Labares, Kyscia Gordove, John Miguel Activity No. 1: Engage Detailed analysis of a case study 1. The history, development, and growth of the company over time Best Buy Co. Inc. was originally known for their retail business of audio components which then in the later expanded into retailing video products, and they decided to change the name to Best Buy. Best Buy has expanded its operations into 1,100 stores headquartered in the US, Canada, Mexico, China, and Turkey. Best Buy has begun expanding their business by acquisitions into international markets since 2000. In their acquisitions, they began acquiring Magnolia Hi-Fi, Inc. a known retailer of audio and video products and services. This acquisition has resulted in Best Buy pulling in those upscale customers internationally. After a year, Best Buy acquired another international leading electronic consumer retailer in Canada which was Future Shop Ltd. This allowed Best Buy to increase their earnings in the industry resulting in a gain in market share and leverage operational expertise. In 2002, Best Buy acquired Geek Squad, a computer repair service company providing an enhancement to the technological support system to customers. In the year of 2006, Best Buy acquired Pacific Sales Kitchen and Bath Centers Inc. which helped Best Buy to develop a new customer base. In the subsequent year, Best Buy also acquired Jiangsu Five Star Appliance Co., Ltd, a China-based appliance and consumer electronic retailer. This allows Best Buy to be available and accessible to the Chinese retail market which made the first opening of a Best Buy China store. Throughout its series of acquisitions, Best Buy gained valuable learnings and experiences under the Best Buy family. Its effects of integration to international companies, Best Buy accumulated ideas on the market differentiation and some locations on where to acquire and expand. Moreover, Best Buy has also acquired high-level employees which helped them to grow and develop in their strategy and success, which made Best Buy a well-known company in the international market. 2. The identification of the company’s internal strengths and weaknesses Strengths Best Buy’s internal strength commenced with their service. Best Buy provides additional training to its employees so that they can provide clients with a better shopping experience. The training improves their ability to answer inquiries and offer a comparison of different brands. However, Geek Squad professionals in the organization have the ability to provide the greatest tech assistance for customers. Smart acquisitions are the most effective methods for increasing a company's profitability. Best Buy has done so effectively by acquiring multiple consumer electronics companies in order to boost its market share. Because of the acquisitions in the international market, Modal, Pacific Sales, Magnolia, and Insignia are among the private brands owned by the corporation. This gives an advantage to expand their products and may choose from a diverse choice of high-quality items in the company's expansive inventory. Weaknesses Despite that Best Buy has providing training to their employees to be ethical and knowledgeable workforce, there happened some allegations and issues roamed that Best Buy’s employees misrepresented the company as it negates their reputation. Its acquisition is that Best Buy has entered into a corporate-wide scheme to institute high-pressure sales techniques about the extended warranties. Moreover, the commerce platforms have evolved dramatically since the advent of the internet. Best Buy has previously lost a lot of revenue owing to the development of E-Commerce platforms. Technology innovation is rendering things outdated, putting the company's goods at jeopardy. However, anytime a new technological product reaches the market, the items on the firm's shelves become out of date, resulting in more losses for the company. 3. The nature of the external environment surrounding the company Current economic conditions, advances in technology, and more competition have put significant pricing pressure on many consumer electronics appliances. This is a major concern for all businesses in this industry. Best Buy does not compete just on price structure and raises the stakes even higher. Given Best Buy's greater training expenses, any pricing pressure that reduces margins puts Best Buy's financial health under strain. Moreover, Wal-Mart, a new archrival, is branching out into consumer electronics and ramping up rivalry in a pricing war it expects to win. Best Buy must combat competition not by reducing costs, but by offering products and services that are truly distinctive. Best Buy must find the best strategy for increasing its ability to separate itself from competitors, which is becoming increasingly challenging given the current economic situation and Best Buy's financial crisis. It is known how Best Buy will sustain innovative items, top-tier employees, and exceptional customer service while confronting greater competition and operational costs. 4. A SWOT analysis Strengths High-level workforce. Best Buy guarantees to have the greatest and most knowledgeable employees and stores. Best Buy is able to offer and provide repair service and on-going support. It has provided customers with highly trained sales associates to foster and educate customers regarding educational information to product features. The training develops their ability to answer inquiries and offer a comparison of different brands. Product Variety. Best Buy has a tremendous breadth of products and services. With regard to Best Buy’s acquisitions, it has accumulated the essential products that allows customers to purchase all components for a particular need within the Best Buy family. The company offers a wide range of quality products in its extensive portfolio to its customers, so they would provide customers with a better shopping experience. Market dominance. Best Buy's operational objectives involve generating revenues by expanding its customer base, boosting market share globally, effectively executing marketing and sales tactics in Europe, and acquiring several brands to cater to varied consumer lifestyles. Domestic Best Buy retail operations have been divided into eight locations, with areas within every district. A retail field officer monitors store performance through district managers, who meet with store personnel on a regular basis to discuss operational initiatives such as loyalty programs, sales promotions, and new product releases. Weaknesses Legal issue. Despite Best Buy's strategies to educate an ethical and knowledgeable workforce, there have been several claims and controversies surrounding Best Buy employees, giving the firm a negative reputation in the public eye. In one lawsuit, Best Buy employees were accused of misrepresenting the manufacturer's warranty in order to market its own product servicing and replacement plan. It accused Best Buy of "entering into a corporate-wide scheme to institute high-pressure sales techniques involving the extended warranties" as well as "using artificial barriers to discourage consumers who purchased the 'complete extended warranties' from making legitimate claims." Technological update. The growing popularity of e-commerce sites is one societal threat to the retail business. Internet buyers may use search engines to get the cheapest rates on certain items. This technology has enabled consumers to become more informed about their purchases while also driving down prices. Thereby tarnishing Best Buy's service record and potentially damaging one of its most important, if not the most important, differentiators. More resources must be directed at research of new products to make sure Best Buy continues to offer the products consumers desire. Electronic products over-reliance. Best Buy mostly sells electronics and appliances. Electronic items are now beneficial and serve an important role, but market instability may lead to a drop in demand for these products. Thus, an alternate product type, such as essential goods retailing, might be beneficial in unpredictable future situations and keep the organization financially secure. Opportunities Online platform. Following the pandemic crisis, online shopping became popular and is expanding, and Best Buy should adopt a plan to attract more customers to its online stores and encourage them to shop online. Despite the fact that the consumer electronics firm has taken highly effective strategic initiatives, there is always opportunity for expansion. The corporation should follow in the footsteps of Amazon, the world's largest e-commerce retailer. New product. The business's revenue and profits are boosted by a few product segments, including televisions, games, mobile phones, and blu-ray players. Best Buy's primary motivating factor was television sales, notably LCD sets, which account for 77% of overall television sales and account for 15% of total industry revenue. The gaming category remains an opportunity for the business, with revenues forecast to have significant space for expansion. Smartphones are another electronics sector area that is expected to have a significant influence on the whole industry. Collaboration and Acquisition. The business's revenue and profits are boosted by a few product segments, including televisions, games, mobile phones, and blu-ray players. Best Buy's primary motivating factor was television sales, notably LCD sets, which account for 77% of overall television sales and account for 15% of total industry revenue. The gaming category remains an opportunity for the business, with revenues forecast to have significant space for expansion. Smartphones are another electronics sector area that is expected to have a significant influence on the whole industry. Threats Barriers to entry. As modernization increases, global integration and Internet use develops, the barriers to entry into the consumer electronics business are decreasing. Obtaining the substantial capital resources required for entry into the market when the business was dominated by brick and mortar enterprises was a hurdle for anyone hoping to achieve any major market share. Buying or leasing large storefronts means incurring substantial upfront and overhead expenditures while expanding a firm. The Internet, on the other hand, has considerably decreased the capital required to enter the market. Competitors. In reality, Best Buy faces strong rivals both online as well as in its in-person retail location sector. The number of second-tier rivals is steadily expanding. Wholesale shopping centers are growing in popularity, and corporations such as Costco and BJ's have grown their share of the consumer electronics pie in recent years. Ultimate Electronics, which is controlled by Mark Wattles, a key investor in Circuit City, has an advantage over his competitors. Ultimate Electronics intends to open at least 20 new locations in the near future. 5. The kind of corporate-level strategy that the company is pursuing Best Buy Co Inc., corporate-level strategy revolves around their customer centricity model and is the core of their company mission and goals. To implement this strategy and gain a competitive edge, Best Buy not only maintains a diverse range of products to cater to customer needs but also extends its offerings beyond the initial sale through comprehensive service options. As a publicly traded company, Best Buy prioritizes sustained growth and earnings as its key objectives. To achieve these goals, the company consistently evaluates and updates its business model to ensure maximum effectiveness and customer satisfaction, addressing their needs and desires comprehensively. 6. The nature of the company’s business-level strategy The nature of Best Buy Co Inc.'s business-level strategy revolves around differentiation. Best Buy differentiates itself from competitors through a wide range of consumer electronics, appliances, and entertainment products, coupled with exceptional customer service. The company sets itself apart from competitors by implementing a differentiation strategy instead of relying on a low-price approach. To transform into a service-oriented firm, it restructured the compensation system for sales associates and adopted a customer-centric operating model, enabling the provision of end-to-end services. These strategic initiatives have allowed Best Buy to establish itself as a leader in delivering comprehensive and personalized solutions to meet customer needs. By creating a unique customer experience through knowledgeable staff, product demonstrations, and service offerings, Best Buy attracts and retains customers, gaining a competitive advantage in retail. 7. The company’s structure and control systems and how they match its strategy The crucial database at Best Buy enables the organization to align customer needs with specific locations, leading to cost savings through accurate inventory shipping. This strategic approach helps counterbalance the additional expenses associated with providing extensive training to sales associates and service professionals. By structuring inventory in this manner, Best Buy optimizes its business-level strategy, ensuring that each market contains the most desired products while avoiding items that are not in demand by customers. As stated by Hill & Jones, Best Buy’s customer based structure is only as strong as their greatest service professional and staff member. Best Buy recognizes this and invests a lot into their employees. Best Buy has a reputation for retaining their talent and is widely recognized for superior service. Highly trained sales professionals, like the members found at Best Buy stores, have become a unique resource in the consumer electronics industry, where technology is changing at an unprecedented rate, and this is a significant source of competitive advantage for Best Buy 8. Recommendations The organization should create a new, compelling mission and vision that gets employees excited, re-energized and engaged. Best Buy needs to Refocus its strategy for highly potential markets segment, teenager especially College Student (18-24 years old) are Most Valuable Segment, because : ● They are open to trying new brands, often becoming life-long BrandLoyal Customer, ● They spent > $ 200 billion annually, ● They consume less traditional media, ● They kept following new trends, new gadgets, new games, & new music While Best Buy can’t duplicate their high-level customer service experience found in-store they can expand on sales by offering a broad range of products online. From here, customers can be invited to visit stores in person for services that may aid in the set-up and installation of products purchased online. I also recommend that Best Buy address their issues with outstanding debt by temporarily halting expansion and focus on their current strengths. While acquisitions have been very profitable for Best Buy, they may want to slow down temporarily as the economy starts to recover and consumer spending slowly begins to increase.
