Best Buy: Merging Lean Sigma with Innovation SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Best Buy: Merging Lean Sigma with Innovation
This case is intended to highlight entrepreneurial thought and action - a specific style of entrepreneurial leadership - inside the context of a large enterprise. Based on both primary and secondary research, the case protagonist is Mike Fisher, Sr., Director of Lean and Six Sigma at Best Buy. The protagonist as well as his direct reports were interviewed for the case, and articles were accessed to support the general environment around which the case was developed. The setting is the HQ of Best Buy, a large U.S. based electronics and appliance retailer. The case spans the years 2005 to 2011.
Swot Analysis of "Best Buy: Merging Lean Sigma with Innovation" written by Jay Rao includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sigma Buy facing as an external strategic factors. Some of the topics covered in Best Buy: Merging Lean Sigma with Innovation case study are - Strategic Management Strategies, Innovation, Organizational culture, Supply chain and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Best Buy: Merging Lean Sigma with Innovation casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing household debt because of falling income levels, increasing energy prices, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic ,
challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Best Buy: Merging Lean Sigma with Innovation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Best Buy: Merging Lean Sigma with Innovation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sigma Buy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sigma 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 Best Buy: Merging Lean Sigma with Innovation can be done for the following purposes –
1. Strategic planning using facts provided in Best Buy: Merging Lean Sigma with Innovation case study
2. Improving business portfolio management of Sigma Buy
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sigma Buy
Strengths Best Buy: Merging Lean Sigma with Innovation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sigma Buy in Best Buy: Merging Lean Sigma with Innovation Harvard Business Review case study are -
Learning organization
- Sigma 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 Sigma Buy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Best Buy: Merging Lean Sigma with Innovation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Sigma 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 Jay Rao 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.
Organizational Resilience of Sigma Buy
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sigma Buy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Best Buy: Merging Lean Sigma with Innovation 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.
High switching costs
– The high switching costs that Sigma Buy 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.
High brand equity
– Sigma Buy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sigma Buy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Sigma Buy is present in almost all the verticals within the industry. This has provided firm in Best Buy: Merging Lean Sigma with Innovation 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.
Training and development
– Sigma Buy has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Best Buy: Merging Lean Sigma with Innovation 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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Best Buy: Merging Lean Sigma with Innovation firm has clearly differentiated products in the market place. This has enabled Sigma Buy to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Sigma Buy to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Sigma Buy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sigma 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.
Ability to lead change in Innovation & Entrepreneurship field
– Sigma Buy is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Sigma Buy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Sigma Buy is one of the leading recruiters in the industry. Managers in the Best Buy: Merging Lean Sigma with Innovation 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: Merging Lean Sigma with Innovation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Best Buy: Merging Lean Sigma with Innovation are -
Increasing silos among functional specialists
– The organizational structure of Sigma Buy is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Sigma Buy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sigma Buy to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Best Buy: Merging Lean Sigma with Innovation, in the dynamic environment Sigma Buy has struggled to respond to the nimble upstart competition. Sigma Buy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Sigma 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 strategic competitive environment developments
– As Best Buy: Merging Lean Sigma with Innovation HBR case study mentions - Sigma 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Best Buy: Merging Lean Sigma with Innovation 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 Sigma Buy has relatively successful track record of launching new products.
High cash cycle compare to competitors
Sigma 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Jay Rao suggests that, Sigma Buy 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: Merging Lean Sigma with Innovation, is just above the industry average. Sigma 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.
Skills based hiring
– The stress on hiring functional specialists at Sigma 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.
Aligning sales with marketing
– It come across in the case study Best Buy: Merging Lean Sigma with Innovation 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 Best Buy: Merging Lean Sigma with Innovation can leverage the sales team experience to cultivate customer relationships as Sigma Buy is planning to shift buying processes online.
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 Sigma Buy supply chain. Even after few cautionary changes mentioned in the HBR case study - Best Buy: Merging Lean Sigma with Innovation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sigma Buy vulnerable to further global disruptions in South East Asia.
Opportunities Best Buy: Merging Lean Sigma with Innovation | 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: Merging Lean Sigma with Innovation are -
Buying journey improvements
– Sigma Buy can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Best Buy: Merging Lean Sigma with Innovation 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sigma Buy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Loyalty marketing
– Sigma Buy has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sigma 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 Sigma Buy to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sigma Buy 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. Sigma Buy 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sigma 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.
Learning at scale
– Online learning technologies has now opened space for Sigma Buy 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.
Creating value in data economy
– The success of analytics program of Sigma Buy has opened avenues for new revenue streams for the organization in the industry. This can help Sigma Buy to build a more holistic ecosystem as suggested in the Best Buy: Merging Lean Sigma with Innovation case study. Sigma Buy can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Sigma Buy can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Developing new processes and practices
– Sigma Buy can develop new processes and procedures in Innovation & Entrepreneurship 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sigma Buy is facing challenges because of the dominance of functional experts in the organization. Best Buy: Merging Lean Sigma with Innovation 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sigma Buy can use these opportunities to build new business models that can help the communities that Sigma Buy operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Better consumer reach
– The expansion of the 5G network will help Sigma Buy to increase its market reach. Sigma Buy 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.
Threats Best Buy: Merging Lean Sigma with Innovation 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: Merging Lean Sigma with Innovation are -
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sigma Buy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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: Merging Lean Sigma with Innovation, Sigma 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 Innovation & Entrepreneurship .
Consumer confidence and its impact on Sigma 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sigma Buy in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Shortening product life cycle
– it is one of the major threat that Sigma Buy is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Sigma Buy business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Sigma 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. Sigma Buy can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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 Sigma Buy in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Sigma Buy high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sigma Buy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Sigma Buy has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Sigma Buy needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
Stagnating economy with rate increase
– Sigma Buy 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.
Weighted SWOT Analysis of Best Buy: Merging Lean Sigma with Innovation 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: Merging Lean Sigma with Innovation 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: Merging Lean Sigma with Innovation 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: Merging Lean Sigma with Innovation 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: Merging Lean Sigma with Innovation 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 Sigma Buy needs to make to build a sustainable competitive advantage.
