Best Buy's competitive strategy and market challenges

Best Buy Strategy

Best Buy Current Strategy

Best Buy Co. Inc. is a global retailer that produces technology and entertainment products and services across the globe. The company incorporated in 1966 in the state of Minnesota and today it is operating in U.S., Europe, Canada, China and Mexico. Best Buy controls a collection of retail stores and websites under eleven brand names.

Target Market

Best Buy mostly targets the individual consumers, which Best Buy divides in to three main areas; rich suburban families, trend setting urban individuals and closely linked families of Middle America. Majority of the Best Buy's consumers are Americans; however, the international customers also made a good contribution to the revenue few years back.

Best Buy currently operating in four continents provides following range of products and services:

Consumer electronics: It is the largest product category providing audio equipments, television sets, audio players, DVD players etc.

Entertainment software: CDs, DVD movies, video game hardware etc.

3. Home office products: Computers, calculators, cellular phones etc.

4. Appliances: Air conditioners, washing machines, refrigerators etc.

5. Installing and repairing computers and related services

Competitors

Since last several years, Circuit City is the direct competitor of Best Buy and is the second largest electronics retailer after Best Buy. However, Circuit City also suffered from huge financial losses due to which they were force to do liquidation in 2009. Best Buy was able to take around 40% of Circuit City's market share after this incident.

The indirect competitors of Best Buy are more in number; these include:

Wal-Mart and Target which are discount retailers but not specialized in electronics

Dell, Amazon.com and other online retailers

Office supply stores; OfficeMax, Office Depot, Staples etc.

Retailers that provide home improvement such as Home Depot

Software stores

Analysis of Current Problem

Despite huge success and having the title of one of the global retailers of the world, it is now time to say bye to the troubled Best Buy (Brush, 2011). Best Buy is facing a critical situation these days and facing huge financial loses. There are several reasons behind decline of Best Buy; some of which are as follows:

1. Best Buy's online competitors like Amazon.com have taken away business from it by offering better prices to the consumers. Similarly, other big chains, like Wal-Mart are also competing greatly on price by offering less expensive products to customers (Brush, 2011).

2. Best Buy sells products and services that are consumer luxuries and not necessities. The worldwide recession has badly affected the consumer buying behavior of shopping. Around 6 million people became jobless due to recession, so people do not have enough money to do shopping the luxury and entrainment products and services.

3. People prefer to download movies, games and listen music free instead of buying DVDs and CDs at Best Buy.

4. People have switched more towards other types of electronics; like Apple iPad and now they do not have craze in buying flat screen TVs or such type of entertainment electronics.

5. Best Buy has become a target of complaints due to its inability to fulfill the customer orders. For instance, one day, they promote a video deal but when customer goes for purchase, the video is neither available on shop nor online on their website. They also canceled some of the Christmas order this year, which very much annoyed customers. Different newspapers also warned that shoppers should avoid BestBuy.com due to delivery delays (O' Donnell, 2012).

These changing environments and trends of consumers have negatively influenced Best Buy revenue. The company has recently reported a decline of sales at its stores since last one year and is therefore having lower profits (Brush, 2011). Its shares have also fallen to around 34% (O' Donnell, 2012) which is portraying same situation that lead Circuit City to liquidation.

Best Buy's Response

Best Buy is trying to handle this difficult situation and move towards the positive side. A recent article published in Forbes site on July 4, 2012 "As Best Buy Closes 50 Stores And Faces Threat of Junk Bond Status, Richard Schulze's Fortune Shrinks" stated that Best Buy is closing 50 stores in order to get profitable and is facing threat of Junk Bond Status. Best Buy is trying hard to meet its customer's need by providing good service and technical support. However, by the time it fixes these issues, it will be too late and the net worth will continue to drop.

Best Buy has also focused on its pricing and promises to offer lower prices than its competitors have, by announcing 'Price Beat Promise' strategy. In this program, the company claims that if customer find lower price of any product online, or in other store or advertised in print than Best Buy will beat it by 10% of the difference. Moreover, if a lower price is found, even after 30 days of purchase, Best Buy will even than beat it by 10%.

Best Buy is also focusing more on the online business by moving from print to digital and after the increasing customer usage of online shopping. They are also trying best to manage and deliver orders on time and without cancellations (Edmonds, 2012).

The threats of Best Buy are not very serious and it can cope up with these by repairing company (Jones, 2012) and making strategies that attract customers. The two most important areas on which Best Buy really needs to focus are the price and performance. In this competitive world, customers not only look for price but also want good services and cooperation before and after the purchase. Therefore, Best Buy should focus on its price strategy, online business, aggressive marketing and its customer service, which also includes online sales service.