On March 1, 2017, Best Buy Company, Inc., North America's largest retailer of consumer electronics and appliances, announced a third year of comparable-store sales increases and a 20.8% increase in domestic comparable online sales. These results were in marked contrast to four years of declining comparable-store sales from 2010 through 2013. The stock price rose 17% in March, and on April 20, 2017, it surpassed $50 for the first time since January 2008. When CEO Hubert Joly took over in September 2012, Best Buy was losing share to Amazon.com, which was encouraging consumers to view products at Best Buy and other physical stores and then buy them for a lower price online, a practice known as "showrooming." Undaunted, Joly had encouraged the practice, convinced that it presented an opportunity to sell to customers as long as Best Buy's prices were competitive. Joly had committed the company to a multi-channel strategy in North America and exited struggling international operations. Operating margins had increased as a result, but growth was still proving elusive. In early 2017, Joly announced that his "Renew Blue" turnaround effort was complete and that he was now intent on creating the New Blue. Would the new strategy be enough to stop Amazon's advances?
Swot Analysis of "Reinventing Best Buy" written by John R. Wells, Gabriel Ellsworth includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Joly Buy facing as an external strategic factors. Some of the topics covered in Reinventing Best Buy case study are - Strategic Management Strategies, Business models, Change management, Competition, Costs, Customers, Growth strategy, Innovation, IT, Pricing, Supply chain and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Reinventing Best Buy casestudy better are - – there is backlash against globalization, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, increasing energy prices, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google,
increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Reinventing Best Buy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Reinventing Best Buy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Joly Buy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Joly Buy 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 Reinventing Best Buy can be done for the following purposes –
1. Strategic planning using facts provided in Reinventing Best Buy case study
2. Improving business portfolio management of Joly Buy
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Joly Buy
Strengths Reinventing Best Buy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Joly Buy in Reinventing Best Buy Harvard Business Review case study are -
Analytics focus
– Joly Buy 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 John R. Wells, Gabriel Ellsworth 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.
Highly skilled collaborators
– Joly Buy 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 Reinventing Best Buy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Joly Buy 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 Joly Buy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Reinventing Best Buy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Reinventing Best Buy 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
– Joly Buy is one of the most innovative firm in sector. Manager in Reinventing Best Buy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Joly Buy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Joly Buy 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.
Cross disciplinary teams
– Horizontal connected teams at the Joly Buy 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
– Joly Buy is one of the leading recruiters in the industry. Managers in the Reinventing 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.
Strong track record of project management
– Joly Buy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Joly Buy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Joly Buy 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.
Low bargaining power of suppliers
– Suppliers of Joly Buy in the sector have low bargaining power. Reinventing Best Buy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Joly Buy to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Joly Buy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Reinventing Best Buy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Reinventing Best Buy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Reinventing Best Buy are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Reinventing Best Buy, is just above the industry average. Joly Buy 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 cash cycle compare to competitors
Joly Buy 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.
Lack of clear differentiation of Joly Buy products
– To increase the profitability and margins on the products, Joly Buy needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Reinventing Best Buy HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Joly Buy has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study Reinventing Best Buy that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Reinventing Best Buy can leverage the sales team experience to cultivate customer relationships as Joly Buy is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Reinventing Best Buy HBR case study mentions - Joly Buy 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 Reinventing Best Buy, in the dynamic environment Joly Buy has struggled to respond to the nimble upstart competition. Joly Buy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Joly Buy, firm in the HBR case study Reinventing Best Buy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Joly Buy has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Joly Buy 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Joly Buy is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Reinventing 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.
Opportunities Reinventing 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 Reinventing Best Buy are -
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. Joly Buy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Joly Buy 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 Reinventing Best Buy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Joly Buy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Joly Buy can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Reinventing 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Joly Buy can use these opportunities to build new business models that can help the communities that Joly Buy operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Developing new processes and practices
– Joly Buy can develop new processes and procedures in Strategy & Execution 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Joly Buy 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, Reinventing 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Joly Buy to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Joly Buy to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Joly Buy 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.
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 Joly Buy 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.
Manufacturing automation
– Joly Buy can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Joly Buy is facing challenges because of the dominance of functional experts in the organization. Reinventing Best Buy 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.
Building a culture of innovation
– managers at Joly Buy can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Joly Buy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Reinventing 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 Reinventing Best Buy are -
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. Joly Buy 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. Joly Buy needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Environmental challenges
– Joly Buy 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. Joly Buy can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.
Shortening product life cycle
– it is one of the major threat that Joly Buy is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Joly Buy has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Joly Buy needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing wage structure of Joly Buy
– 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 Joly Buy.
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 Joly Buy in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Joly Buy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Joly Buy in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Joly Buy 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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Reinventing Best Buy, Joly Buy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Weighted SWOT Analysis of Reinventing 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 Reinventing 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 Reinventing 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 Reinventing 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 Reinventing 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 Joly Buy needs to make to build a sustainable competitive advantage.