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Essay analysis of the Best Buy Co., Inc. Customer-Centricity case
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BEST BUY 2010
COOK’S CONSULTANTS Specializing in Consumer Electronics Industry
Bert Van Den Hooff Lisa Fischer Shahar Abrams Megan Brolley Furkan Cizmeci
OVERVIEW 1. Strategic Issues A. Corporate Strategy B. Industry Analysis C. Competitive Strategy D. SWOT Analysis E. Strategic Challenges
2. Strategic Alternatives + Evaluation A. Possible Alternatives B. Evaluation of Alternatives C. Selected Alternatives !
3. Action Plan !
4. Questions
IN REVIEW: THE YEAR 2009
CORPORATE STRATEGY
CUSTOMERS
“Technology Novices”
CORPORATE STRATEGY
Individual Consumers Age 16-35 Age 35-60
Small Businesses
BUSINESS + BUSINESS FIT Discretionary
Consumer Electronics
Electronic Repairs
CORPORATE STRATEGY
Entertainment Platforms
Appliances
SUBSIDIARIES GEEK SQUAD
PACIFIC SALES
MAGNOLIA AUDIO VIDEO
FUTURE SHOP
CORPORATE STRATEGY
CORPORATE GOALS
1
2
3
“Make technology deliver on its promises to customers”
SUSTAINABILITY Customer Centricity strategy Brand name + reputation Acquisitions
BUSINESS LEVEL STRATEGY
COMPETITIVE ADVANTAGE CUSTOMER SERVICE ORIENTED •
no commission
•
investment in employee training
•
employees are product experts/consumer educators
•
acquisitions that match customer lifestyle groups
•
industry-wide strategic target
•
product variety
•
high economies of scale
BUSINESS LEVEL STRATEGY
COMPETITIVE DISADVANTAGE
BUSINESS LEVEL STRATEGY
COMPETITIVE DISADVANTAGE Not as many store locations
BUSINESS LEVEL STRATEGY
COMPETITIVE DISADVANTAGE Not as many No low cost store locations structure
BUSINESS LEVEL STRATEGY
COMPETITIVE DISADVANTAGE Not as many No low cost store locations structure
BUSINESS LEVEL STRATEGY
Not as specialized
COMPETITIVE DISADVANTAGE Not as many No low cost store locations structure
Not as specialized
A lot of branches
Best Buy
ACQUISITIONS BUSINESS LEVEL STRATEGY
GENERIC BUSINESS STRATEGY
Broad Target Market
BUSINESS LEVEL STRATEGY
Uniqueness
GENERIC BUSINESS STRATEGY
Broad Target Uniqueness DIFFERENTIATION Market
BUSINESS LEVEL STRATEGY
Internal
SW OT External
Internal •
Differentiation strategy
•
Expansive reach (& financial performance) through acquisitions
•
Customer information database
•
Extensive level of service
•
Large global presence
•
Increase in net income
•
Steady increase in sales
SWOT ANALYSIS
S
Internal
S SWOT ANALYSIS
Internal • Shorter
product life cycles increase training costs
• Decline
in operating margins
• Fewer
stores relative to competitors (ie. WalMart + GameStop)
•A
LOT of money needs to go into research
• Relatively • Large
new CEO, Brian Dunn (2009)
debt and reduced available cash
SWOT ANALYSIS
W
Internal
W SWOT ANALYSIS
External •
Provide more value-added services in store
•
Increase global presence as domestic market matures
•
Move into digital streaming space by acquisitions or expansions
•
Increasing complexity and functionality of new technology
•
Products plays into competitive advantage.
SWOT ANALYSIS
O
External •
•
• •
•
Information available to consumers = direct threat to Best Buy’s strategic model and core competency Downward price pressure on technology products = less consumer purchase decision time Shorter tech product life cycles increases employee training costs Regulation changes about deferred interest financing could have a large negative effect on revenues. Price Matching Controversy
SWOT ANALYSIS
T
KEY STRATEGIC CHALLENGE “How can Best Buy continue to have innovative products, top-notch employees, and superior c u s t o m e r s e r v i c e w h i l e f a c i n g i n c re a s e d competition, operational costs, and financial stress?”
GLOBAL MARKET STRATEGY
ALTERNATIVES
+ !
EVALUATIONS
ALTERNATIVES
1
2
3
4
GLOBAL EXPANSION
MARKETING INITIATIVE
DIGITAL ACQUISITIONS
STRATEGIC ALTERNATIVES + EVALUATIONS
ONLINE CUSTOMER SERVICE/LEARNING EXPERIENCE
VIABILITY MATRIX OF ALTERNATIVES CONSISTENT WITH STRATEGY + CORE COMPETENCIES GROWTH POTENTIAL CONSISTENT WITH MARKET TRENDS PROFITABILITY COST EFFECTIVENESS EASE OF IMPLEMENTATION
POINT VALUE SCALE 1-4
4 3 3 2 2 1
STRATEGIC ALTERNATIVES + EVALUATIONS
POINT % 100%
50%
— 0% X
ALTERNATIVE 1
DIGITAL ACQUISITIONS
STRATEGIC ALTERNATIVES + EVALUATIONS
ALTERNATIVE 1
DIGITAL ACQUISITIONS
PROS •
•
CONS
Anticipates growth in online
•
Requires large capital investment
streaming/gaming market
•
Could cannibalize brick and mortar
Differentiates product portfolio from competitors
STRATEGIC ALTERNATIVES + EVALUATIONS
compact-disc sales
EVALUATION OF ALTERNATIVES
1
DIGITAL ACQUISITIONS
CONSISTENT WITH STRATEGY + CORE COMPETENCIES
—
GROWTH POTENTIAL CONSISTENT WITH MARKET TRENDS PROFITABILITY COST EFFECTIVENESS EASE OF IMPLEMENTATION STRATEGIC ALTERNATIVES + EVALUATIONS
TOTAL
— X — 9.5
ALTERNATIVE 2 ONLINE CUSTOMER SERVICE/LEARNING EXPERIENCE !
• • • •
Customer Oriented Online Shopping Assistance Live online sales representatives Online tutorials Business cards with usernames
STRATEGIC ALTERNATIVES + EVALUATIONS
ALTERNATIVE 2
ONLINE CUSTOMER SERVICE/LEARNING EXPERIENCE
PROS •
Enhance customer experience
•
Maintain online competitive advantage
•
Lowers HR costs
CONS •
Challenges with not face-to-face teaching
•
Customer is not able to ‘sample’ product
STRATEGIC ALTERNATIVES + EVALUATIONS
EVALUATION OF ALTERNATIVES
2
ONLINE CUSTOMER SERVICE/LEARNING EXPERIENCE
CONSISTENT WITH STRATEGY + CORE COMPETENCIES GROWTH POTENTIAL CONSISTENT WITH MARKET TRENDS PROFITABILITY COST EFFECTIVENESS EASE OF IMPLEMENTATION STRATEGIC ALTERNATIVES + EVALUATIONS
TOTAL
— — X
12
ALTERNATIVE 3
GLOBAL EXPANSION STRATEGIC ALTERNATIVES + EVALUATIONS
ALTERNATIVE 3
GLOBAL EXPANSION
PROS •
Large untapped demand
•
High potential growth
•
Consistent with strategy and core competency
•
Established presence and knowledge base
STRATEGIC ALTERNATIVES + EVALUATIONS
CONS •
Expensive and risky
•
Cultural barriers
•
Competition from large global competitors
EVALUATION OF ALTERNATIVES
3
GLOBAL EXPANSIONS
CONSISTENT WITH STRATEGY + CORE COMPETENCIES
—
GROWTH POTENTIAL CONSISTENT WITH MARKET TRENDS PROFITABILITY COST EFFECTIVENESS EASE OF IMPLEMENTATION STRATEGIC ALTERNATIVES + EVALUATIONS
TOTAL
— — X 10
ALTERNATIVE 4
MARKETING INITIATIVE
STRATEGIC ALTERNATIVES + EVALUATIONS
ALTERNATIVE 4
MARKETING INITIATIVE
PROS •
CONS
Allows for re-energization of Best Buy
•
Expensive
brands
•
People already familiar with Best
•
Gives rationale for higher prices
•
Fulfilling corporate goals
STRATEGIC ALTERNATIVES + EVALUATIONS
Buy
EVALUATION OF ALTERNATIVES
4
MARKETING INITIATIVE
CONSISTENT WITH STRATEGY + CORE COMPETENCIES GROWTH POTENTIAL CONSISTENT WITH MARKET TRENDS PROFITABILITY COST EFFECTIVENESS
— — X —
EASE OF IMPLEMENTATION STRATEGIC ALTERNATIVES + EVALUATIONS
TOTAL
9
EVALUATION OF ALTERNATIVES
1
CONSISTENT WITH
STRATEGY + CORE COMPETENCIES
2
3
—
—
GROWTH POTENTIAL CONSISTENT WITH MARKET TRENDS PROFITABILITY COST EFFECTIVENESS EASE OF IMPLEMENTATION TOTAL
4
— —
— — — X X — — — — X X 9.5
12
10
9
EVALUATION OF ALTERNATIVES
1
CONSISTENT WITH
STRATEGY + CORE COMPETENCIES
2
3
—
—
GROWTH POTENTIAL CONSISTENT WITH MARKET TRENDS PROFITABILITY COST EFFECTIVENESS EASE OF IMPLEMENTATION TOTAL
4
— —
— — — X X — — — — X X 9.5
12
10
9
SELECTED ALTERNATIVE
STRATEGIC ALTERNATIVES + EVALUATIONS
SELECTED ALTERNATIVE
ONLINE CUSTOMER SERVICE/LEARNING EXPERIENCE
STRATEGIC ALTERNATIVES + EVALUATIONS
SELECTED ALTERNATIVE WHY SHIFT TO E-COMMERCE? Year 2006
E-commerce Revenue 2,972
% change Total Commerce 13.9% 6.8%
2007
3,333
12.15%
5.0%
2008
3,704
11.13%
5.0%
2009
3,371
8.99% 10.9%
STRATEGIC ALTERNATIVES + EVALUATIONS
ACTION PLAN ACTION PLAN
WHO IS RESPONSIBLE? SENIOR EXECUTIVES
DEPARTMENTS
•
VP of Operations
•
eCommerce
•
VP of Human Resources
•
Information Technology
ACTION PLAN
TIMELINE
TIMELINE
1
RESEARCH •
• •
Which stores to close Outsource? Operational + HR logistics
3 MONTHS
TIMELINE 2
PREPARATION •
1
RESEARCH •
• •
Which stores to close Outsource? Operational + HR logistics
3 MONTHS
• •
Development Training Create marketing campaign
5 MONTHS
TIMELINE
3
BETA TESTING •
2
PREPARATION •
1
RESEARCH •
• •
Which stores to close Outsource? Operational + HR logistics
3 MONTHS
• •
Development Training Create marketing campaign
5 MONTHS
•
Employee familiarity with system Check for platform glitches/problems
4 MONTHS
TIMELINE
3
4 BETA TESTING •
2
PREPARATION •
1
RESEARCH •
• •
Which stores to close Outsource? Operational + HR logistics
3 MONTHS
• •
Development Training Create marketing campaign
5 MONTHS
LAUNCH!
•
Employee familiarity with system Check for platform glitches/problems
4 MONTHS
1 YEAR
from start date
MAJOR IMPEDIMENTS Potential loss of excellent customer service (not same as in person face-to-face) •
!
•
Limited ‘barrier to entry’
•
Potential competition with Amazon and other online/digital companies
ACTION PLAN
CONTINGENCY PLANS
•
Patents
•
If all fails, dissolve BestBuy U and redistribute employees to brick and mortar stores
ACTION PLAN
CONCLUSION “How can Best Buy continue to have innovative products, topnotch employees, and superior customer service while facing increased competition, operational costs, and financial stress?”
1
Solidify customer service value proposition
ACTION PLAN
2
Continue to differentiate from competitors and potential new entrants
3
Accomplish this through innovative online platform (BestBuy U)
