Strategic Management and Business Policy - Case Study Example

Best Buy Co. Inc FUNCTIONAL STRATEGY Function’s Essential Goal for Best Buy Co. Inc. defined its marketing goals for which were of fourdifferent types that included marketing its product based upon the customer oriented operating model, addressing the requirements of groups in customer lifestyle, to be the best in technological advancement and meeting the requirements of the customers with end-to-end resolution. Best Buy was delighted in its marketing strategy as the products they developed were customer-oriented that catered the requirements and expectations of the customers. On the other hand, operating goals of Best Buy for the year 2014 involved increasing the derived revenue through growth in the customer base, augmenting the market share in the global front to enhance profit, ensuring successful implementation of the strategies relating to sales and marketing all over Europe, and developing multiple products or brands based upon the distinct lifestyles of customers. Best Buy’s in-store operations were organized and to furthermore enhance its operational strategy for the year 2014 it was observed that managers on a regular basis met various store employees and indulged in discussions relating to operational strategies that involved loyalty programs, new product innovation and sales promotion (Wheelen and Hunger, 24 [1] - 24 [13]). Resources to Be Employed. It is required for the operational manager to develop an operating system that would enable the company to manufacture the required number of products. It is also important to ensure that the products should meet the required standards along with incorporating certain specific quality. Moreover, in order to effectively attain the desired goals which include meeting the requirements of the customers, it is very essential to employ certain resources to reduce the cost of manufacturing products along with ensuring that the cost would not exceed customers’ expectations. Technological advancement has been perceived by the company that can be successfully achieved by installing machineries that are updated which would ultimately facilitate Best Buy to produce the product within the given time frame. Introducing a new promotion strategy is also an important tool to generate sales revenue and boost profit. The company must use the research and development department in an effective manner so that it enables the company to develop new products as per the customer requirements (Wheelen and Hunger, 24 [1] - 24 [13]). Measures to Ensure Successful Functional Strategy. Best Buy must develop initiatives for innovative growth by focusing on its core business. It is also considered for the company to derive alternatives and select the best out of the derived alternatives that would result in increased market share all over Europe. It would be worth mentioning that operational excellence can be attained if the company focuses on core business and marketing strategy. Development in the vision of the company must be ensured to bring discipline within the employees so that they provide equal contribution for achieving the desired goals. The resources of the company must shift from product oriented to technology oriented and certain innovation initiative must be taken to meet the customer requirements. It is vital for the company to appropriately follow these measures to successfully achieve the goals that have been perceived (Wheelen and Hunger, 24 [1] - 24 [13]). 2) STRATEGY IMPLEMENTATION Six Sigma And Its Uses for Performance Improvement. According to Jack Welch, Six Sigma is a systematic method for accomplishing perfect outcomes in the production process. The process of Six Sigma involves five phases wherein the first phase is to define the process in which the derived outcomes are lesser than average, the second phase is to conduct process measurement in order to define the present performance, third phase includes analyzing the data to find out the aspects due to the process might be going wrong, fourth phase involves developing the process and eradicating errors and the last phase involves establishing measures for prevention of future errors. For instance, it has been observed that General Electric (GE) effectively uses Six Sigma and it is employed successfully in the organization. According to GE’s Chief Executive Officer (CEO) Jack Welch, it has been understood that Six Sigma is advantageous as it is a suitable program for change in the organization. In terms of its strengths, it is determined that it is a program which has enabled the organization to accelerate the Research and Development (R&D) department along with helping in analyzing how other companies have been more efficient in selling more products than GE. However, there are certain disadvantages or weaknesses for using Six Sigma wherein it has been viewed that in order to provide training for using this program a company might have to incur a huge cost that would surpass savings. Besides, this program cannot be standardized easily due to which the expense of the company would exceed savings (Wheelen and Hunger, 24 [1] - 24 [13]). Issues Being Faced By Best Buy That Has Resisted It to Implement Successful Strategy. With regard to the issues it would be worth mentioning that Best Buy has been facing certain challenges in managing its products and service cycle. The burning issue associated with this facet involved decrease in the profit margin of the company. In addition, shorter life cycle of products necessitated the employees to learn the method of rendering new products with a higher frequency. This in turn augmented the overall training cost of the organization. The unique service model of Best Buy was also threatened by social prerogatives wherein online marketplace was affecting its sustainable existence (Wheelen and Hunger, 24 [1] - 24 [13]). 3) EVALUATION AND CONTROL The traditional balanced scorecard (BSC) model of Kaplan and Norton includes certain financial and non-financial measures. There are four main objectives in BSC which include financial objectives, customer objectives, objectives of internal perspective and learning and growth objective (Wheelen and Hunger, 24 [1] - 24 [13]). Best Buy’s BSC model in relation to financial objectives should emphasize revenue growth. It can be ascertained that revenue growth can be ascertained by Best Buy by improving flexibility in the business function. It is also important for the organization to position itself in the market and Best Buy must have the ability to take advantage of prospective opportunities. The supply chain of Best Buy must be more responsive and the management of the company must make sure that it makes quick decisions pertaining to the functioning of the business. It is recommended that there should be an improvement in the strategy of introducing the new product into the market which would facilitate in increasing sales, thereby bringing about revenue growth. The organization must be driven towards to customers in delivering various services along with solutions so that there is an improvement in the revenue growth (Wheelen and Hunger, 24 [1] - 24 [13]). Best Buy’s customer objective must include improving customer relationship. This can be achieved through understanding the expectations of the customers, ensuring equal treatment of all the customers and providing priority to the needs of the customers. Customer Communication Schedule must be developed to so that the company is connected to its customers and there is a frequent conversation between the customer relationship manger and the customers (Wheelen and Hunger, 24 [1] - 24 [13]). Best Buy’s internal business process objective must include enhancement in the operational excellence. The company must focus towards improvement of its products and services. It is also considered that the company must identify certain strategic objectives that would add up to the operational excellence of the company. It must derive appropriate resources for its production and focus on improvements in its product quality along with service quality (Wheelen and Hunger, 24 [1] - 24 [13]). Best Buy’s learning and growth objective must include employee involvement. The company in order to augment employee involvement must find out the desires of its employees. The top level management of the company must encourage the employees to make decisions pertaining to framing of certain strategies in the organization and use their point of view to make prudent decisions. Positivity must be initiated within the organization which would in turn encourage the employees to function effectively (Wheelen and Hunger, 24 [1] - 24 [13]). Figure 1: Best Buy’s Balanced Scorecard Model Figure 1 provides a clear understanding regarding Best Buy’s BSC model. This customized illustrative model states that Best Buy’s financial objective should be mainly focused towards revenue growth which would help the company to become financially sound. The customer objective for Best Buy is to be considered as improvement in the customer relationship that would provide recognition to the company. The internal objective for Best Buy must be focused towards operational excellence i.e. providing better quality products to the customer along with exceptional service. Finally, the objective for learning and growth of the company should be employee involvement which would result in increased responsibility of the employees along with quick decision making (Wheelen and Hunger, 24 [1] - 24 [13]). 4) GOOD STRATEGY/BAD STRATEGY & THE STRATEGIST The three elements of the kernel of Best Buy’s strategy must be focused towards mitigating the problem faced by the company regarding its product and service. The three core elements of Best Buy’s kernel strategy include diagnosing the challenge, introducing guiding policy and executing coherent actions to tackle these challenges. The first core element of this strategy is diagnosing the problem which highlights decrease in the profit margin, increased training cost for developing new products and social threat to the company through popularity in online shopping. The second element of this strategy involves introducing a guiding policy that would help in overcoming the challenges. This policy must have the initiative of increasing the profit margin which can be effectively done through mergers that would facilitate in collective production and result in reduction of production cost. New product development requires training the employees which involves substantial cost, but this can be a positive constituent for the company in the future perspective as these new products would attract the customers to buy them. The last element of this strategy involves carrying out coherent actions by implementing the guiding policy that has been developed. This strategy would provide the understanding that whether the policy developed is either effective or ineffective. Consequently, a structured approach needs to be taken by the company to ascertain that every level of employee is accustomed with the requirements of new development (Rumelt 77-90).). According to Richard P. Rumelt, the ‘difference between good and bad strategy’ is that a good strategy recognizes the challenges that have been faced by the company and provides a systematic approach to overcome these problems. However, a bad strategy will have a possibility of avoiding the problem and result in ignoring the choices towards solving these problems (Rumelt 9-58). The good strategy used by Best Buy was that it actuality changed from a discount retailer to a service oriented company. The compensation paid to the sales associates changed from commission based to non-commission based which reduced the cost incurred by the company. However, the bad strategy used by the company was that it made its employees to deny the customers for matching the price of the products due to which there was a case filed against Best Buy as it followed an Anti-Price Matching Policy (Wheelen and Hunger, 24 [1] - 24 [13]). Best Buy’s business is based on customer centricity. This is why Best Buy is different from other organizations as it caters the specific requirements of the customers and provides customized service based upon the behaviors of the customers. This difference for Best Buy matters a lot to the organization as it places customers at the core of its actions. Placing customers at the core is a vital aspect to ensure that the business is successful. Customer centric approach used by Best Buy is difficult to imitate as it uses this approach to obtain the loyalty of the customers along with providing a facility of branded experience to its customers. It is worth mentioning that the approach used will provide a huge value to the company in the future prospect as it would increase recognition of Best Buy in the eyes of customers which would in turn result in sustainable growth and competitive advantage for the company (Montgomery 265-277). Works Cited Montgomery, Cynthia A. The Strategist Be the Leader Your Business Needs. United States: HarperBusiness, 2012. Print. Rumelt, Richard. Good Strategy/Bad Strategy: The Difference and Why it Matters. London: Profile Books, 2011. Print. Wheelen, Thomas L. and Hunger, J. David. Strategic Management and Business Policy. United States: Pearson Education, Inc, 2012. Print. Read More