When Best Buy, the leading American consumer electronics retailer planned to expand its operations

700 WordsApr 23, 20193 Pages
When Best Buy, the leading American consumer electronics retailer planned to expand its operations outside the United States in December 2000, they earmarked Canada as the first foreign country for its international expansion strategy. The choice was mainly driven by the fact that Canada was its closest neighbor with a retail market that was largely similar to the domestic United States market, which Best Buy had already dominated. The Canadian consumer electronic retail market was largely fragmented, with the dominant force being future shop which had 15% of the market share. The original expansion strategy for Best Buy was to enter the Canadian market and directly compete with future shop as well as the other market players for a piece…show more content…
• Rebranding the Future Shop franchises would be a lengthy and costly process. • Future shop already had brand recognition as well as brand loyalty in Canada • Best Buy had already committed itself to a number of property leases before the merger. The business risks that accompanied the move included the fear that the two competing brands, now subsidiaries of the same company, would cannibalize each other’s sales, thus splitting the profits. Also, there were concerns that the duplication of roles that would result from each company having its own distinct management structure would increase operational costs, minimizing overall profitability. Another fear was that there would be diminished brand awareness for both brands as consumers would treat the two retailers as one company, thus benefiting the competition (Laurent, Lambkin 803). However, the strategy proved successful. This was largely because the two retailers had their own separate operational structure and style that attracted different market segments (Bala, Lorange 4-11), which avoided sales cannibalization between them. Within the first year, positive results were already being seen; a case in point that proved the strategy was successful was in Mississauga where the sales revenue only dropped by $2 million from $40 million to $38 million while a Best Buy outlet just across the street recorded $30 million in sales (Chandrasekhar.5) From this market experiment in Canada, Best Buy learnt that

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