Best Buy Co., Inc.

Case Study

Ha Huynh

Columbia Southern University

BUS 6320, Global Strategic Management

Instructor: Dr. Michael Morris

October 12, 2021

 Best Buy Co., Inc. Case Study

Best Buy Co. is based in the United States as a multi-national retailer of electronic and

entertainment goods and services. The company has stores in the United States, Canada, and

Mexico, where it conducts business. Minnesota is home to Best Buy's corporate headquarters,

which operates 11 different brands of retail shops and online. United States' biggest consumer

electronics store, Best Buy, with a market value of $16.53 billion [ CITATION Kwo09 \l 1033 ]. Best

Buy recorded $ 47 billion in sales for the fiscal year that concluded in 2020.

Reported sales decline at domestic and foreign branches of Best Buy Co Inc. have been

seen, particularly in Canada and Mexico. The reseller of electrical devices has 49 locations in

Mexico. Especially at the end of 2020, there are now 41 sites of Best Buy in Mexico after the

retailer shuttered eight shops so far this year [ CITATION Sol20 \l 1033 ]. By the beginning of 2021,

signs of Covid-19 have not stopped, Best Buy Co Inc indicated a slowdown in the coronavirus

crisis-driven demand for remote-work computer equipment as it failed holiday-quarter sales

forecasts, sending its shares down by 8% [ CITATION Kum21 \l 1033 ]. Since this drop has occurred

and sales volume is declining, the business has developed a strategic plan to deal with this issue.

The plan will focus on re-establishing and growing sales revenue in the company's three major

foreign markets.

Even though Best Buy dominates the US e-commerce industry, it faces strong

competition from other retailers, both in-store and on the internet. The considerable competition

from retailing behemoths such as Walmart and Amazon are being blamed for the decrease in

sales. For instance, now that everyone prefers to buy online, more and more individuals are

opening their laptops and doing product searches on the internet rather than getting in their cars

and going to the store. Among the numerous reasons for this include ease of use, free next-day
delivery, and online discount offers. However, in terms of technology development to interact

with customers, Best Buy has always been slower than rival companies.

Situational Analysis

Traditional retailers like Best Buy are going out of business as a result of competition from

the e-commerce giant Amazon. Best Buy was on the verge of bankruptcy, just like those other

companies. Best Buy has started establishing delivery centers to counteract this decline and

better support the growth of e-commerce. However, companies must not only change with the

times but also stand out from the crowd. A refocus on sales and marketing endeavors, new

employment roles to suit changing business requirements, or a new brand identity is an example

of this.

Competitor’s Analysis

Wal-Mart is Best Buy Co Inc's main rival. This retailer competes with Best Buy in the

consumer electronics industry, which offers a broader range of goods such as home appliances

and computers as well as entertainment media such as music and movies. Walmart's cheap

pricing is well-known, and they've helped the company overtake Best Buy in terms of revenue

[ CITATION Hau07 \l 1033 ]. Expanding its product line and offering competitive pricing are two of

Best Buy's competitive tactics for taking on Walmart in this market. Because of its expansion in

cloud computing and e-commerce, Amazon poses a major threat to Best Buy's consumer

electronics sector [ CITATION Fue18 \l 1033 ]. However, the competitive advantage of Best Buy in

comparison to as opposed to online-based purchasing, Amazon's physical store presence gives

customers a more complete brand experience. Though Amazon's popular third-party goods are

absent from Best Buy's restricted product offering, even in important areas like video games and

appliances, it's able to compete because of its wide selection. The company is also strengthening
its e-commerce strategy with the incorporation of Best Buy Beta, as well as protecting their

gadgets and giving customers a great deal initial experience.

S.W.O.T. Analysis

Best Buy Co Inc. Strengths

1. Strong presence in the United States market. Due to its good name and stellar

customer service, the business has a devoted following of repeat customers in the

United States.

2. Best Buy has made significant investments in digital technologies. Consequently,

Best Buy has experienced sales reach almost 44 billion dollars by the year 2020. And

now, Best Buy's global sales have already surpassed a new record of 47 billion dollars

[ CITATION Vai21 \l 1033 ].

3. It offers goods and services in six major areas. Best Buy's biggest product categories

are computers and phones. Best Buy also sells a wide variety of electronics and

appliances. Insignia is a private label brand for refrigerators, TVs, and other

appliances [ CITATION Besnd \l 1033 ] Additionally, entertainment-related goods and

services are offered by Best Buy.

4. Strong free cash flow. From fiscal 2016 through fiscal 2020, the retailer produced

total Free Cash Flow of $7.3 billion while paying dividends of $2.4 billion [ CITATION

Swo21 \l 1033 ].

5. Supply chain. In fiscal 2021, approximately 20 vendors supplied 80% of the

company's goods (Best Buy Annual Report fiscal, 2021a). In fiscal 2021, the business

sourced 57 percent of its goods from five major vendors (Apple, Samsung, LG, HP,

and SONY).
 6. Included in the company's recent acquisitions are Geek Squad, Magnolia Hifi, Pacific

Sales Kitchen and Bath Centers, Great Call, Signal technologies, and some more.

These purchases have solidified its status as a retailer in the US.

Best Buy Co Inc. Weaknesses

1. It only operates in two foreign markets: Mexico and Canada. In the fiscal year

2021, the business left Mexico. So, the business is highly reliant on the US market.

2. In 2020, Walmart had over 5000 stores, while Best Buy had just over 1000. In 2021,

it has 1126 small format and 33 big format shops open (Best Buy Annual Report

fiscal, 2021b).

3. Best Buy's primary income streams include computers, phones, and gadgets

electronics. These goods are vital to the company's income. Other US shops like

Walmart, Costco, Target, and others deal in a far broader variety of goods.

Best Buy Co Inc. Opportunities

1. Using digital and social media for marketing, sales, and customer interaction may

help the business flourish throughout the epidemic as well as going forward.

2. Best Buy can increase sales and income by entering European, Asian, and developing

countries. A significant potential to increase sales and income in India.

3. Whereas Best Buy also offers a nice range of private label brands and products, the

company’s range of private label brands is much limited compared to the range

offered by leading retailers like Walmart and Costco. [ CITATION Bus09 \l 1033 ].
Best Buy Co Inc. Threats

1. Amazon, for example, is a significant competitor to Best Buy's company since it has

invested substantially in digital capabilities. Also, Amazon is aggressively promoting

its own private label goods to sabotage sales at other shops in the USA.

2. The minimum wage rules impact all shops, and regulators raise retail operating

expenses.

3. New difficulties have arisen with the emergence of internet streaming services like

Netflix and Prime Video. Best Buy’s entertainment product sales, including movies,

have slowed.

P.E.S.T.E.L. Analysis

Political - Customers who buy goods from Best Buy and are injured will be compensated.

To safeguard local businesses from cheap imports, the government is considering imposing a

border tax. The company's earnings will be further hampered by rising expenses [ CITATION Cav21

\l 1033 ].

Economic - The negative impact of the Covid-19 epidemic on the world economy had a

negative influence on the net sales of virtually every sector, and Best Buy Co Inc. was no

exception.

Socio-Cultural - Influence of population growth rate on firm profitability Population growth

has slowed in most industrialized countries like the USA and Canada, where Best Buy is based.

Best Buy must thus seek foreign markets, particularly those with rising populations [ CITATION

Coa15 \l 1033 ].
 Technological - When it comes to enhancing the client experience, Best Buy has invested in

technological systems that provide them access to consumer information. Finally, technology has

made companies vulnerable to harmful assaults that lose them money and reputation.

Environmental - Global and national companies are increasingly pressuring businesses to

implement waste reduction methods like recycling. Costs rise operation costs as a result.

Legal environment - The retail business was recently sued for alleged harassment in the

workplace, which tarnished the company's reputation [ CITATION Sul201 \l 1033 ].

Best Buy Co Inc. Porter’s Five Forces Analysis

Threats of New Entrants - For Best Buy Co. Inc., new competitors in electronics stores

introduce new ways of doing things and put pressure on the company's price strategy by

lowering costs while offering new value propositions to consumers.

Threats of Substitute Products or Services - New products and services that fulfill the

same consumer requirements in various ways hurt industry profitability. Alternative products and

services are significant-high if their value proposition is distinct from current industry offerings.

Power of Buyers - As a result of the intense rivalry in the retail industry and the lower

prices offered by rivals like Amazon, consumers may compel Best Buy Co Inc offers the item at

the lowest feasible cost., resulting in losses.

Power of Suppliers - The Electronics Stores sector as a whole purchases its raw materials

from a wide range of vendors. Due to the fact that they do not produce their own products, even

a little disagreement with their suppliers may result in their being forced to shut down.
 Existing Competitors - Consumer electronics retailers like Best Buy Co., Inc. face intense

competition in today's market. This rivalry has a negative impact on the organization's long-term

prosperity.

McKinsey on Best Buy Co Inc. Scheming

Shared values - To guide employees towards desired conduct, the company's values and

beliefs are crucial to consider. Shared values have an impact on the fundamental values of a

company, which are rooted in its culture and work ethics. Hence, it is critical to consider

common values while laying the groundwork for any company.

Strategy - Using a solid strategy, Best Buy may prepare for a long-term competitive

advantage while staying true to its purpose, values, and vision. By assessing present and

anticipated future performance, a strategy develops a road map for getting there.

Structure - Best Buy's horizontal structure is advantageous in planning since it lowers the

amount of time needed for consultation, allowing for quicker decision-making. In addition, a flat

structure makes it easier to support the company's vision and direction.

Staff - Ceaseless skills evaluation ensures employee preparedness and safety at work for

optimum output. Innovating ideas from human resource offer superior company tactics and

future predictions.

Recommendations

The implementation of an online selling platform by Best Buy Co Inc. will have a significant

effect on the company's operations and revenues. Customers will have easier access to the online

platform as a result of the platform being widely available. This will help the business greatly.
The running costs of a physical store may be reduced by using an online selling platform. As a

result, the business will be in a better position to compete with online marketplaces like Amazon

and eBay. Best Buy could also execute its strategy using a Balanced Scoreboard and collaborate

on strategic ideas rather than relying only on one individual. By including workers in additional

talent development and training, the business may use the steering wheel idea to intelligently

accomplish its plan objectives. To facilitate effective planning and strategy execution, the values

should be clearly articulated and should be founded on both individual and company values.

Conclusion

Walmart, Amazon, and eBay, among others, may be outcompeted by Best Buy Co Inc. if the

company takes advantage of technology advancements, product diversity, and aggressive

marketing campaigns. While stressing total return on sales, the company's stated goal is to treat

customers as distinct individuals fulfilling their needs by providing them with end-to-end

solutions that energize, motivate, and engage the company's workers [ CITATION Bes13 \l 1033 ].

According to Best Buy Company's corporate vision, people, technology, and the pursuit of

pleasure are three important elements in the company's operations. The company's goal is to

become the market leader in the electronic retail sector, to provide stimulating leadership in the

industry, and to improve its competitiveness in both new and existing areas.
 References

Best Buy. (n.d.). Insignia.

https://www.bestbuy.com/site/best-buy-brands/insignia/pcmcat159800050007.c?

id=pcmcat159800050007

Best Buy Company. (2021). Best Buy annual report fiscal.

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Bustillo, M., Lawton, C. (2009). Best Buy expands private-label brands. The Wall Street

Journal.

https://www.wsj.com/articles/SB124078866665357525

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