Several decades ago, both Best Buy and Circuit City used to belong to the most popular electronic retailers in the USA. However, whereas one of them is still popular and profitable, another had to announce bankruptcy and close all of the stores. The major reason why Best Buy was able to succeed while Circuit City failed is the attitude to change and the desire to adapt to the evolving market conditions.
Circuit City was at the peak of its popularity in the 1980s and the 1990s. In 2008, the company filed for bankruptcy, which did not surprise those specializing in economy. According to Hamilton (2008), there were minor causes of the company’s failure, such as reduced consumer spending and poor economy. However, the major reason was that the firm’s management was old-fashioned and had no intention to change. As a result, Circuit City announced a loss of $239 million in September of 2008. At the same time, Best Buy reported a profit of $200 million (Hamilton, 2008). Such statistics indicate that there were indeed considerable differences between the two organization’s management processes that led to favorable outcomes for Best Buy and adverse results for Circuit City.
The fatal error made by Circuit City was becoming complacent in the ever-changing environment of the retail-economic industry. As Hamilton (2008) notes, the first step in the direction of bankruptcy was made in the late 1990s, when Circuit City did not take care of securing prime real estate. Since the company’s locations were not convenient for customers, Circuit City started losing loyal buyers. The next wrong move was the cessation of appliance sale (Hamilton, 2008).
When the organization failed to enter gaming in an aggressive way its competitors did, it met another challenge. Also, Circuit City did not care about enhancing its online presence, which led to considerable losses and gave the advantage to the competitors (Hamilton, 2008). However, the greatest mistake was neglecting its customers’ needs when the company replaced its highest-paid employees with cheaper workers. All of these and some other issues led to the graduate loss of profit until finally, in November of 2008, Circuit City announced that they were going out of business.
Some of the mistakes made by Circuit City served as good lessons for Best Buy. When Circuit City missed the opportunity to compete with thriving firms due to its failure to arrange aggressive gaming politics, it created an opening for Big Buy (Hamilton, 2008). As a result, Best Buy’s management, which was ready to adjust to the new circumstances, allowed the company to become a healthy competitor for such a huge online retailer as Amazon (Duprey, 2018).
One of the key decisions that promoted Best Buy’s success was to match Amazon on price and offer consumers excellent service. Conquering online market enabled Best Buy to get rid of the former status of a showroom for Amazon’s products.
The positive change is most frequently associated with the acquisition of Hubert Joly as the CEO in 2012 (Griffin, 2018). Other lessons of success that can be taken from Best Buy’s story include creating a safe place for ideas, engaging employees in decision making, making house calls, and creating showcases for big brands. While Circuit City neglected all of these aspects, Best Buy paid specific attention to them. As a result, Circuit City went bankrupt, and Best Buy remained at the market and became one of the most successful electronic retailers.
References
Duprey, R. (2018). Why Best Buy is still a buy despite the return of Circuit City and RadioShack. The Motley Fool. Web.
Griffin, J. (2018). Best Buy’s turnaround: You can’t make this stuff up!Forbes. Web.
Hamilton, A. (2008). Why Circuit City busted, while Best Buy boomed. Time. Web.