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Best Buy Case Analysis

In: Business and Management

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Best Buy is no longer the all-powerful super store that it has been known as the past couple of decades. With today’s rapid increase in e-commerce, it makes it hard for “big-box” stores such as Best Buy to cope with the changing customer preferences. As a result, Best Buy’s 2011 financial performance fell subpar, with a 2.4% revenue decrease, and an overall loss of $1.23 billion. In response to this financial loss, the store is going to close 50 stores and fire 400 corporate staff members (Savitz). This report will provide a detailed internal and external analysis of Best Buy’s operations that have resulted in the company’s current market position. Best Buy’s previous strategy of relying on “big box” stores is being replaced by a new strategy of a higher number of smaller stores. Best Buy plans to open 100 new small stores to replace the 50 big stores that they are closing. Best Buy realized that the big stores were starting to be used for “showrooming”. This allowed consumers to come into the stores and experience the products, only to go online and purchase the product cheaper. In 2011, over 15% of volume sales were taken by internet retailing (Euromonitor). On top of the slipping sales, the expenses of the “big box” stores are not something to be forgotten. Best Buy believes that by 2015 $800 million will be saved by closing the larger stores. Also, the smaller stores will allow for more customer interaction, which Best Buy learned is one of the main reasons the “big box” stores failed when opened overseas. In 2010, Best Buy was operating in 14 different markets, but shortly after closed its stores in The United Kingdom and China. Although the US is the biggest market in terms of sales value, China is an overall bigger market, with a higher growth rate. The market potential of China is what led Best Buy to begin operating over seas. However, the company made the...

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