Best Buy scales back global expansion
Best Buy is dialing back its international business ventures to focus more in improving domestic sales in the U.S. On Tuesday, the retailer sold its 50 percent stake in Carphone Warehouse, based in Europe; Best Buy initially invested in the company in 2008 to open stores in Spain, Portugal and France. But with the European economy in financial straits and Best Buy’s U.S. sales not faring much better, the company has decided to make improvements on the home front.
One of the benefits of investing in Carphone Warehouse was its expertise in helping develop Best Buy Mobile. This innovative spin off helped Best Buy cater to the digitalization of the marketplace and attract consumers looking specifically for smart phones, tablets and services to go along with them.
During the past few years, Best Buy also made investments in other technology startups through its Strategy and Innovation department in order to cultivate innovation from those ventures and translate it into disruptive shifts for its own business model. But company executives say they will no longer look for innovation from outside of the company; instead, they will harness internal talent and strive to make innovative changes from within. This switch in strategy means small businesses and startups in the technology space will have to look elsewhere for mentorship and venture funding.
The impact on small businesses
The decision to go from a large U.S. and European footprint and operate on a smaller scale is a signal to other businesses to focus on core businesses first before trying to branch outward. Some may call it focusing on the fundamentals or learning to walk before you run, but spreading an imperfect business model into new markets can cause huge losses.
In the case of Best Buy, the retailer knew it had problems with its U.S. sales performance, and is now taking the opportunity to scale back and make improvements in its North American stores. For small businesses that helped supply inventory for the European stores, this will cause a reduction in revenue; but with Europe’s already tough economy, it may present an opportunity for small business to revisit their own strategy and seek ways to leverage their internal resources to promote innovation and bring in new opportunities.
