The Operations of Best Buy and Its Social Responsibility Initiatives over the Last Couple of Years - Case Study Example

TITLE by Name of author Name of class Name of Professor Name of school Location of school Date Executive Summary The report that follows looks at the operations of Best Buy in terms of its social responsibility initiatives over the last couple of years. The report denotes Best Buy as a customer-centric organisation that takes pride in meeting customers’ demands and desires. The report further gives reasons why Best Buy has been able to maintain competitive advantage in the industry while at the same time driving sustainability initiatives. The company continues to rely on its knowledgeable employees, customer segmentation strategy, good leadership and its unrivalled customer service. This report also delves into the investment that Best Buy has been able to invest in helping customers on ways that they can be part of an environmentally friendly community and how these investments have been positive to the company. Investments such as recycling kiosks, haul-away services, recycling gift cards, trade-in programs and pick up services have all been aimed at promoting an environmentally conscious customer base. It goes ahead to detail how these investments have been good investments for Best Buy. The impact of the social responsibility efforts by Best Buy is discussed in detail in this report. It looks at how the company’s major stakeholders – shareholders, customers, employees and suppliers – have been impacted by its social responsibility initiatives. Customers have been able to save on energy costs; shareholders’ enjoy the positives of reduced operational costs, employees’ philanthropy and morale are boosted and suppliers have the chance to improve their businesses if they are to work with Best Buy. Additionally, the report discusses some of the major ethical challenges facing most businesses in the 21st century. Such ethical issues highlighted in the report include inequality in pay perks, employee harassment, accounting ethics and social networking issues. Recommendations are then made in the end as to how businesses can create an ethical organisational culture. Recommendations such as creation of an ethics committee, education and clear organisational procedures are some of those suggested in the report. Introduction Best Buy is a company that deals in retail of consumer electronics majorly in the United States of America. It commands a 21% markets share making it arguably the biggest markets share holder on the consumer electronics specialty sector (Ferrell, Fraedrich & Ferrell 2013). Having command of this large market in the U.S, Best Buy is looking forward to expanding its operations overseas, especially in Mexico and China. The electronics is well known for its cheap but high-quality products. However, it is its consumer-centric strategy coupled with its environmental sustainability outreach programs that sets it apart from other major players in the sector (Ferrell, Fraedrich & Ferrell 2013). Having researched and found out how being sustainable is important, the company has over the year implemented several far-reaching recycling programs that meet its customers’ needs. It is such programs that have ensured the company is recognized as a socially responsible company across a wide array of quarters. The adoption of programs and systems such as ROWE system, to help its employees and flexibility as well has seen the company received numerous awards (Ferrell, Fraedrich & Ferrell 2013). Best Buy Competitive Advantage Best Buy’s vision “People. Technology. And the Pursuit of Happiness” is what has taken the company to where it is today (Lamb, Hair & McDaniel 2008). Having the aptitude to fight other big competitors like Amazon and Ebay is no minor feat and Best Buy has proved over the years that it is fit for the long haul. One of the reasons why the company has been able to maintain its competitive advantage over competitors is the fact that its leadership is able to lead from the fore front and ‘walk-the-talk.’ This was clear for everyone to see when Hubert Joly, the CEO appointed in September 2012, arrived for duty the following day ready to work. He literally rolled up his sleeves and worked at various local Best Buy stores for a whole week. During this period, he empowered store associates to make reasonable price decisions on the spot so that they could close every possible sale (Zentes, Morschett, & Schramm-Klein 2011). It is a well known fact that electronic consumers practice cross-shopping across different stores; Best Buy, Amazon, Ebay and Walmart. These consumers also understand pretty well what the current prices of electronic goods are, from TV’s to digital camerals. Given this situation and the fact that competition is high resulting into slim profits, closing any possible sale would improve the profit margin for any of these companies. Fortunately for Best Buy, Mr. Joly has got them there and competition is playing catch up to this strategy. One thing that is worth pointing out is that Best Buy strategies ca not be replicated by online electronics retail stores such as Ebay and Amazon. Just like Apple stores, Best Buy boasts of a well trained and well-informed sales staff. The sales staff know everything about the products on sale as well as the latest products in the market. These employees have been given the tag ‘Geek Squad’, and although they were at first not helpful as it was hoped, Mr.Joly came in and changed all that. With fresh vigor and the renewed need to improve customer service in all Best Buy stores, the ‘Geek Squad’ desks are now full every other minute with customers inquiring on various product related issues (Hill and Jones 2012). A look at other major players in the sector, Amazon, Ebay, Walmart and Costco, and it is clear for anyone that they all have an assortment of offerings with great value. However, today’s customer is not just looking for great value, customer service, introduction of innovative products and loyalty programs are what rank high in the list of the 21st century customer. It is the availability of these in Best Buy stores that have kept customers going to shop at Best Buy. The one-on-one customer service has enabled Best Buy to stay ahead of the competition (Hill and Jones 2012). A related strategy is the company’s Speakeasy brand that is tailor-made for its small-business customers (Ferrell, Fraedrich & Ferrell 2013). Through the Speakeasy brand, business owners are able to call the company at any time with questions regarding the company’s products or services. This strategy has received positive feedback and its approval rating has been high ever since it was implemented. Another reason why Best Buy has been able to maintain competitive advantage is the fact that the company implemented a customer segmentation strategy that saw it customer base divided into five different levels; small-business consumers who use Beat Buy’s products and services, mothers who stay in the suburban and would like to enrich their children’s life with electronic innovations, men with families looking for ways to keep their families entertained, young men thirsty of new technological innovations and lastly wealthy professionals who look for the best in terms of technological gadgets for their professional lives as well as for entertainment (Hitt, Ireland, and Hoskisson 2012). According to Zentes et.al (2012), the way to achieve competitive advantage is through supply chain management whereby products and services are supplied to customers keeping in mind that all customers are not the same and that each has different needs and desires. Best Buy has been able to achieve this adequately by carrying out its market segmentation strategy. The positioning of the company’s stores has been done in a way that all customers are taken care of with regards to their preferences and desires (Hitt, Ireland, and Hoskisson 2012). A good example is in the Pasadena store where the management decided to refurbish the store so that it could appeal to the company’s customers who were mothers (Zentes, Morschett, & Schramm-Klein 2012). The refurbishments included the transfer of small electronics to low racks found at the store’s walk way so that mothers could easily reach them. Basically, the company’s decisions are based on the customers’ point of view, by trying to understand clearly what the customer needs and trying its level best to meet these needs (Zentes, Morschett, & Schramm-Klein 2012). Employees make an integral part of any company and if any company is to remain competitive in the industry it is operating in, then its employees must be up to the task (Cantrell & Smith 2013). Much as it listens to its customers, Best Buy makes a point of listening to its employees as they are the ones who have to deal with customers on a daily basis and therefore their input is invaluable. The company has created platforms on which employees can openly communicate with management at any time to give their views or even ideas. Additionally, training of its employees has been Best Buy’s culture for a very long time as it requires employees to be knowledgeable in diverse fields related to each employee’s sector of operations (Cantrell & Smith 2013). Through various program aimed at improving employee productivity, the company has been able to add to its bottom line while at the same time decreasing electronic waste. For instance, the Geek Squad, through the company’s open-source approach, came up with a new design to its HDMI cables which led to the reduction of the amount of plastics used in the packaging by 30% (Ferrell, Fraedrich & Ferrell 2013). The design not only combated electronic waste, it also appealed to customers which led to an increase in the sales of HDMI cables. The ROWE approach allows employees to choose where they feel they will be more productive working from and this has improved employee satisfaction (Ferrell, Fraedrich & Ferrell 2013). Cases of micromanaging are now a thing of the past for Best Buy. Overall, a happy and satisfied staff will almost certainly transfer that satisfaction to the customers by providing the best customer service they can offer and hence keeping Best Buy ahead of the pack (Cantrell & Smith 2013). Best Buy Investment to Recycling Best Buy’s initiative to become a more environmental friendly company is well within its strategy and vision and as such, the company has invested heavily over the past few years on curbing e-waste (Ferrell and Hartline 2012). Resources in form of time, funds and staff have been well employed by Best Buy to further its recycling initiative by teaching customers ways they can take part in the company’s recycling initiative. In the 21st century, everybody is seeing the effects of global warming, if not personally experiencing it in one way or another. From heat waves to receding snow levels in the arctic, the effects of global warming as a result of neglecting the environment is clear for all to see (Turker 2009). Thus, customers are today more than willing to take active part in any kind of eco-friendly programs such as the one Best Buy is driving in full force. Investing resources in such programs has been a worthwhile investment for Best Buy. Given that consumers today are well informed, they would more likely stick with a company that promotes the conservation of the environment and this in turn leas to repeat customers as well as attracting new customers and employees (Neu 2013). A good example is when Best Buy refunds customers the $10 fee for recycling electronic products with a $10 gift card (Ferrell, Fraedrich & Ferrell 2013). This program has ensured that new customers are attracted to the company as they are assured of a gift card with every non-functioning electronic product they take for recycling. This is definitely a plus for Best Buy as sales are sure to increase in the long run. Best Buy can then sells these recycled products to online retail stores such as eBay and at the end of it all, make money. It can be seen that the company has sold a single product twice as a result of investing in helping customers to recycle their electronic products. This is also evident in Best Buy’s support of manufactures who design products that are more environmental friendly as well as easy to handle in the recycling process (Ferrell, Fraedrich & Ferrell 2013). By supporting these initiatives, Best Buy ensures that its easily recyclable products are purchased in bulk thereby adding to the company’s sales in the end. According to the U.S. Environmental Protection Agency estimates that approximately 3.2 million tons of electronic waste fill landfills in the United States alone (Environmental Protection Agency 2009). The situation is even dire considering that only 20% of this is recycled. It should be noted that these e-waste have useful commodities in them too such as glass, plastic and different kinds of metal (Environmental Protection Agency 2009). By allowing customers to use the company’s in-store recycling program to drop off worn out products which the company then takes to its recycling partners, Best Buy is able to get a return on these useful parts (Aston 2012). The biggest advantage of all this investment, however, is the innovation, focus on goals and the awareness of challenges (Gunther 2009). By investing resources in helping consumers participate in recycling products, a sense of discipline is created among company employees and management. This helps the company to push forward and gives it a chance to measure the progress made in its sustainability endeavors. As the old adage goes, what gets measured gets done, the company has been able to grow the business, eliminate e-waste and at the same time encourage employees to improve the company’s customer experience (Aston 2012). Given that the company has invested a lot in its sustainability programs, these investments translate to high targets which in turn make failure and mistakes a reality. This thus ensures that the company works extra hard to avoid any possible failures and in the long run, the challenging environment has become a platform on which Best Buy has improved its business year in year out (Gunther 2009). Impact of Best Buy Social Responsibility Efforts One of the main factors dictating the negative or positive performance of any company can be said to be social responsibility (Paetzold 2010). Companies today, whether big or small, have invested heavily in social responsible causes in a bid to maintain their current customers as well as attract new customers. This is made possible by the efforts of the company management and its employees working towards giving back to the community within which they operate in (Paetzold 2010). being one such company, Best Buy has been driving several eco-friendly and sustainability initiatives over the past few years (Ferrell, Fraedrich & Ferrell 2013). These initiatives have had both direct as well as indirect impact on all shareholders, customers, employees and suppliers. Associating oneself with a social responsible company is the norm today and all those involved with Best Buy operations have not been left behind. Shareholders For a very long time, there has been debate as to whether there exist any connection between business social responsibility and better financial performance (Paetzold 2010). A study carried out in 2002 at DePaul University found that the financial performance of the Business Ethics Best Citizen companies were way better than those companies that did not make the list. It is for this reason that any company would want to make decisions that are first and foremost, in the interest of its shareholders. What shareholders need from their investment a company are returns that are attractive and which would encourage them to invest even more (Gunther 2009). For Best Buy, its efforts in initiatives in social responsibility have to a great extent improved the financial performance of the company. Shareholders will be interested in most things that a company is involved in but their ultimate interest is the company’s financial performance (Paetzold 2010). As part of its social responsibility, Best Buy partnered with Business for Innovative Climate and Energy (BICEP) in a bid to reduce its energy consumption (Ferrell, Fraedrich & Ferrell 2013). The company plans to do this by reducing its energy emissions through using skylights to improve its stores lighting. The company management has also implemented a policy that has seen company truck drivers kill their engines whenever they are idle in the parking bays. All these initiatives have seen the company reduce operating costs considerably which is a positive for shareholders (Paetzold 2010). If a company’s overhead costs are reduced and sales increases, what this means is that company’s profits will increase and in the long run the value of the company’s shares will rise not to mention its dividends. Employees Best Buy employees are proud to be associated with a company that is known for its great social responsibility programs. At Best Buy, they are given the opportunity to take part in volunteer causes of their choosing and the company will provide cash awards to nonprofit organisations (Bowie 2013). This offers employees a form of satisfaction and reduces the chances of leaving the company in search for another job. Employee awards are also available for employees who exceed volunteer expectations via the President’s Volunteer Service Award (Ferrell, Fraedrich & Ferrell 2013). Through the company’s Local Giving Program, employees are given the chance to give ideas on how they would want the company’s Children’s Foundation money to be allocated among nonprofit organisations. This way, employees’ sense of philanthropy is increased and their morale boosted as well. Customers Being a customer-centric company, Best Buy customers have been able to benefit the most from the social responsibility programs that the company has been running over the year. Customers who want to buy a new product are asked to bring in an old or non-functioning product for recycling and although they are asked to pay a $10 bill for the recycling process, they in turn receive an equivalent $10 gift card from Best Buy (Ferrell, Fraedrich & Ferrell 2013). The company then encourages them to use the gift card to purchase any product of their choice from its stores. In essence, customers in a way get the gift cards for free. With such a program in place, customers leverage on this and keep going taking old products for recycling with the $10 gift card in mind (Ferrell, Fraedrich & Ferrell 2013). Social responsibility efforts by Best Buy have also enabled the company to provide its customers with new innovative products. This is evident from the company’s support of electronic manufacturers that make products which are easy to recycle. As such, Best Buy has been able to offer lighter electronics that are easy to recycle such as organic LED TVs (Ferrell, Fraedrich & Ferrell 2013). Such products are often cost effective in the long run because they do not use a lot of energy and thus customers are able to save on energy costs (Paetzold 2010). Other energy-saving products that Best Buy offers refrigerators, printers, laptops, air-conditioners and many others and this has been made possible by the company’s partnership with ENERGY STAR (Ferrell, Fraedrich & Ferrell 2013). Electronic products from ENERGY STAR meet strict energy efficiency guidelines that are set by the U.S. department of Energy together with the Environmental Protection Agency. According to sales estimates of ENERGY STAR products by Best Buy in 2009, it is estimated that consumers saved approximately $89,000,000 in utility bills (Ferrell, Fraedrich & Ferrell 2013). This is a massive saving that would attract any new customer to Best Buy stores. The haul-away services by Best Buy is also another way that saves customers money by having the company offer to carry away a customer’s old television for recycling and for free (Ferrell, Fraedrich & Ferrell 2013). Best Buy only provides its haul-away services for free if the customer purchases the product from its stores. However, if the customer wants to hire the company to haul his/her large electronic away without a purchase then the company charges $100. This high fee by the company is meant to attract in-purchase purchases from environmentally-conscious customers. Suppliers Best Buy’s social responsibility efforts have had a tremendous impact on its suppliers. This is because the company has enforced sustainable practices and principles amongst its suppliers. The company thus has in place a Suppliers Compliance Standards and suppliers must adhere to these standards (Ferrell, Fraedrich & Ferrell 2013). Suppliers who fail to adhere to these standards are dealt with accordingly and those that do not show any signs of adhering to these standards are let go by the company. Additionally, Best Buy only deals with partners who value their worker’s rights and as such, the company carries out human rights audit of their suppliers to make sure that they observe the worker’s rights (Ristau 2011). Suppliers on the other hand strive to make the company’s suppliers list given the reputation that Best Buy has in the U.S. and overseas too. These suppliers are thus forced to work extra hard to meet these standards and therefore become the best in the business (Paetzold 2010). Conclusion Being arguably one of the largest electronics retail stores in the U.S. Best Buy has done a remarkable job with its social responsibility initiatives. Industry players know very well how difficult it is keep up with the stiff competition and make a profit while being actively involved in sustainability causes. Best Buy’s ability to take good care of its employees, customers and shareholders can be said to be the main factor of its marvelous performance in all areas, including financially. If the company continues to implement innovative consumer-centric strategies, then online electronic retail stores will have do something extraordinary to beat what Best Buy has to offer. Otherwise, customers will continue to visit Best Buy mortar and brick stores to shop. Ethical Challenges Facing Businesses in the 21st Century The business environment has changed over the years and companies in different industries the world over face numerous of the same ethical challenges (Bowie 2013). Such ethical issues may cover issues such as employee harassment and unequal pay rates in the workplace. Companies are thus trying so hard to come up with strategies that will enable them tackle these issues appropriately. As such, companies that have managed to confront these ethical dilemmas have earned praise or ire from customers depending on the policies and strategies that they have put in place (Ristau 2011). Accounting Practice Ethics Corporate scandals are today perverse and they majorly involve unethical practices in accounting with good examples being Enron and Tyco. In the wake of this, many customers are becoming more hesitant of investing in businesses, and rightly so (Keillor & Wilkinson 2011). Federal governments have thus come up with new financial reporting requirements in a bid to protect consumers. Consumers however continue to feel that much has not been done if the “Occupy Wall Street” demonstrations in 2011 are anything to go by (Bowie 2013). Social Networking Ethics The emergence of social network platforms in the 21st century has brought with it both good and bad. Anybody is able to join freely and post what they feel at any particular time. Like anybody else, employees of businesses across the globe are members of one social site or another (Bowie 2013). There have been cases where employees have posted what might seem as negative comments regarding their workplace or bosses and these have cost many their jobs. There have been therefore ethical as well as legal challenges around the use of social media platforms and the consequences of such actions. This has to a great extent affected businesses as employers have set policies dictating how employees are to use social media when at work and even when their employees are off the clock (Keillor & Wilkinson 2011). Other employers have also been accused of hacking into their employees’ personal social media accounts with the aim of tracking their conversations (Bowie 2013). This has been made possible with a program developed by Cisco System Inc, Cisco SocialMiner, which allows employers to monitor the activities of their employees in the various social media platforms. The fine line existing between an employer’s right to keep an eye on employees and an employee’s right to privacy is hard to define and therefore brings about ethical issues (Keillor & Wilkinson 2011). Workplace Harassment Employers are continually finding it difficult to maintain a professional relationship with employees in the workplace no matter what industry it is. It becomes more challenging when the image a company chooses to portray has a considerable sexual charge (Bowie 2013). It thus creates an ethical challenge regarding the kind of images that the company should use to sell its products and how its employees should conduct themselves in the workplace. Any kind of harassment cannot be justified; however, readiness to use sexually charged imagery in advertising may in one way or another depict a workplace climate where is harmful practices may easily occur (Ristau 2011). Unequal Pay Packages Labour laws all across the world require employers to pay employees who perform similar tasks in the workplace equally, irrespective of their gender, race, region, age or ethnicity. However, the issue of unequal salaries continues to plague most businesses today and is more prevalent in gender circles (Keillor & Wilkinson 2011). A report prepared by the National Committee on Pay Equity in the U.S. found out that the annual salary gap between men and women in 2010 stood at $10,784. The ethical challenge in this case comes about when businesses decided to pay men higher salaries than women and then champion for equality in their business values (Keillor & Wilkinson 2011). Recommendations for Creating an Ethical Culture in the Organization Despite the many ethical challenges facing businesses and organisations in the 21st century, businesses must still try to operate profitably and socially responsibly (Bowie 2013). This can only happen if certain decisions, policies and strategies are reached and implemented. Developing a code of conduct The management of any organisation should develop a code of conduct that will emphasize the organisation’s guiding values. This code of conduct will guide employees and management as well on how they should carry themselves out and that failure to adhere to the organisations rules and regulations will have consequences (Bowie 2013). An Ethics Committee The creation of an ethics committee will help create the required infrastructure needed to make sure that an organisation’s values are a priority in all dealings (Ristau 2011). The character of an organisation, just like an individual’s, needs to magnify integrity and ensure that no gaps exist between the organisation’s championed values and its actions (Bowie 2013). As such, ethics committee created will be tasked with the creation of the required policies that will continuously guide the organisation’s ethical decision making process Education Organisations should also organize ongoing educational forums that focus on ethical issues. Such forums would be of great help to staff in making them understand the differences existing between personal values and organisational values (Keillor & Wilkinson 2011). Once they understand this, employees will be able to make decisions on behalf of the organisation keeping in mind that it is the organisation’s values that should prevail, not their personal values (Ristau 2011). “Getting Aggressive about Passivity” This is a phrase that cements the role of each individual employee in the workplace in supporting the organisation’s positive ethical climate. It emphasizes a culture whereby employees are made aware that they will not be ruled by the ‘bystander effect’ where employees know of a wrongdoing but do not intervene to correct the situation (Keillor & Wilkinson 2011). In most organisations, employees feel that some decisions or acts are the management’s responsibility and therefore do nothing in case they encounter an ethical problem. In order to make this work, an organization will have to put in place a recognized reporting system (Keillor & Wilkinson 2011). Develop Organisational Procedures The establishment of clear and precise procedures will be useful for staff to follow in cases where it is believed that present practices are not in tandem with organisation’s values. This will include for instance a company hotline or an ombudsman (Bowie 2013). With these procedures put in place, company staff will be less fearful of possible retaliation and more likely to articulate their concerns via an existing formal reporting channel (Keillor & Wilkinson 2011). In order for such reporting procedures to be effective, they will have to allow for anonymous communication as well as an appeal procedure for anyone who feels that they suffered retaliation as a result of whistleblowing. Reference Ferrell, O. C., Fraedrich, J., & Ferrell, L, 2013. Business ethics: Ethical decision making and cases. Mason, OH, South-Western/Cengage Learning. Paetzold, K. 2010. Corporate social responsibility (CSR): An international marketing approach. Hamburg: Diplomica-Verlag. Pride, W. M., & Ferrell, O. C, 2008. Marketing. Boston, Houghton Mifflin Co. Bowie, N. E, 2013. Business ethics in the 21st Century. Dordrecht, Springer. Environmental Protection Agency, 2009. Statistics on the Management of Used and End-of-Life Electronics. 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