Culture Determines Business Models: Analyzing Home Depot's Failure Case in China for International Retailers from a Communication Perspective

Abstract

This article is a result of a longitudinal case study regarding Home Depot's operation in China. From 2006 to 2011, the author conducted 37 in‐depth interviews with Home Depot executives, managers, lawyers, employees, suppliers, and consumers, as well as its Western and Chinese competitors. These interviews generated 500+ pages of transcripts and field notes. Home Depot entered China in 2006 by acquiring 12 stores from a Chinese company, Home Way. However, by September 2012 all Home Depot stores in China had been closed. This interview‐based single‐case‐study research has these notable contributions. First, this research stresses the importance of host culture in creating a business model when an international retailer expands to a foreign country. Second, the research develops a new Host Culture Analysis Framework: CELM (host Culture, business Environment, target consumer Lifestyle, and target consumer Mentality). Third, by applying the CELM framework to the Chinese market, this research suggests that Home Depot could have replaced its ineffective DIY (Do‐It‐Yourself) model with the new DIFM (Do‐It‐for‐Me) business model for China. Fourth, this article proposes a new urban boutique store (UBS) retail format for international retailers entering emerging markets. Finally, this research shows that in‐depth interview is a solid research method to be applied to case studies, for the discovery of deeper reasons of international expansion failures. © 2013 Wiley Periodicals, Inc.

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