its business equally. Firstly, Best Buy had enough experience in the American market. It had encountered success in the American market with the introduction of new electronic items at a much cheaper rate. It had helped them to become the market leader in the US. This had encouraged the company to expand internationally so as to increase the sales revenue and profit. Internationalization was not successful for Best Buy in China and Europe as it failed to adopt the culture of the markets and also could not recognize the taste and preferences of consumers. Therefore, it should expand in the close neighbouring countries so that the culture and the consumer tastes are similar to a great extent. Chapter 5: Conclusion Best Buy had developed an established business in the US by providing electronic items at a cheaper rate. International expansion is crucial for every company as it increases its strength and profit globally. The global expansion not only helps the company to earn more profit but it also adds new customers to the business. Best Buy had expanded in the UK and China so as to extend the presence of the business internationally. However, the business failed in both the countries as Best Buy failed to understand the cultural differences. The Porter’s five forces and Generic strategies have identified the fact that Best Buy had successfully penetrated the US market by offering electronic items at cheap price. Therefore, it is identified that the failure of Best Buy in China and Europe had made the global expansion weak and also affected the profit. In Europe, Best Buy wanted to open about 200 stores but latter the number decreased to 100 stores. However, the company had to cease its operation in the UK as it could not meet the demands of the local population. According to the critics, Best Buy flaunted their American culture and failed to provide items, which would fulfil the needs of the Europeans. The same situation was encountered in China, where Best Buy offered electronic items to the customers, which are expensive then the local Chinese products. The Chinese people prefer to purchase cheap products form the local retailer than to visit Best Buy stores. 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