April 25, 2007
Best Buy Names New Leader for Asian Expansion
Best Buy has named Redmond Yeung to head up its Asian business. Mr. Yeung will take over the newly created position of president and chief operating officer of Best Buy Asia and be responsible for overseeing the division’s retailing businesses in the region along with the company’s global sourcing office in China.
Robert Willett, chief executive of Best Buy International, called Mr. Yeung “an exceptional leader with the vision, global experience and deep retail knowledge to help us create great experiences and relationships with our customers in China. He has achieved an extraordinary track record of success in growing and delivering superior operating results in highly competitive markets while always focused on serving the needs of customers.”
Mr. Yeung joins Best Buy from Ports Design Limited, the largest upscale fashion retailer in China.
“Best Buy is just beginning to understand what it means to be part of the Chinese retail landscape. We are building our presence in a deliberately careful and controlled manner and have a desire to learn from others who have gone before,” said Mr. Willett.
Discussion
Questions: What are the challenges retailers from outside the continent face
as they look to formulate strategies to expand throughout Asia? What types
of leaders are needed to succeed in the developing markets of nations such
as China and India? What do you make of Best Buy’s decision to include oversight
of the company’s global sourcing office in China among Redmond Yeung’s duties?
BrainTrust
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Discussion Questions
Poll
Success in the Asian market has similar and different requirements to success in the U.S. market. Certainly, knowing your consumers well is critical for success in both places. However, consumers are different in both places. While many consumers in the U.S. are price conscious, it pales in comparison to the cost conscious perspective in the Asian markets. Brand name is less important in the U.S. than in Asia. The housing and transportation are also different which has a huge impact on the physical dimensions of products. Most important of all–the marketplace moves MUCH faster in Asia in terms of the numbers of brand name items available at any one time and the speed with which new items are introduced.
Success will be very lucrative IF the challenge of determining what is truly different and what is similar can be managed successfully.
Mr. Yeung’s background (mainly clothing), as well as the Best Buy management structure (combining sourcing for the U.S. as well as a Chinese retail venture) is unconventional. Most multinational retailers organize their sourcing for the U.S. separately from their foreign retail stores. Best Buy’s best strategy? To see if sourcing can leap from commodity merchandise to truly unique and valued proprietary items. Otherwise, the low margin trench warfare with CompUSA, Sears, Circuit City, et al will continue to sap its potential.
Best Buy has a great strategy: learn from others who have already entered the Asia market. Learn from previous mistakes and successes. If you don’t understand the culture, business process and regulations, the company will be stepping on land mines everywhere. Best Buy has acknowledged that they need someone at the top to guide them through the learning phase of setting up a new division in Asia.
This advice holds true anywhere overseas. It is imperative for a company to understand fully the impact of different policies and regulations…the traditions, holidays, working hours, customs, taxes, subsidies, permits and labor laws to mention a few details. There are many horror stories for companies that have entered other regions such as Asia, EU, South America and didn’t fully understand the current business climate.
Best Buy respects the multi-faceted challenges of acculturation with this expansion. Combined with their appetite for innovation, they’re simply doing it right. From the initial responses I’ve heard from internal employees, it’s working!
Challenges that any retailer will face while entering or expanding in Asia are several such as:
a. Asian consumers are more brand conscious. Therefore, more or wider brand choice in stock assortment will be better than trying to provide “value” through private label or non-branded merchandise.
b. Asian homes tend to be smaller that the U.S. homes. Therefore, size of a TV or a stereo system is an important factor in making a buying/purchasing decision.
c. Similarly, cars tend to be smaller in Asia. Therefore, how is a customer going to haul one or several big boxes home? Therefore, service such as delivery, set up and hauling away empty boxes and packing material becomes important.
d. Food and other necessities, such as transportation take bigger chunk of disposable income in Asia compared to the U.S., so pricing is a challenge.
e. Consumers in Asia are not the same as those in the U.S. Therefore, management would be wise to include local employees in as much decision making as possible.
d. Above all do not go in with the attitude some American companies have (big three automobile companies?), i.e., “what do our customers know? We know what is best for them and what they want.”
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Success in the Asian market has similar and different requirements to success in the U.S. market. Certainly, knowing your consumers well is critical for success in both places. However, consumers are different in both places. While many consumers in the U.S. are price conscious, it pales in comparison to the cost conscious perspective in the Asian markets. Brand name is less important in the U.S. than in Asia. The housing and transportation are also different which has a huge impact on the physical dimensions of products. Most important of all–the marketplace moves MUCH faster in Asia in terms of the numbers of brand name items available at any one time and the speed with which new items are introduced.
Success will be very lucrative IF the challenge of determining what is truly different and what is similar can be managed successfully.
Mr. Yeung’s background (mainly clothing), as well as the Best Buy management structure (combining sourcing for the U.S. as well as a Chinese retail venture) is unconventional. Most multinational retailers organize their sourcing for the U.S. separately from their foreign retail stores. Best Buy’s best strategy? To see if sourcing can leap from commodity merchandise to truly unique and valued proprietary items. Otherwise, the low margin trench warfare with CompUSA, Sears, Circuit City, et al will continue to sap its potential.
Best Buy has a great strategy: learn from others who have already entered the Asia market. Learn from previous mistakes and successes. If you don’t understand the culture, business process and regulations, the company will be stepping on land mines everywhere. Best Buy has acknowledged that they need someone at the top to guide them through the learning phase of setting up a new division in Asia.
This advice holds true anywhere overseas. It is imperative for a company to understand fully the impact of different policies and regulations…the traditions, holidays, working hours, customs, taxes, subsidies, permits and labor laws to mention a few details. There are many horror stories for companies that have entered other regions such as Asia, EU, South America and didn’t fully understand the current business climate.
Best Buy respects the multi-faceted challenges of acculturation with this expansion. Combined with their appetite for innovation, they’re simply doing it right. From the initial responses I’ve heard from internal employees, it’s working!
Challenges that any retailer will face while entering or expanding in Asia are several such as:
a. Asian consumers are more brand conscious. Therefore, more or wider brand choice in stock assortment will be better than trying to provide “value” through private label or non-branded merchandise.
b. Asian homes tend to be smaller that the U.S. homes. Therefore, size of a TV or a stereo system is an important factor in making a buying/purchasing decision.
c. Similarly, cars tend to be smaller in Asia. Therefore, how is a customer going to haul one or several big boxes home? Therefore, service such as delivery, set up and hauling away empty boxes and packing material becomes important.
d. Food and other necessities, such as transportation take bigger chunk of disposable income in Asia compared to the U.S., so pricing is a challenge.
e. Consumers in Asia are not the same as those in the U.S. Therefore, management would be wise to include local employees in as much decision making as possible.
d. Above all do not go in with the attitude some American companies have (big three automobile companies?), i.e., “what do our customers know? We know what is best for them and what they want.”