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Umeed Sherpa
Critical Analysis Paper 3
Dr. Christopher Monos
BA 3103
Section 008
4th April, 2014

Best Buy Hits Rock Bottom
Best buy the specialty retailer of consumer electronics in the United States is no longer the all-powerful super store that it used to be. Over the last fifteen years Best Buy, like many retailers, is “competing with a perfect storm of disruptive technologies (Savitz 2)”; making it hard to compete with companies such as such as Apple and Amazon that are embraced with innovations. As a result, Best Buys 2012 financial performance fell subpar, with a revenue decrease of 2.4% in the brick and mortar sector and operating profit plummeting by 54.30% in 2012. The net loss of the company was $1,231.00 million for 2012, against a net profit of $1,277.00 million during 2011 (Global Data 1). Lastly, Best Buy appears to be having cash flow problems in terms of declining liquidity of $1125 million (41.28% drop) for the year 2011. It is obvious by these numbers that Best Buy, a company that has been historically successful, has been running into some recent troubles. In this report I will conduct a situational analysis of potential causes of Best Buy’s problems and identify the major causes for declining revenue, net loss and declining cash flow position.

Revenues Declining
Best buy’s main source of revenues is contributed from the US market (76%) out of which the traditional brick and mortar accounts for 94% of the revenues and rest is from e-commerce segment (Passport). Best buy’s report card showed declined revenue at established stores by 2.7% in 2012 from last year as well as a 4.7% decline prior to that. Since Best Buy sells products and services that are viewed as discretionary items rather than necessities, the ability to generate revenues is more sensitive to macroeconomic conditions which affect consumer spending. The economic

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