Question

Business Strategy

Best Buy is the largest consumer electronics retailer in the United States with 2013 sales of almost $50 billion. The company competes aggressively on price with rivals such as Costco Wholesale, Sam’s Club, Walmart, and Target, but is also known by consumers for its first-rate customer service.

Best Buy customers have commented that the retailer’s sales staff is exceptionally knowledgeable about products and can direct the customer to the exact location of difficult to find items. Best Buy customers also appreciate that demonstration models of PC monitors, digital media players, and other electronics are fully powered and ready for in-store use. Best Buy’s Geek Squad tech support and installation services are additional customer service features valued by many customers.

1. How would you characterize Best Buy’s competitive strategy?

2. Should it be classified as a low-cost provider strategy? a differentiation strategy? a best-cost strategy?

3. Explain your answer.

4. Now think of your Glo-Bus (simulation) company: would you approach Best Buy to promote the distribution of your camera? How?

Answer 1

1. Forces that shape Best Buy strategy are:

Threat of new entities is very low as there is huge initial capital requirement to start a retailer in regards to equipment, electronics purchase with high set up costs

Power of suppliers is low as the retail consumer electronics is dominated by strong, established few companies like mentioned Walmart, Sam's club, Costco Wholesale. Switching cost to change the supplier is also low for the retailers. Retail ndustry is more concentrated than that of the suppliers group.

Power of buyers is high as the switching cost to change the seller is very low. There are other established rivals from whom the customers can purchase the products.

The threat of substitutes is high as there are similar products from many manufacturers. However retailers can influence the purchasing decisions of customers through exclusive arrangements and by advertising.

There is great level of rivalry among existing competitors through price wars.

2. So the Best Buy's competitive strategy must be through differentiation.

3. It should position the company by building defense's against forces that are the weakest.

Retail consumer electronics industry usually deal with standardized products with similar manufacturers. So Best Buy should understand they buying patterns, and can club the products as a package that is customizedcto the buyer.

For example, it can bring in a sales strategy to sell safety equipment along with kitchen electrinics to stand out from the competitors.

SWOT analysis of Best Buy:

Strengths:

• skilled, knowledgeable staff
• Quick service resolution and less turn around time to address customer issues.
• Existing customer base service satisfaction
• Good will on the after sales services.

Weakness:

Low control on the product manufacturing and design

Opportunities:

• Tie up with many categories of consumer electronics manufacturers
• Expanding the reachability and branch locations
• Building more in-house service centres for major revenue generating areas

Threats:

• Price competition from the rivals

4. Glo-bus would approach Best Buy to distribute camera through:

• Training set of sales staff of Best Buy on the basic functionality of the camera. It would ease the tech know-how and make the front sales staff capable to sell it professionally
• By explaining the benefits of clubbing Glo-bus camera sales with the sales of security alarm systems, televison and stereo systems that customers benefit from product packaging.
• Through the brand name of Glo-bus and its extensive service support locations that will have mutual synergies with Best Buy retailer.
• Easy Product integration and anywhere after sales with lesser resolution time along with highly skilled staff is definitely a key point to have Glo-bus camera in the Best Buy's distribution.