Video Cases 2

These questions are based on videos from the Canadian Broadcasting Corporation that accompany the textbook. In addition to whatever in-class use your instructor may have given them, they're available on this website for online viewing. If directed to do so by your instructor, you can answer the questions online and email the results.
     These videos are intended only for students using the 10th Canadian Edition of Basic Marketing. To view the video, you'll require a password. Refer to page 782 in your textbook and use the first word appearing in the main text column as both 'username' and 'password.' Use of the word is case-sensitive.
     The free RealPlayer plug-in is required in order to view the videos. If needed, the plug-in can be downloaded from Real.

Retail Wars II
This case is especially topical given that Best Buy recently (September, 2001) announced its purchase of Future Shop. The video takes place almost a year earlier and, because it focuses on the differences between the two competitors, raises some interesting questions about the goodness of fit.
     Best Buy is just one of at least 16 American retail chains that are preparing to enter Canada. They include American Eagle Outfitters, Old Navy (a division of the Gap), Pottery Barn, Williams-Sonoma and Pacific Sunware. What's going on?
      "As soon as there starts to be a slowdown in the United States we have to watch out in Canada and elsewhere in the world because they (U.S. retailers) need to keep their growth growing" says retail consultant Richard Talbot. And he says he's seen it before. During the last recession there was another wave that came over the border. They included Home Depot and Walmart. And Canadian retailers were taken by surprise. "In the first invasion in 1990 they were totally blown over. They were just bulldozed right out of the way" says Talbot.
     Part of what the Americans bring is a hyper-competitive style of retailing. Author Wendy Evans has studied the American invaders. She says "they are far more aggressive, far more competitive. It's "we're not going to share this market with you, we're going to annihilate you"". Costs are squeezed out constantly, often through state-of-the-art efficiencies.
     And bulldoze is what Best Buy intends to do. Healy says that Best Buy has always enjoyed success. And their Canadian expansion will be no different. "We're projecting within a year to have a dominant market share in every market we're in" says Healy. Try telling that to the reigning king of consumer electronics retailing in Canada, Future Shop. Their president, Kevin Leyden, wishes them good luck but thinks they are in for a surprise.
     And Richard Talbot says that Canadian retailers are better prepared for the foreign competitors this time around. "I think Canadian retailers have been through it once, once bitten, twice shy- and they're going to be prepared. Not to say that there won't be blood on the sand but they will be better prepared".
     Future Shop has decided to be proactive to help head off the invaders. The chain is expanding from 88 stores to about 120 and intends to more than double sales to five billion dollars in the next five years. It's an aggressive strategy to maintain their number one position. Leyden says that with this strategy, Best Buy may be setting their sights a little high. "There's no way they can catch us in their timeframes that they are announcing. There is no doubt in my mind" he says.
     And real estate is the battle ground. Richard Talbot recognizes the strategies at work. Using a map of the greater Toronto area, he plots the existing locations of Future Shop stores. "Then what you can actually do is you can predict which site...(Best Buy) will be looking at" because of the gaps in Future Shop's store network. The idea is to "get there first and tie up the prime location at that corner, even if it's not neccessarily a really good site for us but at least it stops them coming". And he shows an area of the map that has just such a gap and sure enough, Best Buy has signed a lease for a store in that spot.
     But Kevin Leyden says bring them on. He says that by adding special services to Future Shop's arsenal, things like Aeroplan reward miles and state-of-the-art digital photo labs that let customers preview and pick their favourite shots, will help keep their customers loyal to his chain. But he knows it won't be easy. In his suburban Vancouver head office he starts his calculation. Best Buy "said that they will have 65 stores in Canada, their average volume per store is US$37 million.
     Future Shop will have 120 to 125 stores and our average volume is C$22 million" he says crunching numbers. When the exchange rate is factored in he admits Best Buy "would get close" to Future Shop's sales numbers. But he is confident that same-store increases and other improvements to revenues will keep Future Shop on top.
      As long as business remains slow in the United States, more Canadian retailers will have to embrace that spirit of competition.

View Retail Wars II

1		Why has Future Shop succeeded in Canada? Why has Best Buy succeeded in the US?
2		Does Best Buy's arrival undermine any of Future Shop's strengths? Augment its weaknesses?
3		What are the key assumptions Best Buy and Future Shop are making about buyer preferences in their belief that they will prevail?
4		How is this situation different from, say, Krispy Kreme's arrival in Canada against Tim Horton's?