1. Best Buy is currently underperforming because of several circumstances. It is at a competitive disadvantage with some large firms such as Wal-Mart and Amazon in terms of supply-chain and distribution, which impacts the customer in terms of price-point. Additionally, Best Buy has been undergoing a strategic change of direction that focuses more on small specific stores, and less on the larger, broader operations for which they are currently known. Though this may bode well for the future, there have been financial consequences from this process. As seen in Exhibit F, Best Buy has 1,055 main locations that consist of their standard large format stores, and 406 Best Buy Mobile locations that focus on mobile device sales. To supply these locations, Best Buy has 23 distribution centers located throughout the country. Comparatively, Wal-Mart has 4,625 stores stocked by 158 strategically located distribution centers. This puts Wal-Mart at a huge advantage in a couple of ways. Not only is Wal-Mart much more likely to have a store nearby any given customer, they are also better equipped to keep its products in stock at all times. This means more customers visit, and due to stocking, more customers can make the purchase they want. On an international level, Wal-Mart also exceeds Best Buy’s few hundred stores with 6,308 stores in over 11 countries. This furthers Wal-Mart’s availability to customers and puts them at an advantage over Best Buy. Additionally, the increased scale of Wal-Mart’s retail and distributive operations make them extremely competitive on pricing, a major aspect of purchase decisions for high-ticket items like consumer electronics. Amazon is similarly competitive in terms of price, as it has no physical stores to o... ... middle of paper ... ...he company has had to recall a number of products that have defected or injured customers in recent years. Another potential source of competitive advantage is Best Buy’s Geek Squad. While this has been a successful line of business for Best Buy, this too could become obsolete. Already an expensive part of Best Buy, Geek Squad costs would most likely increase if they wanted it to be more widely used. The likelihood of Best Buy overcoming this is arguably even less than its likelihood of competing with Amazon’s quick inventory - between 30 and 40%. With technology changing and a trend towards more user-friendly interfaces and products, consumers may not require the help of Geek Squad representatives to assist with their product, as they can figure out any issues on their own or by searching online for troubleshooting or product help blogs, customer reviews, etc.
A LOOK AT AMAZON.COM Amazon.com has a mission statement that says their mission is to use the Internet to transform book buying into the fastest, easiest, and most enjoyable shopping experience possible.1 based on the quality and size of Amazon.com, it would be correct to say that their strategic direction would be to provide the same quality shopping experience and customer service for multiple goods and services beyond books to ensure continued growth. And in doing so, Amazon.com still maintains their founding commitment to customer service and the delivery of an educational and inspiring shopping experience.1 Amazon.com has many qualities that keep them at the top of the e-retailing business. The first of their core competencies is being the leader in e-retailing. They are able to obtain this status by having superior knowledge of e-retailing. Low cost structure, a real time ordering system and being more global round out Amazon.com’s core competencies that make them the number one choice among online customers.
This organization has adopted a cost leadership strategy whereby all of their products and services have a lower cost for purchasers in comparison to their competitors. To accomplish this, Amazon has utilized economies of scope, which involves having a wide variety of products available for customers to buy and reducing their profit margin so as to capture a greater market share, hence gain a competitive advantage over other e-retailers. They have provided high quality products and services for their customers as well as made their online selling platform very user friendly; allowing anyone to use their website quickly and efficiently. Strategic acquisitions have been a general strength for the organization as they have acquired other retailers and companies enabling them to penetrate new markets without risking their own resources. The distribution channel of Amazon affords them the opportunity to satisfy their customers, and a satisfied customer is one who will return and continue making purchases from the site. They offer free shipping to the doorstep of their customers and it is always on time, also building a strong relationship for repeat business. Economies of scope involves generating savings that come from producing several goods or services altogether at a cost less than what it would be had Amazon produced each individually. Particularly evidenced in the use of their online platform offering the largest range of products possible, not placing any restrictions on their catalogue.
Amazon has more warehouses than any other online retail sites. They also have them spread out all over the world in more countries than any other online retailor. This gives them a competitive advantage because they are able to get the product to the customer quicker and most of the time overnight even. This is certainly a sustainable competitive advantage for Amazon because it is not a resource that will go away or that fluctuates on price or availability.
Callistus, thank you for outlining the growth that Best Buy has achieved. Based on the information you’ve provided in your post, it’s noteworthy to mention additional data specified in Best Buy 10K report, and highlight critical success factors that this organization will be focusing on to maintain their competitive advantage. To your point, Best Buy has experience exponential consistent growth experiencing an increase in operating income for fiscal 2017 of 479 million which equates to 4.7% of their revenue, this was primarily due to an increase in gross profit rate and decrease in restructuring activity. Gross profit in 2016 increase by .9%, net income increase by 39.6% in 2016, and up 19.1% in fiscal 2017. Best Buy is in
Wal-Mart relies heavily on a few key things that they believe will help them have a competitive cost advantage. Size plays a big role in what Wal-Mart is trying to do to keep market share. Wal-Mart’s size helps to effect the economy, and surrounding geographic locations by mitigating the threat of new entrants. If Wal-Mart has already invested in a small area it will be hard for competitors to come in, and share the market, or even small businesses to make rent. Sure, the brick and mortar side of the business is impressive. However, the size that Wal-Mart’s reputation holds is so much larger than we, as consumers can visualize. Also, the distribution centers are a prime part of the success Wal-Mart has. They utilize the hub and spoke system,
Best Buy’s “big box” stores were once the answer to every customer’s dreams. Drive up, walk inside and stare wide-eyed at the world of electronics open before you. Everything electronic you could ever want was in this one place, and the Geek Squad helped the uninformed purchase whatever device was popular. One-stop shopping was the ultimate high.
Based on Best Buy’s customer base, I do not feel that the company does the best at marketing its products and services. I would recommend that Best Buy’s research and development team strategically locates where their customer base of Urban Trendsetters, Empty Nesters, Middle America, and Upscale Suburban consumers live. The company’s research and development team should also find areas where income levels are average or above. Areas where those two categories overlap should have intensive marketing. Television and radio advertisements in those areas expressing Best Buy’s expert advice, current deals on products and services, and a newly reconfigured online shopping experience should produce the best
Best Buy: A Proposal for Improvement Sound of Music, which would later turn into Best Buy (BB) was founded in 1966 as a record store. As available technologies and customer service norms changed, so did our business model. Since then, Best Buy has evolved into a technological hub where people can get music, movies, computing devices, electronics, and appliances. We started our online store in the year 2000, and we acquired Geek Squad (GS) three years later with more than acceptable results. As of 2006 our outstanding shares had reached their maximum value at 56.00 per share, while our most visible competitor’s (Amazon) share was about 35.00.
Amazon has been able to maintain sustainable competitive advantage based on three operational strategies. These are low cost-leadership, customer differentiation and focus strategies. Low cost-leadership is pursued by Amazon by differentiating itself primarily on the basis of price. By offering low prices to customers Amazon ensures its future success. Partially modifying the costs of lowering prices over time through achieving higher sales volumes, negotiating better terms with suppliers, and achieving better operating efficiencies. Amazon makes sure that it offers the same quality products as other companies at a considerably cheaper price. Another strategy that Amazon has is its fast delivery service and there are many delivery services that one can choose from. With Amazon Prime, there are certain, but many products that have free two-day shipping. Also, with Amazon Prime, there are many offers specifically for people that have Amazon Prime. For example,
Internal Analysis: Strengths: Best Buy was well established brand in US consumer electronics market with 14% of market share. Best Buy has a big advantage of Big-Box stores around the World. These stores allowed customers to have a hands on experience before making any purchases. Specially, services like geek squad gave Best Buy a solid competitive advantage which was later on copied by other competitors like Target.
Amazon.com has a motto which is “get big fast”, what they mean by this is investing aggressively in product categories and themselves instead of focusing on the company’s business health and bottom line. The problem with this is the fact that Amazon only has a 2% profit margin where the retail industry average is over double that depending on the products that a retailer specializes in. Instead of specializing in one type of product which allows for a company to buy in greater bulk to reduce their costs, Amazon focuses on every industry which is the exact opposite of a successful retail business
...ays. “Wal-Mart is able to maintain lower levels of inventory and still meet customer demand. These lower inventory levels result in either a reduced floor plan with lower carrying costs and lower interest expense – or a greater diversity of products on the store shelves.”3 Both of these result in a significant advantage over its competitors when it comes to operations. Due to Wal-Mart’s superior ability to order inventory on demand, they are in a position to also meet customer demand better than their competitors. This is especially true with fad products, because they are only popular for a limited amount of time when they become unpopular they can leave massive amounts of inventory that nobody wants to purchase. Due to Wal-Mart’s superior supply chain and their technology they are better able to avoid carrying an oversupply of fad items, and regular items as well.
Amazon.com was a venture into an emerging market of internet and had to face hidden and unexpected hurdles in order to survive and excel in the market. Therefore, Amazon.com kept modifying its strategies with their focus on enhancing customer experience of online shopping and to delivery exceptional services with complete convenience to their customers. One of the major strategic decisions was to compromise on cost saving stragegy when Amazon.com started to maintain its own warehouses in different countries in order to ensure timely and accurate delivery to their customers
The firm has no direct sale stores, as all transactions are done online. It offers absolutely everything from food to industrial machines, sells all categories of goods, as well as quality products under its own brand. The Amazon Company produces e-book readers, tablets, consoles and smartphones. In doing so, it is the world's largest cloud infrastructure service provider (IaaS). The firm also sells some other products (e.g. USB cables) under the internal AmazonBasics brand.
3:58 PM http://money.cnn.com/2017/04/22/news/credit-suisse-retail/index.html Online shopping offers numerous advantages that stand-alone retail stores cannot offer such as, convenience, lower and comparative pricing as well as product selection. No ecommerce business knows this better than Amazon. There is no doubt that Amazon has a strong influence in our global and economic society as evident in the chart.