Best Buy Crisis

Topics: Best Buy, Marketing, Geek Squad Pages: 8 (1998 words) Published: August 9, 2013
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Contents

I.Background2

II.SWOT Analysis3

III.Synopsis of the strategy3

IV.Situation Analysis3

V.Target market discussion and recommendation3

VI.Differentiation and positioning strategy4

VII.Marketing mix4

VIII.Projected outcomes and key risks4

IX.Final recommendations4

X.Appendix A4

XI.Appendix B5

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Background and Synopsis

Dick Schulze and a business partner opened the first Sound of Music store in St. Paul, Minnesota. By 1969, Sound of Music had expanded into five more locations around Minneapolis and revenue had reached $ 1 million by 1970 and Schulze bought out his original business partner. By end of 1978, Sound of Music operated nine stores. Best Buy opened its first superstore in 1983 in Minnesota, signifying the commitment that Dick Schulze, the owner, had to discounted, value products. Sales grew steadily from 240 million in 1987 to 50.7 billion. However, Net income in 2012 was a loss of 1.2 billion. An assessment of the current market presence, financial trends and the overall demographic trends in the region is done to analyze the situation and to provide feasible alternatives. Best Buy should use the formula “segmentation, targeting, positioning (STP)” which are the essence of strategic marketing. It should provide value through specific product features, prices and distribution. In addition, it should communicate value through the sales force, Internet, advertising and other communication tools to announce and promote the product[1].

Situation Analysis

Best Buy has been losing market share since the advent of online retailers as well as discounters. It has simply become a showroom for lower cost retailers. Even though it claims to be the world’s largest consumer electronics retailer with $ 50.7 billion in revenues, the growth has been very slow at less than 1 %. The Financial Performance figures of Best Buy for the year 2012 have been dismal with Net Income falling from$2.3 billion in 2011 to a loss of $1.2 billion.

SWOT Analysis

Some internal strengths of best buy are that it provides value to the consumers by providing good quality of goods. It has a great return policy and has store locations in every major city in North America. It is a leading brick-and-mortar retailer and has unparelled brand equity. Like all big businesses, Best Buy has some inherent weaknesses. Some of these are that it has a low internet presence, the real estate costs are expensive and the stocking expenses for the stock of goods held in the stores. Best Buy can take advantage of the opportunities such as the acquisition of Napster, international expansion, online retailing, providing business account and new services by using Geek Squad. Like all major stores, there are threats faced by Best Buy. Some of these are competitors such as Wal-Mart and Amazon. The international markets are relatively unknown and new. The economy has been volatile and the consumer spending habits have been changing. The SWOT analysis can also be seen in tabular form in Appendix B.

Target market discussion and recommendation

Three potential ways that target markets can be differentiated are: age group, business or individual and men or women. In the case of Best Buy, age group differentiation of the target markets can be based on the following three...
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