Bestbuy Case Study

Executive Summary

• Leading consumer electronics retailers in the world. Reportedly has been in losses but in the past starting FY were very successful.      

• Using several analysis techniques including  SPELT, SWOT & Porter’s Five Forces, study shows that the company is dealing with intense battle both online and offline.

• This intense competition pushes price cut down, hence lowering the margins of any retailer and also leading to outflow of long time employees.

• To counterbalance the negative effects of the company’s unstable financial position a    number of strategic alternatives is being offered with each strategy having its own advantages & disadvantages.

• Rely comprehensively on private label that is exclusive products majorly, sold only at BestBuy under a variety of brands.

• Tapping consumer electronics market and selling products at a high profit margin by acquiring other manufactures is another way to be ahead of the curve.

Introduction

history

• Founder:  Richard Schulze and another partner in 1969.

• Managed as a single home and car audio specialty store in St. Paul, Minnesota.

• Schulze after buying out his partners continued to expand and broadened the product line to suit the needs of his customers by early 1980’s

• Founded  as “Sound of Music” but after two decades of operation it was officially  know “as BestBuy” with launching its first store in 1983.

• Within the next five years, opening 24 superstores with sales rising $24 million to $240 million through IPO on NASDAQ.

Spelt analysis

The analysis contains political, social, Technological, Environmental and Legal aspects of a country in relation to Best Buy CO.Inc.

Political

In United States, direct corporate contribution to the candidates of any political party and committees is not allowed in some states and at federal level.

Proposal by the trump administration to impose 20% border tax on imports from Mexico would increase costs for Best Buy (Gillespie, 2017).

Economical

With simplification in tax for business and creation of more jobs in the United States, there would be a outburst in demand.

Not necessity products.

Less disposable income.

Low- interest financing are given to customers.

Heavily attracted to seasonal business to achieve the financial goals.

Social        

Consumer credit remaining rigid for income group with suppress demand (Richter, 2014).

Slowing product innovation in most electronic product categories tend in slowing sales.

Best Buy ensures that the factories producing its imported private label products meet the safe workplace standards (Corporate Responsibility and Sustainability Report, 2015).

Technological

BestBuy is focusing on expanding e-commerce and mobile development capabilities.

Web encryption technology for easy and safe transactions wit its customers.

Location Information provide helpful messages in your mobile app when one comes to the stores (Best Buy Privacy Policy, 2017).

Digitalization will help in improving customers to have secure shopping experience and in return helps understand the company about their visitors (Best Buy Privacy Policy, 2017).

Environmental

“Best Buy wants your junk”, campaign initiated by Best Buy with offering free recycling of products in 2009 by Fortune magazine.

Boosting the company’s goodwill and trust, which lead to increase in number of customers into stores (Gunther, 2009).

Legal

Best Buy has faced several lawsuits and was fined $3.8 million penalty in 2016 for selling recalled products ("Best Buy Is Getting Fined for Selling Recalled Products", 2017).

In 2005, The company was alleged for discriminating against the women employees specially African-American and Latino employees.

Best buy is keen on changing and moreover comply with the said rules and regulations and law of the government depending on the region.

Porter’s Five Forces
analysis

Threat of new entrants

The threat of new entrants in the consumer electronics market is medium to low.

Easy for any Asian in setting up small scale electronic website to sell in America or Europe.

Drawbacks :-

• Costly Advertising

• Long Shipping time – Around 6 months from China to USA.

• Huge investment cost

Bargaining power of buyers

Due to fierce competition from various online businesses, the bargaining power of buyers is high.

Leading to low-price strategy because availability of substitutes.

Best Buy has a upper hand to attract more customers by giving quick after sales service  assurance and also attracting them with exclusive brands

Bargaining power of suppliers

The bargaining power of suppliers is low due to the organization economy of scale.

As being the 10th largest online retailer in the North American market, mass network, high sales and capital investment enabled suppliers to gain trust in the company.

Threat of substitute products

Threat of substitute products is low.

Wide range of consumer electronic product to offer to the consumer.

As suppliers needed to achieve their target sales, Best Buy is always above the latest trends in technology and devices.

Rivalry among competing firms

Competition is high among the rivals, leading to strong price war between retail and online.

Competitors : Amazon and Walmart.

Leading to low customer retention due to competition in the market as products offered are similar to other competitors.

Abhinav

Comparative UPDATED financials of at least 2 (3 is better) major competitors, including ratios based on current balance sheets and income statements, explaining what they measure and what it means in terms of the industry’s performance compared to other industries

 Still left

comparison of BestBuy to their direct competitors.

SWOT Analysis

Recommendation

With competition from Internet, Best Buy should focus on sticking with having 1415 stores domestically and 216 units internationally making customer experience more realistic. As most of the top branded suppliers like selling their products in store.

Same day delivery should be started in all regions.

As its only available in the US, Best Buy should tap customers internationally by opening stores in the  geographical regions to cater the needs of the customers.

Acquisition and Merges with the other competitors only for strategic benefits.

References

Annual Reports - Investor Relations - Best Buy Co., Inc.. (2017). Phx.corporate-ir.net. Retrieved 25 June 2017, from http://phx.corporate-ir.net/phoenix.zhtml?c=83192&p=irol-reportsannual_pf

Boyle, M., (2006).  Best Buy's Giant Gamble. Fortune, retrieved on June 24, 2017 from  http://money.cnn.com/magazines/fortune/fortune_archive/2006/04/03/8373034/

Best Buy’s recycling program is changing. Here’s how and why.. (2016). Best Buy Corporate News and Information. Retrieved 26 June 2017, from https://corporate.bestbuy.com/10556-2/

BBY: Best Buy Co Inc Top Competitors and Peers. (2017). Financials.morningstar.com. Retrieved 27 June 2017, from http://financials.morningstar.com/competitors/industry-peer.action?t=BBY®ion=usa&culture=en-US

Best Buy Co. Inc, (2017). Privacy Policy, Retrieved on June 24, 2017 from  http://www.bestbuy.com/site/Help-TopicsPrivacyPolicypcmcat204400050062.cid=pcmcat204400050062&DCMP=rdr2623#priva cy_cookies

Best Buy Is Getting Fined for Selling Recalled Products. (2017). Fortune.com. Retrieved 26 June 2017, from http://fortune.com/2016/10/04/best-buy-recalled-products/

Best Buy Workers File Bias Lawsuit. (2005). latimes. Retrieved 26 June 2017, from http://articles.latimes.com/2005/dec/09/business/fi-bestbuy9

Gunther, M. (2009). Best Buy recycles - Good for environment and business. Archive.fortune.com. Retrieved 26 June 2017, from http://archive.fortune.com/2009/11/30/technology/best_buy_recycling.fortune/index.htm

Corporate Responsibility and Sustainability Report. (2015). Retrieved from https://corporate.bestbuy.com/wp-content/uploads/2015/06/fy15-full-report-final.pdf

Gillespie, P. (2017). A 20% Mexico tariff would pay for the wall. But it would hurt Americans. CNNMoney. Retrieved 26 June 2017, from http://money.cnn.com/2017/01/26/news/economy/trump-mexico-tariff/index.html

Inside Best Buy’s Customer-Centric Strategy. (2017). Harvard Business Review. Retrieved 26 June 2017, from https://hbr.org/2010/04/inside-best-buys-customer-cent.html

Richter, S. (2014). As Goes Best Buy, So Goes U.S.? - The Globalist. The Globalist. Retrieved 26 June 2017, from https://www.theglobalist.com/goes-best-buy-goes-u-s/

Thank You