Established in 1966, Best Buy (BB) is an American multinational consumer electronics company with headquarters at Richfield in Minnesota. At its founding by Richard Schulze and Gary Smoliak, the company had the name Sound of Music, largely operating as a home and car audio specialty store until it change its name to Best Buy in 1985, having expanded to about 24 stores in addition to millions in sales (Bensen et al., 2014). Currently, the company owns more than 100 express stores in addition to 1150 big box stores around the world. It also has holdings including CinemaNow, Geek Squad, Magnlia, Audio Video, MindShift and Pacific Sales in addition to a large assortment of sports brands.
BB operates in the consumer electronics retail industry, perhaps one of the most competitive industries in the world. Presently, the consumer electronics industry has more than 24,000 stores, with annual revenues well over $50 billion (Raimo et al., 2009). The retail industry within which the company operates offers different products and services to its customers. These include consumer electronics, home and office electronics, in addition to services such as broadband, voice, data and information technology services. Among the biggest players in the retail industry, include Amazon, Wal-Mart, Target, Sears, and Radio Shack among a large array of online retailers. While Amazon remains the largest online retail store, the market share of other brick and mortar stores, in the retail industry where BB operates is different. According to a 2015 retail industry analysis by Mazzone& Associates (2016), currently, Macy’s Inc. has the largest market share at 17.3 percent, followed by Sears Holding Corporation formed by the merger of Sears and Kmart at 15.3 percent. Wal-Mart, JC Penny, Nordstrom and Target follow with 10.8%, 10.8%, 7.7% and 4.8% market share respectively. Wal-Mart, however, remains the largest retailer by revenue followed by Target. On the other hand, Best Buy is the largest consumer electronics retail store, followed by Wal-Mart and Amazon coming third.
At present, Hubert Joly serves as the chairperson and the CEO of the company. Joly took the reins of the company in 2012 (Loeb, 2014), having previously been the president of Carlson Wagonlit Travel (CWT), a hospitality and travel company headquartered in Minneapolis. Under his leadership, CWT grew its sales from $8.9 to $25.5 billion, while at BB, Joly helped triple the company’s stock in 2013. He has focused on superior customer service and product selections, moves that have helped improve sales in the company.
With his appointment in 2012, Joly began implementing a new strategy that focused on customers more and international expansion, as a measure to improve sales and company performance in the stock market (Loeb, 2014). Before implementing the customer centric strategy, the company had a 1.2 percent drop in sales in 2013 in the fourth quarter; 2012 had seen a 1.4 percent drop in sales in the fourth quarter (Loeb, 2014). A customer centric strategy has the ability to improve sales, especially when an organization understands the needs, aspirations and wants of its customers. Moreover, with a customer-centric strategy, a business has the ability to secure competitive advantage, higher sales and most importantly customer loyalty. It is perhaps this customer-centric strategy that saw BB’s sales rising by 3.2 percent in domestic sales, while online sales rose by 21.6 percent in 2014 (Loeb, 2014).
The customer-centric strategy, apart from ramping up the company’s sales volumes and profits, has also leveraged the company’s technological innovation. With the new strategy, BB has been able to provide customer service in sales via its 24/7 online service (Raimo et al., 2009). For its international expansion, as part of its new strategy, the company has launched several stores across the nation and internationally. The aim of the expansion is to ensure increasing revenue growth. Best Buy Mobile, Apple store-within-a-store in addition to Dell computers store are among the stores launched by the company. This is in addition to their international expansion with the launch of Best Buy Canada, China and Europe, all aimed at not only reaching customers, but also establishing the company’s presence in these lucrative international markets (Bensen et al., 2014).
Within the strategic grid, BB’s customer centric and growth fall in the strategic quadrant of the strategic grid. As a measure of improving performance, the strategic quadrant has high operational and strategic impact on the company implementing such a strategy. Therefore, BB has not only expanded its customer centric approach to business and growth to international markets, but also segmented its customers as a means of serving them better as well as build customer loyalty (Bensen et al., 2014). Each segment (rich professionals, technology thirsty young men, family men, small-business customers and busy mothers) gets customized services and different approach, which serves the segment’s needs and ensure customer satisfaction. This way, BB has been able to serve and provide customers with lessons, especially with the help of Geek Squad, without necessarily pressurizing customers on sales: something that the company had previously been accused of doing (Bensen et al., 2014).
Regarding the sales accusation, two of the company’s customers filed a lawsuit against the company in 2000. In the suit, the customers had accused the company of engaging in deceitful business practices regarding the service plans the company was offering to its customers. In the suit, the plaintiffs argued that BB’s employees misrepresented warrantees on some electronics, and that the company instituted high-pressure sales methods, which involved extended warrantees. Moreover, the suit also claimed the defendants (BB) put in place barricades, which in essence, discouraged the customers with the extended warrantees on the goods purchased from making legitimate claims.
Similarly, the BB was in court again in 2009, with the plaintiff, TechForward (a startup company) accusing BB of copy and using its proprietary technology (Fortune, 2012). TechForward had developed a Buyback Plan, where customers could choose to purchase the plan at the moment they purchased a new gadget, with the option of selling the gadget back to BB. TechForward’s process of buyback evaluation was unique in that they took into consideration the price, exercise rates among other factors into consideration in determining the worth of the gadget (Fortune, 2012). Although BB had agreed into a partnership with TechForward, it did not follow through with its partnership, but asked TechForward to share their proprietary data. After the exchange of the proprietary information, BB ended the relationship with the startup, and started a similar in-house program, which had semblance to TechForward’s procedures and format.
The rule of law guards against the illegal use of proprietary data without license from the owner of the rights of the idea. The court, therefore, found BB liable of stealing corporate secrets. Further, the court found BB liable of misappropriation of trade secrets and breach of contract (Fortune, 2012). The court thus awarded $22 million to TechForward. Additionally, the court found substantial evidence that BB carried out the actions willfully and maliciously, and in the discovery, awarded an additional $5 million to TechForward in punitive damages (Fortune, 2012).
BB operates in one of the most competitive industries. Many of BB’s competitors have ventured and continue to venture in selling other products such as groceries to expand their revenue streams (Mazzone& Associates, 2016). However, revenue in consumer electronic is expected to decline 4.5 percent as more competitors, particularly e-retailers, continue to drive the price-based competition. While the e-retailers pose a risk, there is opportunity in expanding into the online segment for the specialty stores. Leveraging the online catalogue with brick and motor stock will go a long way in drving sales for the retailers and for BB specifically.
Operating in consumer electronics, which is one of the most innovative industries, there are many opportunities for new products to emerge. Each year, consumer electronics manufacturers launch new products surrounded with hype. This presents an opportunity for BB each year as the companies launch the new products. Moreover, the success of the company is highly dependent on offering a wide selection of products to consumers, a fact that demands a cordial and stable relationship with suppliers (Raimo et al., 2009). The bulk of the company’s sales come from some of the top suppliers of the company including Sony, Samsung, Apple and Dell among others. Furthermore, any economic pressures on consumers have a huge effect on the company’s sales. This means that external conditions such as partners and the economic environment have a huge effect on BB’s performance.
Bensen, S. et al. (2014).Best Buy Corporation: Strategic Management Analysis. University of St. Thomas
Fortune (2012).The defunct startup that beat Best Buy in court.Fortune.
Loeb, W. (2014). Why Best Buy will probably beta the competition, exceed expectations. Forbes.
Mazzone& Associates (2016).2015 Retail Industry Report. Atlanta: M&A
Raimo, R. (2009). An In-depth Analysis of Best Buy.4th Annual Siena College Student Conference in Business