Question

• What are some of the risks that Best Buy and the retail industry are facing in the current economic and political environment? You need to research risks from current financial publications (e.g., Bloomberg, The Financial Times, The Economist). A current publication is no older than four years. Quote your source.
• Has the company addressed these risks? If yes, how? If not, what should they have done?
• Is another competitor on the market facing the same risks, and how did they address them? Briefly summarize.

Answer 1

Retain industry is one of the biggest industries in the world. There are many players in Retail industry. It has so many alternatives available.

Risk in Retail Industry- There are following risks in retain industry:

1. There is cut throat competition in this industry, many companies are there in the industry that come up with cheap and best offers, companies are going online and providing the customers, ease in purchasing, sitting anywhere. Companies are coming up with heavy discounts and lucrative offers, they all are attracting buyers. There is intensive competition in this industry.
2. There is no entry and exit barrier in this industry, companies can easily set up their outlets and business, even a small business works. It also does not require much investment so many players are there in the industry, it is very tough to compare and choose the best products.
3. Companies have to keep their prices as low as possible because there are many alternatives and choice available. Customer loyalty and satisfaction are most important. Trends keep on changing so companies have to upgrade their products frequently.

Best Buy- It is a retain giant in USA. It was incorporated in 1966. It provides consumer electronics, home & office products, appliances and related services. It has its operations in USA, Canada and Mexico.

Risk with Best Buy- These are the risks with the company:

1. Company is facing intensive competition, there are many players in the market like. Amazon is the biggest competitor of Best Buy as it provides great discounts.
2. New technology and changing consumer behavior may be a threat for Best Buy in coming years. In spite of being big company, it is facing challenges in moving to other product segment. It is concentrating on the current business model and not on the expansion part that may be difficult for company in the future.
3. Best Buy has high attrition rate as compare to other players in the same industry, that is also a hazard for company as company has to spend more money on training and development of its employees.

Conclusion- Yes company has analyzed these risk and that is the reason, it is entering into new markets and getting success. Company is also focusing on product innovation, company is getting high level of customer satisfaction and maintain strong free cash flow.