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 – there is increasing trade war between United States & China, technology disruption, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing energy prices, wage bills are increasing,
increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, 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 -
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.
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.
High switching costs
– The high switching costs that Best 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.
Cross disciplinary teams
– Horizontal connected teams at the Best 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
– 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.
Digital Transformation in NA industry
- digital transformation varies from industry to industry. For Best Buy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Best 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.
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.
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.
Learning organization
- Best 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 Best Buy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Best Buy emphasize – knowledge, initiative, and innovation.
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.
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.
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.
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 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 Best Buy supply chain. Even after few cautionary changes, Best Buy is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Best Buy vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Best Buy is slow explore the new channels of communication. These new channels of communication can help Best Buy to provide better information regarding NA products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Skills based hiring in NA industry
– The stress on hiring functional specialists at Best 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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Best Buy, in the dynamic environment of NA industry it has struggled to respond to the nimble upstart competition. Best Buy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
High operating costs
– Compare to the competitors, Best Buy has high operating costs in the NA industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Best Buy lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Best 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 NA industry using digital technology.
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.
Manufacturing automation
– Best Buy can use the latest technology developments to improve its manufacturing and designing process in NA sector. 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.
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.
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.
Loyalty marketing
– Best 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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Best Buy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the NA industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Best 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. Best 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, 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.
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.
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.
Leveraging digital technologies
– Best Buy 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.
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.
Threats Best Buy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Best Buy are -
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 Best Buy business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Best 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 NA 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 Best Buy in the NA sector and impact the bottomline of the organization.
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.
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.
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.
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.
Easy access to finance
– Easy access to finance in NA industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Best Buy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 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.
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.
