Case Study Description of Best Buy Co., Inc.: Customer-Centricity
With FY2005 sales of $27.3 billion, Richfield, Minn.-based Best Buy Co., Inc. was the leading retailer of consumer electronics, home-office products, and related services in North America. Its operations included the distinct store formats Best Buy, Future Shop in Canada, and Magnolia Audio Video as well as service provider Geek Squad. For the eight years leading up to 2004, Best Buy had reported double-digit revenue growth every year and rarely missed earnings. But on December 13, 2005, Best Buy missed its third-quarter earnings per share (coming in at $0.28, not $0.30). The company's stock price fell nearly 12% that day, a loss of $2 billion in market cap. The poor results were attributed to the aggressive rollout of 144 new "centricity" stores--revamped retail formats featuring a customer-centric operating model designed to offer targeted "value propositions" to one or two distinct customer segments. The new format was a departure from Best Buy's winning formula and required adjustments in interactions between various parts of the Best Buy organization, including a new set of segment leaders.
Swot Analysis of "Best Buy Co., Inc.: Customer-Centricity" written by Rajiv Lal, Irina Tarsis, Carin-Isabel Knoop includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Buy Centricity facing as an external strategic factors. Some of the topics covered in Best Buy Co., Inc.: Customer-Centricity case study are - Strategic Management Strategies, Customers, Financial management, Leadership and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Best Buy Co., Inc.: Customer-Centricity casestudy better are - – digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing government debt because of Covid-19 spendings, there is backlash against globalization,
central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Best Buy Co., Inc.: Customer-Centricity
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Best Buy Co., Inc.: Customer-Centricity case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Buy Centricity, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Buy Centricity 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 Co., Inc.: Customer-Centricity can be done for the following purposes –
1. Strategic planning using facts provided in Best Buy Co., Inc.: Customer-Centricity case study
2. Improving business portfolio management of Buy Centricity
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 Buy Centricity
Strengths Best Buy Co., Inc.: Customer-Centricity | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Buy Centricity in Best Buy Co., Inc.: Customer-Centricity Harvard Business Review case study are -
Diverse revenue streams
– Buy Centricity is present in almost all the verticals within the industry. This has provided firm in Best Buy Co., Inc.: Customer-Centricity 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.
Analytics focus
– Buy Centricity 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 Rajiv Lal, Irina Tarsis, Carin-Isabel Knoop 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.
Ability to recruit top talent
– Buy Centricity is one of the leading recruiters in the industry. Managers in the Best Buy Co., Inc.: Customer-Centricity are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Best Buy Co., Inc.: Customer-Centricity Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– Buy Centricity is one of the most innovative firm in sector. Manager in Best Buy Co., Inc.: Customer-Centricity Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Buy Centricity is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Buy Centricity has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Best Buy Co., Inc.: Customer-Centricity Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Buy Centricity in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Buy Centricity 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.
Low bargaining power of suppliers
– Suppliers of Buy Centricity in the sector have low bargaining power. Best Buy Co., Inc.: Customer-Centricity has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Buy Centricity to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Buy Centricity has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Buy Centricity has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Buy Centricity has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Best Buy Co., Inc.: Customer-Centricity HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Best Buy Co., Inc.: Customer-Centricity | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Best Buy Co., Inc.: Customer-Centricity are -
Workers concerns about automation
– As automation is fast increasing in the segment, Buy Centricity needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Buy Centricity 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. Buy Centricity 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Best Buy Co., Inc.: Customer-Centricity 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 Buy Centricity 's lucrative customers.
Interest costs
– Compare to the competition, Buy Centricity 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.
No frontier risks strategy
– After analyzing the HBR case study Best Buy Co., Inc.: Customer-Centricity, 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 bargaining power of channel partners
– Because of the regulatory requirements, Rajiv Lal, Irina Tarsis, Carin-Isabel Knoop suggests that, Buy Centricity 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Best Buy Co., Inc.: Customer-Centricity, is just above the industry average. Buy Centricity needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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 Buy Centricity supply chain. Even after few cautionary changes mentioned in the HBR case study - Best Buy Co., Inc.: Customer-Centricity, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Buy Centricity vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Buy Centricity is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Buy Centricity needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Buy Centricity to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Best Buy Co., Inc.: Customer-Centricity HBR case study mentions - Buy Centricity takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Best Buy Co., Inc.: Customer-Centricity, in the dynamic environment Buy Centricity has struggled to respond to the nimble upstart competition. Buy Centricity has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Best Buy Co., Inc.: Customer-Centricity | 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 Co., Inc.: Customer-Centricity are -
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 Buy Centricity 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Buy Centricity 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.
Manufacturing automation
– Buy Centricity 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Buy Centricity can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Buy Centricity can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Buy Centricity to increase its market reach. Buy Centricity will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Buy Centricity can use these opportunities to build new business models that can help the communities that Buy Centricity operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Developing new processes and practices
– Buy Centricity 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Buy Centricity 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.
Buying journey improvements
– Buy Centricity can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Best Buy Co., Inc.: Customer-Centricity 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.
Leveraging digital technologies
– Buy Centricity 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Buy Centricity can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Buy Centricity 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 Co., Inc.: Customer-Centricity, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Buy Centricity is facing challenges because of the dominance of functional experts in the organization. Best Buy Co., Inc.: Customer-Centricity case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Best Buy Co., Inc.: Customer-Centricity 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 Co., Inc.: Customer-Centricity are -
Shortening product life cycle
– it is one of the major threat that Buy Centricity is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Best Buy Co., Inc.: Customer-Centricity, Buy Centricity may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Regulatory challenges
– Buy Centricity 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.
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. Buy Centricity 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.
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 Buy Centricity.
Environmental challenges
– Buy Centricity needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Buy Centricity can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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. Buy Centricity needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Buy Centricity 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 Co., Inc.: Customer-Centricity .
Stagnating economy with rate increase
– Buy Centricity 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Buy Centricity with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Buy Centricity in the Sales & Marketing sector and impact the bottomline of the organization.
Increasing wage structure of Buy Centricity
– 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 Buy Centricity.
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.
Weighted SWOT Analysis of Best Buy Co., Inc.: Customer-Centricity 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 Co., Inc.: Customer-Centricity 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 Co., Inc.: Customer-Centricity 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 Co., Inc.: Customer-Centricity 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 Co., Inc.: Customer-Centricity 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 Buy Centricity needs to make to build a sustainable competitive advantage.
