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An Organization Overview: Best Buy

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Heather Mack

on 3 December 2013

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Transcript of An Organization Overview: Best Buy

Best Buy: An Organization Overview
By: Kaira Adamson, Stephanie Losier, Heather Mack, Erika Mair and Jackson Tiefenbach
Company Overview
- Best Buy Canada is a retail store that specializes in selling consumer electronics.
- They provide consumers with brands such as Apple, Microsoft, Samsung and Sony to name a few.
- Their products range anywhere from televisions, laptops, movies, cellphones and miscellaneous electronics to gift cards.
- Best Buy operates and manages the Best Buy brand stores as well as Future Shop stores.
- Together there are 139 Future Shop branded stores and 58 Best Buy stores in Canada.
- They employ approximately 17,000 employees.
- They are currently the leading retailer for electronics in Canada.
Best Buy is currently facing issues with their management operations and long-term objectives.
The company closed
seven
Best Buy and
eight
Future Shop stores across Canada in January.
Without notice to the employees or the public, the company shut their doors to 15 stores.
Approximately 900 full-time and part-time employees were affected by this change.
In order for Best Buy to achieve their long-term objectives, it was in the best interest of the company to close the “money draining” stores.
The company believed by making such drastic changes it would allow the company to have a better position in the economy in the future.
Current Company Issues
Span of Control
Best Buy’s span of control ranges from 2 to 20 with a lower span of control corresponding with higher levels of management.
Ron Wilson, president and Chief Operating Officer, controls most major departments including operations, marketing and merchandising.
Some departments, such as Merchandising, are further broken up into more levels of management. Other departments, such as E-commerce, are only broken up into 3-5 teams that include several members.
Annalisa King, Senior Vice President and CFO, manages all financial activity and information technology.
Charles Tobin, Senior Vice President of Operations oversees all sales strategies, employee engagement, and retail operations for all retail stores within Canada.
General Managers from retail stores will report to him and have 4-5 levels of management beneath them that can include up to 20 employees to one manager.

Flat vs. Tall
Although some departments include teams with equal ranks, Best Buy is considered a tall organization because of the many levels of management that exist within the company.
Employees of local retail stores are unlikely to communicate with upper district and regional management, this discourages communication and coordination among different levels of management.

Formalization
Best Buy does not allow much variability in the way members perform their given tasks and is therefore a moderately formalized organization. Formalization can seem excessive and can sometimes eliminate freedom and creativity, but in this Best Buy’s circumstance, it is just simple rules and procedures that create defined roles for better organization.
Centralization
Best Buy is a mostly centralized organization as Ron Wilson, Annalisa King and Charles Tobin hold the decision making power for all departments. A centralized organization can suggest limitations on individuals to make the best decisions for the company. Because the decision making power is split between three knowledgeable executives, decisions are made without many setbacks and in a timely manner.

Complexity
Best Buy is a tall organization that divides labour vertically, making it fairly complex with many levels of management. Although some departments are only broken into teams, it has many different departments throughout the company that hold several separate job titles.

Structural Characteristics
Company Analysis
Best Buy is considered a mechanistic company because of it’s structural characteristics within the organization. Best Buy is a functional organization that is tall, fairly centralized and formalized. Each department serves a separate function and is closely coordinated with others.


One key structural deficiency is the lack of communication between upper and lower management. Since it is a tall organization, there are many levels of management to send a message through. When the corporation shut down 15 stores early this year, employees were blindsided due to the lack of communication. Having a flatter organizational structure may have solved this problem.
Structural Deficiency
References:
http://www.bestbuy.ca/bestbuycanadacorporate/en/our-executives.html
http://www.bestbuy.ca/bestbuycanadacorporate/en/departments-accounting-and-finance.html
http://www.ctvnews.ca/business/best-buy-closing-15-stores-slashing-staff-in-canada-1.1137420
http://www.wikiwealth.com/swot-analysis:bby
http://en.wikipedia.org/wiki/Best_Buy
http://business.financialpost.com/2013/01/31/best-buy-to-close-15-stores-in-canada-lay-off-900-workers/

Opportunities and Threats
Opportunities
New Products and Services Could Increase Revenue: with the new release of the PS4 and XBox One consoles there will be a console to game shift where the sales of video games increase due to new systems.
With E-Commerce expanding, Best Buy has an opportunity for online growth. Best Buy is pushing their online sales by promoting online orders when there is a lack of stock in the local store and by reshaping the way their sales staff views online sales.
Best Buy also has an opportunity due to their new agreement with Samsung to develop exclusive Samsung Experience stores within Best Buy. This gives them a competitive advantage allowing the company access to exclusive Samsung technologies.
Threats

Competition is a major threat for Best Buy Canada. Stores like Wal-Mart, Visions, London Drugs, The Source, Sony, etc. put pressure on Best Buy Canada to be the best, sell the best products, provide the best customer service, and advertise the lowest prices. This also has some environmental uncertainty because other stores can be incredibly unpredictable about what their next moves are.

Technology and online shopping can also be a threat. With the increase in online sales, consumers don’t have to go into retail store locations to shop. As well, there are a huge variety of online stores, on top of the retail competitors already in place. This decreases the potential number of possible sales, and especially impulse shopping. Online sales do not allow for the window-shopping effect, which pulls consumers into the store.

As well, if Best Buy Canada is not proactive in their responses to the growing interest in environmentalism of the public, it may tarnish their image in the eyes of their consumers.

Because Best Buy doesn't sell necessities the economy can influence the company greatly and a poor economy can be a threat. When there is a recession, retail companies like Best Buy suffer.
Best Buy Canada falls into Cell 4, High Perceived Uncertainty. This means that Best Buy Canada has a dynamic and complex environment.
There are many different factors and components within Best Buy's environment to make it complex, as they receive their supplies from a multitude of companies and sell their products in roughly 200 stores Canada wide. Because Best Buy Canada is a retailer of technological goods, there is constant change in the environment. With new products coming out, technological change, social/political factors changing, and new competition everyday, the world is always evolving.
These factors are unpredictable, and in constant state of change. Therefore, Best Buy falls within the High Uncertainty scope.

Uncertainty




Matrix


When considering Perrow's Matrix, Best Buy falls into the category of Routine Technology which means they have easy analysis of problems and few exceptions.
Factors considered when placed:
Best Buy Canada is a retail store that trains their employees in a fairly structured manor.
Technology used is reasonably routine for the staff because of proper training.
They deal with fairly standardized inputs and outputs in their everyday store.
When exceptions do occur, they are able to come up with a fairly clear answer.

Perrow's Matrix
What implications does Best Buy's organizational structure have on the company?

Best Buy is a centralized organization, where upper management is faced with all the decision-making. This creates little to no communication between upper management and lower level employees. This affects Best Buy, as poor communication is known to cause uncertainty, mistrust, poor teamwork and conflict, among other things. Best Buy is also quite structured in the way they handle day-to-day tasks, therefore, there is little variability. There are many different departments, and levels of management positions within Best Buy, which is why they are fairly complex.

Is the structure of your organization suited to the environment and the technology?

The tall, complex, centralized and fairly formalized organizational structure that Best Buy uses, works well considering the environment they are exposed to. Best Buy believes that being structured benefits them as it helps them to properly train and develop their sales staff in a consistent manner, as well as defend themselves during times of threats and utilize opportunities quickly and efficiently.

Because the external environment and technology is constantly changing, Best Buy feels as though following a fairly formalized structure is best for them as it keeps the decision making within upper management where the top management can manage the companies future and reduce setbacks in a timely manner.
What internal and external forces for change does Best Buy face?

Best Buy Canada’s need for change is caused primarily by external factors such as decreasing sales. They had to close 15 stores in February of 2013 due to a 2.9% decrease in sales over the past year. This decline comes mainly from the fact that Best Buy is increasingly falling victim to a phenomenon known as “show rooming”, where a customer comes into a store to view at an item and gain product information, before purchasing it online at a lower price.
Is Best Buy faced with a crisis or trigger event that has highlighted the need for change?

Yes, the sudden closing of 15 stores in early 2013, highlights the need for change within Best Buy's business plan, as their declining profits were what ultimately lead to the decision of the closures. As well, the store closures indicate a need for change in corporate culture or communication within the business. Not informing the employees of the store closures suggests either the decision was a very last minute one, or done without consideration of the employees, and improved corporate communication could have made the news of this easier to bear.

What type or types of change do you propose for your organization? (Goals and strategies, technology, job design, structure, processes, culture, people)

The goals and strategies of Best Buy Canada, namely to sell electronics at a price comparable to online retailers, are relatively solid. However, focusing more on online sales will help them, as this is where consumer buying trends are headed. A change in the culture of the organization would be helpful as well, as complaints are frequently made about Best Buy employees not being trained sufficiently in product knowledge. As well customers feel that they are pressured into buying Best Buy house brand products rather than the best option for their needs. If brick and mortar electronics stores are to survive, they have to specialize in actual customer service and make the experience of shopping there preferable to getting the same product, potentially for cheaper, online. This may, however, require a change in some staff, particularly at the executive and managerial level.

What types and sources of resistance can you anticipate and how will you overcome this resistance?

Low individual tolerance for change, a lack of trust and different assessments of the situation would most likely be the key sources of resistance towards change. Best Buy needs to reevaluate its position as a retailer and focus more on service, which is the one thing that a brick and mortar store can do better than online retailers. That would require an overhaul on how staff are trained and reemphasizing the importance of customer service. A lack of trust in this way of approaching things, or an assessment that resulted in a different approach being seen as preferable would create resistance toward any idea that involved radical change to the way things are done. This resistance can be dealt with in a few ways; through sharing information and detailing the issues with best buy, and through clearly communicating goals and changes with the current employees, while maintaining both upward and downward communication, assuring the employees have a say in the events occurring.
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