Best Buy Company, Inc Analysis - Case Study Example

 Best Buy Company Inc. Beat Buy Company is the largest retail company, originated in United s. It was established in 1966 with the “Sound of Music” and because of some natural disasters it renamed to “Best Buy Company” in 1983. “The company opened its first store in 1966, and called it “Sound of Music.” After a tornado hit one of its stores in Roseville, MN, it held a “tornado sale,” and later reopened in 1983 under a new corporate name, Best Buy.” (Matthew Kemp) The company is dealing in electronic items i.e. Entertainment software, Office products and other electronic products. It’s capturing a big market share in the financial world. From 1983 the company is operating in United States as well as in Canada. In last few years they expanded their business and made it globalize through launching it in the market of China. With the passage of time as the Market grew, the profits of the company have also been accelerated. “Best Buy has seen large increases in revenues over the past few years because of the demand for flat-panel TVs. Revenue increased 12.45% overall in fiscal 2006 and 16.49% overall in fiscal 2007. It is unlikely that these margins will continue due to slowed demand and decreased prices for the TVs.” (Matthew Kemp) The research shows that the company have more potential to increase its revenue in the future and it will keep hold the largest market share as well. Analysis on the Company: External Forces: There are few factors which can effect the company i.e economic forces, social forces, cultural and environmental forces, Political, legal and governmental forces, technological forces, and competitive forces. These forces are important to evaluate the company. Economic forces: There always been ups and downs in the economy. Either there is inflation or deflation. If the GNP is higher in the economy the income also increases and people can spend their incomes on different items. From last few years US is enjoying healthy economy. That factor is helping the retail industry as well. In future Best buy company profit may increase by as the trend shows. “Increasing GDP would be good for companies like Best Buy; however the smaller increases in GDP can have a negative effect on not only Best Buy’s sales, but Best Buy’s stock price if investors predict that GDP will fall in the future.” (Matthew Kemp) Social Forces: Best Buy Company is also socially committed and believes in literate people about technology. They are socially responsible. The company spent $13 million in teach Awards for the school to aware them from the new technologies about the classrooms. They also gave scholarships to the students all over the world. “Best Buy stores have awarded over $13 million in scholarships to nearly 11,000 students nationwide.” (http://communication.bestbuy.com) Technological forces: In this modern world, where every day new technologies are coming up and frequently they are becoming outdated. Under this scenario, the Best buy company has to keep itself up to date and must have to keep watch on the new technologies. In this way the company can survive under intense competition. Legal and governmental Forces: Wisconsin State Attorney General's office took a serious civil action against Best Buy Company In 2005. They stated that the company is violating the consumer protection law by misleading the people about service plans, supplemental magazine subscriptions etc. Competitive forces: Where the company is enjoying healthy profits, there the company is also facing intense competition. The biggest competitors of Best Buy Company are Dell, Wal-Mart, Circuit City and all those retailers which are supplying those products on reasonable prices. The company should also bring some changes in their business to stay in the top line. Like, they should also offer their products online as other companies are doing. “To help overcome online competitors, Best Buy allows consumers to purchase their items online. Consumers then have an option of having the product shipped to their home or picking it up at a local Best Buy store.” (Matthew Kemp) Internal Forces: The internal forces include Marketing and Management of the company. Marketing: The company is spending a greater amount on the marketing expanses of the company. They spend millions of dollars on their website to provide people with all the information about their business and description about each and every product they are dealing with. Mostly they do business-to-business marketing for their business. They also mailed thousands of copies to their target market, with the catalog attached to it. With the changing trend, the company is also planning to open inbound as well as outbound call center. “In October the company plans to mail a second catalog for larger businesses. The catalog will sell computers, cables, and accessories as well as a smattering of consumer electronics. To help in its efforts in bagging big businesses, Best Buy is setting up a call center for inbound and outbound calls.” (http://directmag.com/news/marketing_best_buy_mails/index.html) SWOT Analysis: SWOT analysis will help to examine the condition of the company from internal as well as external. Strengths: Major share of the market: The Best Buy is the specialized retailer store in the US and Canada dealing with electronic items. The company is enjoying the leadership in the market because of its highest share. It is one of the leading companies in States with total market share of 18%. Because of its large operation, the company is able to capture the market and supply the products on spirited prices. “Best Buy leads the consumer electronics retail market in the US and Canada, with total revenues reaching $27,380 million in fiscal 2006. It has about 18% market share of the consumer electronics retail market the US. Leveraging its large scale of operations, the company has been able to increase its bargaining power with consumer electronics vendors and offer more competitive prices.” Strong Performance: The company is capable of performing strong operations during last few years. It revenues increase by 15.2%. This figure is much more then the average rate in the same fiscal year. The company has shown that the company is efficient enough to capture the large share of the market. “Its operating margin of 5.3% in fiscal 2006 compares well with the industry average of 4.7% for the same period. Strong operating performance implies that not only was the company able to increase its market share but also its operational efficiency.” (DataMonitor 2006) Weakness: Revenue from one sector: The revenue which is continuously generating by the Best buy’s are only from one sector i.e. from flat panel TV’s. It is the biggest weakness for the company. The company should not rely on one product. If the product is hotcake today, it can be outdated tomorrow. Then it will harm the company as well as its revenues. Opportunities: Emerging trend: The emerging trend of electronic items in the market is an opportunity for the Best Buy Company to accelerate their profits by offering them. “Such as new computer technology like Windows Vista which can drive computer or software sales, or the release of Apple’s iPhone. The immense popularity of the Nintendo Wii may also drive up sales of consumer electronics as well as entertainment software” (DataMonitor 2006) Flexibility in Expansion: Best Buy Company has an opportunity to expand their business globally. As electronic items have a big consumer market, so there is also a chance of gaining more profits inside the other countries. Recently Best buy company opened there outlet in China. And it attracted a large number of buyers. ”Best Buy already opened a store in China in December, which reportedly exceeded sales expectations by 40%, and on January 1st attracted more than 20,000 customers.” (Matthew Kemp) Threats: Consumer Income: Electronic items are mostly luxurious items. The consumer mostly buys these items when his/her income is high. And high income is depended on good economy. If the income of a person falls then he will definitely go for the basic items not for these secondary items. So at this point the company can lose the profits. Work Cited Best Buy Mails B-to-B Book http://directmag.com/news/marketing_best_buy_mails/index.html Matthew Kemp 2007. Best Buy Co., Inc. (NYSE: BBY) Consumer Discretionary. Krause Fund Research Spring 2007 www.biz.uiowa.edu/krause/Spring_2007/BBY_sp07.pdf DataMonitor 2006. Best Buy Co, Inc. http://web.ebscohost.com/bsi/pdf?vid=4&hid=101&sid=490d36a7-8cb9-4ad7-9843-b6ea7baf4c9f%40sessionmgr107 Best Buy Community Relations. http://communication.bestbuy.com Read More