B&Q's Strategies in China

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Case Details:

Case Code : BSTR245
Case Length : 11 Pages
Period : 1999-2006
Pub Date : 2007
Teaching Note :Not Available
Organization : B&Q
Industry : Retailing
Countries : China

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"This is a state-controlled economy. Price fixing is endemic. Retailers are at the bottom of the food chain in China. They have far less power than manufacturers. It is the opposite of the rest of the world."¹

- Steve Gilman, B&Q's CEO for Asia, in 2003.

Introduction

For the financial year 2005-06, B&Q China, a UK based home improvement retailer and a subsidiary of Kingfisher Plc.², generated revenues of GBP 312.8 million and net profit of GBP 5.6 million. The company's revenues increased by 44.7% from GBP 211.7 million reported in financial year 2004-05 while its net profit increased by 65.7% from GBP 3.68 million reported in the previous financial year.³

B&Q said it was bullish on its growth prospects in China. In February 2006, the B&Q's management announced that it would be increasing the total number of stores in China to 100 by the end of year 2010. B&Q China's sales revenues accounted for 4% of the total sales of B&Q.

The company was a pioneer in launching the Do-It-Yourself (DIY)⁴ concept in the retail stores in China. The company skillfully adapted its products and services to the changing needs of its Chinese customers and grew its operations rapidly during the 2003-06 period.

In the year 1999, B&Q opened its first store in Shanghai, China, through a joint venture with Home Decorative Building Materials Limited, a Shanghai based property developer.

The company faced challenges initially as the Chinese home improvement retail sector was traditionally a low margin business.

However, with time B&Q was able to build its brand successfully through its quality products and by developing a relationship of trust with its customers. The company generated awareness about the DIY concept by arranging workshops and providing free demonstrations in its stores.

B&Q's Strategies in China - Next Page>>

1] "Doing up the Middle Kingdom,"www.economist.com, October 09, 2003.

2] Kingfisher Plc., a UK based global home improvement retail group, was incorporated in 1982. As of 2006, the company operates over 680 stores in 11 countries across Europe and Asia.

3] "Kingfisher Annual Report 2005/06,"www.kingfisher.com.

4] 'Do It Yourself,' or DIY, is a term that is used by various communities of practice that focus on people creating things for themselves without the aid of a paid professional. (Source: http://en.wikipedia.org).