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Best Buy 499

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Christina Kopk

on 12 March 2015

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Transcript of Best Buy 499

Best Buy Strategic Audit
Loser Consulting LLC
Overview
Key Issue Summary
SWOT
Alternatives/
Recommendations
Evaluation& Control
Key Issue: Customer Service
Best Buy Strategic Audit
Loser Consultants LLC
2 phase approach
Phase 1: Months 1 - 6
- Market Research
- Incentivized Survey Distribution and
Analysis
Phase 2: Months 7 - 12
- Implementation of Small
Business Help Desks
- Exploitation of Geek Squad
services
Main alternative evaluation measure: Comps.
(Comparable same store sales)
Activity based costing
Input controls
Evaluation and Control
- Internet sales critical to any retailer’s strategy
- Essential to maintaining a competitive position
- 2011: Best Buy’s domestic online sales increased by
13%
- Contributed to the 3.6% gross profit increase
- Store sales for Best Buy declined by 3%
- Indicates a shift in customers' purchasing behavior
Key Issue: Bestbuy.com
Strengths:
- Free shipping on all orders
- Expansive selection
- Spanish
Weaknesses
- Website not conducive to drawing in customers or driving sales
- Lack of graphic identity
- Text heavy, poorly classified information
- Noise
Opportunities
- Differentiate from Amazon
- Customer service online
Threats
- Amazon's hold on market
- Prices
- Already behind
SWOT
Text heavy
No logo/color scheme
- Change search engine feel to that of a shopping experience
- Improve the minimal resources available to assist customers
- Better categorize four tabs: Products, Services, Shops & Deals, and Gifts
Alternative 1
- Company struggles to properly utilize its database technology
- Succinctly categorize and organize its product catalog
- Eliminate visual barriers: small font and excessive detail
- Incorporate interactive media
Customer Service is one of Best Buy’s potential core competencies
- Demonstration videos
- Service phone numbers
- FAQ page
- Links to online forums
- Geek Squad live chat

Streamline product pages to improve shopping experience
- Advisable model: http://www.zappos.com/msr-twin-sisters-n-a
- Ease of access to product categories/individual items

Implement social media strategy
- Link Facebook and Twitter accounts to website
- Develop seamless identity.
- Condense 10+ Twitter accounts for various divisions, services, and stores
- Facebook page has over 6.6 million “likes”
Best Buy's Best Bet
- Track website and social media traffic using
analytics technology
- Test website through click/hover maps that
measure the parts of the website that attract
the most clicks or hovers of visitors’ pointers
- Track sales before and after changes to
assess effectiveness of changes/guide future
decisions to its online operations
Evaluation & Control
- No distinct identity
- Difficulty communicating with customers
- Lack of social media and online understanding
- Unable to clearly define target market due to
breadth of customer base
Follow purchasing patterns of customers based on demographics

- Market stores to older demographics
- Older customers less trusting of
technology, likely to desire assistance

- Market online to younger demographic
- Younger customers "grew up" online, more likely to
desire fast and modern online purchasing platform
- Ease of online purchase, no need to "try" product
Alternative 1
Best Buy's Best Bet
- Invest in detailed and timely market research
- Track daily, weekly, and monthly sales with respect to releases of advertising and promotional efforts
- Collect data by region and product category to better place and develop advertisements
- Strategize based on data and focus on what works to move product off store and online shelves.
Evaluation and Control
Strengths:
- Geek Squad, Reward Zone
Weaknesses:
- Window-shoppers, Geek Squad exploitation
Opportunities:
- Appeal to all shoppers, expand customer base
Threats:
- Customer attrition, declining financials
SWOT
Pros/Cons
Small Business Help Desks & Geek Squad Exploitation
Small Business Help and Customer Service Kiosks
Project Lead
Desk Installation
Purpose
Exploitation of Geek Squad Services
Target Audience
Free Trials
Analysis
Phase 2 (Months 7 – 12)
Two phase alternative can help Best Buy analyze problems faced with customer satisfaction and attrition

At a cost, Best Buy can return to industry average service, increase its customer base, and improve financial measures at a corporate and store level
Summary

Headquarters: Richfield, MN
Price: $32.37
Market Cap: $12.91 billion
Yield: 1.8%
Employees: 180,000
Key Facts
Key Financial Metrics
Ratio Analysis
Investor Expectations
Financial Brief
Key Issue:
Supplier Relationships

Key Issue: Marketing
Analysis
Analysis
Alternative 2
Improve hidden infrastructure
Analysis
Best Buy's Best Bet
Key Issue: International Expansion
Best Buy Turkey
Five Star Appliance
Best Buy China
Carphone Warehouse
Best Buy United Kingdom
Future Shop
Best Buy Canada
Best Buy Mexico
Best Buy’s Global Presence
First Expansion outside the US: 2002
Greenfield, Acquisitions, Joint Ventures
The Background
(The Grey Market)
Double Costs
- Running two stores in one market
- Customers loyal to national chain band
What’s Going Wrong
Analysis
Alternative I: Practical Approach





Alternative II: Best Buy Global Approach
Alternatives
*Connected Pro
Alternative I:
KEEP WHAT WORKS
NO OVERLAP

Eliminate Redundancy
Store Phase Out
Pro- Forma Budget
China
Europe
Canada
Keep Best Buy "strategy" consistent

Retain: Mexico, Canada, Turkey, United Kingdom

Eliminate all not purely Best Buy Stores
Alternative II
Questions?
Loss of exclusivity with suppliers
Suppliers selling directly to consumers
Supplier power very high
40% of supplies from 5 different suppliers
65% of supplies from 20 different suppliers
Supplier Relationships
Strength: Brand awareness and knowledge
Weakness: Best Buy weak online supplier
Opportunity: Strategic partnerships with suppliers
Threat: Suppliers’ relationship with competitors
Basic SWOT
Create consumer products that are specifically Best Buy/Supplier products
- Best Buy/Samsung Galaxy phone
- Cheaper product than offered on market

Best Buy Mobile convenient kiosks

New store layout
- General store managers responsible for
overseeing implementation
Alternative #1
- Encourage brands to allow products to be
in Best Buy stores for three months before
they are in other stores and available to
online retailers
- Best Buy image of first in technology
- Supplier preference
- General store managers responsible
Alternative #2
PROS
-Cheaper product for
consumers
- Better Best Buy’s Brand
image
- Can offer person-to-person
customer assistance with new
products
CONS-
- Lower-quality products than
brands without Best Buy
name on them
- Suppliers not associating
closely with Best Buy brand
because of lower-quality
image
Recommend Alternative #1
- Best Buy projected sales revenue outweighs the
cost of developing a strategic partnership with
Samsung
- Partnership should only produce its first phone
for one year
- The price of the phone will decrease in the
market by the second year, product margin also
decreases
- Partnership should develop a new phone after
the first year to compensate
Best Buy’s Best Bet
- Number of sales generated per new Best
Buy/Supplier product
- Information collected in a timely manner using an
RFID system
- Benchmarking against competitors in industry
Evaluation & Control
- Alternatives are low risk/ potential high return
- May reopen two market segments for Best Buy
- Still allows for use of traditional sales methods
- Allows for breaking through in online arena
Projections
International
Domestic
Business Segments
Alternative 2 :
Segment customer service channels

Goal: turn customer service into a core competency for Best Buy
Alternative 1 :
Include all “shoppers” in customer service efforts

Goal: increase customer base and improve financial performance
Strategic Alternatives
Incentivized survey creation, distribution, and analysis
Project Lead
Creation
Distribution
Incentive
Giveaways
Financing
Analysis
Participation
Phase 1 (Months 1-6)
Strength: Best selection of in store inventory of any retailer
Weakness: Poor job enticing the right type of customers to shop
in its stores and online
Opportunity: Best Buy has the opportunity to have the best
customer support and is the only retailer that can
specialize in consumer electronics
Threats: Other companies are more convenient to shop at
because of easier access
SWOT
- This will allow Best Buy to reach its specific customers more
efficiently and effectively
- Best Buy already has a large marketing budget, so it will only
slightly be increased to implement the strategy
- The only drawback to the new strategy is that some of the
targeted data to one group of consumers may reach the other
group (Ex. Older consumers seeing our website ads online)
Pros and Cons
Full transcript