A key aspect of managing brand equity is the proper branding strategy. This case deals with the major strategic branding decision faced by Best Buy International, a division of Best Buy Inc. (Best Buy), the largest retailer of consumer electronics (CE) in the United States. The company had acquired a majority stake in Jiangsu Five Star Appliances (Five Star), the third-largest retailer of appliances and consumer electronics in China and is weighing in on a branding option. The company is in situation where it is facing a dilemma whether its dual branding strategy that worked well in Canada will work in the vastly different retail environment of China.
The case also provides a retrospective view of its expansion success in Canada where it successfully implemented a dual-brand strategy, wherein two brands, Best Buy and Future Shop, both part of a common corporate entity, vied for market share. In Canada, there was no evidence of cannibalization, the single largest risk in dual branding. Best Buy and Future Shop had both grown together as independent brands.
The basic principle in designing a brand portfolio is to maximize market coverage so that no potential customer are being ignored, but minimize brand overlap so that brands aren’t competing among themselves to gain the same customer’s approval. Each brand should have distinct target market and positioning. The success of Best Buy in Canada can largely be attributed to its adherence to this basic principle while expanding across various regions with its dual branding strategy.
The major issues of the case are as follows:
* Does dual brand strategy work in the vastly different retail environment of China? * How should Best Buy develop two competing store brands while reducing both the risk of product and perception overlap?
In its quest for expanding to the growing and lucrative market of china, the major...