Best buy in a global growth mode

Best Buy in a Global Growth Mode

Submitted by:Ahmad Atif Abdullah

Umesh NairAamir Ansari

Maneck DebaraAdnan Ahmed

• Founded in 1966

• International retailer of consumer electronics

• Headquartered in Richfield US.

• Named as ‘company of the year’ by Forbes

Magazine in 2004.

Company overview

Competitors:

Wal-Mart

Amazon

Newegg.com

EBay

Target

Costco

Subsidiaries and

acquisitions:

Future shop

Geek squad

Carphone warehouse

Magnolia

Five star

Overview of the case

• This report has provided a close and detailed analysis of Best Buy retailing

strategy by highlighting the market conditions.

• It assessed their global expansion strategy and their performance during

the recession.

• At the end, the report provided some recommendations for Best Buy to

maintain their position in the market and assist them to excel in their

industry.

Other Initiatives

• Planned up to open 400 mobile stores in US in 2009.

• Target is to grow the mobile market and increase it by 2%.

• Expanded store-within-store concept in US.

• Started focusing on musical Instruments.

• In 2007 added more branded ladies bags and cases to attract more

women.

• Partnered with FixYa.com, that allows customers to seek help in

technology issues.

(1)What can any retailer learn from this case?

To leverage their customer knowledge for product differentiation

and to understand what the needs of the customers are.

Discover what satisfies the customer and what not.

Seek for news partnerships, new stores, new countries and

services in order to increase their net sales and their share market.

Invest in marketing study aiming to discover what the other

companies are doing.

(2)Analyze the data in tables 1 and 2 . What conclusions do you reach ?

• From the table we see that the market is not stable and there are continuous

alteration and fluctuations because of various reasons such as credit crunch, income

concerns.

• Conclusion we reached is that the expending on consumer electronics is due not only

for the price, depend also of the marketing strategy and the incomes that the

consumer could have.

• Best Buy, Wal-Mart, Circuit City, Target and Dell were the largest U.S. sellers of

consumer electronics between 2003 and 2007. Both Circuit City and Dell lost market

share, while Best Buy, Wal-Mart and Target increased Market Share.

• Competition Gaining faster.

• Even though category growth has slowed down, online retailers are also gaining on

market share as they provide the convenience of easy price comparison and

shopping.

(3)Why Has Best Buy Been Able To Weather The Recent Economic Downturn Better Than Many Other Retailers?

• Best Buy was able to weather the economic downturn better than many retailers. The

high price of gasoline, the increasing cost of food, the credit crunch, the slump in the

housing market and job and income concerns all have affected the retailer industry.

• The ultimate result of economic downturn is that consumers become price conscious and

they use balance the price-selection equation when they choose a retailer.

• All the mentioned factors led to increase the competition between the retailers. Some of

them were able to survive, while other suffered from bankruptcy and they closed down

such as Circuit City. Circuit City was the second largest consumer electronics chain .

• At the beginning they had a strong growth as results of flood of demand from consumers

spending borrowed money that led to open thousands of stores .During the recession they

started to face a decline in sales, as result of the radical shift that took place in retailing.

• Their chains started to close because they were unable to face the freeze-up in

consumer spending and choked by tight credit markets. At the same time, Best Buy was

doing well and that’s due to many factors:

Customer Centricity: The most important asset of the company is their customers,

Best Buy were able to understand the customers need and this helped them in

targeting with the right products and this led to achieve an optimal satisfaction.

Joint ventures and global expansion: The Company has partially integrated system,

they formed joint ventures with existing retailers which allowed them to acquire the

local expertise and they got to know the local market in better way also that helped

them in saving the capital cost. Best Buy have strong existence in US and they

acquired local retailers such as Geek Squad .Also, They have joint venture with

Future Shop in Canada and Five star in China.

• As a results of the above tactics, the Best Buy store was one stop shopping store for

customer and offered them wide assortment at convenient locations with great

service and good understanding of their needs .This led to great customer traffic,

generate stock turnover and achieve economies of scale and attract the price

conscious consumers.

(4)Does Best Buy do a good job with regard to the retailing concept?

• Good customer service paired with a unique store experience

• Effective selling techniques

• Store within a store format

• Own private brand business that provides more affordable alternative products

• Catering to different demographics

(5)Assess Best Buy’s global strategy

• Initial strategy

- Multi pronged global growth strategy

- Four key geographic areas

- Emerging Markets

- Maximize international returns

• Modes of entry

- Acquisitions : domestic and abroad

- Established brands

- Dual branding strategy

Other best buy growth Initiatives

• Mobile format sees heavy investment

• Apple department grow in US stores and China

• Dell completes the computer assortment

• Best Buy in China: Dual strategy of Best Buy and Five star in China.

• Best buy in Canada:

Appointed product experts to facilitate more.

Trained associates to support home-network sales.

Launched ConnectPro to provide home installation service for

home theatre.

• Best buy in Europe:

Carphone Warehouse, the fastest growing retailer.

Joint venture with Carphone Warehouse by opening stores in London.

Expanded Geek Squad with Carphone Warehouse in 2008.

(6)Look at the website of best buy’s geek squad. Why has this service business done so well ?

• Geek squad is arguably the most polished computer help service.

• The support experience

• Geek squad has two levels of tech – Analysis & Expert

• Web resources – wealth of free computer health tips

• A decrease in return rates by 25%-35% of their products

• Customer friendly website which results in customer engagement

Wal-Mart's CE Expansion

• Adding brands continuously.

• Targets mid to high income customers.

• Redesigning efforts and improving the customer experience.

• Lack of installation and repairs services.

• Geek Squad is Best Buy’s competitive advantage in providing

services to customers.

• Wal-Mart teaming up with Dell to provide installation and repair

service.

(7)From a strategic planning perspective , what must Best Buy do in the future to

stay ahead of Wal-Mart ? Will it be able to do so in the long run?

• Wal-Mart's low pricing strategy will eventually cause them to win out over

Best Buy

• If Best Buy wants to stay ahead they need to continue to serve niche markets

and find ways to further differentiate themselves from Wal-Mart

• Programs like The Geek Squad will help Best Buy stay ahead but they need

more programs like these to keep their competitive advantage over Wal-Mart

• They need to capitalize on their association with electronics since Wal-Mart

offers a wider variety of products.

Recommendations:

• Continue innovating: Innovation in this field is paramount as retailers struggle to maintain

market share from fierce online competitors.

• Step-up E-commerce: Best Buy needs to update and integrate their online portal with their

current brick and mortar structure. Include price comparisons apps, reviews from buyers and

easy way to buy products.

• Embrace showrooming: Unless the retailing concept changes, this phenomenon is here to

stay.

• Involving in social responsibility activities: to establish a solid relationship with its customers

and staff and increase their loyalty Best Buy should involve in social causes that concern and

attract its target market and its staff. By being socially responsible this will enhance the brand

image and might attract new consumers as well.

Reference:

• http://www.bestbuy.com/

• http://en.wikipedia.org/wiki/Best_Buy

• https://www.youtube.com/

• http://www.academia.edu/2377926/Best_Buy_Corporation_Strategic_Management