December 2, 2011
McCombs School of Business
The University of Texas at Austin
Best Buy operates as one of the largest electronic consumer outlets in the United States. While Best Buy is internationally known for selling a large variety of electronics, it also sells home office products, appliances, and entertainment products. Best Buy chains are located predominantly in the United States, Canada, Europe, and China. Since Best Buy’s success is strongly dependable on the consumer, its main goal is to do whatever it can, within reason, in order to make its customers fully satisfied.
Its vision is centered around the "People, technology, and the pursuit of happiness.” As a corporation, its four main value concepts are having fun while being the best, learning from challenges and changes, showing respect, humility and integrity, and unleashing the power of its people. When asked about a mission statement Best Buy Co. stated, “Our formula is simple: we're a growth company focused on better solving the unmet needs of our customers---and we rely on our employees to solve those puzzles. Thanks for stopping."
The History of Best Buy
Richard M. Schluze founded Best Buy in 1966 as Sound of Music, Inc. In 1982, after revenues reached $9.3 million, Schluze renamed the company Best Buy Co., Inc. In 1987 the company gained a listing on the New York Stock exchange. At this time its revenue had soared to $239 million from only 24 stores. Six years later the company finally reached a milestone: their revenues surpassed the $1 billion mark and reached $1.6 billion in 1993. By 1997 the company had achieved something that most corporations only dream of; it became the industry leader, and with this achievement, also came an increase in price profits.
In March 1998 the company decided to adapt the e-commerce way of doing business, and launched a music store on bestbuy.com. Later that year the company introduced a concept IV format for its stores. This format included a more spacious layout, more variety of high-tech products, and products were organized in different departments in different sections of the store.
It also decided to add cash registers to different parts of the store rather than only in the front. When asked about the new concept CEO Richard Schluze stated, "The new format reinforces our brand position as the destination for new technology in a fun, informative and no-pressure shopping environment." The transformation turned out to work in favor for Best Buy. Revenues jumped 21 percent allowing the company to hit the $10 billion mark. Currently, Best Buy is still one of the top electronic consumer outlets with yearly revenue totaling over $16.5 billion.
Best Buy’s Business Model
Best Buy makes most of its revenue domestically through entertainment software and televisions. In the 2010 Fiscal year Best Buy earned 8.5 billion dollars in revenue, 6.5 of which came from domestic sales. Best Buy Co. also has family brands which help to generate revenue. These include brands such as Best Buy, Audiovisions, Best Buy Mobile, The Carphone Warehouse, Five Star, Future Shop, Geek Squad, Magnolia Audio Video, Napster, Pacific Sales, and The Phone House. Collectively, Best Buy and these partnerships generate more than $50 billion in annual revenue.
Best Buy Co Inc. is in the services sector, operating in the electronics stores industry. Best Buy lacks immediate comparable competitors; however, it still faces a wide array of indirect competitors from: (1) Unspecialized discount retailers such as Wal-Mart, Target and Costco; (2) Online retailers such as Dell, Amazon.com, and eBay; (3) Entertainment software stores such as GameStop; and (4) Office supply stores such as Staples, OfficeMax, and Office Depot; among others.
Internal rivalry is the most significant force of Porter’s Five Forces and it is very high in the consumer electronics retail...