Operation Management of Best Buy - Essay Example

Operation Management of Best Buy Operation Management of Best Buy Best Buy Co., Inc. is an international retailer with operations in various countries. It deals with home office appliances, services and consumer electronics. The company started its operations in China in the year 2007 after it acquired majority interest in China’s Jiangsu Five Star Appliance Co. Ltd for $180 million (Kwok, Dornbach-Bender & Lange, 2009). It started with opening a single store in Shanghai. Later on, expansion saw the company open five more stores in Shanghai, plus three others in neighbouring cities.

Moreover, in 2009, Best Buy acquired a local chain store called Five Star Electric Appliances (Baijia, 2013). However, in a global restructuring program, the company closed its Shanghai headquarters in 2011 plus other nine stores (Zhihao, 2012).DiscussionDespite being seen as a saviour, after other electronics retail companies that had failed, Best Buy was forced to shut down operations because of several reasons. According to Baijia (2013), the company operated on small scale. As such, it could not take advantage of economies of scale aimed at lowering costs.

Additionally, the company failed to strike a balance between lowering prices while at the same time providing high quality services. This meant that despite offering low prices on its products, these products did not satisfy customer needs. As such, many customers were dissatisfied with the product quality hence many preferred those produced by rivals. With fewer customers using its products compared to competitors, there were reduced profits. Furthermore, there was an unsuccessful strategic adjustment in the United States hence forcing the company to shut down its branded stores in 2010.

After the shutdown, only outlets branded Five Stars were still in operation. The Five Star brand was the one that people in China recognized more than Best Buy branded stores, hence the need to leave it in operation. Additionally, the Five Star brand had been in operation for longer compared to Best Buy stores in China (Zhihao, 2012).The numerous challenges forced the Company to shut down its China stores in order to focus on an expansion plan in areas that were deemed more profitable. Focus was on areas like the United States of America which were viewed as being profitable with more growth opportunities (Bloomberg News, 2011).

The failure of Company to do well in China can be attributed to its inability to fully understand the Chinese market. Whereas its target market was the middle class, it was unable to judge what these shoppers were interested in buying. Burkitt and Davis (2012) say that the Company failed to read the market. As such, the Company tried to export US style stores with Western products. Many shoppers hence were stuck with what they had known for long and thus the Five Star brand. ConclusionThe failure of Best Buy to understand the Chinese market led to its failure.

Whereas its target market was the middle market, it was unable to satisfy customer needs. It continued to export Western products while many shoppers were interested on using local products. Additionally, the Company failed in enhancing customer experience through the provision of transparent prices. Product and service quality did not meet the market demand. Failure of the management to streamline Company operations meant that it could have a competitive advantage over rivals, hence the failure.

Thereafter, the Company’s focus was on the US market which was more profitable with high growth opportunities, as compared to China. ReferencesBaijia, L. (2013). Best Buys exit typifies tough electronics market. Retrieved from http://usa.chinadaily.com.cn/epaper/2013-02/26/content_16257176.htm>.Bloomberg News. (2011). Best Buy Shuts China Stores to Focus on More Profitable Brand. Retrieved from < http://www.bloomberg.com/news/2011-02-22/best-buy-s-china- stores- shut-as-retailer-focuses-on-more-profitable-brand.html>.Burkitt, L.

, & Davis, B. (2012). Chasing Chinas Shoppers. How Best Buy Tapped a Supercharged Middle Class—Through Trial and Error. Retrieved from http://online.wsj.com/article/SB10001424052702303444204577460693377819420.html> Kwok, I., Dornbach-Bender, R., & Lange, R. (2009). Strategic Report for Best Buy Co., Inc. Retrieved from http://economics files.pomona.edu/jlikens/SeniorSeminars/oasis/reports/BBY.pdf>.Zhihao, T. (2012). Best Buy returns, opens stores in Nanjing. Retrieved from http://www.chinadaily.com.cn/bizchina/2012-06/27/content_15525910.htm>.