tgs kelompok best buy

5/26/2018 Tgs Kelompok Best Buy

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Strategic Management Analysis BEST BUY CO. INC. 1

STRATEGIC MANAGEMENT ANALYSIS

BEST BUY CO. INC.

Sustainable Customer Centricity Model ?

Source :www.bestbuy.com

I. Current Situation of Best Buy Co. Inc.1. Historical Brief

1) Best Buy Co. Inc. was a specialty retailer of consumer electronics.2) Incorporated in 1966, founder by Richard M. Schulze.3) Originally known as Sound of Music retailer of audio components then

expanded retailing video products

4) Shortly after changed name as Best Buy, in 1983, the company began toexpansion its superstoreconcept.

5) In 2000, launched its online retail store : BestBuy.com2. Current Performance

1) Headquarter in Richfield, Minnesota2) Operated over 1100 store in USA, 19% of the market.3) Approximately 155,000 employees4) Also operated over 2800 stores in Canada, Mexico, China, Turkey5) Subsidiaries : Geek Squad, Magnolia Audio Video, & Pacific Sales, Future

ShopCanada

6) Best Buy was once lauded byForbes(Company of the Year in 2004)andFortune(listed as a Most Admired Company in 2006).


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3. Expansion through Acquisitions 2000 : Acquired Magnolia Hi-Fi Inc.,become Magnolia Audio Video in 2004.

Achievement Gain access to a set of upscale customer.

2001 : Acquisition of Future Shop LtdCanada leading retailer.Achievement Increase revenues, gain market share, leverage operational

expertise.

2001 : Purchased Musicland, mall-centered music retailer in USA, butdivested in 2003.

2002 : Acquired Geek Squad, a computer service provider.Achievement Help Develop a technological support system for customers.

2006 : Acquired Pacific Sales Kitchen & Bath Centers Inc.Purpose to develop new customer base : builders & remodelers.

2006 : Acquired 75% of Jiangsu Five Star Appliance Co., Ltd.Purpose to enable company to access the Chinese retail market.

2007 : Acquired Speakeasy Inc., a provider of broadband, voice, data, & ITservices.

Purpose To develop further technological solutions for customers.

2008 : Strategic Alliance with Carphone Warehouse Group, a UK-basedprovider of mobile phones.

2008 : Acquired Napster, a digital download providerPurpose to counter the falling sales of compact disc.

2009 : Acquired the remaining 25% of Jiangsu Five Star, Best Buy Mobilemoved to Canada.

2. Strategic Posture1) CORPORATE TOP OBJECTIVES Sustained growth & eanings2) VISION

To be the preferred authority & destination for technology products &

services

3) MISSION"Our formula is simple: were a growth company focused on better solving the

unmet needs of our customersand we rely on our employees to solve those

puzzles. Thanks for stopping."


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4) MOTTOTo make life fun and easy

5) StrategiesFrom a strategic standpoint, Best Buy moved from being a discount retailer as

a low price strategy to a service-oriented firm that relied on a differentiation

strategy. By 2005, Best Buy initiated a strategic transition to a customer-

centric operating model

6) PoliciesPrice Match Policy

II. Strategic ManagersBrian Dunn as new CEO has work at Best Buy 24 years, so has enough experiences.

III. External Environment1. SocietalEnvironment

1) Economic DriveIncreasing size of markets and demands. (Opportunity)

Had significant potential for expansion into the global marketplace Many untapped markets, especially newly developing countries, which

have fast economic growth but having lowest ownership rate of gadgets.

European Market Research largest growth China (22%), Middle East(20%), Russia (20%), & South America (17%).

2) Technological DriveAlways had new product segments, such as gaming, Blu-Ray Player, LED

TV, 3D TV, Smart TV. (Opportunity)

3) PoliticalLegal SituationGovernment restricted credit purchase (Threat)


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4) SocioCultural ConditionCustomer still tend to buy electronics in brick-and-mortar-stores like Best

Buy than through internet, because they need to see the actual product before

buying. (Opportunity)

2. Task Environment1) Degree of RivalryHIGH (Threats)

Customer now could get gadgets easier, by internet, phone call services,etc

Cheap retailer and wholesaler like Walmart and other Hypermarket startsell electronic & appliances product

BEST BUY COMPETITORS :

BRICK-AND-MORTAR STORES COMPETITORS

Wal-Mart Stores Inc., revenue US$ 405 billion, developing 3500electronics departments, offer wide & higher range of electronic

products, also always provide Lowest Possible Price

GameStop Corp., a leading video game retailer, 6.000 locationsworldwide. (Best Buy only have 1.023 stores) , revenue US$ 9 billion.

RadioShack Corp., 4.453 locations, revenue US$ 4 billion.Consumers had a preference for audio & video components @ this

store.

SECOND TIER COMPETITORS

Costco, BJ, HH Gregg, & Ultimate Electronics.

ONLINE COMPETITORS

Amazon.com Inc., USA largest online retailer, revenue US$ 19 billion(2008)

Netflix Inc., online video rental service, offering streaming downloadsthrough its website, revenue US$ 1.4 billion


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2) Bargaining Power of Buyers PowerMEDIUM (Opportunity&Threats) The customer ability of Price-Matching extend the bargaining power of

buyers

Best Buy offer service satisfaction by having well-trained sales associates

3) Bargaining Power of SuppliersMEDIUM (Opportunity) Because of large quantity order, so cost of goods sold are less than other

smaller competitor

4) Threats of SubstitutesHIGH (Threats) Product life cycle is short because of technology advance Many companies are developing rapidly in electronic & gadgets products,

even in Asian & other developing countries5) Barriers for New EntrantsMEDIUM (Opportunities & Threats)

As use of internet grew, barriers to entry is easier. Such as Amazon.com& DELL Online Selling.

Use of internet grew, hard to maintain Customer Loyalty, customer Customer still tend to buy electronics in brick-and-mortar-stores like Best

Buy than through internet, because they need to see the actual product

before buying.

Economies of scale, Best Buy had a large economies of scale so couldobtain lower cost due to high quantity of orders.

Large firms like Best Buy, had the ability to increase advertising budgetsto deter new entrants

IV. Internal Environment1. Corporate Culture & Core Competencies

Customer Centr ici ty ModelWhen most players in the consumer electronics industry focused on

delivering lowest price products, Best Buy took a different approach by

providing customer with highly trained sales associates in order to educate

customer about the product features.

Successful Acquisi tionsThe ability to determine where to expand & successfully integrating all

the acquired companies under Best Buy family.


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Retaining TalentBest Buy had a reputation for keeping every senior, well trained, & talent

sales professional, so they could give Superior Service

2. Corporate Resources1) Marketing

Marketing Goals

(1) To market various products based on the customer centricity operating

model,

(2) To address the needs of customer lifestyle groups,

(3) To be at the forefront of technological advances, and

(4) To meet customer needs with end-to-end solutions.

2) FinanceWhile Best Buys increase in revenue was encouraging (see Exhibit 1),

recent growth had been fueled largely by acquisition, especially in 2009

revenue growth. At the same time, net income and operating margins had

been declining (see Exhibits 2 & 3).

Best Buys long-term debt increased substantially from fiscal 2008 to 2009

(see Exhibit 4), which was primarily due to the acquisition of Napster and

Best Buy Europe. The trend in available cash has been a mirror image of

long-term debt. Available cash increased from fiscal 2005 to 2008 and then

was substantially lower in 2009 for the same reason.

3) OperationsOperating Goals

(1) Increasing revenues by growing its customer base,

(2) Gaining more market share internationally,

(3) Successfully implementing marketing and sales strategies in Europe,

(4) Having multiple brands for different customer lifestyles through M&A

(Merger and Acquisition).

4) Human ResourcesIn 1989 Best Buy changed the compensation structure for sales associates

From commission-based to noncommissioned-based, which resulted in

consumers having more control over the purchasing process and in cost

savings for the company. The number of sales associates was reduced.


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(1)To provide consumers with the right knowledge of products andservices,

(2)To portray the companys vision and strategy on an everyday basis, and(3)To educate employees on the ins and outs of new products and services.(4)Best Buy employees were required to be ethical and knowledgeable.

V. Analysis of Strategic Factors1. Situational Analysis (SWOT)

1) Opportunities Company size and extensive (domestic and global) distribution network Core competency in technology services through Geek Squad Well-known brand Strong past performance Already develop internet presence and online infrastructure

2) Threats Governance Issueslimiting credit Heavy training cost because product lifecycle is shorter. Recent senior leadership turnover in the midst of a crisis (governance,

market shift)

Weakening financial situation Too many brands with poor inventory management

3) Strengths Emerging global markets Quick obsolescence of mobile technology (Requires frequent upgrades,

repurchases)

Online purchasing is becoming more prevalent Increasing need for IT outsourcing Economic recovery: Small-midsize businesses and households may

resume purchasing

4) Weaknesses Lawsuits against value destruction Limited number of suppliers Growing power of wholesalers competitors Exchange rate fluctuation


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Unemployment and recession impact on discretionary income2. Challenges Ahead

ECONOMIC DOWNTURN

Electronic as discretionary items, rather than necessities Duringeconomic recessions, consumers had less disposable income to spend

Private label credit card purchase could increase 16-18% revenue, but dueto credit crisis, USA Government issued new regulations that restrict

companies to effering deferred interest financing to customers.

PRICING & DEBT MANAGEMENT

High pricing pressure due to depressed economic conditions,technological advance, & increase competition.

Best Buy had higher cost in training employees, decreased margins couldweaken Best Buy financial strength

PRODUCT & SERVICE

Shorter product life cycles increased increased training cost. Growing popularity of online market-place

LEADERSHIP

Best Buy has just replaced New CEO - Brian Dunn, after Richard Schulze& Brad Anderson

3. Review Current Brand PosititioningWhat do Customer need? Cheap Price or Buying Experience (Service)

Best Buy focused on Differentiation, giving customer Buying Experiences.

4. Review of Current Mission and Objectives


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Best Buy does not have a published mission or vision statement on its website.VI. Recommended Strategy

1. Internal Fixing1. Brand Re-Positioning Statement :

Its about the customer Buying Experience

2. Best Buy does not have a published mission or vision statement on its website.The organization should create a new, compelling mission and vision that gets

employees excited, re-energized and engaged.

3. Best Buy needs to Refocus its strategy for highly potential markets segment,teenager especially College Student (18-24 years old) are Most Valuable

Segment,because :

They are open to trying new brands, often becoming life-long Brand-Loyal Customer,

They spent > $ 200 billion annually, They consume less traditional media, They kept following new trends, new gadgets, new games, & new

music

4. Explore new ideas and unique integration with suppliers5. Evaluate use of in-store square footage and consider leasing space

2. External Fixing1. The company should consider a merger with rival Amazon2. Obtaining larger market-scale by another acquisition


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3. Cultivate plans to entry the emerging markets (Newly developing countries)that have a growing discretionary income and a desire for electronic status

symbols.

VII. Implementation Review pricing strategy since a big portion of profits is derived from margins

on accessories

Review debt financing, cost of capital and capital structure Close the least profitable stores and invest the resources in further vertical

integration

Assess internal spending, financing and hedging to protect against currencyrisk

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