Background and Problem Statement –
Best Buy Company, Inc. is the world’s largest specialty retailer of name-brand consumer electronic products. Product categories include home office, consumer electronics, entertainment software, and major appliance products.
The Company currently offers over 6,000 products in these product categories. During fiscal 2000, the Company increased its store count by approximately 15%, with the addition of 47 new stores, including nine small-market stores and, as of December 2000, was operating more than 400 stores in 41 states. The Company anticipates opening approximately 60 stores in fiscal 2001.
Best Buy was founded under the philosophy of providing customers with a wide selection of high quality products at the lowest possible price.
From its inception the company built itself around its large warehouse type image and ran on a bare bones staffing philosophy. Contrary to there major competitors, Best Buy does not pay their sales staff on commission. This practice was done to provide a non-invasive shopping environment.
Best Buy did launch it’s first website in 1996 but it was limited to basic services such as store locations and in store specials. The current website was not launched until June 2000 and it’s primary focus is treating the customers, retail stores, and the on-line as one. The problem that Best Buy faces is customer service. The irony here is that this stems not from their internet site but from the store it’s self. Best Buy’s philosophy was to provide a non-invasive sales environment, while providing their customers with the lowest price. This worked for driving away annoying sales people, but did just the opposite when it came to finding additional help. The major reason for this is that they still run a bare bones staffing philosophy.
Description of Industry including its growth, number of firms, and major players The electronics industry is growing at a rapid pace due to the speed at which technology is increasing. The major competitors are electronic retailers such as Circuit City and Radio Shack; computer superstores such as CompUSA; home office retailers such as Office Depot, Office Max and Staples; mass merchants such as Sears, Wal-Mart and target; home improvement superstores such as Home Depot; and entertainment software superstores owned by Musicland and Tower Records.
STEP Analysis –
Situation – The situation of the industry is good. The technology is growing and so is the industry. Best Buy is growing in terms of revenue and number of stores.
Technology – In the case of Best Buy, technology is a major factor in terms of products. If technology were to slow down, so would sales. One of the biggest benefits of Best Buy, Circuit City and Radio Shack is that they have the newest electronics. If there were no new electronics (computers, digital camera’s) then sales would fall.
Economic –We see that economically the industry does fluxuate with the amount of money consumers have to spend. Most of Best Buy’s products are just little extra’s that if consumers do not have money they will not buy.
Political – There does not seem to be any political factors affecting Best Buy unless they take over the market entirely and cause a monopoly. Which at this time is not happening.
Analysis of Porter’s Five Competitive Forces
For an organization to be able to determine how competitive their company will be and how strong their competitive advantage is, they must first perform a simple comparison using Michael Porters five competitive forces. The five forces that pertain to Best Buy are identified below.
Suppliers – The Suppliers are an important part of Best Buy since they rely upon them to provide the most competitive price. If there were major issues with suppliers in the future, then prices could go up. If prices go up Best Buy would loose one of their competitive advantages.
Buyers – Buyers are huge to...