Introduction



-28575762000Best Buy: Ending or Enduring?A SWOT AnalysisPresented by: Derina Conney, Marlena Erickson, and Karl Johnson IntroductionIn a world of constant change, such as consumer electronics, there is bound to be fluctuation in performance of the individual firms competing for top billing. Circuit City was an industry leader for a few decades before quickly fading into bankruptcy and extinction. It is the same story for Radio Shack that, although has never been a major player in the realm of big-ticket electronics, competed with big box retailers with its convenience and simplicity. Radio Shack recently reported closing 20% of its locations due to several years of net loss CITATION Bus14 \l 1033 (Business Sun, 2014). In contrast to these, Best Buy has been a stable force in the consumer electronics industry for several decades. Recent losses in 2011 and 2012 signal that change is necessary if it wants to avoid the same fate as its competitors. Best Buy needs to be analyzed for its strengths and the opportunities it has in the market to overcome its current weaknesses, and the threats it faces.StrengthsBest Buy is the largest, and most recognizable brand name in the consumer electronics retailer industry. Their favorable reputation is due in large part to several factors: 1) store accessibility, 2) in store product availability, 3) knowledgeable staff, and 4) online shopping experience. These factors have contributed to the stability of Best Buy, despite the growing e-commerce competition.1 - There are currently more than 1,988 Best Buy's in operation, with 479 of those stores in Canada and Mexico CITATION Bes14 \l 1033 (Best Buy Corporate, 2014). Although the domestic market seems to be holding steady at about 1500+ stores, the Canadian and Mexican markets are showing favorable increases. These numbers by far outstrip any consumer electronics retailer on the market. The accessibility to Best Buy is a major strength of the company. Its presence in every major city in the U.S. not only adds convenience, but also an image of stability and reliability.2 - Accessibility would not be of much use if the product availability was lacking, something which Best Buy does not need to worry about. With consistent online and in store access to the latest technology from all the leading manufactures, as well as their own product offerings, Best Buy has a unique advantage above that of its competitors. So much so that, for a few years, Best Buy consumers would go into a store with the express purpose of handling, and trying the products, in their live displays, and then purchasing them from an online retailer. Best Buy, with “Low Price Guarantee”, has recently addressed this trend, known as “show–rooming”. The guarantee now matches any local retailer and major online supplier. 3 - Regardless of whether a shopper entered the store for "show–rooming" purposes or because they were there to actually purchase the products, one thing that they all noticed has been the consistency of its knowledgeable staff. Geek Squad, acquired by Best Buy in 2002, is the company’s 24-hour task force, and is the envy of all the online competitors that Best Buy faces. With Geek Squad onsite at all the stores to answer questions, provide support and repairs, and install products, Best Buy can market itself to the "less than technical" consumer as a full service retailer. Customers, who visit Best Buy, not only have a wide variety of the latest electronics to select from, they also have a knowledgeable staff to answer questions. This service is unparalleled among any of the major Best Buy competitors.4 - Online e-commerce has been the preferred shopping method for most persons seeking new electronics for the past several years. Large online retailers such as and , have benefited from this trend. Beginning in 2009 Best Buy started overhauling its website by adding more than 20,000 additional products. Then in 2012, it launched a new easier to use website: overall clicks to purchase products went from eight to three, and recommendations were integrated based on capture data about your purchase history, where you lived, and even climate in the area CITATION Mic13 \l 1033 (Fitzgerald, 2013). The new site also tied more closely to inventory management not only at online distribution centers, but to the stores themselves. This added a new dimension to the selling experience as customers now had the option to go into the store to pick up the item. More than 40% of the customers that purchase items at utilize the pickup in store feature, creating a unique opportunity for up selling. WeaknessesEvaluating the financial data of Best Buy from 2008 through 2012 shows their loss of sales and increased liabilities, which points to their net losses over the 2011-2012 period. Several conditions can be attributed to the state of Best Buy's financial status.1- Primarily the economic downturn of the last decade has had its impact on virtually every business in one way or another. Some businesses, such as discount stores, have benefited from the recession and job losses throughout the United States. Best Buy however sells what some would consider luxury items. People who have lost a significant amount of their disposable income will concentrate their spending on the necessities (housing, food, and clothing) and less on the extras (TV's, computers, surround sound and DVD players). 2- Brian Dunn placed high value on the physical aspect of Best Buy's business, but still cut costs by reducing the company's real estate expenses, also resulting in the loss of thousands of employees including some from their name brand "Geek Squad". 3- Although he did attempt to increase Best Buy's visibility by increasing the items available online, it still was not enough. His plan to make the company a place people could go to see firsthand the products they wanted to buy backfired. Instead, Best Buy became the place people could go to see the product they would buy through online retailers at a lesser cost.4-Dunn resigned in 2012 due to investigations regarding personal misconduct. It was alleged that he had a "close relationship" with a female employee and although the investigation revealed no mishandling of company resources, the ordeal left the company's top management in a chaotic state.4- The next several months resulted in several changes in management personnel until Hubert Joly was brought in as the new CEO. Mr. Joly did not have previous retail experience, which concerned investors further on the future of Best Buy. Joly has presented a plan to put Best Buy back on track, but with a weak economy, low employee morale and pressure from investors, the plan will take quite some time to fully evolve.OpportunitiesSince Best Buy’s appointment of Mr. Joly, in August of 2012, the company has found stable and even lucrative footing again. The new CEO lost no time in getting to work and formulated a plan to turn around the business. His plan of enhancing the service of customers, cultivating top-notch leaders, motivating the employees, and starting a new program for their own private labels to complete at a higher level, has resulted in positive returns.1- The first opportunity for the company was acquiring several other chains over several years; most of which were a success. The revenues skyrocketed from $12.5 billion to almost $51 billion in just 12 years. 2- Having the Geek squad on board with their company ensured a bigger shopper audience to, including those who don’t know computers and now can have a one stop shopping experience for all their needs in electronics.3- Deciding to go international from Canada, Mexico, and all the way to Asia seemed like a huge opportunity to dominate the sales market globally. So far, Best Buy has been able to maintain in Canada buying a chain Futureshop Ltd. They hired Sharon McCollam to November 2012 to help guide the global financial side of the business and capture a higher audience globally. She has had great success and experience with her abilities in another U.S. based company.4- The trend of shopping was heading towards online shopping. With other big names brands available online it was important for CEO Brian Dunn to increase the items available to shoppers by more than 20,000 to increase the competitive virtual shopping experience. Offering competitive prices, and rethinking their shipping policy for same day to compete with Amazon would be beneficial to their increase in sales. In October of 2012, they hired Scott Durchslag to be the President of Online e-Commerce to make the online experience desired by all. 5- To create greater opportunity, the plan was to create a team that could lead Best Buy through their big transformation by having top of the line, experienced leaders. Setting the plan by Matthew Furman, he said “where it’s been (Best Buy), where it intends to go, and how it’s going to get there”-with “consistency, clarity, and passion” to all the stakeholder audiences (Furman).6- The next strategy was to determine the customer base that actually brought true sales to Best Buy and having the stores based around those customer’s needs within their region. They were able to determine where 90% of the in-store sales were coming from. Having highly trained personal that could answer all the questions a customer might turn to the internet for was a great need.7- Best Buy implemented the ROWE (results-only work environment) within the stores and had great success. The employees were able to increase the productivity by a whopping 35%. Joly felt that the employees needed to be motivated and they already had a great practice in place in human resources. The company was a leader in hiring persons with disabilities, and was named several times “Best Places to Work” for equality in the workplace for the gay, lesbian, and transgender community. 8- The final opportunity was to have their own exclusive name brand to compete with the major brands offered out there. The intent was to offer high quality products that would be economically priced for the average consumer. This idea was a healthy competitive edge against other well-known stores that had their own exclusive brands. The end of 2012, Best Buy decided to open up their competition to adding their own line to compete against the popular tablets created by Amazon kindle, Apple iPad, and other like devices. ThreatsThe threats for Best Buy was many other big name, well known brands as well as online shopping becoming increasingly popular to the consumer. There are always external factors such as the market and recessions to consider, as well as top of the line products, and global competition.1- The first biggest threat to Best Buy was the recession of 2008. Because of this, many companies including Best Buy had to close some stores. They ended up closing all their branded stores in Europe and Asia. Consumerism is directly related to macroeconomic factors such as unemployment, the housing market, and the ability to obtain credit (Best Buy, 2010).2- The second biggest threat was the growing sales on the internet and obtaining electronics for cheaper prices. The biggest threat online is Amazon who is followed by the world’s largest retailer, Walmart. Amazon is an online retailer who not only allows third party vendors to sell on their site, they have bought several companies over the years including Zappos. Amazon has even made the announcement to compete at a higher level for consumer demand; they will start to make smartphones to go head to head with Apple. Apple being a company who may start seeing its end to growth. A huge advantage Amazon has is its shipping method of one day service. This makes shopping online all too convenient for shoppers who want things now. Amazon takes great advantage of Best Buy having the electronics in a brick store for the consumer to come and “touch and feel” the product and then turn around and buy it from Amazon at a discounted price in comparison.3- Best Buy has competition with other big name stores that are globally and nationally known. Best Buy, Circuit City, and Radio Shack were the top three of the electronic market of the U.S. before the big recession of 2008. Walmart is a global company who employs millions in many countries. Walmart is aggressive in their competition taking advantage when other companies collapse and fail. They keep their prices low and value at a level customers enjoy. Apple has hundreds of stores for consumers to come visually see their product and have superior customer service in great locations. Their products are expensive but are of top quality and consumers know it. Target made the decision to jump on the opportunity to pair up with to help with internet sales. This strategy worked well for the company bringing in billions CITATION Tar11 \l 1033 (Target 2011 Annual Report, 2011). Target has kept the idea of offering products for the middle and upper class versus the audience of Walmart. Target also has a wider variety of items in their store versus the local Best Buy. It has dived into the new venture of mobile service, price matching in holiday times, and has recently signed a new agreement with Apple to have a greater competitive edge within the stores CITATION Vat13 \l 1033 (Vatalyst, 2013).ConclusionBest Buy has made great strides from its humble beginnings to the super giant they are today. Like many other businesses they have had some difficulties, some extrinsic and some within their own ranks. If they continue with the plan set forth by Joly, then they have the possibility of hanging on and coming back stronger. Reviewing the financials shows some slight gains from their lowest point in 2011, however they need to focus on the future of business and give equal attention to their online services and name brands to continue toward recovery.Works Cited BIBLIOGRAPHY Best Buy Corporate. (2014, June). Store Statistics. Retrieved from Best Buy Financial Performance: Sun. (2014, March 4). 1100 Underperforming Stores to be Shut Down by Radio Shack. Retrieved from Business Sun: , B. B. (2010, August 28). Retrieved from Fitzgerald, M. (2013, Novemeber 20). Best Buy Battles Back Online. Retrieved from MIT Technology Review: 2011 Annual Report. (2011). Retrieved from : documents/Target_2011_Annual_Report.pdf. Vatalyst. (2013). Why Walmart beats its competitors. Retrieved from . ................
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