Overview:
Best Buy, currently fighting to be the number one consumer electronics retailer title in the United States, began quite humbly indeed. The company started as a single location car and home stereo store in 1966. In North America alone, Best Buy has some 1400 locations, while the figure goes up to 2600 in Europe and China. Industry analysts believe that Best Buy has certainly improved its standing in recent times, and this is backed by the demise of two of the company's major competitors, Circuit City, and CompUSA. Best Buy was pushed on by a strong market share, healthy stock prices, and a global expansion strategy.
The first competitor to go was CompUSA. Then, hampered by the global economic recession, Circuit City seemed vulnerable, and Best Buy had no trouble in delivering the knockout blow to the company as well. However, while many believed that it was down to Best Buy's strength that it got rid of its competitors so easily, the numbers portray a different picture. Best Buy's stock returns have been below that of the S&P 500 and S&P retailing group. Revenue growth too, slipped to a miserly 1.6% by 2011.
The decline in profitability as shown by the numbers is down to a few major reasons. First of all, the economic recession has hampered the purchasing power of consumers. However, the more obvious reason for Best Buy's downfall is the presence of new, diversified competitors such as Walmart and Costco, and most importantly, the online retail giant, Amazon.com. In fact, while Best Buy's stock prices dipped, Amazon's prices increased by almost the same percent, showing that consumers while increasingly shifting towards the online retailer. Such has been the impact of Amazon that purchases are being made in Best Buy using Amazon through barcode scanners. Needless to say, Best Buy finds itself in an increasingly tough situation.
Recommendations:
#1:
It is clear that Best Buy has had to face a completely different challenge in recent times than it used to when CompUSA and Circuit City used to be the major competitors. At that time, Best Buy had to compete with the two companies with the playing field being level, as all the companies maintained a physical presence and sold the same kind of products. Now, however, online retail stores such as Amazon have changed the consumer electronic landscape, and this has been fueled by increased willingness of consumers to make online purchases. It is obvious that Best Buy cannot create an online presence to try and beat Amazon, as the latter is simply too far ahead at this point. What Best Buy can do, however, is put increased focus on B2B (business to business selling). Companies such as Walmart and Amazon do not focus on personal selling, so this is where Best Buy can really bring home the advantage. The case states that Best Buy already has started to work on business to business selling, training staff specifically for this purpose. Therefore, Best Buy already has the upper hand in this situation, and all the company needs to do is increase focus on personal selling. B2B selling has a number of advantages that can really strengthen Best Buy's position. Compared to individual consumers, businesses generally make purchases in bulk, so this can help Best Buy covers its costs while at the same time increase its revenue growth. In addition, selling directly to businesses can help Best Buy maintain excellent relationships with other businesses, and the company can influence future purchasing decisions in this way as well. Selling to businesses would also present buy with an obvious marketing advantage. More importantly, Best Buy's major competitors such as Walmart do not focus on personal selling, so this is an untapped market waiting for Best Buy to pounce on. Although the company would need to spend money on training of staff and also increase its investment, the foundation is there, as Best Buy already sells to consumers, so all the company needs to do is to hire specialized staff and market to other businesses.
#2:
Although Best Buy has a presence in North America, China, and Europe, the company lacks a presence in other major markets such as other areas in Asia, Australia, and the Middle East. These markets are rapidly growing, specifically in Asia and the Middle East. Moreover, while online purchases are a big thing in North America and Europe, most consumers still prefer to make in store purchases in Asia and the Middle East. For example, in countries such as India, most consumers like to see a product in person and then make a purchase. This presents Best Buy with a great opportunity to latch on. In addition, there is a clear lack of supply of quality, genuine electronic products in most Asian countries, with fakes being a common occurrence. By selling original consumer electronics, Best Buy can really bring in customers and create a name for itself in these markets.
Justifications:
#1:
It is clear that Best Buy cannot compete continue to operate like it is in the future. Also, the company cannot create an online presence and compete with Amazon, or diversify like Walmart. Therefore, Best Buy should stick to its advantages, and business to business selling is something the company is already working on. The company has the staff, and the business model to sell to other businesses, and none of Best Buy's competitors appeal to other businesses, so this is a major opportunity that Best Buy must latch on.
#2:
Asian and Middle Eastern markets are growing rapidly, and again, neither Walmart nor Amazon has a presence in these areas. This also presents Best Buy with a clear opportunity to latch on. Moreover, consumers in these regions like to make in store purchases, and this suits Best Buy's business model perfectly as well. Expanding in these regions also suits Best Buy's expansionary policy.
Implementation:
#1:
Implementing the first recommendation is simple. Best Buy already has staff that has been trained for business to business selling. Therefore, all the company needs to do is to increase the scope and size of this form of selling by hiring more staff and increasing its marketing efforts. The foundation is already there, as Best Buy has a lot of experience when it comes to selling to consumers.
#2:
Implementing the second recommendation is much tougher, but it is in line with the company's expansionary strategy. To ensure that Best Buy makes a good landing in Asian and Middle Eastern markets, the company would have to train staff accordingly. Best Buy can hire locals and make them managers. This way, the company would be aware of local consumer behavior, and would be able to make a much greater impact.
