Best Buy Case Analysis

Topics: Best Buy, Retailing, Consumer electronics Pages: 12 (4628 words) Published: June 15, 2013
Best buy Case Analysis
case #2
Best Buy is a multinational retailer of technology and entertainment products and services operating in both domestic and international markets, including Canada, China, Europe and Mexico. With headquarters in Minnesota, Best Buy has more than 1,050 domestic locations and more than 165,000 employees (Best Buy Co., Inc., 2013). It is the largest consumer electronics retailer with a market capitalization of $9.18 billion and revenues over $50 billion in 2012 (Best Buy Co., Inc., 2013; Yahoo! Inc., 2013). Recently evolving external industry conditions, as well as changes in Best Buy’s internal environment have presented new challenges for its leaders. The company’s growth, profitability, relevance, and perhaps survival, depends on its ability to develop, integrate, and exploit its capabilities and competencies to establish a sustainable competitive advantage. BACKGROUND

Founded in 1966 by Richard M. Schulze as an audio component systems retailer named Sound of Music, Best Buy later changed its name in 1983. Included in the change, the company began using mass marketing merchandising techniques and operating consumer electronic stores based on a differentiation strategy to create value for their customers (Hitt, Ireland, & Hoskisson, 2013). The company sells a number of consumer electronics including mobile phones, tablets and computers, large and small appliances, televisions, digital imaging, entertainment products and related accessories via online and physical retain stores. Best Buy also offers technology services, such as support, repair, troubleshooting and installation, under the Geek Squad brand. With more recent expansion including a number of acquisitions, Best Buy conduct operations under a variety of names including Best Buy Mobile, Best Buy Express, Geek Squad, Cell Shop, Connect Pro, Future Shop, Carphone Warehouse, The Phone House, Five Star, Magnolia Audio Video, and Pacific Sales (Best Buy Co., Inc., 2013). As a shrinking industry has met a new breed of competitor, Best Buy faces new external challenges among a variety of internal ones. With recent allegations leading to the resignation of the company’s chief executive officer, Brain J. Dunn, followed by the subsequent resignation of the founder Schulze’s position as the Chairmen of the Board, Best Buy’s new CEO Hubert Joly faces a compromised internal quandary amid an evolving external environment (Clifford, 2012; Stych, 2012). Such industry conditions have forced Best Buy to acknowledge its capabilities and resources and develop core competencies that can emerge as competitive advantages in its new environment. EXTERNAL ENVIRONMENT ANALYSIS

The industry environment has a direct effect on a firm’s strategic competitiveness and ability to earn above-average returns. As such, an industry’s profit potential is a function of the five forces of competition: the threat of new entrants, the power of buyers, the power of suppliers, product substitutes, and the intensity of rivalry among competing firms. An analysis of these five areas will aid in understanding the profitability potential within Best Buy’s external industry environment. Rivalry among Competing Firms

Because companies within industries are mutually dependent, competitive actions usually invite competitive responses. Differing in resources and capabilities, competitors seek to differentiate their offerings in ways that create consumer value and give the company a competitive advantage. These typically are based on price, service after the sale, and innovation (Hitt, Ireland, & Hoskisson, 2013). With the closing of Circuit City and CompUSA, the pure electronic retail industry has become more concentrated. According to Yahoo! Finance, there are six major electronic store companies that are traded publically. With Best Buy’s market capitalization of over $9.18 billion constituting an outstanding majority of the electronic stores industry’s $15.9...

References: Best Buy Co., Inc. (2013, March 21). Annual Report. Retrieved from Best Buy SEC Filings:
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EDGAR, Inc. (2013, June 6). Investor Relations. Retrieved from Best Buy, Inc.:
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Yahoo! Inc. (2013, June 5). Best Buy Co. Inc. Competitors. Retrieved from Yahoo! Finance:
Yahoo! Inc
Yahoo! Inc. (2013, June 4). Industry Browser - Consumer Goods - Electronic Equipment - Company List. Retrieved from Yahoo! Finance:
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Yahoo! Inc. (2013, June 5). Industry Browser - Services - Electronics Stores - Company List. Retrieved from Yahoo! Finance:
Yahoo! Inc
Yahoo! Inc. (2013, June 4). Industry Browser - Services - Home Improvement Stores - Company List. Retrieved from Yahoo! Finance:
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