An Investment Of Best Buy

The low cost product can also change customers buying behavior. Some customer who prefer to buy goods in the physical stores might decide to buy Amazon’s online product if they see it is in so low a price.

Furthermore, Best Buy’s rapid expansion(s) did brought with it, usual high debt levels and uncommon low profit margins that eventually forcing Best Buy (the firm) into slowing down the firm’s expansion and reconsidering few-to-some of its low-cost strategy or strategies.

Unlike Target, who’s profits allow them to self fund the company, by back debts, and pay higher dividends, the gross profit margin for Best is rather low; currently it is at 24.5%. Also, financial analysis and quick ratios show that Target is in a superior position, whereas Best Buy is very weak and demonstrates a lack of ability to pay short-term obligations (Standard).

The Headquarters of Best Buys is found in Richfield Minnesota. It is a large company with approximately 155,000 employees and 1,100 stores in the United States alone. It also has about 2,800 stores in other countries outside the Unite States. These countries include: Canada, Mexico, China and Turkey. To add on to this, it has a number of subsidiaries namely the Geek Squad, Pacific Sales, Future Shop and Magnolia Audio Videos. Its mission is making life fun and easy by making technology solve customer needs and helping the same customers to appreciate the benefits of technology. It also aims attaining sustainable growth and earnings through constantly changing its business model to suit the needs of the customers (Lal, 2006). It also strives to sell quality products along with maintaining a high level of employee training program in order for them to have extensive product knowledge.

This report analyzes the concerns that Best Buy will face, and addresses them from a behavioural and legal perspective. In order to maximize the benefits and limit the risk, our analysis indicates that Best Buy should wind down Future Shop operations and maintain it as an inactive company.

Costco is not a direct competitor as it competes in the warehouse club industry. However, Aldi and Costco are similar in how they sell products off shipping pallets eliminating fancy store designs. Retail giants Walmart and Target are briskly expanding their grocery options. However, due to their large size they are not able to benefit from the same efficiencies as Aldi. A pricing survey in July by Bloomberg Intelligence found Aldi items averaged about 19 percent less than the comparable Wal-Mart items, undermining Walmart’s ELP concept. Mass retailers do not offer the same product selection in the grocery section but they compete on convenience (“one stop shopping”). Online players Google and Amazon have also added grocery delivery to their offering and they compete on speed and convenience.

All primary competitors have the characteristics of drastically discounted merchandise and low-cost strategy. In my opinion convenience and store location often dictate revenues and values of this highly price sensitive market. The quality may differ slightly, and brand names are more prevalent in Dollar General or Family Dollar/Dollar Tree (Malcolm, 2014). Dollar General would be the primary competitor, and it would be significant to understand the areas differentiation and deeply analyze the strategy or competitive advantages of this company (Parnell, 2014). In addition competitors such as Sam’s and Costco compete in the discount retail industry offer bulk shopping at discounted prices.

In the international segment each of the nine European countries run their operations at a smaller level than the Best Buy branded stores but the rest of the branded stores in those territories run an operating model similar to that used in the U.S. stores. The only differences would be in Canada and China where Best Buy runs and supports two principal brand companies. In Canada the Future Shop stores “Have commissioned sales associates who take a proactive role in assisting customers and driving

The rivalry among existing competitors is high because there is a large number of domestic and international discount retails, internet based retails and magazine competing with Wal-Mart (Soni, 2015). Target, Kohl’s, Dollar group, Kroger, and Costco are some of the national chain competing with the company. For example, in 2015, Wal-Mart’s grocery sales slowdown compared to its rival Kroger, which sales rise to 5.3 %. Also, in 2015 Wal-Mart e-commerce sales rose 17%, while its rival Amazon’s sales rose 25%. Furthermore, Sam’s Club (Wal-Mart chain) and its rival Costco gets a lot of revenue by selling gas. In 2015 Sam’s Club reported a gas sale increase of 0.4% while its rival Costco reported a gas sale increase of 7% ( Wahba, 2015). Despite

Best Buy had a history of being able to adapt to the changing markets and their ability to do so contributed to their success (i.e. the vastly expanded product line, evolution to superstores, expansion, acquisition, converting from commission to salaried sales force.). The perception that customers were focusing less on the technical aspect of products and redirecting their attention to service and support, led to Anderson’s custom-centricity initiative. This transition and the rollout of 144 new “centricity” Best Buy stores was being blamed for the company missing third quarter earnings in 2005, resulting in a 12% decline in stock value and a loss of nearly $2B in market capitalization. Did Anderson perform the proper strategic market planning analysis before selecting and implementing the centricity initiative?

Another threat to Best Buy are large box stores like Walmart that create an all in one, grab and go experience for the customers. In today’s society consumers are doing what is easy. It is easiest and faster to go to a super Walmart

New Entrants – The threat of new entrants is moderate. Moderate because of the high cost of entry, but the relatively successful business model Best Buy has outlined.

Wal-Mart, Sam's Club, Cost-Co, Target, Amazon.com, and etc… are all targeting the same consumers and continually adding value and\or discounting prices.

It makes sense for Best Buy to worry more about Wal-Mart, which is getting more involved in electronics retailing, and less about Circuit City. The competitors are a diverse lot today, and for them to continue to grow they're going to have to get much better at everything they do and define themselves in clear ways. Best Buy's plan is to revamp its stores according to the types of customers they serve. A strategy previously mentioned, customer centricity, focuses on targeting five prototypical customers, all of whom have been given names: "Jill," a busy suburban mom; "Buzz," a focused, active younger male; "Ray," a family man who likes his technology practical; "BB4B" (short for Best Buy for Business), a small professional employer; and "Barry," an affluent professional male who's likely to drop tens of thousands of dollars on a home theater system. Their most current focus is on a "Jill" based store, the soccer mom who has money to spend but typically hasn't a clue of where or how to find products in the store. According to the data Best Buy has collected, Jill shops a few times a year, usually twice at an electronics store, but she usually spends a significant amount.

According to this case, and concerning about the strategy that Best Buy has created, retailers can similarly create a retailer-led product strategy to leverage their customer knowledge for product differentiation and to understand what the needs of the customers are; they must discover what satisfies the customer and what not. In addition, the retailer can seek for news partnerships, new stores, new countries and new categories and services in order to increase their net sales and their share market. It’s very important invest in marketing study aiming to discover what the other companies are doing. Besides, with the time, the smaller retailer can increase significantly even more than the