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Kimberly Payne

on 21 April 2010

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Transcript of BestBuy

Best Buy Corporate Background
Corporate divisions & subsidiaries BCG Matrix Strategies
VIRO Cost Leadership
Locations in inexpensive areas surrounding downtown business centers
Buying power gives Best Buy control over suppliers
Superior Customer service
Independant research centers
In home consoltations for electronics and appliance selection and set up
Core Strategies Aquisitions
Aquiring competitors to increase the companies size and resources
Entering international markets through new store construction and the aquistion of established foreign chains

5 Forces Model Market Share Market Growth Rate ? 1966 Richard Schulze and James Wheeler open Sound of Music store in Minnesota.

1983 Sound of Music gets new name, Best Buy Co., Inc.

1985 Best Buy debuts on NYSE. (Symbol: BBY)

1992 Best Buy hits $1 billion annual revenue.

2000 BestBuy.com online store launched
Corporate Background Continued... 2002 – BestBuy acquires Geek Squad

2004 – Geek Squad open in every Best Buy store.

2007 – Best Buy acquires internet service provider, Speakeasy.

2008 – Best Buy purchases online music service, Napster.
Best Buy Stock Corporate Composition Suppliers

Best Buy has a wide range of suppliers such as Dell, HP and other electronic companies.

In case of Play station, Wii, suppliers hold moderate bargain power because Best Buy can not get the supplies through other sources without having to pay more.

Level of threat: Low/Moderate

New Entrants

High initial investments and fixed costs. Best Buy market cap is 18.79B.

After the financial crisis, Circuit City went out of business, thus the market is not attractive to many investors.

Experience curve effects of operation. For example, Best Buy can minimize cost by telling major suppliers to be up on RFID for easy tracking inventory

Level of threat: Low
5 Forces Contitued Competitors

Major competitors: Fry’s Electronic, RadioShack.
There is not much differentiation between players and their products, hence, there is much price competition and services to get brand loyalty of customers.
The price competition in the Western U.S is more intense than Eastern because there are many Fry’s Electronic stores.

Level of threat: Moderate/High


The relative low price for performance of online stores and there are generally more sales on websites than in physical stores to attract customers.
Threat of cannibalization from its own website.

Level of threat: Moderate

Switching cost is relatively low makes customers have higher bargaining power.
The electronic industry comprises a large number of small distributors including online stores, thus buyers have more options to choose.

Level of threat: High
5 Forces Threat of Suppliers
Low/Moderate Threat of New Entrants
Low Threat of Competitors
Moderate/High Threat of Substitutes
Moderate Buyers
High Prioritized Ranking of Strategic Issues The Good 1. Customer Service & Service Plans

2. Advising Team

3. Supplier Relationship

4. International Expansion

5. Internet Options and Social Media (Napster, remodel website and practices, MP3 for music players and cell phones)

6.Management Style
Prioritized Ranking of Strategic Issues The Bad 7. Cost Leadership- declining

8. Competitors (On Demand, Netflix,
WalMart, iTunes, Costco,etc…)

9. Commoditization

10. Retention and Turnover Rates

11. Little Differentiation among product lines
Resources Valuable Rare difficult to Imitate Organized Competative
Customer Service Yes No yes No None

Advising team yes yes yes yes Sustained

Reputation yes No No yes Temporary

Management Style yes No No yes Temporary By Margarita Esquivel, Ryan Payne, Anh Nguyen, Ashley Brocious, Xiang Fang, Shawn Hall, Keagan Rogers
Resources Professional advisory agent
-Geek Squad
- Home theater advisors and installers
- Computer Specialists
- Car electronics installers
- International stores and manufacturers

- $33.4 million to improve vitality of communities
- environment friendly

Capabilities In-store service style
-from product to customer centric
-sales people not on commission

Individual research centers
Distinctive Competencies Advising service

In-store service

Mobile stores Generic Strategies Internationalization

Merge and acquisition

Business Level Strategies
Service differentiation

cost leadership
Recommendations Issues Cost leadership is slipping
Lack of brick and mortar competition
Circuit City going under

Mobile and Electronics generation shifting
Younger buyers growing up with E-Commerce
No longer apprehensive to shop online

Advantage of immediate benefit fading
Shipping times are becoming shorter
Partnerships with shippers (Amazon-Fedex)
Even with shipping costs prices are significantly less Improve cost leadership
Continue to find inovative ways to cut costs

Improve online sales
Compete directly with Amazon, Newegg and other online retailers

Better Inventory and POS sytem integration
Decrease out of stock and ordering times
Synchronize in store and online sales
-Order online, pickup instore
Full transcript