Best Buy (BBYY34) SWOT Analysis / TOWS Matrix / MBA Resources
NA
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Best Buy (Brazil)
Based on various researches at Oak Spring University , Best Buy is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, geopolitical disruptions, wage bills are increasing, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google,
technology disruption, 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 Best Buy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Best Buy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Best 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 can be done for the following purposes –
1. Strategic planning of Best Buy
2. Improving business portfolio management of Best Buy
3. Assessing feasibility of the new initiative in Brazil
4. Making a NA sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Best Buy
Strengths of Best Buy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Best Buy are -
Sustainable margins compare to other players in NA industry
– Best Buy has clearly differentiated products in the market place. This has enabled Best Buy to fetch slight price premium compare to the competitors in the NA industry. The sustainable margins have also helped Best Buy to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Best Buy in the NA sector have low bargaining power. Best Buy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Best Buy to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Best Buy has one of the best training and development program in NA industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Best Buy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Best Buy staying ahead in the NA industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Best Buy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive NA industry. Secondly the value chain collaborators of Best Buy have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the NA industry
– Best 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.
Analytics focus
– Best 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 NA industry. The technology infrastructure of Brazil is also helping 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 Best Buy
– The covid-19 pandemic has put organizational resilience at the centre of everthing Best Buy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Best Buy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Best 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.
High brand equity
– Best Buy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Best Buy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Best Buy is one of the leading players in the NA industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in NA
– Best Buy is one of the leading players in the NA industry in Brazil. Over the years it has not only transformed the business landscape in the NA industry in Brazil but also across the existing markets. The ability to lead change has enabled Best Buy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Best Buy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Best Buy are -
High dependence on Best Buy ‘s star products
– The top 2 products and services of Best Buy still accounts for major business revenue. This dependence on star products in NA industry has resulted into insufficient focus on developing new products, even though Best Buy has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Best Buy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the NA industry over the last five years. Best Buy 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.
No frontier risks strategy
– From the 10K / annual statement of Best Buy, it seems that company is thinking out the frontier risks that can impact NA industry. 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.
Aligning sales with marketing
– From the outside it seems that Best Buy needs to have more collaboration between its sales team and marketing team. Sales professionals in the NA industry have deep experience in developing customer relationships. Marketing department at Best Buy can leverage the sales team experience to cultivate customer relationships as Best Buy is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Brazil, Best Buy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Best Buy has some of the most successful models in the NA industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Best Buy should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Best Buy is one of the leading players in the NA industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the NA industry in last five years.
Lack of clear differentiation of Best Buy products
– To increase the profitability and margins on the products, Best Buy needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Best Buy has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners in NA industry
– because of the regulatory requirements in Brazil, Best 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 NA industry.
Employees’ less understanding of Best Buy strategy
– From the outside it seems that the employees of Best Buy don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Best Buy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Best Buy 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 Best 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Best Buy is facing challenges because of the dominance of functional experts in the organization. Best Buy can utilize new technology in the field of NA industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in NA industry, but it has also influenced the consumer preferences. Best Buy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Best 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 NA industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, Best 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Best Buy can use these opportunities to build new business models that can help the communities that Best Buy operates in. Secondly it can use opportunities from government spending in NA sector.
Developing new processes and practices
– Best Buy can develop new processes and procedures in NA 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.
Buying journey improvements
– Best Buy can improve the customer journey of consumers in the NA industry by using analytics and artificial intelligence. It 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.
Use of Bitcoin and other crypto currencies for transactions in NA industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Best Buy in the NA industry. Now Best Buy can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Best 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.
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. Best Buy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Best 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 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Best 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 NA industry, 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 of Best Buy are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to NA industry are lowering. It can presents Best Buy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the NA sector.
Consumer confidence and its impact on Best 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 NA industry and other sectors.
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. Best Buy needs to understand the core reasons impacting the NA industry. This will help it in building a better workplace.
Increasing wage structure of Best 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 Best Buy.
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 Best Buy.
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.
Technology acceleration in Forth Industrial Revolution
– Best Buy has witnessed rapid integration of technology during Covid-19 in the NA industry. As one of the leading players in the industry, Best Buy needs to keep up with the evolution of technology in the NA 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.
High dependence on third party suppliers
– Best 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Best Buy in NA industry. The NA 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Best Buy 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 Best Buy prominent markets.
Environmental challenges
– Best 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. Best Buy can take advantage of this fund but it will also bring new competitors in the NA industry.
Stagnating economy with rate increase
– Best 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 NA industry.
Regulatory challenges
– Best Buy 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 NA industry regulations.
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 at 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 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 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 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 Best Buy needs to make to build a sustainable competitive advantage.