logo image

Home Depot in China Essay

1.         Home Depot’s decision to defer its entry into the China home improvement market may come as a surprise to many people, considering that most industry players are grabbing shares of the market there, with B&Q claiming top spot. The economic boom in China which brought about the rapid rise of the home construction industry may seem to be the right signal for Home Depot to enter the market immediately, or risk encountering tougher entry barriers.

            However, I would agree with Home Depot’s decision to defer its entry because of two factors. The first factor is cultural- that the home improvement market for China is not what one expects it to be. The reason for this is that labor costs are cheap, thus instead of adopting the Do-It-Yourself concept, Chinese home owners would rather have cheap labor make their cabinets and other furniture than make it their own. Thus, it would be very difficult tio penetrate this unique cultural barrier

            The second factor is political. It is quite common in China to establish government connections first, before a foreign company can foray into the local market and establish branches or offices. The choice of location of store is dependent

Need essay sample on "Home Depot in China"? We will write a custom essay sample specifically for you for only $ 13.90/page

on how good the connections are of one company. This presents a tough challenge for Home Depot’s entry also since they will be considered as late market entrants and thus be elbowed out of the prime locations for establishing their store branches.

2.         In my mind, the three most important challenges that Home Depot needs to address regarding its entry into the Chinese home improvement market are first, the unique characteristics of the target market (consumer behavior) which sets it apart from the Western markets; second, the supply chain difficulty, considering the sheer geographical size and climatic conditions; and third is the political bias foreign-owned companies get from the Chinese government.

            The first challenge can be seen as unique since consumer behavior of the Chinese market is relatively different from their Western counterparts. As mentioned earlier, the low cost of labor does not support a DIY attitude, but a BIY (Buy-It-Yourself) attitude. Hence, Home Depot will have a hard time going through this cultural entry barrier.

            The second challenge is the supply chain difficulty considering the huge geographical size of China and the different climatic conditions which have an effect on home improvement products. Supply chain costs in China are very high compared to other countries because of the aforementioned factors.

            The third challenge is political, considering the fact that foreign-owned companies are generally taxed higher than locally-owned ones. They are also offered the poorest sites in locating their store. This is also one challenge that Home Depot needs to consider.

3.         I would suggest licensing as the best entry mode in entering the Chinese market. This is because of many advantages, considering also the barriers to entry that will be encountered by Home Depot. Licensing means that Home Depot authorizes a local firm to manufacture and sell its products.

            One distinct advantage to licensing is that it is less risky for Home Depot. The licensee (local company) assumes the risks involved in manufacturing the product. Aside from that Home Depot is paid a royalty on each unit produced and sold by the local firm.

There are also advantages to this entry mode, but considering Home Depot as a late entrant into the Chinese home improvement market, the benefits outweigh the risks involved.

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!
Sorry, but copying text is forbidden on this website. If you need this or any other sample, please register

Already on Businessays? Login here

No, thanks. I prefer suffering on my own
Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.
Sign in / Sign up
No, thanks. I prefer suffering on my own
Not quite the topic you need?
We would be happy to write it
Join and witness the magic
Service Open At All Times
Complete Buyer Protection
Plagiarism-Free Writing

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy