International Business: Globalisation and Its Challenges Essay

Introduction In this essay, I will be focusing and discussing on major challenges faced an international business due to differences in culture at the country or region the business is or was operating. For this essay, I have identified Best Buy Co Inc as one international business and a case study that had faced major challenges in their operations in the United Kingdom. Due to the major cultural challenges faced by Best Buy Co Inc, they had since ceased their operations in the United Kingdom and their venture there is deemed as unsuccessful. Best But Co. Inc was incepted in 1996 in the United States of America. It is a leading multi-channel worldwide retailer and technology product and services developer. In 2010, Best Buy forayed in to the United Kingdom with a joint venture with UK-based mobile phone retailer, Carphone Warehouse after a 50% purchase of The Carphone Warehouse’s retail division. As the world is plunged into a recession during that period, Best Buy’s initial plan t o enter the market in 2009 was pushed back and it seems like they had ran into trouble even before they started. Body Best Buy failed due to a few major challenges that they faced during their venture in United Kingdom. To name a few, they entered the market in United Kingdom when the world is experiencing a recession. They are also overly ambitious in aiming to establish over 200 megastores in the United Kingdom and they faced major challenges in the shopping culture of the English consumers and the far-flung locations of their megastores play a part in their failure too. When Best Buy enters the United Kingdom market in 2009, much of Europe is experiencing and is affected by a recession. While the British pound is still one of the strongest financial economies in the world, they are still nonetheless affected by the recession in Europe. It is understandable that when a recession hits, consumers tends to go easy on their spending. Being a giant American electronic retailer, Best Buy’s venture into United Kingdom during a time of recession will indefinitely affect their businesses. Consumers will be more wary of how they will spend their money. It is not everyday that you need to buy a new television set or refrigerator. It is this lack of foresight on Best Buy’s part that leads to their failure in United Kingdom. Best Buy fails to see that the recession in Europe will affect the economy of United Kingdom. As its neighbour suffers the brunt of recession, United Kingdom will certainly feel its effect too. In United Kingdom, about 42% of all adult employees are provisioned for occupational pension. Recession has affected the people’s attitudes to savings and their ability to save. Two fifths of people in United Kingdom, which is about 41%, can only save little for their retirement due to the economic downturn. Nearly a third, 32%, of people in United Kingdom with a pension and not retired believe the economic downturn has affected the size of their pension pot to a great extent, and 18% say the recession has put retirement lower on their list of priorities. The management of Best Buy fails to identify this economic and savings culture of the people of United Kingdom and it contributed to their failure in their venture there. When people have fewer saving, they will realign their priorities. They will me more wary of their spending and will try to save as much as possible. They need not get a new television set or refrigerator and would rather save the money for rainy days. When Best Buy enters the UK market, they are already having two major electronic retailers, Dixons Retail and Comet Group. These names has been synonymous to the people of UK and are having for more number of stores in the UK as compared to Best Buy’s 11 ‘Big Box’ stores which are located in out of town locations. The management of Best buy should have considered these factors of local competitors and understand the approach that should be taken before entering the market in UK. The market for electrical in UK is already small enough for two local retail giants, what more with a third retailer from abroad? Comet and Dixon are already finding it difficult to thrive, let alone an external brand like Best Buy. These are the type of signs and pointers the management of Best Buy should look into even before they enter the UK market for electrical retailer. They should take note of the size of their prospective competitors should they enter the market and understand how they can make a difference in the electrical market in UK. Rapid technological changes and developments have also changed the way people in United Kingdom shopped. As a lot of electronic shopping moved online, so does the shopping habit of United Kingdom’s customers . Best Buy made a mistake of adopting a strategy in locating its large outlets in out of town and out of the way locations. Being a new business that is not of local origin, this mistake has made the brand more obscure. Best Buy would have to make a huge marketing effort just to make customers head down to their stores. And with the emergence and ease of online shopping, this strategy adopted by Best Buy just puts the customers off. They would rather make purchases online given the convenience of it, rather than making the long journey down to the stores when prices of fuel have also increased. There are also too few Best Buy stores in the UK as compared to its local competitors. Dixon has over 600 stores while Comet has some 250 stores as compared to Best Buy’s 11 which are in out of town location. Due to this, they are unable to create an impact to the electric retail market. Another reason why Best Buy fails in UK is due to its brand recognition. Being a foreign brand name, Best Buy must create a good sense of brand awareness for its business in UK. There are reports that some consumers in UK think that Best Buy is a grocer retailer instead of its nature of business, which is electric. Its brand awareness was not spread rapidly. This is perhaps due to the simple fact that that people do not go to an electric store everyday or week as compared to a supermarket for instance. Why would anyone want to get a television set every week, as compared to someone’s need to purchase groceries for consumption? Even advertising did not help for Best Buy. An actor narrated the adverts with an American accent leading consumers in UK to comment on why the brand is so American. This comment just proves to show how ignorant the marketing department of Best Buy is wen trying to market the brand in the UK. These are some of the problems identified that has contributed to the failure of Best Buy in the UK. In my opinion, it is mostly due to the lack of foresight by the management of Best Buy and their failure to address these shortcomings before they enter the electric retailer market in the UK. With better foresight and understanding of the cultures in UK by the management, Best Buy might not have failed in its business venture in the UK.