Strategic Management of Best Buy Company - Case Study Example

 1. THE BASICS Strategic management usually deals with the arrangement of managerial decisions along with actions that assist in determining the performance of an organization in a long run. The process of strategic management involves better understanding of the environmental factors, strategy implementation and strategy formulation among others. The strategic management focuses on evaluating external opportunities and threats pertaining to an organization for ensuring stable functioning and attaining growth. The strategic management is divided into four phases which comprises financial planning, forecast-based planning, externally-oriented planning and strategic management (Wheelen and Hunger 2-90). BestBuy Company Incorporation is a multinational retailer that deals with selling of computer electronics, mobile phone products and various other appliances. Other than the retail stores, the company is also involved in the operations related to call-center and online retail transactions. In order to maintain the smooth flow of the organizational operations, requirement for strategic management frames is observed to be a vital part for BestBuy. Few examples can be cited from BestBuy, where application of strategic management has been depicted. Considering the fiscal year 2001, BestBuy Company has acquired the Magnolia Hi Fi Inc., which is a retailer of audio along with video products. In this aspect this strategic decision was undertaken in order to access upscale consumer segment. This is an example of strategic change within the domestic environment of the company (BestBuy, “About Best Buy”). In accordance with the strategic change during the fiscal year 2002, BestBuy acquired Future Shop Ltd for better prospect. Future Shop is considered as Canada’s largest retailer and has been acquired with an objective to retain the company’s brand equity and also increase its consumers’ base. Another example can be cited from the field of its operation that reflects about the initiative taken by BestBuy Company as an approach to strategic management. The US based BestBuy stores have provided the customers’ with the facilities of differentiated product categories such as computing and mobile phones, entertainment, services, consumer electronics and appliances among others. (BestBuy, “About BestBuy”). The mission statement of the BestBuy Company is identified as “Our formula is simple: we’re a growth company focused on better solving the unmet needs of our customers—and we rely on our employees to solve those puzzles. Thanks for stopping” (BestBuy, “About BestBuy”). The goals of BestBuy Company for the year 2014 are to accelerate the sales through online services. It also looks forward to enhance the multi-channel experiences of the valued customers’. The company is also looking forward to increase its revenue and accelerate gross profits by application of ‘Space optimization’. Additionally, the company also focuses in the reduction of selling and the administrative costs among others (BestBuy, “About BestBuy”). 2. CORPORATE GOVERNANCE Corporate governance is considered as the relationship between the board of directors, top management and shareholders. Corporate governance is associated with monitoring and measuring the various activities executed in the organization while realizing the goals and objectives of an organization. In this regard, further observations revealed that governance in actual terms depicts about mitigating the interest of the shareholders (BestBuy, “About Best Buy”). The basic characteristic surrounding the corporate governance generally comprises: Equitable rights along with fair treatment of shareholders Mitigating conflicts of interest amid the stakeholders of an organization Committed efforts from organization’s board of directors Revealing ethical behavior as a compulsory activity within the organizational environment Disclosure along with transparency of the book of accounts for better functioning of the organization The three major roles that are revealed by the board of directors are monitoring, evaluating and determining the processes among others. Directors are the top level management who strategizes the advance planning for the development of an organization. They play the major role in an organization for ensuring greater profitability and growth of business. The major liability as well profit share lies with the directors. Monitoring is regarded as an important responsibility of the directors as it directs the employees towards attaining the organizational objectives. Through monitoring process the board of directors is able to keep a check on the internal and external development of an organization. Moreover, directors are also required to monitor the effectiveness of the strategy implemented in order to determine the future course of the business (Wheelen and Hunger 2-90). Another vital role being played by the directors is considered as evaluation and influencing. On further explanation, it can be well ascertained that directors are largely responsible for evaluating the performance of the employees. Moreover, they are also expected to influence the employees to attain the organizational objective. On further note, it has been observed that the board of directors usually examines the proposals and decision among others made by the management. Another major role of board of directors is related with initiation and determination. Initiation involves delineation of mission and strategies for an organization (Wheelen and Hunger 2-90). BestBuy Company in the year 2012 faced challenges pertaining to the corporate governance issues. According to the news, the company was in the midst of financial risk, company’s chief executive officer Hubert Joly has been faced with an accelerated governance issue related to accounting which has worsen the atmosphere within the organization . Accounting issues is one of the major governance failures that can ruin the entire business activities, if not mitigated on immediate concern. In order to deal with this issue, the board of directors of the organization launched a new tablet with advanced features named ‘Insignia Flex’ in order to compete with its major competitors like Apple incorporation (Wheelen and Hunger 2-90). BestBuy Company has undertaken a philanthropic initiative named as ‘Best Buy Scholarship Program’. This scholarship program has provided around 21.8 US million dollars to 17,644 school students’ for realizing their dream. This has ensured the company’s involvement in the corporate social responsibilities and has created goodwill amidst the societal context. 3. COMPETITION & PORTER’S FIVE FORCES Michel E. Porter has given a five forces model that has assisted the organizations to effectively frame strategies in order to sustain long term competitive advantage. Rivalry among competitors, threat of new entrant, supplier’s bargaining power, buyer’s bargaining power and threat from substitutes are the five major element of Porter’s Five Forces Model. During the year 2011, the company has been ranked in the9th position amidst 100 largest stores. Sales figure of the company revealed around the turnover of 49.8 billion US dollars. Moreover, BestBuy Company has also been able to retained 11th place for being the best online retailers in the year same year i.e. 2011. On further observations, it has been ascertained that BestBuy’s major competitive advantages firmly associated with its well-trained and experienced staffs. In this aspect, these staffs are also equipped with advance knowledge related to the products being sold in the market along with the emergence of the latest technologies that have influence over the competitive position of the company. Additionally, BestBuy Company also endures the cost leadership as its competitive advantage among others. Application of cost leadership has helped the company in mitigating financial issues more efficiently. The company has faced challenge, whereby the customers’ mainly browse through the online retail store of the company but actually make the purchase from other online retailers. In this aspect the ‘show-rooming’ behavioral dimension of the customers’ has resulted in the acceleration of the company’s cost (Wheelen and Hunger 2-90). In order to mitigate this particular challenge, the company’s management has come up with the strategy of Geek Squad. In accordance with the specialized knowledge of the Geek Squad, it has created leverage for BestBuy Company. This also ensures the competitive advantage of the company over other online retailers. Correspondingly, the other various competitive advantages of BestBuy involve efficient price matching and the selection of appropriate retail locations for its operations. BestBuy Company endures various core competencies. The management recruits skilled and talented employees in order to accelerate the productivity and also reduces the time being allotted to competence. The internal environment of the company reflects knowledge-sharing culture. Moreover, this company provides ample opportunities for the young and experienced employees. New leaders are initiated within the company management speedup the work processes being involved. Moreover, the company management retains the knowledge of the employees, even if they transferred to other jobs. These can be considered as the core competencies of the company (Wheelen and Hunger 2-90). BestBuy’s five forces models explains about the competitive advantage that is essential for gaining sustainable competitive advantage over its rivals. BestBuy has been considered as the dominant player in the consumer electronic retailer industry. Nonetheless, the company is faced with fierce rivalry form the competitors such as Wal-Mart Stores Incorporation and Costco Wholesale Corporations that occupies a significant part within the similar industry. BestBuy faces minimum threat pertaining to new entrant, but potential entrants frames a larger base that might create a hurdle in the growth of the company in near future. The degree of threat from substitute is quite high as there are several other companies offering the similar type of products and services to that of BestBuy. . Concerning with the bargaining power of the consumers’, the company enjoys a better position as bargaining power of consumer in retail industry is limited. Lastly, the bargaining power of the suppliers is relatively higher in case of consumer electronic retail sector that creates hurdle in the growth of the company (Wheelen and Hunger 2-90). The sixth force is considered as the relative power of the stakeholders other than the suppliers and buyers and includes factors such as government and external communities. In case of BestBuy Company, employees within the company are skilled and highly experienced who contribute their valuable service for accomplishing the goals of the company. 4. VALUE CHAIN The business model of BestBuy Company practices is based on the aspects of capitalizing over the benefits of scale and location. The company has introduced a policy related to match up pricing. This policy assisted the online retailers to collect the taxes that ultimately narrow down the gap between online and in-store sales. Another concept being introduced by the company is ‘stores-within-stores’ (Wheelen and Hunger 2-90). Value chain’s components incorporate operational excellence, product leadership and customer intimacy. It has been ascertained that the organizations pursue operational excellence through cost minimization along with convenience maximization. Product leadership focuses on the design of innovative products and services. Customer intimacy basically mitigates the requirements of the consumers’ by delivering the product at appropriate price, place and time. Best Buy Company frames various strategies in accordance with operational excellence value chain. The company greatly relies upon the information system for reducing the operational costs. It further relies upon complex events for maximization of the sales. The company outsources the support along with the other IT activities that assisted it in the reduction of cost and direct the focus on core competencies. On further note, the company also prepared various procedures for operating business involving less leeway (Wheelen and Hunger 2-90). BestBuy has integrated various strategies with its value chain activities associated with customer. The company applies shopping assistance for accelerating the customer base. It further implements Greek Squad as a service guidance that assists the company for growth and development. Concerning the dimension of the value chain the company recruits well trained knowledgeable employees for the acceleration of the productivity. Rewards programmers have been initiated by the company such as ‘zero financing’ for the selection of appropriate customer target. The company has implemented various strategies to keep its focus on personal requirements of the consumers’. It has been further observed that social media is extensively being applied by the company for gathering information from various sources. Such approach has facilitated in its growth and development. Product leadership is another dimension of value chain that has assisted BestBuy Company to develop a mobile network of its own. Moreover, by applying this value chain strategy, the company strives to develop its own commercial venture for profit motive. These depict the diversified areas pertaining to the value chain of BestBuy Company (Wheelen and Hunger 2-90). 5. GENERAL STRATEGY Corporate strategy of any organization basically represents the company’s attitude towards management of the diversified product lines and business operations. Corporate strategy usually incorporates three base elements which are stability, retrenchment and growth. It has been observed that BestBuy’s advanced strategies provide sustainability to the company in the midst of competitive market scenario. Observations revealed that the retailer’s change of share price has gained a momentum over other strategies. The CEO Hubert Joly has changed the scenario of BestBuy Company in order to sustain its business and attain greater competitiveness within the highly competitive market with competitors such as Wal-Mart and Costco among others. ‘Space optimization’ is one of the latest strategies being undertaken by the company with an objective of increased sales. Few examples of the ‘Space optimization’ of BestBuy Company are ‘Samsung experience shops’ and the ‘window stores’. In this aspect, the particular strategy has provided profitability to the company and established an extensive loyal customers’ base. In-fact, recent observations depicts that BestBuy will earn greater profits in the next two years by adapting the strategy of ‘Space optimization’. Another major strategically advancement of the company is ‘Geek Squad’. This strategy has in-fact assisted the company to cement its position as a successful electronic consumer retailer within the competitive market scenario (Wheelen and Hunger 2-90). Various strategies being adopted by the company endures certain strengths and weaknesses. The core competency of BestBuy Company is regarded as the Geek Squad. This strategy has helped the company in facing fierce competition in the market place. Correspondingly, the major strength of the company is its goodwill and familiarity amidst the customers’. The major disadvantages associated with the implementation of the ‘Space optimization is funding and the priority conflicts. Funding must be ample and continuous for the implementation of the aforementioned strategy (BestBuy, “About BestBuy”). The above study has provided an understanding that threat from new entrant in case of consumer electronic products is limited. But in near future, it might accelerate and create hurdle for the growth and development of the company. Therefore, the company might adopt advanced strategies, which will enable the company to gain competitive advantages over other competitors (BestBuy, “About BestBuy”). Works Cited “About BestBuy.” BestBuy. 2013. Web. 30 Jan. 2014. Wheelen Thomas L. and J. David Hunger. Strategic Management and Business Policy toward Global Sustainability. New York: Pearson Education, Inc, 2012. Print. Read More