Abstract report is to analyze what is happening

Abstract Best Buy is one of the largest consumer electronics retailers in the worldwith 19% share of the global retail consumer electronics market. Althoughextremely successfull in the past, starting in FY2011 the retailer has beenreporting losses. The purpose of this report is to analyze what is happeningand how can company overcome its financial difficulties and emerge on as aleader again.   Introduction  The purpose of this paper is to examine Best Buy’s strategies using EFAS, IFAS, SFAS tables and Porter’s 5 forces Industry, SWOT, TOWS analysis.

Itproposes business strategies that can evolve Best Buy’s current organizationalproblems and improve its competitiveness. Best Buy is a multinational consumer electronics retailer founded in 1966 andheadquartered in Minnesota. The public company has operations more than 1, 100stores in United States with almost 115, 000 employees. It also operates morethan 2, 800 stores in Canada, China, Mexico and Turkey. The company has 19% ofUS market as it’s main dominance. The company provides home office products, entertainment software, appliances, and related services. Consumer electronics is Best Buy’s largestproduct category, which includes video and audio equipment such as televisionsets, DVD players, audio systems, portable audio players, and car stereos. Homeoffice products include personal computers and related peripheral equipment, telephones, cellular phones, copiers and calculators.

Entertainment softwareincludes CDs, DVD movies, computer software, and video game hardware andsoftware. Appliances consist of washing machines, dryers, air conditioners, dishwashers, ranges and refrigerators. In addition these four main categories, the company offers residential and commercial computer repair, support, installation and related services.  Since 2000, Best Buy made various strategic acquisitions in order to expandit’s market both domestically and internationally. The company’s currentportfolio consists of 11 brands.

The domestic acquisitions includes the U. S., and the international acquisitions includes Canada, Europe, China and Mexico.     First brand is Best Buy which offers consumerelectronics, home office products, entertainment software, appliances, andrelated services in the U. S., Canada, China and Mexico.

Future Shop isthe second brand who is a Canada-based retailer also sells similar products asBest Buy. Third one is Geek Squad, they provide residential andcommercial computer repair, support, installation and related services in U. S., Canada, China, and U. K. It operates in both Best Buy stores. Fourthbrand is a Seattle-based, high-end retailer of audio and video products, MagnoliaAudio Video. It operates also in both Best Buy stores.

Jiangsu Five StarAppliances is the company’s fifth brand, it’s the fourth-largest applianceand consumer electronics retailer in China and they sell similar product linelike Best Buy. Sixth brand is The Carphone Warehouse which is theEurope’s leading independent retailer of mobile phones and services. Seventh one is Best Buy Mobile, it’s a U. S.-based retailer who sellssimilar products like The Carphone Warehouse.

It operates in both BestBuy stores as well. The eights brand is Pacific Sales, it’s a brand who offers kitchen, bathand home improvement products in Southern California. Speakeasy is the company’s ninth brand they are U. S.-basedprovider of broadband, voice, data and information technology services.

The tenth one is also a U. S.-based commercial and residential video/audiosystems integration firm, Audiovisions. And Napster is the lastbrand, it’s an online provider of digital music.  Company’s Mission and Business ModelThe company’s mission and business model has shaped in customer-centricway. Providing technology to its customers and helping them to realize thebenefits of technology and technological changes so they could enrich theirlives in a variety of ways through connectivity, “ To make life fun and easy” asBest Buy puts it. In order to achieve that the company improved their productsand created tools to help their customers.

We see the effort especially ontheir exclusive trainings to its employees who are intensely involving incustomers buying experience. While implementing that customer-centric model toit’s business model the company deeply evaluated their customer’s by observingtheir behaviors. As a result they identified and created 5 customersegmentation; 1. Jill, the busy suburban mom who wants to enrich her children’s liveswith technology and entertainment.

2. Buzz, the focused, active, younger male customer who wants the latesttechnology and entertainment.  3. Ray, the family man who wants technology that improves his life – thepractical adopter of technology and entertainment.

4. Barry, the affluent professional who wants the best technology andentertainment experience and who demands excellent service.  5. BB4B (Best Buy for Business), the smallbusiness customer who can use Best Buy’s product solutions and services toenhance the profitability of his or her business. It allowed Best Buy to meet with customer needs in each segment better bytraining their employees and making stores more appealing those specificcustomer segments. Sales were average of 7% higher, the percentage of shopperspurchasing was 6% higher and eversince Best Buy constantly observes customer’sbehaviors and adapting it’s business model to gain growth.

PORTER’S 5 FORCES ANALYSISBarriers to EntryThe threat of potential new entrants intothe consumer electronics retail industry is relatively low. Athough to that thepotential pool of entrant is actually quite large as it consists of numerousonline electronics retailers. Since Best Buy has reputable brand name and goodrelations with its customers with many stores and operations in both domesticand international market it’s not a dangerous challange for Best Buy.   Supplier Power Moderate and Steady, since Best Buy hadfew number of main suppliers for its most of the products in stores it createsdangerous dependency on those suppliers which might a big disaster in order tomeet with customer demands if any of the main vendors fails to supply theproducts. Buying PowerIt’s quite low effect because the cost ofbuying electronic products is not a huge percent of a buyer’s budget, unlikepurchasing a house or car. Since the customers are in individual level theywill purchase one item of a specific product as a reason buyers actually do nothave big influence on prices. Rivalry in the IndustryIt’s often high and increasing.

There hasalways been competition between various electronic retail stores. Best Buy isthe dominant player in the industry especially in US market. Eventhough thatcompetiton comes from the cheap retailers like Wal-mart or online retailerslike Amazon. since the products are not differentiated buyers are able to getsimilar products at almost all of the different electronic stores.

Thus, companies compete on prices and non-tangibles, such as customer service andgoodwill. In other hand, while economic situation turning down for companiesand pushing them to the brink of bankruptcy, competition is quite severe anddestructive.                Threat of SubstitutesThe substitute products that may take aportion of the market share away from the consumer electronics retail industrydo no pose a huge or direct threat. Today’s society and culture places a lot ofemphasis on technology and is highly dependent on electronics. As a result, there are few substitutes for electronics that will directly take their place, such as books, magazines and other non-electronic hobbies to occupy people’stime. Some of the main retailers of books are Barnes and Noble, Borders and theonline retailer Amazon. com.

SWOT Analysis     Table 1: SWOT Analysis                                INTERNAL FACTORS STRENGTHS (+) WEAKNESSES (-)   ·         Customer orientation. ·         Quality product and service portfolio. ·         Domestic and international stores. ·         Large customer base.

·         Good warranty policy. ·         Highly trained sales partners. ·         Integrating employees from acquired companies who are able to offer and provide installation services, product repair, and ongoing support. ·         Creating high quality in-store service offerings for customers ·         By constantly growing and increasing company’s revenue ·         Reputable brand nameand recognized by its excellent product and service offerings ·         Highly trained sales professionals had become a unique resource to gain competitive advantage   ·         Marketing different product and services is a difficult task have less location than Gamestop. ·         Amazon. com was able to maintain a lower cost structure. ·         Netflix began offering streaming downloads through its website.

·         Depressing economic conditions, technological advances and increased competition. ·         Unexperienced  CEO. EXTERNAL FACTORS OPPORTUNITIES (+) THREATS (-)   ·         Adaptation to changing customer. ·         Developed Best Buy mobile by buying Pasific sales.

·         Expanding the product line constantly. ·         Developments and changing trends in mobile technology. ·         Bankruptcy of Circuit City allowed a tremendous opportunity for Best Buy to gain market share from competitors scramble. ·         Using database of customer information to offer different products to match customer needs     ·         Saturation in TV market. Since the television sales 77% of Best Buy’s  total sales revenue. ·         Overwhelming promotional offerings from competitors Wal-Mart is  the world’s largest retailer, with a focus on being a low-cost provider.

·         Wal-Mart  considered to offer diverse products. ·         Second tier competitors were rapidly increasing. ·         Amazon. com was positioned perfectly with online shopping. ·         Margins started to decrease with technology improved, product life cyles and prices decreased. ·         Growing popularity of the online market-place.   Internal Fix-It StrategyBB must review spending in connectivity, services, online, retail and home and pay specialattention to the power ofsuppliers such as Apple, Dell, HP, etc.

The corporation must re-vitalizeitsabout new technology and perform an internal audit of how they areusing theirBig Data and Analytics initiatives to make thoughtful strategic decisions. Itisimperative that BB take advantage of its own consumer insights and marketintelligence toanticipate changing trends. BB does not have a published missionor vision statement on its website. The organizationshould create a new, compelling mission and vision that gets employees excited, re-energizedandengaged. In addition to closing non-performing stores, the use of in-storesquare footage and the company’s pricing strategies must be reviewed. To becompetitive, a clarification of value streamsis needed (i. e.

for OE treatstores as additional channel of distribution; for CI ensure items areavailableto deliver when purchased by the consumer, empower associates, customchoicesthrough online near infinite selection etc.   External Fix-It strategyBB needs to rethink its strategy for newmarkets and cultivate plans to integrate culturaland economic factors bydeveloping specific entry strategies for emerging markets that have agrowingdiscretionary income and a desire for electronic status symbols. This should bedone byleveraging a concentric diversification strategy ix and understandinghow other cultures use retailand mobile technology differently than NorthAmericans (i.

e. mobile payments, money transfer, pay as you go, etc.) BB mayface state owned or supported monopolies in mobile technologies. Thus, it mustexplore cooperation with state capitalism drivers as a market penetrationtactic. In an effort to capture early adopters and be perceived as a progressivecompany, they should seek exposure to a captive social media community ofpeople in public relations, journalism, advertising, music and film who canchampionBB’s brand and create opportunities to expand the enterprise’saffiliate marketing channel reach.

This will differentiate BB from Wal-Mart, Apple, Amazon and others. BB must also ideate innovative strategic alliances andpartnerships with othercompanies and organizations that align with the brand.   Company Strategies·        As Best Buy’s costwas boosted by high-level training for its affiliates and serviceprofessionals, it was important for the company to remain vigilant to reducecosts without compromising customer experience.·        Best Buy’selectronics have become a unique source of industry and an important source ofcompetitive advantage.·        To increase salesrevenue, many retailers, including Best Buy, have offered low interestfinancing to their customers with private label credit cards. These promotionswere successful at Best Buy. From 2007 to 2009, these private brand credit cardpurchases accounted for 16-18% of Best Buy’s internal revenue.

·        Whether Best Buy andother retailers were expanding these credit lines could have had a hugenegative impact on future revenues.·        Best Buy has tried tokeep up with the demand for brick-and-mortar sites and offer value-addedservices from stores that compete against the Internet-based competitionthreat. Customer service, repairs and interactive product screens were just afew examples of these services.  RecommendationsAlthough the Best Buy’s sales force is one ofthe primary aspects of the company’s model that sets it apart from onlineretailers, it is also one of the company’s biggest disadvantages. A salesforcethat can barely justify the cost of its own maintenance – a present reality forBest Buy’s sales force – is nothing but dead weight for a retailer. If thesales force cannot perform, then underperforming aspects of that sales force –whether entire departments or individual employees – need to be trimmed fromthe company’s list of expenses. Best Buy’s recent move of shifting lossprevention associates to the sales floor is probably a losing decision for thecompany.

In the status quo, Best Buy stores show no lack of salespeople ofevery kind and variety – and they simply don’t seem to be able to convince enoughcustomers to make their electronics purchases at Best Buy. Worse, the sheernumber of employees that Best Buy must keep on staff to cover its sprawlingstores – most of which exceed an acre in floor area – is a major contributingfactor in the company’s inability to match the prices offered by onlineretailers, recentlyhowever, this has been turning around. Though a sales force of some sort needs to bemaintained, it needs to consist of solely top-performers from the existingsales force. Since US consumers seem quite content with the necessarily “ selfservice” shopping model implemented by online retailers, Best Buy could adaptto running its stores with less employees by expanding the amount ofinformation provided on product demonstration displays, and perhaps by placingtouchscreen computer terminals that answer “ frequently asked questions” abouteach category of item offered on the store’s showroom floor.

These measuresshould only be implemented in a way that is comparatively less expensive thanemploying the workforce that they are intended to compensate for.     We believe that someof the following strategic moves might be required:·        The company shouldconsider a merger with rival Amazon·        Explore new ideas andunique integration with suppliers? ·        Close the leastprofitable stores and invest the resources in further vertical integration·        Evaluate use ofin-store square footage and consider leasing space in the corporate office·        Assess internal spending, financing and hedging to protect against currency risk ·        Review pricingstrategy since a big portion of profits is derived from margins onaccessories, home theatre and extended warranty protection·        Review debtfinancing, cost of capital and capital structure