Best Buy

Satish Nadar
Pratik parmar
Shweta Pradhan
Tushar rathi
Heena Raut
Kirti Raut

History
It was started by Richard Schulze & gary smoliak.
Earlier in 1967 the sound of music acquire two small
stores
& in 1969 it went public .
In 1981 the largest sound of music store was hit by a
tornado.
Sound of music changed its name to best buy co in 1981.
Best buy co. is the world largest consumer electronics
retailer with 1400 stores.

 Best buy co. consist of phone products,computers,television,

cameras etc.
They also provide services such as contracts,extended
warranty & product repair.

Mission & vision

Mission is to bring technology and consumers together in a
retail environment that focuses on educating consumers on
the features and benefits of technology and environment
products.
At best buy, vision is to become the leading electronics
specify retailer that focuses on customers and their needs.

INTERNAL ANALYSIS
Strengths

Weight

Rating

Weighted
Scored

1.Lrgest consumer electronics retailer with over 1,300 stores

0.06

0.18

2.Highly trained sales force; 165,000 employees worldwide

0.08

0.32

3.Customers-centric strategy focuses on key customer segment by tailoring entire

store layout

0.08

0.32

4.Broad product assortment

0.07

0.28

5.Maintains majority of industry market

0.07

0.28

6.Twenty-one hour geek squad customer support

0.05

0.15

7.High inventory turnover

0.04

0.12

8.Brick-n-Click vertical integration of online sales

0.05

0.15

9.RFID supply chain management expertise

0.05

0.15

10.Exercise a 75% interest in Chinas star chain

0.06

0.24

Weaknesses
11.Not many high-end niche goods

0.03

0.06

12.High turnover of sales force ,44%

0.02

0.04

13.Value propositions arent clearly defined related to warranty

0.07

0.07

14.Service levels across regions and not uniform

0.03

0.06

15.Poor communication of special offers to customers

0.04

0.08

16.Lack of diversification as it relates to primary source of profit

0.06

0.06

17.Mixed customer reviews

0.04

0.04

18.Dependent on seasonal sales

0.10

0.1

Total

2.7

EXTERNAL ANALYSIS
Opportunities

Weight

Rating

Weighted
score

1.Increase consumer performance for Best Buy

0.07

0.28

2.Offer more exclusive brands

0.03

0.03

3.Introduce new product categories

0.05

0.20

4.Provide value-added software on mobile devices

0.06

0.08

5.expand b-2-b relationships

0.08

0.18

6.Open more stores in China; 28 in development

0.07

0.28

7.Open 2-5 stores in Mexico next year

0.03

0.06

8.Open 1-2 stores in Turkey in 2010

0.03

0.06

9.Build online community networks

0.04

0.08

10.Capitalize on high-end appliance market in US

0.07

0.21

Threads

Weight

Rating

Weighted score

11.Low-cost providers

0.10

0.40

12.Large home-improvement retailers

0.05

0.15

13.Leading edge retailers (Apple)

0.04

0.12

14.Alternate distribution channels

0.10

0.40

15.Decreased consumers income

0.10

0.20

16.Prices of inelastic items increase

0.04

0.12

17.Goverment intervention (China,Turkey,Mexico)

0.04

0.12

Total

1=Major Strength 2=Minor Strength 3=Minor weakness 4=Major Strength

2.75

SWOT Analysis

Strengths
Provide variety of products.
Customer centric model.
Large global presence.
Extensive level of service.

Weakness
Higher revenue from US .
Dependent highly on the sales of electronic products.
Dependence on select numbers of vendors.
Fewer stores compared to competitors.

Opportunities
Large demand for electronic & gadgets.
Online growing sales of the customers.
To provide value added services in store.

Threats
Electronic e-commerce retailers.
Competitive environment.
Changes in economic condition

PORTERS FIVE FORCES

COMPETITIVE
ANALYSIS
Internal Rivalry- High
Threat of New Entrants- Low
Threat of Substitute Products- Moderate
Bargaining Power of Buyers- Low
Bargaining Power of Suppliers- Moderate to High
Internal Rivalry
Internal rivalry is the most significant force of Porters Five Forces and is very high
in the consumer electronics retail industry.
According to Yahoo Finance, there are approximately 7 major companies that are
traded publically and sell predominately electronic products.

 There are also numerous privately-held retailers that serve specific niche markets
With a market capitalization of over $16 billion, Best Buy is the dominant player in this industry.
Competition, however, comes from companies outside of this industry. Discount retailers such
as Wal-Mart, Target and Costco occupy a significant part of the consumer electronics market.
Wal-Mart, for example, booked $378 billion in sales in FY08 and its $92.2 million in gross profit
more than double Best Buys $40 billion in revenue during the same period.
Competition is high primarily because there is little to no switching costs if a buyer chooses to
shop elsewhere.
Furthermore, the products are not differentiated: buyers can get similar products at almost all
of the different electronic stores.
As a result, companies compete on prices and non-tangibles, such as customer service and
goodwill.
An important observation of the market is its net profit margin (NPM).
The NPM shows how much profit a company makes after taxes for every dollar it generates in
revenue.

Threats
of
New
Entrants

The threat of potential new entrants into the consumer electronics

retail industry is relatively low.

The market capital of the industry, according to Yahoo Finance, is
currently at $23.2 billion.
The low market capitalization implies that it would not be difficult to
enter the industry based solely on the capital required.
However, a potential entrant would have to overcome the superior
brand reputation that Best Buy has established.
Best Buy has built a reputation for selling mid- to high-end product
and excellent customer service.
It would be difficult for an entrant to challenge the company.

Threat of Substitute Products

The substitute products that may take a portion of the market share away from the consumer
electronics retail industry do no pose a huge or direct threat.
Todays society and culture places a lot of emphasis on technology and is highly dependent
on electronics.
As a result, there are few substitutes for electronics that will directly take their place, such as
books, magazines and other non-electronic hobbies to occupy peoples time.
Some of the main retailers of books are Barnes and Noble and the online retailer is
Amazon.com.

Bargaining Power of Buyers

The bargaining power of buyers for electronic products is extremely low because the buyers
primarily consist of a weak and fragmented group of individuals.
There are several reasons for this:
1. The purchase volume is very low.
2. The cost of buying electronic products is not a huge percent of a buyers budget, unlike
purchasing a house or car.
3. Electronic products are often a luxury than a necessity, buyers do not generally have a say
in what products get produced and at what price.
4. There is no intense competition between buyers for any one brand (i.e. Sony, Panasonic,
Samsung, and etc.).
As a result, the buyers in the consumer electronics retail market do not have any substantial
bargaining power over the companies in the market and do not have any substantial
influence on the products or prices.

Bargaining Power of Suppliers

The suppliers for companies in the market have relatively high bargaining power mainly due
to the fact that there are only a number of suppliers that the market demands from.
Among the pool of suppliers include major manufacturers such as Sony, Samsung, LG,
Panasonic and Toshiba.
These suppliers provide the latest state-of-the-art technology and companies like Best Buy
must purchase from them in order to keep its inventory fresh and satisfy its customers.
The suppliers have a substantial influence on the products that they manufacture and their
pricing.
Furthermore, the high bargaining power of the suppliers is also due to the sheer number of
stores that they are in.
There are several factors that lower the bargaining power of the suppliers.
While most of all the suppliers have their own online stores to drive sales, they rely almost
entirely upon retailers to bring in revenue.

Suppliers want their products on the shelves for people to see and
test them.
They also rely on the sales teams within retail stores to help drive
sales.
Therefore, a company can partially mitigate the bargaining power of a
supplier if it is especially effective in bringing sales.
Best Buy, as the industry leader, therefore has more bargaining power
than other retailers.
Additionally, while there might not be intense competition between
buyers for any one brand, there is intense competition among the
suppliers.
For example, the most recent Blu-ray and HD-DVD rivalry between
Sony and Toshiba caused less bargaining power for these suppliers.

RENEW BLUE- Best Buys Turnaround

Strategy
To improve its financial position, the company launched a
strategic plan it called renew blue.
The plancalled forstrengthening relationships with vendors,
revamping stores, increasing same-store sales, eliminating
unnecessary costs, and ramping up Best Buys online
business.

Renew Blue Strategy.

Cost reduction
Bythe end of 3Q2015 ended November 1, 2014, the
company had generated cost reductions of $965 million
through its multi-year productivity program.
Itreduced costs by$350 million in fiscal 2014 by
closingunderperforming stores, shrinkingits workforce, and
making supply chain efficiencies.

 Enhancing relationship with suppliers

Best Buy partnered with Samsung to open 1,400 Samsung stores-withina-store called Samsung experience shops. Itreached a similar
arrangement with Microsoft (MSFT), opening400 Windows stores-withina-store. Well look more closely atBest Buys key suppliers in Part 8 of
this series
Ramping up online sales
Online retailing has helped players like Amazon.com (AMZN) capture the
market share of bricks-and-mortar companies like Best Buy.
In response
, Best Buy is now highly focused on growing its online business. The
company has extended its online sales distribution network withits shipfrom-store concept, which it hasnow rolled out to 1,400 store locations.

 Other restructuring efforts

As part of its turnaround strategy, Best Buy is also revamping its stores
and tryingtoencouragemore robust store traffic. Well learn more
about these initiatives in Part 6 of this series.

CONCLUSION
As internet retailing becomes more accessible to even those who are not technologically
savvy, Best Buy will become all but obsolete.
Furthermore, internet retailing will almost always be less expensive for customers because of
lower overhead costs. In order to survive this paradigm shift, Best Buy must reshape the look
and feel of its advertisements and stores.
More importantly it needs to sell a shopping experience that cannot be imitated online.
Therefore, the management should try to abandon the warehouse superstore format to a
showroom or exhibit format.
One possibility is for the products to be laid out in different types of showrooms for customers
to interact with.
The concept is similar to an Apple store, but at a much larger scale and incorporating a wider
range of products.

 The existing customer-centricity model would still exist, but the emphasis would be shifted to
selling a lifestyle rather than a profile.
Another possibility is to add coffee shops, game rooms, music rooms and etc. that all utilize
products that are sold by Best Buy.
The advantage of doing this is to increase the customers duration in the store and thus
increase the chances of closing a sale.
I believe rethinking the retail experience to make it more personable and physically
interactive is a viable way to compete with internet retailing.