October 4, 2012
Best Buy after Circuit City: What’s Next
In this case we discuss the various reasons behind the success of the retail firm Best buy in comparison to a similar business Circuit city, which could not face the economic depression in and went bankrupt.
Best Buy is operating in an open market. There are many more firms offering similar products; and, rivalry among the consumer electronics retail industry is considered to be high. Competition has been high in this industry mainly because there has been little to no switching cost at all if any buyer makes a decision towards shopping elsewhere. Apart from that, the products are not at all isolated and differentiated since buyers can buy same type of products at nearly all of the various electronic stores. The threats related to the potential new entries in the consumer and retail electronics industry have been relatively low. Due to this consequence, there have been a lot of new entrants in the electronic market.
The low capitalization in the market implies that the situation would not be highly difficult towards entering the industry that is based solely on the capital required. However, the potential entrants will have to come over the high and superior brand reputations that Best Buy has maintained and established in the past.
Best Buy seems to have built the reputation towards selling mid-to high-end product as well as provide excellent and prompt customer services. Therefore, it has been very difficult for the new entrants towards challenging the customer services. Furthermore, it would have been difficult towards undercutting incumbent firms who would have already established relationships with their suppliers for purchasing the merchandise at the comparatively lower prices. Although the threats towards entry can be considered to be low, the potential and relative pool of the entrants can be...