Best Buy as a Well-Established Company - Term Paper Example

Strategic Management: CEO Project III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT) 3 Natural Physical Environment: Sustainability Issues: Every business faces issues related to sustainability and so does Best Buy. The electronic industry faces several regulations along with restrictions for the safety of the environment and the society. These regulations help in keeping the environment clean and making the company aware regarding the society. One of the major issues faced by Best Buy is related to the carbon emission regulation by the government. The government wants newly developed products to have a better life cycle which can be recycled and disposed properly after the usage. This will help to reduce the carbon footprint. With the increase in the effect of global warming along with the thinning of ozone layer, it is of significance for the electronic goods to be recyclable to reduce the level of carbon footprint (Mann, “Best Buy Research Report Final”). Another issue faced is related to electronic waste which is creating a negative impact on the planets and affecting the society as well. This is impacting the natural resources such as trees, water as well as minerals thereby creating an effect on the society as well. Thus, to address such issues Best Buy has initiated the recycle program to minimize the effect of e-waste. It is reported that the company has collected ‘96 million Pounds of consumer electronics’ to minimize the effect (Mann, “Best Buy Research Report Final”). Furthermore, the company in order to maintain the natural environment is creating products which are energy efficient for the consumers. This will help the society to save energy as less energy will be used by the consumers. Hence, this will have a positive impact on the nature and the society. Consequently, it is determined that these energy efficient products have prevented nearly 680 million Pounds of carbon Di-Oxide (CO2) from inflowing in the environment (Mann, “Best Buy Research Report Final”). 3.2 – Societal Environment 3.2.1 – Economic Economic circumstance prevailing within a country plays a major role in the sustainable business operations of a company. Correspondingly, the purchasing behavior of the consumers depends on the spending power of the individuals. Best Buy as an organization deals with the products which are of discretionary nature. Thus, the demand for these products often decreases with economic turmoil as was the case in the year 2010. During these times, people possess less disposable income to expend. To increase the sales of the product of Best Buy and to minimize the apparent threats, the retailer has focused on providing products to people at low interest finances through the use of the private credit card. This initiative worked in favor of the company and the sales increased subsequently creating revenue for the organization at large. However, the credit crisis restricted the companies such as Best Buy from offering deferred interest financing to the buyers. The aspect of pricing and debt management is another major concern which has affected the success of the company during the economic downturn (Wheelen and Hunger 770-777). 3.2.2 – Technological The electronic industry has changed significantly from the initial years. Electronic goods were initially used by people as a necessity however in recent years many of the offerings are being considered by users as luxury items. With the advancement of technology, Best Buy has shifted from the traditional selling of the cassettes to DVD’s and then to online music. Moreover, with the improved and innovative technological advancements, the product life cycle has become quite reduced. Best Buy is incorporating technological advancement within its business practices by providing new technology driven products through the use of online store. The company is offering several products to the people with the help of technological advancement. It has also focused on minimizing waste that may affect the surrounding environment. Best Buy implements customer centricity model to get relevant information about the enhanced and advanced features of the products. Through this model, people are able to purchase products offered by Best Buy. This service is provided only by this company. The recyclable program is one of the features of the company that has facilitated in reducing carbon emission (Wheelen and Hunger 770-776). 3.2.3 -Political-Legal Best Buy has its operations globally and hence needs to deal with the foreign along with domestic issues. The company operates not only in the United States but also in Canada and China. The maximum revenue for the business is generated from its operations in the US. For making expansion and deriving steady business opportunity, the company has to deal with certain political and legal aspects in its different operational countries. As the company is socially responsible, it adheres to all the policies and legalities. The trade law is becoming an issue for Best Buy business for sustained revenue generation. Monitoring the foreign trade market is of importance to capitalize on the finances by following the foreign trade aspects. Governance law and pollution standards are taken into account by the company to avoid any loss and legal issues in respect of the societal environment. Best Buy is taking relevant measures to reduce carbon emission and thus abiding by the pollution standards of the countries (Wheelen & Hunger 770-776). 3.2.4 – Socio-Culture The socio-cultural dimension takes into consideration the values, customs and morals of the communities. The use of non-disposable electronic products by the people has affected the society at large as the waste products were causing pollution. The negative impact of the pollutants in the society has made people to shift their focus towards Best Buy’s products which are recyclable in nature. This would create a positive impact on the society. As the customers are educated and are showing concern towards the society, the products offered by Best Buy are well developed which helps in creating a better impact on the society along with meeting the needs of the people at large. Moreover, Best Buy allows people to get information through online mode regarding the products before consuming it (Wheelen & Hunger 778-779). 3.3 – Task Environment 3.3.1 – Threat of New Entrants Best Buy is a well-established company in the electronic sector. It produces products which are cost effective, energy efficient and also recyclable. In this regard, it can be stated that the threat of new entrants for Best Buy is low. The capital requirement for new entrants is high as it will have to meet the standards set by the existing companies. Besides, the distribution network is another vital aspect which is to be taken into consideration. The new entrants might have low profit margin in the initial years as established companies such as Best Buy’s products are of high standards and are meeting the needs of the customers. The electronic sector is a consolidating industry hence it focuses on merging with the other existing companies. Customer loyalty towards Best Buy confines the new entrants to capture the market (Wheelen & Hunger 771- 772; Best Buy 1-53). 3.3.2 – Bargaining Power of Suppliers The bargaining power of suppliers is low in case of Best Buy as there are various suppliers available in the market for the company to purchase its raw materials. Thus, the company gets it products at a low cost from the manufacturers. This low price is transferred to the people in the form of benefits. Moreover, to attract the top players of the market, the suppliers offer discounts to the retailers. Correspondingly, in case of Best Buy, if it’s market share declines then the suppliers will be affected and their negotiation power would be lowered even more (Best Buy 1-53). 3.3.3 – Threat of Substitute Products or Services The threat of substitute services or products is high for Best Buy due to the increase in the number of the online retailers in the market. The online retailers provide benefits such as home delivery and lower prices to the people with various options. The e-commerce retailers of electronic products act as a substitutes as they provide similar goods to the people at a reasonable cost along with offering ease of shopping. Furthermore, the online players and brick and motors stores pose a threat of substitution for Best Buy (Best Buy 1-53). 3.3.4 – Bargaining Power of Buyers The bargaining power of customers or buyers is high in this sector. The inherent buyers of Best Buy are individuals and businesses that use products for the entertainment purpose as the company offers discretionary products. The customers have the power to gain information regarding the products offered by different companies through the use of online sources and hence they can bargain on the products. The availability of substitutes is high as well which is enhancing the bargaining power of the customers. Moreover, the bargaining power is high as the customers are able compare the prices of the products through the online sources directly and select the best cost effective products. The buyers have high bargaining power also because of the availability of several competitors in the market. The customers are the main source of revenue generation and hence their bargaining power is more (Best Buy 1-53). 3.3.5 – Rivalry among Existing Firms There are various players in this industry and hence the competition is high. There is a strong competition from leading retailers such as Wal-Mart as well as Target. The level of competition has increased in the market as the competitors are selling identical products with less differentiation in terms of price and quality. The competition is high as the products are not only available at the physical stores but through the internet as well. Besides, every competitor provides the customers with loyalty programs and attracts people with lucrative seasonal as well as weekly offers. Amazon and Netflix are the major online competitors of Best Buy which can attract and retain the existing and prospective customers of Best Buy (Best Buy 1-53). 3.3.6 – The 6th Force The 6th force highlights the power of stakeholders. The performance of a company largely depends on its stakeholders. The power of stakeholders is high for Best Buy as they have huge impact on the company’s business strategy. Employees can be termed as the major stakeholder. Subsequently, the company strives to maintain correlation with them by motivating the employees through using different avenues. One of the key approaches is ensuring safe and respectful environment. The other stakeholders for Best Buy include customers, suppliers and communities. The available set of loyal customers is the other vital stakeholder of Best Buy who possesses distinct bargaining power and whose needs are rendered utmost prominence within the strategic business decisions made by the company in the long run. In this regard, it can be acknowledged that Best Buy needs to continuously change its strategies to meet the changing demands of the customers as they are one of the major stakeholders. Suppliers are of importance as well for Best Buy as the sustainability of the business depends on the quality of offerings and the ethical business practices of the suppliers. The leading suppliers for Best Buy include Toshiba and Sony. Moreover, with regard to communities, Best Buy has various facilities worldwide which affect the environment, safety and behavior of the society at large. Correspondingly, the investors are also one of the valuable stakeholders of Best Buy. There are several investors who have shares of Best Buy. Investors are important as they help the business to function efficiently by providing necessary financial support. Therefore, in order to uphold cordial relation, meetings are held with the investors in case of Best Buy to keep them abreast with the existing strategic decisions made by the company. This in turn enables the company ensure prosperous investor relations (Best Buy 1-53). 3.4 – EFAS Table Table 1: External Factor Analysis Summary (EFAS) External Factor Analysis Summary (EFAS) is one of the strategic management tools, which helps to evaluate the competitive environment of Best Buy. EFAS assists in determining the ability of the company to take effective advantage of the opportunities and to reduce the risk from the external threats. From the evaluation, it has been determined that the prevailing opportunities for Best Buy include scope to expand globally, recyclable products, E- wastage minimization along with expanding industry. On the other hand, the persisting threats for the company entail the concern of recession, competition, online retailers and consumer outlook. According to the findings determined in table 1 based on the weighted score of opportunities and threats for Best Buy, the calculated total score is 2.65. It has been ascertained that Best Buy possesses certain decisive opportunities owing to its sustained focus on offering products of recyclable nature. The company takes into consideration the e-wastage factor. On the other hand, it is determined that the presence of online retailers and the factor of growing competition are the major threats for Best Buy in its endeavor to ensure multifaceted growth. The total weighed average score of Best Buy derived from EFAS is above average. This implies that the company is effectively taking advantage of the prevailing opportunities to a certain extent which in turn enables it to ensure long-term stability and progression. However, it can also be highlighted that there are certain genuine and lingering threats for Best Buy such as the presence of ever-developing online retailers which needs to be dealt with tactfully. Works Cited Best Buy. “Corporate Responsibility & Sustainability Report.” Uploads. (2013): 1-53. Print. Mann, Jefferey. B. Best Buy Research Report Final. 2014. Web. 10 Mar. 2014. Wheelen, Thomas L, and J. David Hunger. Strategic Management and Business Policy. New York: Pearson Education, 2012. Print. Read More