Name: Ahmed Javed (Trinity College Dublin).

Best Buy Co Incorporation:

 Introduction:

 A Profitable growth necessitates renovation and innovation to the company’s strategic corporate
planning. A dynamic, flexible, long-term planning process is required for the ongoing success of the
company. The first rule of revolution is to keep the firm's market share while protecting and
extending the one it already has (Mintzberg, McCarthy and Markides 2000). The profitability of an
enterprise is derived from continuous improvements in its performance. It also depends on new
product introductions, or improved customer service options. Innovation is a form of corporate
creativity. It also requires entry into new markets and the use of new skills. The goal of new
businesses is to take advantage of new opportunities that are strategically positioned to allow for
future profitable growth.   A market-based strategy and a firm’s competencies are vital in
formulating a company's renewal strategy (Chakravarthy and Lorange 2007). Varied markets and
geographic areas define distinct marketing and distributional regions. For example, the group may
be categorised as "wireless products in the USA".

 Reliability is the second aspect. These assets include tangible resources such as raw materials and
equipment, such as machinery but it also include things such as what the company is famous for, or
its good relationships with its customers. In a nutshell, any asset or capability that contributes to a
company's ability to differentiate itself can be a potential differentiator in the marketplace.

However, fresh competencies must always be sought to safeguard the firm's market share but also
to ease entry into new segments (Porter 2004).

 Chakravarthy suggests that it is not enough to simply react to existing opportunities, but is also a
matter of exploring new opportunities. But very often companies face a real challenge in adopting a
method through which it can protect its core business and transform its existing models to enter into
new markets and gain competitive advantage. This is described as “leverage” and “build” by
Chakravarty (Chakravarthy and Lorange 2007). 

 Both leverage and build should be considered to be dependent on one another. “Leverage” and
“build“are two different ways of applying flexibility; they serve as a continuous source of renewal. 
Firms can use such renewal strategies to undergo a dramatic transformation, but through an
evolutionary process not through revolutionary one.

 Best Buy Inc has successfully transformed itself through renewal strategies. Best Buy has achieved
long-term profitability and sustained growth through such renewal strategies.  

 Growth through Creativity:

 In 1966, Richard Schulze opened the Sound of Music store in St Paul, Minnesota. By the early 1980s,
the company had grown to 11 locations in Minneapolis/St Paul, specializing in high-end audio
equipment which was aimed at young males. However, when a tornado destroyed the roof of Sound
of Music's largest and the most profitable store in 1981, family members and employees retrieved
stereos and televisions from surrounding parking lots and fields and staged a spectacular Sound of
Music "Tornado Sale". Sound of Music generated more revenues than it did in a typical month (Best
Buy).
 

Schulze recognized in it the beginnings of a new strategy which he referred to as Concept I. This
strategy centred on inventory turnovers rather than per unit margins and it was also aimed at
making the shopping experience more enjoyable (Lorange 2008).

 Under the Greiner's Growth Model this era of growth of Best Buy can be categorised as a “Growth
through Creativity” (Greiner 1998). Moreover, as Greiner suggests, as organisations grow the
operations become complex. This leads to a leadership crisis which was also evident in the case of
Best Buy Inc.

Growth through Direction:

 In 1983, the company was renamed as Best Buy, since then it has pursued several more additional
distinct strategic initiatives. 

 Best Buy sought to open more superstores which offered popular electronics at a lower price by
leveraging the strengths it had developed in its Sound of Music locations. ‘Concept I’ primarily
targeted adult male shoppers and it aimed to broaden the company's geographic reach to include
the entire state of Minnesota. Through the implementation of Concept I, Best Buy developed new
competencies in managing rapid inventory turnovers and learned how to service a chain of stores
spread across hundreds of miles. By 1988, Best Buy had expanded to 100 locations. That same year,
a larger regional competitor, Highland Superstores, began waging a price war (NewYork Times 1989).

 Even though Best Buy had a strong buying power over its vendors, but it was unable to match
Highland's aggressive pricing policies and hence Best Buy was facing insolvency (Chakravarthy and
Lorange 2007).

 Best Buy’s organisational structure at that time didn’t support its rapid expansion. Hence it became
inefficient in its functioning. There was a crisis of leadership emerging within Best Buy. It needed to
re-organise its management structure which would give it a direction to move forward.

 Schultz and his group decided to conduct an internal survey to find out what customers liked most
about Best Buy. Survey results showed that most people did not welcome the commissioned
salespeople in the store because they were afraid of pushy salespeople. In the light of these results
Best Buy launched its concept II stores in 1989 without any commissioned sales people (Bloomberg
Business Week 1998).

 In a retail industry where margins are already very thin, the implementation of concept II was a
major challenge. However, Best Buy focused on building its Operational excellence as a means
through which it managed to reduce its selling costs by half.  Top management of Best Buy reshaped
the firm’s inventory, distribution, planning and control systems. The introduction of formal systems
allowed Best Buy to reduce its SGA expenses from 20.8% of sales to 11% (Gibson 2003)

 With a clear direction from Best Buy’s leader, Schultz, store management had become more
professional in their role. Best Buy expanded its geographic footprint across East and West Coast of
the United States and its sales grew from USD 500,000 in 1989 to almost $5 billion in 1994 (Best Buy
Inc)

 
 This phase of Best Buy’s growth can be best described as “Growth through direction” under
Greiner’s growth model. However, as Best Buy Inc became more diverse and complex, the crisis for
autonomy gradually started to emerge. This was primarily because Best Buy had expanded beyond
the managerial capabilities of Schultz.  

Growth through Delegation:

 The battle was raging for market share in the US, and was only going to get fiercer with competition.
With the quick expansion, Best Buy wanted to carry a wide variety of products under one roof, such
as large televisions, and small video recorders.  But at the same time, Best Buy was unable to retain
its repeat customers. As Best Buy had put most of its capital into expansion across the US, it was
running short of cash. Schulze re-evaluated the operating model of Best Buy and identified the
challenge was within its organisational structure which needed to be re-aligned with its new growth
(Johnson 2005).

 Historically, Best Buy had allowed every store to practise and function as independently as possible
from the others, with little cross functional cross collaboration.  Best Buy’s store employees were
filled with energy but they did not consistently deliver quality customer experience. Shop managers
saw themselves as masterpieces who were ready to do everything they needed to ensure things
happened. They did without discipline. Simple things such as the loading of Lorries, the shelving of
stock on the floor and the checks of the cashiers in each location were done in a different way. Client
experience, profitability and growth momentum stalled which contributed to the loss of repeat
customers. Meanwhile, central management concentrated on devising expansion strategies of the
entire corporation. In the due process central management had started to lose control and oversight
of the individual stores and its management (Bilings 2003).

 This era of evolution in Best Buy closely ties in with “Crisis of Control” under Greiner’s growth
model. Best Buy had gotten to the point where a mature organization needed to include the skills
and procedures of all its disciplines and teams in order to function well. A more close coordination
between the corporate headquarters and local store management was needed to function in a new
and a dynamic environment.

Growth through Coordination:

 To remedy this, Best Buy rolled out a new Standard Operating Platform (SOP) for all of its stores in
1996. As it turned out, the change at Best Buy was more than the addition of a few new procedures
and processes: it was transformational. All stores of Best Buy adhered to Standard Operating
Platform (SOP). Inventory management, transaction processing, customer relations, store
administration, product sales and services, and merchandise display were all covered by the SOP.
Additionally Best Buy also reshaped its organisational structure of the stores. All of Best Buy stores
were divided across eight districts, each overseen by a district manager, and each was governed by a
geographic territory manager (Gibson 2003).

District managers oversaw store operations and met with store managers on a frequent basis to
discuss things like procurement, new products introductions, sales promotions etc. However,
advertising, and pricing remained centrally controlled.
 Bob Willet, CFO and executive vice president of operations of Best Buy in 2000 said “At Best Buy, we
believe that technology is a catalyst for change. Each business process has been mapped onto the
BOB (Business Operating Blueprint) and is being modified to accommodate new best-of-breed
technologies in order to increase transparency, reduce costs, and improve efficiencies”. (Best Buy
investor call 2000)

 For Best Buy this was a period of growth through “Co-ordination” as the central management was
able to monitor local store management more carefully and made them more accountable. The
emphasis was more on having a coordination between the corporate headquarters and the
functioning of local stores. Furthermore, introduction of SOPs made Best Buy more efficient,
however, it also resulted in increased bureaucracy as everyday processes were prioritised over
problem solving. This phase ended with a “Red Tape” crisis for Best Buy.   

Growth through Collaboration:

 By the early 2000s, Best Buy’s revenues had increased to almost $20bn with an operating margins of
almost 5% across 357 stores. Best Buy had established itself as a leader in the consumer electronics
retail industry and viewed its competitors as Wal-Mart and Target. Its previous competitors such as
Circuit City or Highland Superstores had either gone bust or became too insignificant to Best Buy.
Meanwhile, Best Buy continued to grow its physical presence across USA.

 However, the rise of digital technology forced Best Buy's top management to reconsider its
approach in the early 2000s. Digital consumer electronics goods such as digital cameras, DVD
players, cell phones, and high-definition televisions caused widespread speculation and confusion
amongst the consumers. Best Buy necessitated the development of new capabilities that would
assist customers in deciding the best value. Best Buy's goal was to be a place where people could
learn about new products and make informed buying decisions. Additionally, the company
developed an internet-based distribution platform in the late 2000s (bestbuy.com).

 This was a construct-and-leverage venture. This idea was created to keep up with the rapid
technological developments in the consumer electronics and computing industries. On-site experts
assisted with the resolution of complex transactions involving goods, services, and warranties
(Shreiber 2007)

 The sales team at Best Buy needed to develop new skills in order to predict consumer needs rather
than simply fulfil customer desires. The stores were reconfigured to maximize flexibility. This level of
adaptability was highly needed to meet evolving consumer demands and to compete with the other
retailers. Additionally, the company leveraged its vast retailing capabilities to open smaller, multi-
story inner-city outlets in major cities in the United States.

 There were several justifications for this novel idea. The industry's borders were becoming
increasingly blurred, with service providers and electronics distributors selling directly to end users.
Simultaneously, new rivals emerged with far more agile business models than Best Buy's. The mass
discounters, such as Wal-Mart, had raised its market share to 21%. The only way for Best Buy to
maintain its leadership position was to be in close proximity of its customers. (Chakravarthy and
Lorange 2007)

 Best Buy responded to this by quantifying the profitability of each of its customers. The marketing
team at Best Buy set out to determine why some consumers were profitable and others were not. It
identified five potentially lucrative markets for the business based on the insights gained from this
study. The new segments were characterized more by customer desires and behaviours than by
demographic characteristics. Small business owners and professionals, for example, became
significant new market segments for Best Buy.

 The resulting challenge was to restructure the consumer experience and resolve the unique
requirements of each market and its sub-segments. For each sub-segment, new promotional tools
were created. Value proposition also included a well-considered store strategy. The company initially
tested this concept in 32 of its locations. To ensure its sustainability, the Best Buy had to train store
staff to take on a greater share of responsibility for store-level merchandising decisions. Customer
centricity also ensured that store workers felt empowered (Chakravarthy 2007).

 In the light of Greiner’s growth model this phase of growth could be categorised as “Growth
through Collaboration”. This is because corporate management and local store management of Best
Buy had to find ways to collaborate more constructively to adjust with the changing dynamics of the
markets. More emphasis placed was on teamwork and problem-solving. Participation of store
employees was strongly encouraged as well.  

Current Configuration:

 Best Buy currently has over 1,200 stores across the USA and has over 100,000 employees and earns
revenue close to $45 billion as of 2020. (Best Buy Annual report 2020)

 Best Buy has two reportable segments: Domestic and International. Domestic segment consists of
the store operations in all states, districts and territories of the U.S. The International segment
comprises all operations in Canada and Mexico under various brand names Best Buy.

Best Buy’s Domestic and International segments are managed by leadership teams responsible for
all areas of the business. Both segments operate a multi-channel platform that allows customers to
visit online stores, physical stores or homes consultations.

Various functions are centrally managed such as development of merchandise, pricing and
promotions, marketing and advertising and labour deployment. In addition, support capabilities (for
example, human resources, finance, information technology and real estate management) are also
generally performed at Best Buy’s corporate headquarters. (Best Buy Annual report 2020)

Best Buy’s retail stores have procedures for inventory management, asset protection, transaction
processing, customer relations, store administration, product sales and services, staff training and
merchandise display that are largely standardized. All stores generally operate under standard
procedures, however, they do have a degree of flexibility for store management to address certain
local market characteristics. (Best Buy Annual report 2020)

  Operating core of Best Buy are its store-level workers, which includes sales associates. Each
associate works in an assigned department and reports to its respective supervisor of that
department. Middle line is made up of department supervisors who serve as a liaison between base
level employees and the store management. Each supervisor is assigned into a subcategory, which is
led by an assistant manager who reports to the general manager.

General managers’ report to district managers and typically every district manager looks after 20
stores. This is the basic organizational framework of a single big box Best Buy store (Hess 2017).
 Best Buy's organizational structure includes over 40 regions, and the regional managers oversee
regional operations and typically report directly to corporate executives located at Best Buy’s
headquarters (Hess 2017). Meanwhile the corporate executives serve as a strategic apex. The
executive team is headed by Corie Barry, the current CEO of Best Buy.

 The organisation structure of the Best Buy Corporation’s could be best described as that of a
Diversified Organisation under the Mintzberg’s models. This is mainly because Best Buy Corporation
operates in different geographic segments and considers each segment as a business unit.
Moreover, corporate head office is heavily involved in strategic decision making of the entire
corporation and focuses on a bigger picture. Best buy operates more as a cluster of independent
entities (Best Buy’s stores) through loose administrative structures.

 Meanwhile the individual stores of the Best Buy are more closely aligned with the Machine
structure configuration of Mintzberg’s framework. This is because functions of store employees are
quite standardised and authority is mainly centralized with a little flexibility in day to day decision
makings. Further, the tasks of stores are grouped under the various business units which follow
formalized processes.

 However, in recent years Best Buy has moved from Product Centric strategies to “Customer-Centric”
strategies.  Under this, every customer is divided into different types of customer segments and
strategy is built around the unique interests of the customers.

This requires store employees to engage with customers to understand specific needs of the
customers and make their visit to the stores more entertaining and enjoyable (Hubert Joly).

 The success of customer centric strategy requires corporate executives of Best Buy to engage with
on field operations employees at retail outlets. Hence, the communication, coordination and
collaboration between the executive management and core staff is vital for the successful
implementation of the strategy.

Future:

Best Buy has long been a brick-and-mortar store, and the company's physical presence and
employee competencies have assisted it in gaining a competitive advantage over online retailers
such as Amazon. Consumers also prefer visiting Best Buy stores for a variety of reasons for example
to save on shipping costs, to obtain their product directly, or to sample or experience a product
before buying. Although Amazon, as an online retailer, has its own unique features, the most
notable of which are next-day delivery and reduced product prices (Yohn 2020).

 However, it is important for Best Buy to not assume that the business will return to "normal” after
pandemic. According to the recent McKinsey results, consumers are likely to maintain the habits
they established in response to COVID which increased online shopping and fewer visits to the store
(Mckinsey 2021).

 As the Best Buy had been battling Amazon and other e-commerce players even before the Covid-19
pandemic these problems have now escalated for Best Buy at a very fast pace. To counter these
challenges I believe that Best Buy could possibly change its existing business operating model and
move towards e-commerce and increase its online digital presence to adapt to the changing market
trends and consumer behaviour.
 To do this transformation Best Buy’s management could possibly use Kotter’s Dual Operating model
to incorporate changes into the entire organisation (Kotter 2012).

Step 1: Create Urgency:

Best Buy will need to instil a sense of urgency around the organization's need for improvement. This
can help to provide the initial impetus to get things going. This could be accomplished by engaging
with employees through a cordial and persuasive conversation. These conversations should focus on
highlighting employees about evolving market conditions and the effects it would have on Best Buy's
competitiveness in the market.
During this stage, Best Buy will need to assess potential threats posed by e-commerce companies,
especially Amazon, and assess various scenarios to determine the effects on Best Buy future
profitability.
Meanwhile, it should also focus on the new opportunities that new environments would offer. For
example, the large physical presence of Best Buy stores across the USA could be used as warehouses
to accommodate for online orders.

Step 2: Forming Power Coalition

After persuading employees that change is necessary, the next step would be to build a strong
coalition of influential Best Buy employees. It is critical to have a diverse team composed of
individuals with a variety of roles, including store employees, store managers, customer service
representatives, and corporate executives. Diversity is critical because it brings a range of expertise
and experience, which contributes to the change's momentum.

Step 3: Creating a Vision for Change

The guiding coalition team would need to establish the organization's new values. For instance, one
of the values could be described as Best Buy's e-commerce experience must be simple and seamless
— from browsing to researching, selecting, purchasing, and returning etc. Best Buy will need to
ensure that its websites integrate services such as "buy online, pick up in store" and are capable of
delivering a consistent, dependable digital experience across multiple devices and channels.
Customers will no longer tolerate substandard digital shopping experiences, as they did prior to the
crisis.

The new coalition team should be tasked with developing a strategy to carry out Best Buy's
exemplary vision.

 Step 4: Communicating the new Vision

Best Buy's management would have to communicate the new vision to the rest of the company's
employees and departments. This would have to be done on a regular basis and should be
incorporated into their daily decision-making processes. The critical conversations, in my opinion,
should centre on defining the new concept. For example, Best Buy should inform its employees that
service cannot be viewed as a complement to sales and hence it must not be limited to generic
efforts such as greeting customers, resolving complaints, and managing returns etc. Rather, the
emphasis should be on innovation, which includes digital customer experiences such as real-time
inventory management, predictive analytics, and AI-powered search. This can result in entirely new
and unique shopping experiences. 
 

Step 5: Remove Obstacles

Best Buy is likely to encounter many roadblocks as it embarks on a new transformation. These
impediments may take various forms. For instance, as store employees adhere to Standard
Operating Procedures (SOPs) in their daily operations, a new operating model may cause disruption
or confusion. To address this, either new standard operating procedures must be established or
employee job descriptions must be redefined.

According to Kotter, it is important to celebrate short-term successes to keep team members

engaged, to learn from mistakes, and to incorporate the process into the organization's changing
culture.

However, it should be noted that changing a large retail organization like Best Buy is not easy. The
constantly evolving industry conditions and customer behaviour will continue to have an effect on
Best Buy's overall growth strategies.

I believe that this is not the time for Best Buy to simply try to weather the storm, but it is imperative
that they ride it out. By taking a more progressive approach to the shift to digital transformation as
well as the arrival of a new age of customer engagement, the future might be brighter for Best Buy.

 
 
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