Case Analysis: Best buy Fights Electronic Waste



Introduction

Best Buy Co., Inc (BBY) has been a leading player in the Electronics & Appliances retailing industry for several years now. It has withstood several cycles of churn in the Industry; seen many of its competitors go bust, and faced near bankruptcy on more than one occasion to emerge as an electronic retailer of choice for millions of shoppers in the US and other parts of the world. Best Buy Co., Inc has come a long way from its original avatar as 'Sound of Music', a small store selling audio equipment to teenagers in St. Paul, Minnesota. With more than $50 Billion in revenues and $1.4 Billion in net profits, it is a market leader in the Electronics and appliances retailing industry. It currently has more than 4000 stores across US, Europe & China and a strong online presence (online sales of $2 Billion). Throughout Best Buy's history it has faced rapid changes in the industry and has been challenged by many players with more resources at their disposal, yet it has survived and created a strong competitive advantage for itself. The consistent theme underlying its success is an ability to morph its business model to suit the changing industry trends and to differentiate itself from its competitors.

Discussion

Best Buy's Competitive Advantage

The first major change was in the late 90s, when profitability was at its all time low (0.02% of sales), and Best Buy executives realized that its execution model was no longer valid. They initiated a process of change management that challenged the very culture that had made Best Buy a success. Implementing the Standard Operating Platform (SOP) by overcoming the organization's cognitive and action inertia, not only gave them tangible results in the form of exponential bottom line growth (CAGR of 218% in net income between 1997 & 2002), but also the confidence to take on such challenges in future (Anupreeta & Sharon 2012).

Learning from this process, Best Buy then proceeded to implement the next biggest change to its business model: Customer Centricity. This once again called for abandoning the existing way of doing business and reconfiguring its entire value chain. This process allowed them the luxury of buyer selection and showed that even in a market dominated by bargain hunters, it is possible to create a differentiated business model and a competitive advantage. Best Buy reached its peak in the market with an 18% market share in 2007, over rivals such as Wal-Mart, by adopting the Customer Centricity approach (Ferrell et al., 2005).

In 2011, Best Buy faces stiff competition from large discount retailers such as Wal-Mart and online retailers such as Amazon.com. It is experimenting with various models such as 'Connected' stores, standalone Mobile stores and online service support through initiatives such as Twelpforce. Following its history of committed changes to its business model should allow Best Buy to survive this phase of the industry's evolution (Ferrell et al., 2005).

Best Buy's portfolio includes video products, audio products, car products, cameras, computers, ...