“Best Buy” Company Analysis Case Study

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Updated: Nov 2nd, 2023

Introduction

Best Buy is undoubtedly one of the leading retailers in consumer electronics and entertainment products (e.g.., VCRs, TVs, Music CDs, washing machines, mobile phones, PCs and digital cameras) not only in the United States but also in other countries globally (Gibson & Billings 10; Walden 34).

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This paper identifies and explains Best Buy’s business-level strategy, strategic issues facing the company, its strengths, weaknesses, opportunities and threats, as well as several recommendations aimed at dealing with the strategic issues raised.

Best Buy’s Business-Level Strategy

Available literature demonstrates that business-level strategy “is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets” (Hitt et al 100).

With its light and cheerful vision statement “Making Life Fun & Easy”, Best Buy has chosen customer centricity (putting customers in charge) as its business-level strategy aimed at sustaining and increasing its position in the marketplace, achieving customer satisfaction and increasing financial returns (Walden 34-35).

The citizen-centric business-level strategy provides customers with impartial and knowledgeable advice on the products they wish to buy, competitive prices, ability to shop when and where they want, and technical support for the life of their products (Renew Blue 13).

Strategic Issues facing Best Buy

First, being in the consumer electronics sector, Best Buy often find itself struggling to keep up with the “rapid technological innovations in the consumer electronics and computer industries” (Chakravarthy & Lorange 8).

It shouldn’t escape mention that the market growth for the consumer electronics sector is increasingly being driven by innovation in products such as Smartphones, Tablets, Digital TVs and Notebooks (Renew Blue 9), and hence Best Buy must come up with comprehensive strategies to keep abreast of the rapid technological innovations being experienced within the sector.

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Second, although Best Buy is the overall category leader in a highly-fragmented market when compared to other companies in the consumer electronics and appliances market (e.g., Circuit City, Wal-Mart, Amazon, Target, Sears and Apple Stores); the company still needs to raise the bar in its relationship with customers if it expects to retain its competitiveness in years to come.

One particular study shows that some of its competitors perform better in certain customer-experience indicators such as delivery on promise, knowledge on what the company stands for and what makes it different, as well as setting the standards for others to follow (Renew Blue 9)

Another strategic issue concerns the fact that although Best Buy has a promising multi-channel platform (digital and physical) which ensures that over 70% of its customers are able to do research on bestbuy.com before buying in the company’s stores (Renew Blue 14), it has been slow than some of its competitors to respond to channel and category shifts as demonstrated by its slow trend in capturing the online opportunity (Renew Blue 17-19).

Specifically, with a market share of 7% of the online channel, it has been unable to overtake Amazon share of 21% in the same category as per the FY 2012 results (Renew Blue 19).

Lastly, it is evident that Best Buy has a price perception issue in that competitors such as Wal-Mart, Amazon and Target are able to provide competitive prices for similar products than the company is able to offer customers (Renew Blue 23).

Best Buy SWOT Analysis

Strengths
  • Numerous stores in the U.S. and abroad
  • Capacity to provide both low-end and high-end electronics products under one roof
  • Reliance on “a web-based distribution channel (bestbuy.com)”
  • Strong organizational culture
  • Capacity to initiate and successfully implement transformational change
  • Standard operating platform (SOP) to achieve a more focused and disciplined approach in stores management
  • Adoption of customer-centric innovation
  • Large and loyal customer base when compared to competitors such as Sears, Toys ‘R’ Us, Hallmark, Starbucks, Amazon Prime and Dicks Sporting Goods
Weaknesses
  • Constant shifts in consumer electronics due to rapid technological innovations
  • Numerous employees that are sometimes unmanageable
  • Considerable leverage of stores to govern themselves
Opportunities
  • Global expansions
  • Large and growing electronics and entertainment market
Threats
  • Frequent price wars with competitors
  • Entrance of new competition into the market
Sources: Chakravarthy & Lorange 7-9; Gibson & Billings 10; Halcomb 19; Walden 34;

Recommendation Plan

Best Buy’s management has to act on the strategic issues facing the company, as well as its threats and weaknesses, so as to sustain competitiveness and profitability into the future. First, the company should continue making huge investments in newer technologies to keep abreast of the shifting technological innovations in the market.

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Second, to enhance customer satisfaction and experiences, it is recommended that the company should improve consumer electronics shopping tools and recommendations, expand assortment, be competitive, enhance diversity fulfillment and improve checkout flow (Renew Blue 29).

Third, to develop a winning online presence strategy, Best Buy should

  1. optimize shopping and commerce flows with the view to simplifying, streamlining and minimizing abandonment,
  2. develop a world-class e-commerce platform,
  3. enhance Web 3.0 personalization,
  4. improve the experience with ubiquitous availability on any device at any time,
  5. incent and reinforce desired behaviors using the currency of available reward systems (Renew Blue 30).

Lastly, the company has to develop new approaches to transform its supply chain and other operational activities with the view to achieving operational excellence and logistical efficiency, hence reducing prices.

Works Cited

Chakravarthy, Bala and Peter Lorange. “Continues Renewal, and how Best Buy Did It.” Strategy & Leadership. 35.6 (2007): 4-11. Emerald. Web.

Gibson, Elizabeth and Andy Billings. “Best Practices at Best Buy: A Turnaround Strategy. Journal of Business Strategy. 24.6 (2003): 10-16. Emerald. Web.

Halcomb, Marcus. “Out with the Old Best Buy: New Practices Bring Remarkable Transformation.” Strategic Direction. 20.7 (2004): 19-21. Emerald. Web.

Hitt, Michael A., Duane Ireland and Robert E. Hoskisson. Strategic Management: Concepts and Cases: Competitiveness and Globalization. 9th ed. 2011. Mason, OH: South-Western Cengage Learning. Web.

Renew Blue. Best Buy Analyst and Investor Day. 2012. Web.

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Walden, John. “Best Buy Customer-Centric Innovation.” Human Resource Planning. 29.3 (2006): 34-36. Business Source Premier. Web.

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IvyPanda. 2023. "“Best Buy” Company Analysis." November 2, 2023. https://ivypanda.com/essays/best-buy-company-analysis/.

1. IvyPanda. "“Best Buy” Company Analysis." November 2, 2023. https://ivypanda.com/essays/best-buy-company-analysis/.


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