Documents the evolution of Best Buy, an electronics retailer, from its founding in 1966 to its very successful "Concept 2" strategy in 1996, boosting its sales ($7.2 billion) past industry #1 Circuit City. Its CEO Richard Schulze offers a new vision (Concept 3) to address the company's changed competitive and consumer environment. Reduced profitability in 1996, however, calls for creative adaptation of Concept 3.
Authors :: V. Kasturi Rangan, Baleji S. Chakravarthy
Swot Analysis of "Best Buy" written by V. Kasturi Rangan, Baleji S. Chakravarthy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Concept 7.2 facing as an external strategic factors. Some of the topics covered in Best Buy case study are - Strategic Management Strategies, Competition, Customers, Sales, Social enterprise, Supply chain and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Best Buy casestudy better are - – cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Best Buy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Concept 7.2, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Concept 7.2 operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Best Buy can be done for the following purposes –
1. Strategic planning using facts provided in Best Buy case study
2. Improving business portfolio management of Concept 7.2
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Concept 7.2
Strengths Best Buy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Concept 7.2 in Best Buy Harvard Business Review case study are -
Diverse revenue streams
– Concept 7.2 is present in almost all the verticals within the industry. This has provided firm in Best Buy case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Sales & Marketing industry
– Best Buy firm has clearly differentiated products in the market place. This has enabled Concept 7.2 to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Concept 7.2 to invest into research and development (R&D) and innovation.
Learning organization
- Concept 7.2 is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Concept 7.2 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Best Buy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Concept 7.2 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Concept 7.2 to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Concept 7.2
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Concept 7.2 does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Concept 7.2 digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Concept 7.2 has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Concept 7.2 is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by V. Kasturi Rangan, Baleji S. Chakravarthy can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Concept 7.2 has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Concept 7.2 in the sector have low bargaining power. Best Buy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Concept 7.2 to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Concept 7.2 is one of the most innovative firm in sector. Manager in Best Buy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Concept 7.2 are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Concept 7.2 is one of the leading recruiters in the industry. Managers in the Best Buy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Best Buy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Best Buy are -
High operating costs
– Compare to the competitors, firm in the HBR case study Best Buy has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Concept 7.2 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Concept 7.2, firm in the HBR case study Best Buy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Best Buy, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
Concept 7.2 has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Concept 7.2 is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Best Buy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Concept 7.2 has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Concept 7.2 even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Increasing silos among functional specialists
– The organizational structure of Concept 7.2 is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Concept 7.2 needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Concept 7.2 to focus more on services rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Concept 7.2 supply chain. Even after few cautionary changes mentioned in the HBR case study - Best Buy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Concept 7.2 vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Concept 7.2 has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High bargaining power of channel partners
– Because of the regulatory requirements, V. Kasturi Rangan, Baleji S. Chakravarthy suggests that, Concept 7.2 is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Concept 7.2 has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Best Buy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Best Buy are -
Using analytics as competitive advantage
– Concept 7.2 has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Best Buy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Concept 7.2 to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Concept 7.2 can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Best Buy suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Developing new processes and practices
– Concept 7.2 can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Concept 7.2 to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Concept 7.2 can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Concept 7.2 can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Best Buy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Concept 7.2 can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Concept 7.2 can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Concept 7.2 can use these opportunities to build new business models that can help the communities that Concept 7.2 operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Concept 7.2 can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Concept 7.2 to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Concept 7.2 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Concept 7.2 in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Threats Best Buy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Best Buy are -
Stagnating economy with rate increase
– Concept 7.2 can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Concept 7.2.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Concept 7.2 in the Sales & Marketing sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Concept 7.2 will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Concept 7.2 needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Consumer confidence and its impact on Concept 7.2 demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Concept 7.2 business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Concept 7.2 needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Shortening product life cycle
– it is one of the major threat that Concept 7.2 is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Concept 7.2 with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Concept 7.2
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Concept 7.2.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Concept 7.2 can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Best Buy .
Weighted SWOT Analysis of Best Buy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Best Buy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Best Buy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Best Buy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Best Buy is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Concept 7.2 needs to make to build a sustainable competitive advantage.
