Best Buy CO. Inc Case Study

Pages: 17 (4662 words)  ·  Bibliography Sources: 5  ·  Level: College Senior  ·  Topic: Business  ·  Buy This Paper

SAMPLE EXCERPT:

[. . .] This has increase the threat of legal complications in case the company fails to meet legal or social expectations. On the contrary, the task environment improvement has made it possible for the firm to use information technology to gain a competitive advantage over its rivals as well as better manage its internal resources.

IV- Internal Environment: Strengths and Weakness

A- Corporate Structure

The corporate structure of Best Buy is hierarchical as well as cross-functional. Having viewed the composition of executive management and board of directors, it becomes evident the company lacks talent that can anticipate the future trends in retail sector, specifically the impact of online retailing upon the traditional bricks and mortar retailing. Most of the members of board of directors have rich experience in traditional service sectors such as food service, machinery service, and financial services. These sectors have different customer service policies and depend on physical customer base. Another strategic impediment that executive management of the company created was placing the company in direct competition with both traditional as well as online retail stores, thus stretching company's resources across two different modes of commerce.

B- Corporate Culture

Best Buy Co. Inc. maintains a 'people oriented' culture and highly regards its employees as key resources of the company. While the company strives to provide superior customer services as compared to rival retail companies such as Wal-Mart and Target, it heavily invests in the philanthropic activities in communities where the company operates. Being employee oriented and community centric, the company enjoys good reputation in the U.S. And abroad, unlike Wal-Mart that is considered hostile towards small departmental stores. The company also places high importance to ethical financial reporting and disciplined conduct of operations. Learning aspect within the culture of Best Buy has not been much ingrained that has resulted in learning the process of change in retail sector, just as Circuit City, a traditional retailer that field bankruptcy in 2009.

C- Corporate resources

Total assets of the company were reported to be $16 billion in 2012 and $10 billion worth of assets were current assets. Total current liabilities of the company were around $8 billion and this shows that the company remained disciplined in S&GAD expenses.

D- Summary of internal environment

The internal environment of the company indicates that there is a strong need for aligning the company's human resource capabilities and strategic direction. While the company has set out the strategic policy of shifting towards smaller stores and decreasing the use of physical space to build stores, the company's management team is still dominated by personnel that are rather moderately aggressive and opportunistic in leveraging upon the wave of online retailing. Despite stiff competition that Amazon is giving to Best Buy, the company is still reliant on physical stores to increase its revenue. Amazon on the other hand relies only on its warehouses for conduct of operations in physical world. The sales are generated by using their virtual platform. Best Buy still has the largest customer share in consumer electronics market. The selling of electronics that are highly physical in nature such as consoles and gaming devices, the company had to face a 13.3% comparable store sales depreciation. If Best Buy does not use its currently handsome balance sheet and asset/liability position to venture aggressively into virtual commerce, the strengths of the company will not be used for tapping the opportunities presented in the external environment such as improvement in task environment.

V- Analysis of Strategic Factors (SWOT)

A- Situational Analysis

Mission: Best Buy Inc. has the mission of "to obtain and maintain the market share and profits associated with consumer electronics and appliances." The stated objectives of the company imply that Best Buy aims to gain the market share in the consumer electronics industry. The company plans to do so by increasing the connectivity of digital solutions and growth in international market.

Currently, the retail market is dominated by four or five major competitors of Best Buy. These are Wal-Mart and Target in 'bricks and mortar' retailing business model and Amazon, Apple, and Radioshack in online retail sector. Circuit City left the retail market in 2009 after filing chapter 11 bankruptcies. Due to an increased reduction in comparable store sales of Best Buy, Fitch lowered the credit rating of Best Buy from BBB+ with a negative outlook to BBB -- . This was also due to the shrinking of consumer electronic market share of Best Buy. The direct competition with internet-based businesses, discount chains, wholesale clubs, and home-improvement superstores has led the company to alter its policy of store expansion. Overall decrease in spending of consumers coupled by deep challenges due to recessionary economic outlook in the U.S. And Europe has placed company's growth prospects left dim. The slump in housing sector has also posed a negative impact on consumer electronics sector.

VI- Strategic Alternatives and Recommended Strategy

A- Strategic Alternatives

Consolidation of operations in existing market segments and geographical regions: The first alternative available for Best Buy is to consolidate their operations in existing market segments where the company operates. The company can continue targeting same demographic of people aged 16-35 years belonging to middle and high income groups. Same prices will be offered across different regions. While consolidating, cost of sales will be tried to decrease.

Expansion of online retail operations: This alternative involves considerable capital and human resource investments in developing and expanding online retail platform. The current platform of Best Buy is less scalable and provides little interaction for customer. The online platform of Best Buy can also be integrated with Android-based smartphone applications.

Expanding operations in BRICS: Expansion of Best Buys smaller retail stores, on the format of kiosks, can be initiated in Brazil, Russia, India, China, and South Africa (BRICS). Leading financial and economic analyst firms such as Goldman Sachs has put BRIC countries to top economic development till 2050. Thus, the consistent decrease in sales that Best Buy is facing in Europe and the U.S. can be offset by expanding online and small store operations in BRICS countries.

B- Recommended Strategy

Expanding operations in BRICS is the best advised alternative to be adopted by Best Buy Company. Since European and the U.S. market of consumer electronics is already approaching maturity level and online retail operations are dominated by Amazon and E-Bay, Best Buy can timely enter the BRICS and gain considerable market share in CE. Significant advantage of this strategy can be the gaining of a huge untapped potential of business in international market whereas downside of this alternative will be the legal, social, and economic difficulties in setting up business in a culture significantly different from that of the U.S.

VII- Implementation

In order to implement the recommended alternative, the company will have to restructure its corporate structure. Best Buy Global shall be constituted recruiting the business heads from respective regions of Brazil, China, India, South Africa, and Russia. An integrated Human Resource Information System (HRIS) shall be developed and balanced scorecard shall be introduced in the newly developed entity. The company can acquire smaller e-tailing companies in host countries and venture will major financial institutions to secure the required capital. Individual plans and programs shall be managed by introducing pro-forma budgeting. This will help the new regional divisions of Best Buy Global to anticipate the potential revenue changes.

VIII- Evaluations and control

Best Buy Inc. has considerably outsourced its information technology and management consultancy functions to Accenture LLC. Accenture is a global management and IT consultancy company that provide customized services for managing information technology needs of its clients. Therefore, the current information system of the company is capable of managing the expansion of business operations in BRICS. Although, control measures with respect to current business portfolio are in place, Best Buy Global will need to set up a supervisory board as part of control mechanism having internal (employees and board of directors) stakeholders as well as external stakeholders (partner firms from host countries).

Part II

Functional and Business strategies of Best Buy

I- Operations and Logistics

Operations

Current operational objectives, strategies and objectives:

The company has clearly set its client service objectives, strategies, and polices for retailing services as well as after sales services. Best Buy Co Inc. strives to provide its customers with an unbiased advice for their technology requirements. The company also claims that they are advancing towards customer satisfaction through implementation of latest techniques and customer service practices to assist in their purchase process (Best Buy, n.d.). The organization extensively focused on providing after sales services. The strategic objective of customer retention is achieved through the loyalty programs policy of the company.

Consistency in corporation's mission, objectives, strategies, and policies

The operational objectives are clearly stated and the company strictly adheres to the policy defined for customer services. The strategy of customer satisfaction is also a continuation of overall goals and objectives. The operational objectives for international and local segments are defined separately. The organization has clearly segmented its operations in… [END OF PREVIEW]

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Best Buy CO. Inc.  (2013, March 20).  Retrieved February 18, 2019, from https://www.essaytown.com/subjects/paper/best-buy-co-inc-strategic/5886812

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