RM Case - Reinventing Best Buy

Submitted by: Group 7 | RM - A

085 - Harikrishna P S
093 - Kunal Jhamb
110 - Ankita Sadar
111 - Sarbani Mishra
161 - Mohammed Ishaan K B

1. What were the strategic challenges facing Best Buy in 2012? Why was the company finding them
hard to respond to?

The CEO Brian Dunn had announced the closure of 50 stores in the US and the downsizing of the
remainder by 10%. A plan to cut 800$million in costs by March was also announced. He later resigned in
accordance with an improper relationship with a female employee. Nothing was going right for Best Buy
in 2012. The management didn’t know how to engage the employees properly. Schulze also resigned in
June as Chairman after improper actions regarding the case against Dunn. The appointment of Micheak
Pachter who had worked as CEO in businesses other than retail and having no relevant experience
resulted in the share price fluctuating more than almost 10%. The online marketplaces were taking over
and Best Buy failed to keep up with them as well. Low client satisfaction and the negative perception on
the prices added to these as well.

2. What did Joly see as Best Buy’s key strengths and weaknesses? Do you agree with Joly’s initial
diagnosis?

Joly believed that Best Buy being the market leader in North America while maintaining & gaining share
in most key categories was one of its strengths. This could be leveraged for furthering growth owing to
increasing demand for tech products, services and solutions and the fragmented market therein. Further,
Best Buy was catering to a vast customer base (40mn active & 75mn total members of loyalty program)
via their unique service proposition. They were providing vast range, unbiased advice, competitive prices,
multichannel services and Geek Squad support through a highly productive model which delivered high
sales & operating profits per sq. foot.

The weaknesses, on the other hand, were the declining market shares overall. They observed a shift in
channel & product mix and were unable to do well in the online market. Low sales, low customer
satisfaction scores, poor price perception despite competitive pricing (TV, appliances, laptops, phones but
charged higher for accessories). Another error on their part was opening stores during the recessions of
2007-09. This hit their international performance and added to decline in sales and operating margins,
lowering share prices.
Of all the strengths and weaknesses analysis, Joly diagnosed that most of the issues are created by the
bad decisions from Best Buy’s front and the markets are not fundamentally failing their business. He saw
hope and scope for betterment. Though this seems reasonable, Joly also needs to consider and cope up
with competitor moves and the market evolution with newer players and technology advancements.
Rectification of past errors and rebuilding newer strategies might cost them time and losing out to the
competition in the market. Thus, careful decision making is of utmost importance.

Also, he needs to consider the ‘showrooming’ happening in favor of ecommerce players, bringing in
further threat in terms of pricing and customer diversion.

3. Do the Renew Blue goals address the issues? Which initiatives in Renew Blue made a strategic
difference?

The aims of Renew Blue addressed the challenges in some way. "Attract and nurture 'transformational
leaders' and 'engage our workers to produce remarkable outcomes'" were two of the efforts that made a
strategic impact. Effective leaders are able to encourage, manage, and assign duties to their teams. When
Shawn Score, the new head of retail outlets, explained the prospects for enhancing the company's
performance, it made a huge difference. Employee involvement was responsible for a 7% increase in
comparable-store sales.Good decision-making and leadership resulted in improved multi-channel product
and service delivery, the exhibition of cutting-edge technology for early adopters, and vendor support.

4. What advantages does “multi-channel” retailing offer Best Buy?

The multi-channel approach has benefited Best Buy by increasing sales, enhancing data collecting, and
increasing labour productivity. Best Buy's current multi-channel effort is delivering substantial returns for
the company, as the company reported a record number of people visiting bestbuy.com in the most recent
quarter. Best Buy's online business sales increased by more than 20% year over year in the most recent
quarter.

5. Has Joly done enough? How well is Best Buy doing compared to Amazon in 2017? Is Building the
New Blue a game-changer?

As far as being relevant and competitive in the market, the strategies which Joly has adopted have come
into fruition. The targets set for the financial year 2021 was also achieved on top of that. The following
highlights the major steps Joly had undertaken during that period

- To avoid losing customers who only come to surf in stores before buying online, Joly gave the
employees the liberty to match the retail price with the online price if needed.
- To promote innovative products, Joly made partnerships with a lot of technological firms.
These were mainly focused on the sales side which is an alternate to blindly slashing expenses if a
business is in trouble.

By September 10, Best Buy’s stock had grown a high 113% after the pandemic dump while the Amazon
stock gained 70% for the same time period outperforming all of its retail competitors. Best Buy holds
15% market share in the consumer electronics retail segment in the US but has been losing shares to the
new online marketplaces, especially Amazon. This has pushed the firm to pricing wars and in digitisation
of it’s business to create an omnichannel system. This proved successful when Best Buy reported in Q2
that it had driven consumers to purchase their products online without losing them to competitors. The
virtual trends increasing in every sector has thus enabled them to survive competition as well as compete
in the long run.