Analysis of Best Buy


#1

Go to www.bestbuy.com, click on the investor relations section, and explore Best Buy’s latest annual reports and 10-K filings to see if you can identify the key elements of Best Buy’s strategy. Use the framework provided in your textbook (Figure 1.1) to help identify these key elements. What approach toward winning a competitive advantage does Best Buy seem to be pursuing?


#2

Headquartered in Richfield, Minnesota, Best Buy Co., Inc. is multinational American company catering to the electronics retail need of the customer. Having started its services since 1996 as a specialist in audio, they have come a long way to expand their services beyond just that. Today, Best Buy is known for all kind of electronic and technological products, services, and solutions. They have their stores in three countries which is Canada, USA, and Mexico where they serve with around 1500 stores of different size and customization to the area (Fiscal 2018 Annual Report, 2018). They also cater to the needs with geek squad agents in the store. While also providing customers to make use of their website and mobile application to shop after which they can pick it up themselves or have it delivered.

After looking at their annual report and 10-K filings, these are few of the key strategies that I could point out:

Operational Excellency : Best Buy maintains inventory system in a controlled environment with a strong relationship with the vendors while also ensuring that the customer experience be it in the store, website or the mobile application is as smooth as possible with the use of omnichannel strategy (Gao & Su, 2016). The business also maintains a huge variety of products to cater to the different needs of the customer, this with the integration with online and retail assets makes the selection of product easier for the customer and the load lower in the retail store, helping store agents support effectively to the people present in the store. This omnichannel strategy and the excellence they show as a business in the way they operate add to their competitive advantage.

Renew Blue effort completion: It was initiated by the company with the vision to increase the sales and financial growth in late 2012. It came in action aiming to address the company’s falling operating margin and declining same-store sales. The plan included actions to accelerate the online growth as people during that time were more and more shifting towards the online platform, it would also contribute to reducing the cost in the business front. It also included improving customer experience in all the platform and store it serves while optimizing the space in the store in the most captivating way to draw the attention of the customers. Further to that the plans also focused on improving and strengthening the partnership with the vendors to enhance employee skills and drive value with it. The plans got the business on track with increased financial performance as it saw a 4.5% growth in 2017 as opposed to 3.4% in 2013 as non-GAAP operational income increase. They completed this effort in March 2017.

New Growth Strategy (Best Buy 2020: Building the New Blue): With the completion of renewing blue effort, the business focused on a new growth strategy with Best Buy 2020. The company has been able to dominate the market share of home theater (33%) and notebooks & desktops (30%) in the market they sell. However, the sales of major appliances (12%) and mobile phones (6%) are significantly low. The business with this growth plan aims to expand their presence in these categories where they’re lowly performing while also strengthening in the categories they’re doing well. The business believes smart home appliances would be key in the days to follow and have thus had these solutions in 450 stores and 1,500 dedicated support employees for smart home solutions around its ecosystem. They believe their service business to be a key differentiator and thus includes a team of 300 in-house advisor and several other teach support staffs (Best Buy 2020: Building the New Blue, 2018).

Best Buy appears to be using the following approach towards winning a competitive advantage:

  • The business already has a stronghold in the United States if it’s compared to the other two countries it serves. So, the business appears to be taking a position to accelerate growth in these two nations to increase the revenue of the company.

  • Another focus of the business appears to be towards maximizing the business model it holds of using a multichannel retail system to serve its customer. Looking into the financial report, it’s clear that the company positions itself to be customer-centric to enhance the customer experience while also growing their business in current and new channels. They hope to do so by adding a new product category and a stronger customer relationship.

  • Cater to the needs of the customer. Not come up with any random product or bluff but rather provide the service and solution that the customer actually needs/wants. These may be ones they know or ones they’re not even aware of. Best Buy intends to enhance customer value with a customer-centric approach. With this, they can not only solve the problems of the customer but also increase their satisfaction level.

Overall, Best Buy looks in a healthy position and with the key strategies and approaches as highlighted above shows they know what they’re doing to gain a competitive edge. The key differentiation appears to be on the service they provide, best use of technology for customer-centric approach, multi-channel distribution and commitment for quality.


References

Best Buy. (2018). Best Buy 2020: Building the New Blue (pp. 1-4). Retrieved from http://s2.q4cdn.com/785564492/files/doc_financials/2018/annual/Letter-to-Shareholders.pdf

Best Buy. (2018). Fiscal 2018 Annual Report . Retrieved from http://s2.q4cdn.com/785564492/files/doc_financials/2018/annual/Annual-Report.pdf

Gao, F., & Su, X. (2016). Online and Offline Information for Omnichannel Retailing. SSRN Electronic Journal , 26.


#3

Best Buy is a company that sales consumer electronics, computing and mobile phones, entertainments, appliances and services such as consulting, delivery, design etc. It operates with 1200 large format stores and 300 small format stores in US, Canada and Mexico. Their strength lies in their efficient management of inventory and supply chain. "We believe our dedicated and knowledgeable people, integrated online and retail assets, broad products assortment, strong vendor services and support offerings, distinct store formats, brand marketing strategies and supply chain are important ways in which we maintain this advantage. (Inc., 2018)”

Strategies used by Bestbuy

Stores and outlets

Best Buy is not adamant in permanent outlets. Instead they evaluate every store at the end of their lease period and based on the performance decide on continuing or closing down the store. In 2018, they closed down 257 remaining Best Buy Mobile stand-alone stores in the US. Their domestic outlet have been reduced from around 1400 in 2016 to 1200 in 2018. These outlets are evaluated on their positive or negative operating income of the past 12 months. These strategically placed outlets are one of their major strategic advantage as they are able to ship from any large stores.

Inventory and vendors

Best Buy have a very efficient method to maintain optimal level of inventory. They do not store a lot of products but instead go in short term contract with return clauses for some products with vendors. They monitor and analyse the demand of their customers and prepare inventory based on it. So at one time they do not have assets frozen in stores but rather coming and moving as a constant flow. The vendor agreement are also set up in the same way.

Competition

With online search possibility, customers are now aware more than ever on the real time price of products. This has been one of the challenges to Best Buy. They need to be competitive in pricing, as compared to their competitors and new entrants.

They have attempted to retaliate with their competitors who may have better operational cost, greater capital power, better recognized brand, offer lower price consistently, have better deals with vendors by maintaining product quality, timely delivery and low cost delivery. They can send products from any large format stores in US and Canada. "We believe our dedicated and knowledgeable people, integrated online and retail assets, broad product assortment, strong vendor relationships, range of focused service and support offerings, distinct store formats, brand marketing strategies and supply chain are important ways in which we maintain this advantage. (Inc., 2018)”

"We believe our ability to deliver a high-quality customer experience offers us a key competitive advantage. Some of our competitors have lower cost operating structures and seek to compete for sales primarily on price. In addition, in the U.S., online-only operators are not generally required to collect sales taxes in certain states. We believe this advantage will continue to be eroded as sales tax rules are re-evaluated at both the state and federal levels. (Buy, 2018)”

CSR

"In fiscal 2018, we set a new goal to reduce our own carbon emission by 60 percent by 2020 (over a 2009 baseline), from both operational reductions and renewable sourcing, and we currently expect to meet or exceed this goal. (Inc., 2018)” A good corporate social responsibility has been shown by the company.

Customer service

Customers have the power to make or break a company and thus are at the center of any business. Best Buy sees this importance but is also challenge for them. "Because our business strategy is based on offering superior levels of customer service and a full range of services to complement the products we offer, our cost structure is higher than some of our competitors, and this, in conjunction with price transparency, puts pressure on our margins. (Inc., 2018)” Never the less these are part of their strategy to keep their customers satisfied.

With such steep competition and strategy such as pricing and store location, outlet numbers etc. their revenue has increased by 7% in 2018 as compared to previous year.

These are some of the planned new initiatives, ongoing strategies continued from prior periods, and unplanned circumstance that have supported the company to realize its business strategies.

References

Buy, B. (2018). Fiscal 2018 Annual Report. Minnesota: Best Buy.

Inc., B. B. (2018). FORM 10-K. Washington D.C: Best Buy Co. Inc.


#4

Best buy is the leading provider of electronic goods, product and service or it is tech device and service provider. It has approximate 125000 employees in North America and the annual revenue is approximately $40 billion (WRITER, 2017). Hubert Joly is Chairman and CEO of best buy and he joined best buy in 2012.

Best buy will help customers pursue their passion and enrich their lives with the help of technology. The main goal of best buy is to address the customer needs in entertainment, communication, productivity, security and health and fashion. They have not only product selling strategy, they also make their customer happy. Mr. Joly believed that Bust buy has dual purpose one making the profit and next social responsibility. For social responsibility every years they provide technology training and career path to one million youth in US. The main purpose of training is to generate skillful human resource in US. They have different other strategy

  • Customer focused strategy/ Customer satisfaction strategy

  • Market share gains

  • Revenue growth and improve margin

  • Employee Training

  • Store Atmosphere and Placement

In customer focus strategy, first they segment of broad customer base into a handful of specific target. They categorize their target customer into a different group like Tech Geek, Busy Mom, Gadget Enthusiast, and Price Conscious Dad. Based on this they provide the best offer to them. The main purpose of employee training is to make perfect of their employee in each sales segment. In Tech Geek segment, they should have knowledge sales person to deal with Tech Geek. Similarly, in Best Buy Mom segment she needs personal shopping assistants to help busy Mom. For Budget Conscious dad they provide financial assistants so that they are motivating and convincing to buy a goods.

The Best Buy 2020 building the New Blue:

The New strategy of best buy is best buy 2020 building the new blue. In new blue strategy they ensure that price competitive, they improve their customer experience online, Ti - ups with various manufacturing company (Shelman, 2017). In new blue, they focus on growth improve margin and customer relationship. This strategy is not only about selling the product, it’s about changing the people life. For example, if a person is suffered from physical disabilities and he/she can’t turn ON or Turn OFF their room light. By help of best buy Assistantship, they make their life easier. The Assistant help them by developing a remote system. They can control all electronic goods/ appliances through remote. The new transformation has resulted in improvements in customer satisfaction, market share gains, revenue growth and improved margin (Gibson, 2014).

The Main strengths of Best Buy .Com are

  • Proven Customer centric model with greater customer loyalty.

  • Large global Presence

  • Extensive Level of Service

  • Tie - ups with manufactures

  • Successfully operating Privates levels.

The future Opportunities of Best Buy .Com are

  • More Scope for value added service

  • Expanding global market

  • Investment in employee training to enhanced customer’s experienced

  • Opening of stores within stores with exclusive tie - ups with brands.


References

Gibson, E. (2014). Best practices at Best Buy: a turnaround strategy. JOURNAL OF BUSINESS STRATEGY VOLUME 24, ISSUE 6 .

Shelman, J. (2017). Best Buy 2020 overview. Blog, https://corporate.bestbuy.com/best-buy-investor-day-details-best-buy-2020-building-the-new-blue-growth-strategy/ .

WRITER, S. (2017). Best Buy Investor Day Details ‘Best Buy 2020: Building The New Blue’ Growth Strategy. Best Buy Blog .


#5

Best Buy is an American multinational consumer electronics retailers that operates in Canada and Mexico besides America. The wide range of products offered by this company includes consumer electronics, computing and mobile phones, entertainment products, sporting goods, gaming hardware and software and home appliances along with services of consultation, design, delivery, installation, set-up, protection plan, repair and technical support. These products and services are offered through stores, mobile applications, call centers and websites under Best Buy, Best Buy Direct, Best Buy Express, Geek Squad, Magnolia Home Theater, Pacific Kitchen and Home, bestnuy.ca and bestbuy.com.mx (Bloomberg).

Strategy refers to the ideas and plans prepared to attain the stated objectives overcoming the physical, mental and financial constraints by using minimum possible resources. It is all about finding the reasons and ways to compete and sustain in the market. But strategy cannot be static. The strategies evolve over time because of unexpected moves from competitors, shifts in the needs and preferences of buyers, emerging market opportunities, generation of new ideas for performance improvement and increasing evidences reflecting the failure of current strategy (Gamble, Peteraf, & Thompson, 2015). The key elements of Best Buy’s strategies based on the latest annual report and framework provided in textbook are:

Executing Priorities (Deliberate Strategies)

The deliberate strategies refer to the addition of new initiatives in the ongoing strategies continued from prior period. In case of Best Buy, it set three priorities in the beginning of the year that includes build on strong industry position and multi-channel capabilities to drive existing business, drive cost reduction and efficiency and advance key initiatives to drive future growth. The omni-channel strategy, carefully managed inventory system, strong vendor relationships, high quality customer experience, integrated online and retail assets and broad product assortment helped in achieving these priorities that are reflected through increase in market share, net promoter score, domestic online revenue and cost reduction (Best Buy, 2018).

Completion of Renew Blue Efforts (Emergent Strategies)

Emergent strategies are the unplanned reactive responses to changing circumstances . In order to address the reduction in sales and compete with Amazon, eBay and Wal-Mart, the company launched a transformation program named Renew Blue in 2012. This program was launched with the aim of accelerating online growth, improving customer experience, optimizing store space, building better partnership with vendors to drive value and focusing on employee skills (Trefis Team , 2015). The program that was launched to address the changing business environment helped the company to stabilize the sales and increase non-GAAP operating income. The increase in operating income by 110 basis points, Earning per Share by 9% per year and Return on Invested Capital by 810 basis points from year 2013 to 2017 reflects the success of this strategy.

Best Buy 2020: Building the New Blue (Realized Strategies)

Realized strategy is a blend of deliberate and emergent strategies. Depending upon the priorities and success of the Renew Blue, the company unveiled the strategy for next phase named Best Buy 2020: Building the New Moon that aims to create a company that will enhance the customer value proposition and shareholders’ return. This strategy mainly focuses on maximizing the multi-channel retail business, providing services and solutions that solve real customer needs and accelerating growth in Canada and Mexico (Best Buy, 2018).

Gaining competitive advantage is all about developing durable preferences for the products/services offered by the company among a large number of buyers to offset the customers. Relating to best buy, from the annual report we can see that the company is prioritizing on exploring and pursuing growth opportunities by continuing to innovate digital capabilities, creating growth in international market and expanding in-home advisor program. In addition, it is continuously working on reducing costs and increasing efficiency, improving execution in key areas to improve sales, strengthen supply chain and enhance service fulfillment capabilities. The company is also planning to build the capabilities to execute the plans effectively. Thus, the company is using cost leadership and adapting itself with the technological development to gain competitive advantage and cater the needs of customers in innovative and effective manner.


References

Best Buy. (2018). Annual Report 2017 . Retrieved from http://s2.q4cdn.com/785564492/files/doc_financials/2017/annual/BestBuy-2017-AnnualReport.pdf

Bloomberg. (n.d.). Company Overview of Best Buy Co., Inc. Retrieved from Specialty Report: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=255397

Gamble, J. E., Peteraf, M. A., & Thompson, A. A. (2015). Essentials of Strategic Management: The Quest for Competitive Advantage (Fourth ed.). New York: McGraw Hill Education.

Trefis Team . (2015). How Best Buy’s “Renew Blue” Transformation Program can Impact its Valuation . Retrieved from Forbes: https://www.forbes.com/sites/greatspeculations/2015/10/23/how-best-buys-renew-blue-transformation-program-can-impact-its-valuation/#1c