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Best Buy Case Presentation

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by

Raghavendra Mahto

on 3 July 2014

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Transcript of Best Buy Case Presentation

Situation Analysis by 3C's Model of Ohmae
Economic Trends
Social Trend
Porter
Five Force
Analysis

SWOT
Strengths
Weaknesses
Strong market presence
allows competitive advantage

It is one of the
highest value retailing company
in the world.

Good
brand awareness
when comes to electronics category.

Acquired good assests

Constrained credit availability
& financial resources

Gradually decline in brand awareness
Opportunities
Threats
Growing online sales

Growth in electronics industry makes it look more attractive for expansion investment.

Expanding Overseas
Intense competition from
mega retailers & online business

Small retails emerging
rapidly since the attractiveness is tempting

Small products more desirable
and easy to purchase online
Summary
The outlook for the Consumer Electronics Stores industry looks bright, with revenue forecast to increase at an average annual rate of 3.1% to $92.2 billion in the five years to 2016. Improved economic conditions will likely boost consumer spending, encouraging consumers to spend more on industry goods. In fact, revenue is projected to increase 2.4% in 2012 alone.
Best Buy’s Turn-Around Strategy (2013)
Case Study
Abhishek Bdr. Shah (st115325)
Anansit Pithayapungsakorn (st115388)
Jadeseda Palotaitakerng (st115402)
Raghavendra Mahto (st115346)
Tarinee Jearanaiwongkul (st115382)

Corporation Analysis
Joly’s vision, Best buy was trying to
“be all things to all shoppers”.

Retail stores and Online channel - Best buy has over 1,000 stores that can act as
distribution centers for online orders.

“Best place to work”
: employee-listening program, ROWE and its support gay, lesbian, bisexual and transgender equality
Customer Analysis
Only 1.3 percent of customers who visited Best Buy’s website actually made a purchase.

Reinvigorate the customer experience by a
commitment to customer-centricity
.

Identify customer by objectives into
four overarching segment
(Urban Trendsetters, Upscale Suburban, Empty Nesters and Middle America).
Competitor Analysis
Has a high percentage of customer perception but
less market share than competitor
in electronics industry.

Industry Rivalry
Apart from its own financial demised, these competitor can kill Best Buy.

Potential Entrants
It will take some portion of the whole market share but not enough to make a kill to Best Buy.

Substitutes
Electronics parts can’t be substitute
Suppliers
Buyers
Consumers have choices to buy
Problem Statement
- High
- Low
- Low
- Med
- High
Introduction
Esd.
1966 1983 1987 1990 1995 2001 2002 2008 2012
Changed
to BB
Listed on
NSYC
Sound
of
Music
Unprecedented
Growth
Fortune 500
List
51 Billion as Revenues
Acquisition of
Geek Squad &
Others
International
Expansion
China
Expansion
HUBERT JOLY
Appointed as CEO
2012
Best Buy - Slumped Profits
A decrease in product sales over the past several years

A loss of customers to on-line shopping sites, such as Amazon

Profit from sales not being large enough to support retail stores
Focus -
More Customer Centric
Employee Overhaul
Build Exclusive Brands
Long Term Strategic Plan
Potential competitors

Walmart

The low-cost king.

Amazon
– The original online empire.

Apple
– Premium gadgets and trendy stores.
Fierce competition
Economies of scale is critical for BB
Customer loyalty is critical for this industry
Electronics products have a short life cycle

Increase in
Online
Purchasing
Customer
want
one-stop-shop
Retail store an "Experience Centre"
More mindful
shoppers
Information Density -
Price Comparisons
Online Privacy Monitoring
Various types
of
e-commerce
Less spending -
More output
Flat electronic Sector sales
Strategic Options
Market Penetration Through Promotion
Capitalize on their strong loyalty programs
Promotional offerings to attract customers
Buy back guarantee
30 day trial offering
On site purchase offers
Membership Advantages
4. Diversification
IKEA store eatery units proves to be successful in attracting customers , similar settings can be adopted by Best Buy with Starbucks or Subway.
Rental Incomes - Strategic Locations
Targeting Impulse Buyers
"IKEA sold more than one million meatballs at its Dublin store last year"
5. Improving Financial Outcomes
Improve inventory cost settings
Cut unprofitable product lines
Reduce space consumption - Consolidation of stores
Mobile stores
6. Improving Online Presence
Internet marketing & services
Capitalize on Geek Squad's expertise
Exploit Amazon's lack of focus on electronics
Both party is at stalemate of bargaining.

"2014
Energy Star
Partner of the Year
"21 million units recycled in 2013"
Retail chains have a big, costly and tough job ahead.
Priority#1
- Tackle e-commerce
- Best Buy, Target And Wal-Mart Are Just Showrooms For Amazon, eBay etc.
High Product
Turnover
Rates
Amazon’s Algorithms
Automatically Prices Down
Ruthlessly
Reducing
Margins %
e-commerce
SOLUTION ?
2. Dynamic Pricing Strategy
"Price of an item based on consumer demand, & price fluctuations at a competing retailer"
1.Value Proposition
What value do you offer above what Amazon does?
Retail is about
creating unique customer

experiences
where customers perceive pricing to be fair, but not necessarily the lowest.
When a price in store is 1% to 5% more than what a consumer could get anywhere - likely to purchase the product.
When the price is 6% to 10% more.
60%
18%
In an industry where profit margins are thin, retailers are basing their prices on the behaviors and habits of their shopper.


"Based on service and assortment and experience; and making the path to purchase easier.”

Service
Products
Loyalty rewards
Differentiation
Partnering with vendors
to drive value
1. Sales per visit less and its not a one stop shop

2. Online retailers competitive prices
For example, Amazon slashed its product margins from 2.8 percent in 2008 to 0.6 percent n 2011.
Technological Trends
External Environment :
Retail Trends
3. Intense competition in Electronics
Industry

4. Physical Store Cost, High Inventory Cycle and Less Profit
Source :http://www.gurufocus.com/termInventoryTurnover/BBY/Inventory+Turnover/Best+Buy+Co+Inc
Lower
Profits

5. Sales and Stock price go down
Sales & shares of Best Buy have slumped compared to its potential competitors
Source: http://beta.fool.com/cacody/2012/08/09/repeat-after-me-buying-best-buy-good-buy/8935
BCG Growth-Share Matrix
Source: Forrester's North American Customer Life Cycle Survey
"Positively
Impact
The
World"
Specialty retailer of consumer electronics
products, gadgets and entertainment software.

In store and online at fair prices

Offer additional services
- Like extending warranties
- Geek Squad Service
- Expertise of trained employees
Expand Services Like
Reducing Fixed Cost
Reaching to More Customer
The “try before you buy” experience
1,900 stores
scattered worldwide
Why it will work?
"Experience, Convenience & Price"
Revenues
Customer centric focus
Mobile store offers convenience for servicing
Membership & recycling program serves to locking in customers
Competitive pricing will boost the sales
Additional revenue from the partner
Cost
Consolidation of stores : Reduction in
rental expenses
Reduction of overhead cost
Full transcript