Best Buy's Competition

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In Best Buy, the Benemundus Group has a great opportunity to take advantage of an undervalued company. Best Buy has been a historically strong firm, capable of overtaking large competitors, withstanding a large recession, and commanding high market share. In the last five years, the company’s position has begun to falter with financial and strategic underperformance. Though the quantitative effects are quite evident to a casual observer, the qualitative contributions that have caused this decline are not as readily available. The plethora of problems can be categorized as predominantly macroeconomic factors and firm-specific issues. Certain conditions affect Best Buy as well as competitors and therefore, cannot be considered competitive disadvantages. Best Buy, though a firm in the general retail industry, is a major player in certain sub-industries that deal with “luxury” goods (Exhibit N). It is important to note that the sale of “luxury” goods is affected more by market fluctuations on a macroeconomic scale. With more constricted finances, customers are more likely to focus on goods that are necessary. Like other competitors, Best Buy’s current underperformance is chronologically consistent with the latest economic recession. The exponential rate at which technology has advanced in the last decade is another macroeconomic factor. Such advances have slowly closed the gap between products from well-known and less-known brands. This phenomenon has caused less product differentiation among competitors, leaving price as the major decision-making tool for customers (“Global Consumer Electronics”, 2013). This lack of exclusivity of brands has increased buyer power for the consumer electronics sub-industry (Exhibit J). With price sensi... ... middle of paper ... ..., companies need strong management to be able to help revitalize economic success. Best Buy has had the disadvantage of having management inconsistencies during their fiscal downturn with four changes in CEO since 2009 (Exhibit I). Having a strong corporate force is so important that with the establishment of Hubert Joly as CEO in 2012, the company has had better direction in implementation of strategy to fix existing financial issues. In summary, macroeconomic factors and problems caused by the company have combined to bring Best Buy’s current underperformance. While Best Buy has less control over industry-wide problems, the company can attempt to reduce the impact with a better defined strategy. Many firm-specific issues can also be fixed with effort from the management, with potential to turn undercapitalized resources and capabilities into competitive advantages.

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