Assignment: Best Buy Business Strategy
Introduction and Background
Overview of Company
Best Buy stores offer a wide variety of consumer electronics, home office products, entertainment products, appliances and related services. These include, Best Buy Mobile which offers a wide selection of mobile phones, accessories and related services. Geek Squad provides residential and commercial computer repair, support and installation services. Magnolia Audio Video Stores offer high-end audio, video products and related services. Naspstar is an online provider of digital music. Pacific stores offer high end home improvement products including appliances, consumer electronics and related services. Best Buy International segment is located throughout nine European countries including Canada, China, and Mexico. Their international segment was first established in the fiscal year 2002 in connection with the acquisition of Future Shop Ltd and Canadian’s largest consumer electronics retailer. Best Buy currently has approximately 180,000 employees worldwide. The company preliminary recorded revenue of U.S $50.270 billion during the fiscal year ended February 26, 2011, a marginal increase of $578,000 million or 1.2 percent over 2010. According to Best Buy Co, Inc annual report of 2011, it was reported that his increase in sales was driven primarily by the net addition on of 147 new stores during the fiscal year 2011 coupled with the favorable impact of foreign currency exchange rate fluctuation. The operating profit during the fiscal year end of 2011 was reported at $2.078 billion, a decrease of $117 million over 2010.The net income during the period 2011 was reported at $1. 28 billion, a 3.04% decrease from 2010.
Total assets for the fiscal year end February 2011, stood at $17.8 billion compared to $18.3 billion in the previous year. Total equity stood at $7.2 billion for the fiscal year February 2011 compared to $6.9 billion in February 2010. History of Best Buy Co. Inc
Best Buy was originally founded by Richard Schulze and another partner in 1966. Schulze was also the chairman of the company. The first company that was established under its formation was Sound of Music Inc, as a single home and car audio specialty store. The company was opened in St. Paul, Minnesota in an attempt to capture the shares of the twin cities, home and car stereo retail market. The first year of sale reached a total of $173 million. Four years later Schulze bought out his partner and began to expand the chain. By the early 1980s, Schulze broadened the product line to appliances and VCRs to target older and more affluent customers. Schulze has continued to expand its product line to suit the needs of his consumers. After almost 20 years of operation, Sound of Music changed its name to Best Buy and launched its first superstore in 1983. Best Buy grew rapidly between 1984 and 1987; it expanded from eight stores to 24 and its sales jumped from $29 million to $240 million. Best Buy average future shop outlet occupies approximately 21,000 square feet of retail space. Each of the company’s business units run an electronic shopping web site on the internet. Overall, Best Buy’s revenue mix has consumer electronics generating 37 percent of its total revenue, home office products, 35 percent and entertainment software, 22 percent of appliances. By 1985, Best Buy went public where it raised $8 million through an initial public offering (IPO) and two years later gained a listing on New York Stock Exchange (NYSE). To set Best Buy apart from its competitors, Schulze introduced the warehouse-like store format in 1989 and took sales staff off commission. The concept was crucial to Best Buy ascent to become the second largest consumer electronic retailer in the U.S. by 1993. Best Buy continued to expand aggressively in the subsequent years and found itself in a large amount of debt in 1995. In 1997, earnings plummeted and the company realized it had over extended...
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