Strategic Analysis of Best Buy essay

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BEST BUY CO. INC. STRATEGIC ANALYSIS

Strategic Analysis of Best Buy

Current situation

A- Current performance

B- Strategic posture

Corporate Governance

A- Board of directors

B- Top management

External Environment: Opportunities and threats

A- Natural physical environment

B- Societal Environment

C- Task Environment

D- Summary of external environment

Internal Environment: Strengths and Weakness

A- Corporate Structure

B- Corporate Culture

C- Corporate resources

D- Summary of internal environment

Analysis of Strategic Factors (SWOT)

A- Situational Analysis

Strategic Alternatives and Recommended Strategy

A- Strategic Alternatives

Recommended Strategy

Implementation

Evaluations and control

Part II

Functional and Business strategies of Best Buy

Operations and Logistics

Operations

Current operational objectives, strategies and objectives

Consistency in corporation's mission, objectives, strategies, and policies 13

Operational capabilities 14

Transportation 15

Services and Subcontracting Manufacturer 15

Logistics and shipment operations 15

Types of shipments and integration of customers and shipments

Risks 16

Machines and Human Mix 16

Cost Leadership 16

Information Technology (IT) 17

IT objective, strategies, polices, and programs

Decision making Support 18

Marketing 18

Human Resources 18

Research and Development 19

Emerging Trends and Future Growth 19

References 20

Introduction

Best Buy Co. Inc. is the U.S. based multi-channel consumer Electronics Company based at Richfield, Minnesota, U.S. Founded in 1966, the company operations have now expanded world-wide. The paper will conduct a strategic analysis of Best Buy. To aid the process of strategic analysis, current policies and strategies of the company will also be reviewed. The paper will be divided in two parts, the first part comprises of eight subsections i.e. section I and section II will comprise of current situation and corporate governance respectively, external and internal environment of Best Buy in sections III and IV respectively. After analyzing strategic factors of the company in section V, strategic alternatives will be discussed in section VI. Sections VII and VIII will include implementation strategy and control mechanisms respectively. Part two of the paper will highlight the current and future outlook of the company in key organizational functions such as marketing, finance, operations & logistics, information technology (IT), HRM, and R&D.

I- Current situation

With annual revenue of approximately $50 billion in the year ending December 2012, operations of Best Buy are spanned across geographical regions of United States, Canada, China, Europe and Mexico. The company manages subsidiaries and labels such as Magnolia Audio Video, CinemaNow, Pacific Sales, Geek Squad, Cowboom, Future Shop labels and Best Buy (Best Buy, 2012). Repeatedly praised as best online retailer and most generous company for philanthropic contributions, the company employs 167000 employees.

A- Current performance

Best Buy Co. Inc. operates as an international retailer of consumer electronics, entertainment products, computing and mobile phone products, appliances and related services. Retail stores, online stores, and call centers are operated by the company. Best Buy earned $50.70 billion of revenue as of March, 2012 and $38.11 billion was reported as cost of goods sold, thus cost of selling goods was approximately 75% of the revenues. The company operated with a net income of $1.08 billion and earned a gross profit of $12.57 billion. As of March, 2012, Best Buy reported total current assets of $10.27 billion and total current liabilities of $8.86 billion. The company is currently experimenting with small store network in Europe with frequent opening and closing events reported by the company. After losing significant market share to online stores such as Amazon, the company had decided to close 50 'big boxes' stores within the U.S. In 2012. Best Buy aimed to reduce the store square footage by 20% by December, 2013 (Best Buy, 2012). It was also announced to open 100 mobile-stores in 2013. Due to its presence in both 'brick and mortar' retail stores as well as 'e-tailing', Best has to compete with Wal-Mart and Target in conventional retail sector and Amazon and e-Bay in online retailing. The annual SEC filings of Best Buy in 2012 indicate that the company sales decreased for sixth consecutive quarter at newly opened stores of the company within last 14 months of their opening in 2012 and 2.4% decrease in existing stores sale was also reported (Best Buy, 2012).

B- Strategic posture

Having engaged in enormous layoffs and big store closings in 2012, the company is geared towards shifting its business model towards small and mobile-store platforms. The company has changed the Best Buy Europe's structure and smaller stores are now opened. The company is also reducing expenses on third party services. In context of restructuring charges, the company had to bear $186 million (net of taxes) in 2012. In the same year, Hubert Joly was appointed as CEO to lead the restructuring policies of Best Buy. Having closed all big format stores of Best Buy in U.K, China, and Turkey, the company is headed towards opening 100 mobile stores in 2013.

II- Corporate Governance

A- Board of directors

Designation

Credentials

Hatim A. Tyabji

Chairman of Board of Directors

Served as director since 1998 and Chairman audit committee since 2002

Has also served as CEO and Board chairman of Verifone (NYSE)

Lisa M. Caputo

Member board of directors

Served on board of directors since 2009

Executive Vice President, Marketing and Communications of The Travelers Companies, Inc.

Also founded Citi's Women & Co. business

Kathy J. Higgins Victor

Member board of directors

Served as director at Best Buy since 1999

Alos served as senior vice president at Delta Airlines

Designation

Credentials

Ronald James

Member board of directors

Director since May, 2004

Also remained CEO of Human resources group of Ceridian Corporation

Hubert Joly

Chief Executive Officer CEO

Associated with Best Buy since last 15 years

Also headed Vivendi's video game

Sanjay Khosla

Member board of directors

Board member at Best Buy since October, 2008

Also served as managing director of its consumer and food service business at Fonterra Co-operative Group Ltd.

Matthew H. Paull

Member board of directors

From: McDonald's Corp.

Director at Best buy since September, 2003

Also served as corporate senior executive vice president and chief financial officer for McDonald's Corp.

Gerard Vittecoq

Member board of directors

Director since Sep, 2008

Served as group president and executive office member of Caterpillar, Inc. since 2004

B- Top management

The top management of the company comprises of Hubert Joly as president and Chief executive officer (CEO). Media, technology, and services sectors are main domains of Joly's expertise. Sharon McCollam serves as Executive Vice President-Chief Administrative Officer (CAO) and Chief Financial Officer (CFO). Scott Durchslag is the senior vice president of Digital and Marketing and president of BestBuy.com and e-Commerce. Shari Ballard serves as President, International - Enterprise EVP at Best Buy. Jude Buckley is the Senior Vice President and General Manager of Best Buy Co. Inc. Human resources department of Best Buy is headed by Carol Surface and Shawn Score serves as the Senior Vice President, U.S. Retail at Best Buy. All the executive management is experienced and brings vast expertise in their respective domains.

III- External Environment: Opportunities and threats

A- Natural physical environment

The natural and physical environment in which the company operates has become somewhat difficult to operate in during the last decade. The presence of significant number natural hazards such as hurricanes and snow storms in the U.S. And Europe has led the insurance and risk management costs of large retail stores to increase manifold. On one hand, the governments have improved the availability of natural resources but on the other hand, supply chain management of these resources, such as fuel for logistics and raw materials for manufacturing consumer electronics have got expensive.

B- Societal Environment

The societal environment in which Best Buy operates has got stringent for the company in context of increased expectations of customers and socially active groups for the company to contribute in philanthropic purposes. On the other hand, pressure groups such as environmental watchdogs and EPA has adopted strict guidelines to enforce environmental laws. Carbon footprint of large retailers is required to be reduced. Better service quality and decreased environmental impact of retailers are the main factors that are currently shaping the trends of consumer retail sector.

C- Task Environment

The task environment of Best Buy has significantly improved during the last few years due to increased speed and reliability of services from the supplier groups and other agencies that interact with the company while in the conduct of business on day-to-day basis. Introduction of information and communication technology tools has increased the synchronization of internal operations of the company and coordination with external stakeholders of the company. There are multiple channels now available for the company to carry out external communication, business analysis, and strategic partnerships. Considerable research being carried out in management sciences and use of ICT in management fields has improved the task environment of Best Buy.

D- Summary of external environment

The external environment of Best Buy, specifically the societal and task environments have posed threats as well as opportunities for the business operations of the company. Threats are posed by increased regulatory requirements regarding environmental impact of business operations, human resource management,…[continue]

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