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Best Buy

In: Business and Management

Submitted By oksana991
Words 1005
Pages 5
Critical Analysis Paper #1

The revenue of Best Buy declined by 2.4% since 2011. The company lost $1.23 billion in 2011, or $3.36 per share. This report will conduct a situation analysis of Best Buy, explain internal issues and the external environment, and summarize key issues that can explain the poor performance.
One of the potential internal causes of revenue decrease for Best Buy is the fact that they have high dependence on vendors for a supply of their products. Vendors that supply Best Buy are located domestically and internationally. Around 60% of merchandise that Best Buy purchased was from its 20 largest suppliers in 2011. “The five major suppliers namely, Apple, Hawlett-Packard, Samsung, Sony and Toshiba represented 39% of total merchandise purchased by the company.” Due to this fact, Best Buy might have difficult time meeting the demand of customers because key vendors can fail to supply Best Buy with products. This issue can drive down Best Buy’s revenue and profitability (Global Data).
Another possible internal cause of revenue decrease is the lack of expansion. Previously, Best Buy was trying to open “big box” stores overseas to expand its product as well as customer segments. However, revenue is declining because Best Buy had to close its “big box” stores in United Kingdom, China, and Turkey in 2011 because their strategy failed, which decreased brand awareness in these countries. Best Buy plans on opening 50 new but smaller localized stores in China and also 14 mobile “store within a store” outlets to try to maximize its profitability (Passport).
Best Buy made sales over Internet however did not account a high percent of the company’s total sales in 2011, which can be another internal cause. “Over 2006-2011, Best Buy has seen a 17% value CAGR in its Internet retailing operations, while store- based retailing has seen a value CAGR of just 6%.”...

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