ABHISHEK NAGARAJA MGT 679 Prof. JEFFRY.L.MCNAIRCSU ID: 830467534

CASE BRIEF

Problems:

Current economic climate has forced Best Buy to consider its strategic options. To

gain and maintain sustainable levels of market share and profits associated with consumer

electronics and appliances.

Input- Output analysis:

External Analysis:

Porter’s 5 forces theory

Compliments: Medium

Risk of entry: Medium

Rivalry competition: Very high

Buyers bargaining power: High

Suppliers Bargaining Power: Medium

In the market where Best Buy operates, the entry and exit barriers are rigid because of

huge investments required to enter. It is pretty difficult to liquefy such huge business and

leave the market. The threat of substitutes is low .i.e. there are many options for customers

like Target and Walmart, but they don’t get the desired quality and the variety of product.

Threat of new entrants is moderate to low, the reason being that this business requires

huge investment and goodwill build over years, which makes customer more loyal to best

buy and restricts other players to take over the market.

ABHISHEK NAGARAJA MGT 679 Prof. JEFFRY.L.MCNAIRCSU ID: 830467534

Best buy gets its products at a low cost directly from the manufacturers like Sony,

Samsung, and Asus etc. Hence they rely on them to pass on the price benefit of eliminating

middlemen to the customer. Just in case Best buy does not follow the supplier’s condition

then it may be reprimanded in terms of customer loss. Suppliers can increase the price taking

away their cost advantage.

Since retail buyers don’t buy in large quantity, no single customer can have

bargaining power. Buyers prefer to buy products at comparatively low prices so they prefer to

buy from best buy. Best buy sees to it that it provides quality products at lesser price so as to

fight competition.

Even though Best buy has rivals such as Walmart and Costco, they out do others by

virtue of quality of service, price, variety and staff expertise in electronic gadgets. The

products are not differentiated and hence the customer gets the liberty to choose products

from any of the stores.

Recommendations: Low overhead online retailers capitalizing on price conscious consumers

and using Best Buy as a showroom.

Internal Analysis:

The analysis shows that Best Buy faces a variety of cross-functional issues. They use

direct to consumers distribution method. This increases the days on inventory and the

inventory turnover showed an all-time low. From the marketing perspective Best Buy

focussed more on showrooming strategy, Geek Squad concept. Showrooms provide a

competitive advantage for selling, and building mobile and social platforms for online selling

is a feasible idea. The sales decline was driven by the fierce competition from the online

retailers like Amazon.com. When it comes to customer service best buy historic competitive

advantage are the in-store, online and Geek Squad sale methods. But they need to

ABHISHEK NAGARAJA MGT 679 Prof. JEFFRY.L.MCNAIRCSU ID: 830467534

reinvigorate the customer experience. There is also room for improvement for online and in-

store non-buyer satisfaction. Best buy needs to improve inventory turnover to accommodate

rapid changes in the electronics market. Also they must take action to differentiate Best Buy

from other low priced online competitors. In order to surpass and differentiate from

competitors, Best Buy is undergoing restructuring for cost cutting and also upgrading its

digital capabilities (e.g. websites, shipments).

Recommendations:

Create an in store pick up partnership with Amazon. Best buy can consider the option

of partnering with the reigning online merchants like Amazon to sell products purchased

online from Best buy store. Profit sharing based on the sales.

Best buy can also introduce fee based loyalty club that provides access to real time

customer support, reviews, and Geek squad techniques. Also, they can introduce point system

to reward volume purchasing.