Best Buy Co., Inc’s Case Study (Case Study Sample)

Best Buy Co., Inc’s Case Study
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Best Buy Co., Inc’s Case Study
Consumer electronics continue to face fierce competition. The performance of Best Buy stands in sharp contrast to that of several shops that have entered bankruptcy or are currently in that situation. With a market share of above 20% in the United States, Best Buy led the pack in 2016. Amazon was in second place and is on track to topple Best Buy as the dominant player. In terms of sales of consumer electronics and those of consumer electronics firms, Amazon has already surpassed Walmart, including Apple, Dell, and Hewlett-Packard. Furthermore, the percentage of overall sales of consumer electronics that are made online is rising.
Consumer gadgets are sold seasonally and in cycles. Additionally, purchases of most items regarded as discretionary are closely tied to macroeconomic variables, including consumer trust, unemployment, the real estate market, and credit availability. Best Buy was able to maintain its competitiveness thanks to the strategy devised by CEO Joly to drive engagement in high-touch products that enabled clients to interact with reasonably priced products, notably private-label brands. Also, the poor performance by some of its competitors made it improve its performance. But how will it continue to maintain its performance standards?
External Analysis
Opportunities
It has an opportunity to acquire one of the struggling companies but a company with a good brand. Since Joly became a CEO, she has never attempted an acquisition, yet the company has the potential for inorganic expansion through acquisitions. However, the company can now execute such a plan to gain more market share in the US and outside the US.
Furthermore, there is an opportunity to expand its physical presence. The physical presence expansion can entail increasing its store’s warehouses and region. It can expand its market to Africa, Asia, and Latin America to increase its customer base. Additionally, in these regions, there are more opportunities for electronic devices due to the growing population. A young population fond of electronic devices could also be found in these regions.
Threats
The company is facing strong competition from other retailers, especially Amazon. In electronics retail, Amazon is still a strong competitor, with Alexa, Amazon’s digital assistant, now providing in-home consultations via its Echo speakers. In contrast, Best Buy does not provide a virtual assistant that may take the place of its professional sales team. Additionally, Amazon is expanding its physical presence by building more warehouses.
Consumer electronics, a sector of the economy that Best Buy depends on, are becoming increasingly entangled in the US-China trade disputes, which do not seem to have a simpler or quicker settlement. These disputes between these countries might affect the operations of the company and its market. Additionally, its supply from china may be affected by these trade wars.
Another threat is its strategy in retailing. If competitors successfully automate their processes, Best Buy’s “high touch” strategy to retailing, which depends on luring and keeping talented personnel, might hurt its profitability. When the profits plummet, the company’s finances will suffer, and it will not be able to survive the competition. It might join other companies that were declared bankrupt.
Five forces analysis
The threat of substitute products and services
Electronics are an item that another cannot substitute. However, in the electronic business, competition serves as the primary alternative. Alternatives include manufacturing web stores, like Walmart, and online discount companies, like Amazon. Online shopping is becoming increasingly important in the market. Amazon is a major alternative since it is increasing its online and physical presence.
Rivalry among existing players
There are a lot of rival businesses in this market, the principal rival being Amazon. Walmart, Dell, Apple, Circuit City, and Target are a few more. Even though Best Buy dominates this sector, Amazon plays a key role in the industry. Since the products are not very distinct from one another, there is a lot of competition among electronic retailers. As a result, businesses begin to compete not only on pricing but also on customer satisfaction, reputation, and other factors. This industry’s internal competition is getting more and more intense. The market’s players provide favorable sites and an online presence, which increases player competition.
Bargaining power of suppliers of Best Buyer
The primary suppliers play a significant role in the industry’s earnings. More than half of Best Buy’s stock is sourced from five suppliers: LG, Samsung, Sony, Hewlett-Packard, and Apple. Due to the industry’s low supplier density, suppliers have significant bargaining power. Due to many retailers and a growing number of manufacturers, suppliers significantly impact the items they produce and their pricing. One of the top electronic goods retailers, Best Buy, helps its suppliers make profitable sales. Suppliers put their goods on the Best Buy shelf so customers can see, try, and purchase them. For instance, Best Buy and Samsung invented the shop within a shop idea in 2013 to promote Samsung products inside Best Buy stores.
Bargaining power of buyers of Best Buyer
Consumers in this market tend to be individuals and small firms that purchase a few laptops or CDs, for example, so buyer power is relatively modest. They only purchase one specialty item. Thus, they have little control over pricing. Customers lack an alternative to technological products. However, the power of consumers is growing as a result of competition. Customers can decide where to shop, compare costs online, and purchase from the business with the best deal. Some consumers would even choose to shop online instead of visiting retail stores because the product’s details are all available online, along with consumer reviews and comments.
The threat of new entrants
The retail sector of consumer electronics has homogenized. Potential competitors entering the retail market for consumer electronics pose a minimal danger. Due to the substantial investments needed to enter and exit, there are stiff entrance and exit barriers. Potential new competitors would have to surpass Best Buy’s better brand image. It would be challenging for an entry to contest the business. In addition, it would be tough for newcomers to create relationships with companies like Best Buy as customers, making it difficult to buy products at the best prices.
Internal Analysis
Value
Best Buy depends on its knowledgeable and driven sales team to deliver a genuinely exceptional, multidimensional customer experience. This shows an investment in staff training to produce knowledgeable workers who draw in clients. Best Buy has expanded what it sells and changed how it sells things thanks to its staff. Best Buy’s decision to invest in its employees paid off.
Rare
The customer experience at Best Buy is excellent. It is dedicated to putting the consumer’s needs first, and it does this through thorough customer segmentation and research. Outlets were specifically designed to meet the needs of the predominant client segment in a given location. Four themes were found were identified after the company carried out market research where the consumers were segmented according to their needs.
Costly to Imitate
Competitors find it challenging to replicate Best Buy’s personal label products. This is because the company recycles the materials used to manufacture such products. It would be costly for other companies to start recycling and manufacturing products at lower prices. For the recycling program to be profitable in 2016, increased costs prompted it to charge $25 to salvage TVs and computers. This implies other companies may not break even if they start recycling to manufacture products at lower prices.
Organized to Capture Value
CEO Joly dubbed his recovery plan “Renew Blue,” which focused on offering advice, service, and convenience at reasonable costs to add value to the company and enable it to reach its feet. Joly stressed five points. The five primary stakeholder groups at Best Buy are customers, workers, supply chain partners, investors as well as the general public. He chose Corie Barry, his successor, who had worked for him for 20 years. Joly became the chairman at Best Buy.
To boost employee knowledge and entice customers, Best Buy invests in the training program. Best Buy has expanded what it offers and changed how it sells things by investing in its staff. For instance, Best Buy began sending its staff to consumers’ homes in 2017 to make free product recommendations for the business. Best Buy depends on its skilled employees to produce an exceptional customer experience.
Best Buy has a sustainable competitive advantage according to the VRIO framework due to the quality and competencies of their customer care, qualified staff, recycling ability, and superstores. These are BestBuy’s most important resources, and they are what will maintain the company in operation. To maintain their competitive advantage in the fiercely competitive electronics retailing market, they must keep improving these two important resources and their other assets.
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