Answer the following questions about two of the 10 stories ✓ Solved

1. What incentives did the company have to enter the new market and what were the basic benefit(s) they sought?

2. What International Corporate level Strategy did they choose? What would you choose, why?

3. What were some of the political, economic, and cultural risks the companies weren’t aware of or underestimated leading to their poor performance?

Paper For Above Instructions

Introduction

Expanding into international markets poses numerous opportunities and challenges for U.S. companies. Some American brands have faced significant difficulties when attempting to enter foreign markets, illustrating the complexities of international business. This paper analyzes two case studies: Best Buy's ventures in Europe and eBay's attempts in China and Japan. By examining their motivations for entering these markets, the strategies they employed, and the risks they underestimated, we can better understand the intricacies of international corporate expansion.

Incentives for Market Entry

American companies often seek new markets to exploit growth opportunities unattainable domestically. For Best Buy, the primary incentive for entering the European market was to capitalize on the growing consumer electronics sector during the early 2000s. The company aimed to replicate its successful U.S. business model by establishing large-format retail stores in Europe. Best Buy believed that entering the European market would provide access to new consumers and increase overall revenues.

Similarly, eBay's motivation for entering the Chinese and Japanese markets was driven by the prospect of immense e-commerce potential. A growing middle class in China and Japan presented opportunities for businesses like eBay to capture market share. Furthermore, with the global growth of e-commerce, eBay aimed to be an early mover in these burgeoning markets to solidify its position as a leading online marketplace.

International Corporate Level Strategy

Best Buy's international strategy was primarily a localization approach, seeking to adapt its retail format to meet the preferences of European consumers. However, it did not fully understand the unique shopping habits of these consumers, leading to poor performance. For instance, European customers preferred small, convenient stores over large-box retailers, which Best Buy failed to recognize (Kossow, 2019). In contrast, I would have recommended a more cautious approach, such as a gradual market entry strategy involving significant market research and gradual adaptation of the retail format.

eBay’s approach in China involved a more aggressive strategy that emphasized rapid growth through market saturation. However, eBay did not adequately adapt its platform to local preferences. The company failed to incorporate crucial features such as a cash-on-delivery payment option, which was popular in the Chinese market. Instead of a straightforward strategy, I would recommend an incremental approach focused on understanding local behaviors and incorporating features popular among local users (Liu & Wang, 2020).

Risks Underestimated

Both companies underestimated several political, economic, and cultural risks that contributed to their poor performance. Best Buy misjudged the competitive landscape in Europe, failing to appreciate the strong preference for local retailers (Murray, 2011). Its large-format stores did not translate into consumer interest, leading to significant financial losses and eventual exits from markets like the UK and Germany.

For eBay, significant cultural risks emerged in their two main target markets. In China, eBay underestimated the importance of interpersonal relationships in business transactions. Chinese consumers preferred to develop trust through direct interactions with sellers, contrasting with eBay's reliance on seller ratings and feedback systems (Yuan et al., 2018). In Japan, eBay did not cater to local payment preferences, resulting in a lack of customer acceptance of their services (Finance Elements, 2012). These miscalculations regarding political regulations, consumer preferences, and competitive dynamics ultimately led to both companies' struggles.

Conclusion

The experiences of Best Buy and eBay in their respective international ventures underscore the complexities involved in global expansion. Companies must carefully evaluate not only their domestic business models but also the local market dynamics, cultural preferences, and economic conditions of the markets they intend to enter. A more measured approach, grounded in thorough research and local insight, is crucial for navigating the challenges of international business successfully. Companies must learn from both successful and failed forays into foreign markets to inform their future strategies and avoid repeating past mistakes.

References

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  • Kossow, J. (2019). Best Buy's Challenges in Europe: A Case Study. Retrieved from [link]

  • Liu, H., & Wang, Q. (2020). Understanding E-commerce in China: eBay's Experience. Journal of International Business Studies. Retrieved from [link]

  • Murray, A. (2011). The Retail Fumbles of Best Buy. The New York Times. Retrieved from [link]

  • TechCrunch. (2012). Groupon's Missteps in China. Retrieved from [link]

  • Yuan, Y., Chen, J., & Lin, J. (2018). The Trust Factor: eBay's Failure in China. International Journal of Market Research. Retrieved from [link]

  • Business Insider. (2011). The Best Buy Failure: A Cautionary Tale. Retrieved from [link]

  • Forbes India. (2014). eBay's Japan Strategy: A Lesson in Cultural Sensitivity. Retrieved from [link]

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  • Harvard Business Review. (2018). The Cultural Miscalculations of American Companies Abroad. Retrieved from [link]