Best Buy Case Study

Overview: Richard M. Shultz changed the name of his original company Sound of Music to Best Buy Co. Inc in 1983. His stores went from offering only music to becoming the electronic superstores they are today. By the late 1980’s Price Wars from competition were lowering net earnings. They had to lower their costs while finding ways to stand out from the other super stores. Shultz began implementing Concept II at this point, which meant greater sized and greater stocked show rooms with less sales personnel. This allowed Best Buy to cut their costs and create a hassle free shopping environment. They also began implementing a push distribution strategy so that all of the best buys would always have stocked show rooms. In the 1990’s Best Buy began to enter into more markets throughout the U.S. to try and win market share over Circuit City. This created another price war and Best Buy then decided it was time for Concept III stores. This meant greater sized stores, more advanced products and hands on displays. Concept III caused some problems with their suppliers though. Many suppliers did not want to deal with such large retailers out of fear of losing negotiation power. Best Buy overcame these problems by offering better service options, however, and the 2000’s brought even greater success. In the 2000’s Best Buy became the industry leader owning most of the market share and putting Circuit City out of business. They also began to move into Canada while implementing an online retailing option with Microsoft as their partner. They purchased Geek Squad as well. Now customers can get advanced service with their high tech products.

Problem Statement: The popularity of online retail has made it extremely costly to operate brick and mortars superstores.

Strengths:

• Strong Market Presence

• Innovative Leaders (Shultz)

• Strategic Acquisitions (Geek Squad)

Opportunities:

• Move to developing nations

• Financing to customers

• Reducing stores and costs

Alternative Strategies:

Weaknesses:

• Low customer interactions

• High cost architecture

Threats:

• Suppliers have many options

• Growth of online retailers

• Price