Difficult Retail Environment
BUS 620: Managerial Marketing
Professor David Kalicharan
Best Buy Marketing Strategies in a Difficult Retail Environment
Best Buy was once the “go-to” store for electronics. This organization expanded from the U.S. market to a multi national retailer in 2001. Best Buy has squashed its competition for over four decades. Circuit City eventually declared bankruptcy, while Fry’s Electronics and Hhgregg are minor players in the electronic retail market. With the advent of e-commerce, as opposed to brick and mortar competition, Best Buy has been struggling to compete in a new marketplace. This paper will discuss the three different generic strategies that businesses should implement to gain the competitive edge. It will also go over the population segmentation that Best Buy uses to market its products and services, and how segmentation is changing due to internet sales. Lastly, some improvements to Best Buy’s strategies will be introduced for them to remain a competitor in the online retail market.
Differentiation as a Competitive Strategy
A former Best Buy sales manager wrote on a blog:
I will buy it in your store . . . use it while I order another one for 75% less on Amazon and then return the new in the box one at your store. It's shoppers like me that are multiplying because of research that is available on the Internet and that is why there is concern about the company (Bustillo & Jarzemsky, 2012, para. 8).
For any retailer to succeed in a competitive market, strategies need to be implemented to gain advantages over others. Organizations, such as Best Buy, need to objectively identify their strong points and determine how they can be used to react to the larger market. Michael Porter came up with three generic strategies to give businesses that competitive edge or advantage in their various product-markets. These are: (1) overall cost leadership; (2) differentiation; and (3) focus. “ Ormanidhi concurs and states that if firms pursue any of Porter‘s three recommended generic strategies, they will be able to outperform competitors who do not pursue such strategies” (Monahan & Rahman, 2011, p. 27).
Throughout the years, Best Buy has had to change their competitive strategies as the retail environment has changed due to technology shifts and new online competition. Focusing on differentiation is what Best Buy is practicing to keep afloat during tough economic times when many consumers are looking for the lowest costs in big ticket items. Differentiation is when “great efforts are put into the creation of unique products and services to develop competitive advantage. The differentiation in products and services includes superior quality of the product, better service level, and brand image” (Chen & Lin, 2011, p. 3).
Best Buy has recently been expanding their online presence so that they appeal to different market segments. They are shutting down many of their stores due to high overhead costs and low sales. Their competitive strategy is to create a diversified market by keeping the stores that are doing well so that their loyal customers still have a place to go to, while boosting internet transactions for the customers that prefer a more personal way of shopping. As Michael Porter points out, “A company can outperform its rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or both.” (Mullins & Walker, 2010). The competitive advantage that Best Buy has is the different market places that consumers can go to - online as well as brick and mortar.
Prior to 2011, Best Buy was expanding overseas to countries like Turkey, China, England and Mexico just to name a few. The geographic and demographic strategies through the decades were to open more stores...