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Best Buy Co., Inc. is a global retailer in the technology and entertainment industry. The company offers products as well as services to its global clientele. The company currently operates in the United States, Europe, Canada, Mexico and China. Best Buy Inc. has its headquarters in Minnesota, and the group has a portfolio of retail stores and websites under 11 different brand names. Best Buy is the largest consumer electronics retailer in the United States with a market capitalization of approximately $16.53 billion. For the fiscal year 2009, the company reported revenues close to $45 billion.
The CEO of Best Buy Inc., Brad Anderson, approaches Oasis Consulting in the year 2008 to seek some strategic assistance which would positive impact the company’s operations in view of the financial crises. Mr. Anderson would like the consulting firm to particularly review the domestic business operations of the company and then offer strategic recommendations regarding the way forward.
The company initially recorded revenues close to $45 billion during the fiscal year ending February 28, 2009, which translates to an astounding 12.5% increase over the previous fiscal year 2008. “The operating profit during the FY09 was $1.76 billion, an 18.6% decrease over 2008. The net income during the same period was $1 billion, a 28.7% decrease from 2008”. As the leading consumer electronics firm in the United States, Best Buy Inc. accounts for a total market share of 19%.
Current Situation/Internal Analysis
The consumer electronics industry has very good market expansion potential internationally. There are numerous markets which are still untapped, particularly in the newly emerging areas/geographies. This being the business scenario, the revenue increase of Best Buy Inc. is quite encouraging and the recent growth was fuelled particularly by acquisition. Moreover, net income and the operating margins of the company have been on a sinking trend. Even though this could be an outcome of increased costs, this might possibly be a result of the pricing force too. The company is widely known for its customer centricity model which caters to the specific needs and behaviors of its clients. The local operations of Best Buy Inc. are essentially systematized into eight territories, with each region separated into various districts or regions. The retail field officer is responsible for overseeing the performance of the store along with the various district managers, who interact with the in-store staff regularly while discussing various operations strategies like loyalty programs, introducing new products, promoting sales effectively and innovatively, among others. The human resource objectives of Best Buy Inc. are to offer their consumers with the right and adequate knowledge of its products and services, to depict the organization’s vision and strategy on a day-to-day basis and also to regularly update employees about the several of its products and services.
The marketing objectives of the company are essentially multi-pronged.
- “to market various products based on the customer centric operating model,
External Analysis
A few competitors of Best Buy Inc. include Wal-Mart - the leading global retailer; GameStop Corp – the largest retailer of the video game industry, which has more than 6,000 stores in the United States, Australia, Europe and Canada; RadioShack Corp, a consumer durables retailer. These companies being the offline competitor, Amazon.com is the online company that offers a pretty tough competition to Best Buy Inc.
Current Business Model
The current business strategy has two fundamental goals:
- “Offering customers the widest range of products at the lowest prices, and
- Expanding into new international markets”
The recent acquisitions and the various new business ventures of Best Buy Inc. have been focusing majorly on the above two aspects. The management of the company is highly optimistic regarding the success of the above two strategies which would certainly allow the company to be in an advantageous position to grow both in the US as well as in all other global markets.
Customer-Centricity Operating Model
The success of Best Buy Inc. till date is certainly a testimony to its pledge to “treat customer as unique individuals [and] meeting their needs with end-to-end solutions.” Since the year 1989, the company and its management prides itself as one of the oldest retailers to have adopted the strategy of non-commissioned employees in order to offer higher control to its consumers at the time of their shopping or purchase. In the year 2004, the company started implementing a highly innovative strategy which it termed as customer-centricity at all its retail outlets. By adopting these kinds of strategies, the company has distinguished itself as a retailer offering mid- to high-end electronics and entertainment systems and exceptional customer service. The customer-centricity model adopted by Best Buy Inc. views it as a portfolio belonging to customers rather than products. It forces the company to recognize its customer base more profoundly and target its needs in a better way. Technological developments and the economic depression have also been impacting the financial strength of the company along with the quality of its customer centricity. The most crucial challenge for the company is to determine the exact path to improve its differentiation approach.
Strategically, the company moved from a discount retailer, which earlier followed a low price strategy, into a service-oriented company which relies on a differentiation strategy. It moved from a commissioned based payment in 2005, to non-commission based compensation, the eventual outcome was consumers having greater control over the entire process of purchasing as well as in cost savings for the company. To be precise, customer service was taken a step ahead in the year 2005. This was done by shifting from the regular peddling gadgets, to a customer-centric operating mode.
Discussion
“Becoming customer-centric means looking at an enterprise from the outside-in rather than the inside-out — that is, through the lens of the customer rather than the producer”. It is essentially about getting to know the various problems faced by customers in their lives and eventually offering them mutually beneficial solutions.
It is this approach that Best Buy Inc. adopted and that is primarily why the company has endured in the tumultuous consumer-electronics industry, while a few other players like Circuit City could not live up to the market expectations and hence have lost their business battle. Best Buy Inc. took invested massive amount of time and money in order to understand who their customers are and what their needs are. It is after gaining this initial market and customer knowledge that the company started selling solutions to the customer problems rather than selling just products. As part of its market research, for instance, the company identified that 55 % of its consumers were women, and they predominantly unloved their shopping experience at retail stores. Men normally look for one particular product that comes with a discount in price. On the contrary, women and their expectations are much higher. For example, if a lady opts to buy a digital camera, she would not just limit her shopping to investing in a digital camera but would also look for a printer, an appropriate connecting cable, and various other additional accessories. Moreover, they would also look for help with installing the product and this is not the case for men who handle such things independently. For women, it is these minute and additional things that matter much rather than the price.
In view of that, Best Buy Inc. implemented very simple solutions which are primarily common-sense rather than anything else, once they realized the plethora of issues that were involved. Accordingly, all related products were clubbed together and arranged at one part of the store. In quite a few stores of Best Buy, special play areas were arranged for children to keep them occupied while their moms continued to shop. The store also offered help with installation and for this purpose; it had acquired Geek Squad which would assist in product installations and customer place at very swift pace.
The concentric layout modeled at all the retail outlets of Best Buy Inc. that was initiated over the last few years was initiated as a remedy to meet the demographic needs of the consumers. “The model lays the store out in a manner to individually accommodate customers from four demographic groups: upper-income professionals, young technology enthusiasts, middle income family, and the soccer mom”. Each of these sections is inhabited with teams or sales personnel who are exclusively trained in the products in their particular section. This way, Best Buy Inc. makes sure that each and every customer who visits the outlet receives friendly help from a support staff who is an expert in every single product. Additionally, Best Buy Inc. has carried out little amount of demographic work in order to make their store layouts more appealing to the fairer gender. All these plethora of factors help the company to market their products in their store keeping in mind individual customer needs.
Conclusion
The major advantages of Best Buy Inc. are its ability to offer manifold products and services to its consumers, both in store as well as online. The company is able to make good use of all its technical resources for customizing its products as well as services it offers to its consumers so that they match the constantly changing global technology. In addition, the leadership style of the company is certainly an advantage to both its clientele as well as its staffs. This also helps in improving the company’s future through succession planning and also market expansions.
The major disadvantages of the company are that the technical needs and products are not geared towards the various consumer categories at all times. For instance, the older generations are not very used to or aware of the latest technology updates, and if the company becomes too technical, it may lose that segment of customers due to a thriving need to meet a corporate strategy objective. In case the company focuses on all customer requirements and advantages, then the company can try to retain this group of clientele by continuing to offer in-store support for such customers.
Recommendations
As a customer centric retailer, the strategic initiatives are certainly of high significance for the future of Best Buy Inc. Intermittent research of who the customers are; precisely will assist the company and its management to concentrate on the required strategies to adapt to the constantly changing retail clientele and their needs. Besides, to make sure that the needs of its consumers are met it is important to have thoroughly trained and well-informed staff. Thus, continuing to training their employees and keeping them updated with the company’s products and service in order to improve customer service is of very high importance for Best Buy Inc. Employee satisfaction today comes with the advancement of employee social networking and is also advantageous in retaining the best employees. Best Buy Inc. should continue its grow both in terms of demographics as well as geography, while being prepared to adapt and alter the strategy slightly in order to focus. By marketing and offering various customer service preferences, the company can be successful in satisfying the needs of its customers. In addition to this, brand loyalty is very crucial for maintaining the competitive advantage over brands like Apple Inc. whose brand loyalty levels are very high. Best Buy Inc. should continue to take advantage of its ability to offer a variety of services, opt for joint ventures with diverse organizations, while maintaining its operating costs at an extremely low level. The philosophy of Best Buy Inc. is constant renewal process with leverage and build. The company is reintroducing and refining competencies incessantly, while being committed to profitable growth and setting aspirational goals for itself; renewing its vision, and continually monitory and reacting to the ever changing market demands. It is ultimate with all of these recommendations Best Buy Inc. will be able to sustain its competitive advantage and maintain constructive relationships with its global clientele, while continuing to grow in the marketplace.
Bibliography
Gulati, R. (2010, April 12). Inside Best Buy’s Customer-Centric Strategy. Retrieved April 20, 2014, from Harvard Business Review: http://blogs.hbr.org/2010/04/inside-best-buys-customer-cent/
Heller, L. (2004, April 16). New Best Buy Stores hone in on Demographics. Retrieved April 20, 2014, from BNET - The go-to place for Management: http://findarticles.com/p/articles/mi_m0FNP/is_16_43/ai_n6161022
Hoffman, D. A. (n.d.). Best Buy’s current business strategy has two primary goals: offering customers the widest . Retrieved April 20, 2014, from Cengage Learning.com: http://www.cengage.com/management/webtutor/ireland3e/cases/bestbuy.pdf
Reuteurs. (2009). Best Buy Inc. Retrieved April 19, 2013, from Reuters: http://in.reuters.com/finance/stocks/overview?symbol=BBY.N
