Best Buy's Competition

885 WordsJul 17, 20184 Pages
In Best Buy, the Benemundus Group has a great opportunity to take advantage of an undervalued company. Best Buy has been a historically strong firm, capable of overtaking large competitors, withstanding a large recession, and commanding high market share. In the last five years, the company’s position has begun to falter with financial and strategic underperformance. Though the quantitative effects are quite evident to a casual observer, the qualitative contributions that have caused this decline are not as readily available. The plethora of problems can be categorized as predominantly macroeconomic factors and firm-specific issues. Certain conditions affect Best Buy as well as competitors and therefore, cannot be considered competitive…show more content…
The physical retailers are becoming victims of showrooming, defined as customers browsing in stores but purchasing from other online sources. Best Buy is at a competitive disadvantage in 5 this regard with these pure play online retailers, like Amazon, and even discount retailers, such as Wal-Mart and Target, in terms of price offering. The growth of online retail has also sparked the emergence of direct-to-consumer sales by manufacturers (Exhibit J). In the past, certain suppliers needed retail outlets to be able to reach the same customer base; however, e-commerce has given the manufacturers such access. This introduces new competition, which affects the overall industry. Lastly, all firms in the industry are battling to find the best way to manage the different channels of in-store and online retail. Integration of these channels to a more holistic approach is crucial for customer satisfaction and to remain competitive in the industry. This is referred to as multi-channel integration (Fitzgerald 2013). Though attempts have been made, there has not been true success in this regard for the entire industry. Amidst problems that affect the industry as a whole, Best Buy is directly contributing to its current underperformance. Best Buy is experiencing problems financially due to fixed costs associated with operating physical store locations. One such example is high SG&A costs (Exhibit C) that pure

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