Best Buy Analysis
According to the Best Buy’s corporate website, the company’s “unofficial” mission statement is simple, “We’re a growth company focused on better solving the unmet needs of our customers. ”1 Upon reviewing this statement, our team was motivated to construct a unique plan that expands Best Buy brand and influences new target markets, while also continuing to provide growth and development in Best Buy’s products and services. Our initiative is to develop smaller stores that feature a condensed selection of consumer electronics, these stores will be strategically placed in areas where customers have unmet needs.
The products, services, and staff offered will, high quality and knowledgeable service. These condensed stores will focus on the newest and most popular consumer electronics for our youthful audience. Additionally, through these operations, customers will continue to receive helpful information and technological services. These stores will be primarily located in towns with an influx of consumer’s aged 18-30. Our strategy involves targeting college students and their parents. Our customers will still be provided the “Best Buy Renew Experience” with a reputable and knowledgeable staff that can any questions about products and services.
Best Buy Analysis Essay Example
To reinforce out strategy we have provided pricing strategies, estimating the expected rate of return, and other ratios. Our strategy involves expanding Best Buy locations and offerings; reaching a new customer segment, create a new, and powerful revenue stream. As with any new venture, however, there are many risks that our team had to acknowledge. Situational Analysis About Best Buy Best Buy Co. , Inc. (NASDAQ: BBY) together with its subsidiaries is a multinational retailer of consumer electronics, entertainment products, small and major appliances, and cellular phones. Best Buy currently operates on a global scale; its international operations include the U. S. , Canada, China, Europe, and Mexico. This corporation has a multitude of products and services under eleven brand names: Best Buy, Five Star Appliances, Future Shop, Magnolia Audio Video, The Carphone Warehouse, Best Buy Mobile, Audiovisions, and Pacific Sales. Best Buy also offers technology services; this includes support, repair, troubleshooting and installation through the Geek Squad brand.
Best Buy is currently headquartered in Richfield, Minnesota and has approximately 165,000 employees worldwide and has 4,370 total stores operating worldwide. 2 Best Buy operates with a corporate vision stating, “People, Technology, and the Pursuit of Happiness. ” This vision represents the core values of Best Buy. This company invests in its people, from “unleashing the power” of their employees, to maintaining a clear focus on relationships with customers, vendors, and shareholders alike. Best Buy also remains focused on capturing the market by providing the newest consumer technology.
Best Buy understands the products they sell and the services they provide connect the world. Best Buy additionally, strives toward the pursuit of happiness; this corporation has the unique ability to make its people happy. 2 Best Buy presents a great place to work, and happy workers make customers happy. Correspondingly, Best Buy’s is also influenced by its corporate values that guide the company actions and affect its company image. These values include: 1. ) Have fun while being the best, 2. ) Learn from challenge and change, 3. ) Show respect, humility, and integrity, and 4. ) Unleash the power of their people.
3 Best Buy has business objectives to grow in market share, connect digital solutions, international growth, and to operate as an efficient and effective enterprise. Brief History Best Buy began its operations in 1966, Richard Schulze and Gary Smoliak founded Sound of Music Inc. Originally, this company started as a car audio specialty store, however, in 1971; Schulze bought out Smoliak and began expanding the stores retail to electronics. By the early 1980s, Schulze broadened the product line to include consumer products such as appliances and VCRs to access a wider customer base.
4 After almost 20 years of steady operations, Sound of Music officially adopted the name Best Buy and launched its first superstore in 1983. The super store concept allowed Best Buy to expand rapidly between the years of 1984 and 1987. Additionally, Best Buy became publicly traded in 1985. In that short amount of time Best Buy’s operations went from eight stores to twenty-four and resulted in its sales jumping from $29 million to $240 million. 4 The super-store concept allowed Best Buy to differentiate itself from apart from its competitors.
Additionally, during this transition Best Buy took its sales staff off commission, reducing the competitive nature of the sales staff. This combination of super stores and non-aggressive sales staff was crucial to Best Buy’s becoming the second largest consumer electronics retailer in the U. S. by 1993. 4 Best Buy continued to expand aggressively in the following years and found itself in a significant amount of debt in 1995. By 1997, the company’s earnings dropped significantly; ultimately Best Buy realized it had expanded too quickly.
After such losses the company initiated a massive makeover, scaled back operations and limited the expansion of new stores. 4 After many successful and steady years of operations Best Buy continued to dominate the consumer electronics market. In 2000, Best Buy launched its website, to compete with online competitors and has been somewhat successful in ecommerce ever since. By 2004 Forbes Magazine named Best Buy Company of the year. 2008 was a critical year for the economy, however Best Buy remained in control of the market and was the leader of consumer electronic sales by March 8, 2009.
Best Buy was the biggest player in the consumer electronics industry, however in 2010 the consistent decline in household wealth, rising unemployment rates and unclear economic conditions resulted in low household disposable income. 6 The recession that followed the 2008 market crash caused a slow recovering economy and left individuals with less money to spend on consumer electronics. In December 2010, Best Buy reported a decline in profit, and a decline in its market share. Best Buy insisted these problems resulted because of promotional timing, consumer caution, category weakness, and competition from discounters.
In July of 2011 Best Buy was trading at an all time low, and shares continued to fall. The competitive nature of online sales was causing immense pressure on Best Buy’s market share. 5 Best Buy Today 2011 to 2012 was an unfortunate year for Best Buy. Early into 2012 Best Buy’s profit margin was at an all time low -10. 40%. In August of 2012 Best Buy reported a 91% plunge in profit. Best Buy’s earnings fell from $128 million in 2011 to $12 million in late 2012. 7 Best Buy has also had significant changes within their corporate structure from 2011 to 2012. In 2011 Best Buy lost its Chief Executive Office Brian Dunn, a company success story.
Dunn rose through the ranks from a store salesman to a top executive in his 28 years with the corporation, however after allegations that it was his leadership that caused Best Buy to loose online market-share from competitors, he left the company. 8 In his absence, Director Mike Mikan was named interim CEO for the remainder of the 2011 year. Additionally, Mr. Schulze, Best Buy’s biggest shareholder and founder, resigned as chairman in 2012. 9 Since then, Best Buy has slowly flourished once again under superior management. The company has implemented new innovative concepts in its stores, expanded domestically and internationally.
In early 2013 Best Buy still had a negative profit margin; -8. 86%, however, as of July Best Buy noticed improvements in overall market share. 5 Thus far into 2013, this global corporation has had revenues of $ 45 million, prior to the upcoming and highly profitable holiday shopping season. Financially, Best Buy has been successful in 2013. According to the Wall Street Journal analysis Steven Russolillo, “The stock is up 185% this year as the big-box retailer’s turnaround plans have taken shape much faster than Wall Street anticipated. Best Buy is the S&P 500? s second-best performer this year. ”8 Best Buy Co., Inc. (BBY) – NYSE January 2013 – November 2013 – This chart, provided by Yahoo Finance shows Best Buy’s substantial growth since 201210 Best Buy’s New Leadership and Goals In August 2012, Best Buy named Hubert Joly as its new chief executive. Mr. Joly, assumed the CEO and president role in early September. He resigned as CEO of hospitality and restaurant giant Carlson for the Best Buy position. 9 Mr. Joly, initiated the Renew Blue strategy for Best Buy. This initiative addresses the significant changes needed in Best Buy’s operational goals. 9 Hubert Joly, Best Buy president and CEO, commented,
“In November at our investor meeting, we talked about the two problems we had to solve: declining store sales and declining operating margins. Since that time, the resolution of these two problems has become our Renew Blue rallying cry and the organization’s goals and objectives have been prioritized accordingly. While we are clear there is much more work ahead, we have made measurable progress since we unveiled Renew Blue last year, including near flat comparable store sales, substantive cost take outs, and better-than-expected earnings in the past three consecutive quarters” 9.
Hubert Joly’s Renew Blue Strategy for Best Buy3 Additionally Joly discussed his Renew Blue Strategy financially, “During the second quarter (2012), we continued to make substantial progress on our Renew Blue priorities. This progress included (1) driving a more than 10% increase in Domestic comparable online sales; (2) improving our Net Promoter Score; (3) enriching our retail customer experience through the rollout of our Samsung Experience Shops and Windows Stores; (4) piloting our “buy online – ship from store” initiative in 50 stores; and (5) eliminating an additional $65 million in annualized costs.
” Best Buy’s Organizational Structure Best Buy’s organizational structure is designed to maximize efficiencies across a multitude of business units and service areas, support new business initiatives, advance future digital strategies, and enhance business unit performance. Overall, Best Buy has a newly established structure, which most likely attributes to its recent changes in strategy and leadership. Best Buy’s corporate governance is comprised of the Board of Directors and Corporate Officers. 11 Best Buy’s Board of Directors Hatim A. Tyabji Chairman of the Board, Best Buy Co. , Inc.
Director Since April 1998 Hatim A. Tyabji has served as a Director since April 1998; as Chairman? of the Audit Committee since June 2002 and as Chairman of? the Board since June 2012. Mr. Tyabji has served on a number of other public and private company boards? in enterprise software, payment processing and wireless technologies. He holds a B. S. and M. S. in Electrical Engineering and a M. B. A. Mr. Tyabji is? a graduate of the Stanford Executive Program and was awarded an? honorary doctorate by the State University of New York. 11 Bradbury H. Anderson Former CEO, Best Buy Co. , Inc. Director Since March 2013
Bradbury H. Anderson rejoined Best Buy’s Board as a director in 2013 after retiring in June 2010. Prior to his retirement in 2010, he served as a director since August 1986 and was also Best Buy’s Vice Chairman. Furthermore, Anderson served as Best Buy’s Chief Executive Officer from June 2002 until June 2009, having previously served as President and Chief Operating Officer since April 1991. Anderson’s longevity with the company gives him substantial knowledge of Best Buy’s unique company culture and offers a valuable perspective as the former CEO of a Fortune 100 company with global operations.
11 Lisa M. Caputo EVP of Marketing & Communications, The Travelers Companies, Inc. Former CEO of Citigroup Women & Co. Director Since January 2009 Lisa M. Caputo has extensive experience in politics, media, non-profit organizations and global for-profit companies in the entertainment, media and financial services industries. Caputo brings exceptional leadership, marketing, branding, communications, government affairs, community relations and corporate social responsibility understanding to the board.
Caputo earned degrees from Brown University, where she also serves on the Advisory Council on Media Relations, and Northwestern University, where she serves on the Medill School Board of Advisers. 11 Russell P. Fradin President & CEO, SunGard Director Since April 2013 Russ Fradin brings a wealth of experience to Best Buy. His background in operations, streamlining cost structures, executive compensation and strategic consulting are valuable to Best Buy as it continues the Renew Blue transformation. Mr.
Fradin is the President and Chief Executive Officer of SunGard, a leading software and technology services company, serving approximately 25,000 customers in more than 70 countries. Mr. Fradin holds a degree from the Wharton School of the University of Pennsylvania and an MBA from Harvard Business School. 11 Kathy J. Higgins Victor Founder & President, Centera Corporation Director Since November 1999 Kathy J. Higgins Victor brings forth an extensive knowledge in executive development, human resources, and succession planning to the company.
As Chairwoman of the nominating committee, Victor holds a critical role in helping to shape corporate governance for the company while ensuring the board has optimal composition. Most recently, Victor led the efforts to identify and select Best Buy’s new Chief Executive Officer, Hubert Joly. Victor received a degree from the University of Avila in Kansas City, Missouri. 11 Hubert Joly Chief Executive Officer, Best Buy Co. , Inc. Director Since September 2012 Since 2012 Hubert Joly has been the Chief Executive Officer and a member of its Board of Directors. Hubert was implemented for his track record of successful turnarounds.
He is described as a strategic thinker with deep financial expertise. Hubert also has global experience leading large, international employee groups. Over the past 15 years, Joly has developed growth in the media, technology and services sectors. 11 David W. Kenny Chairman & CEO, The Weather Company Director Since September 2013 David W. Kenny was appointed as a director on Best Buy’s Board of Directors in September 2013. Kenny has served since January 2012 as the chairman and chief executive officer of The Weather Company, the leading provider of weather forecasts and information.
In 1997, Mr. Kenny founded and became the chief executive officer of Digitas, Inc. , a provider of integrated strategy, technology and marketing solutions for internet-based, e-commerce companies. Kenny’s success it attributed to his technology knowledge. 11 Sanjay Khosla Retired EVP & President, Kraft International Commercial Director Since October 2008 Sanjay Khosla provides Best Buy with a strong background in multi-national operations and transformational leadership, as well as a deep knowledge of branding and consumer marketing. Mr.