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States, United Kingdom, China, Japan, India, Germany, South Korea and Taiwan are the biggest
consumer electronic markets in the world and combined they make up more than half of the
consumer electronics market. What this means to companies is that they need to keep
capitalizing on the opportunities that lie in front of them and a lot of that opportunity lies in
expanding their existing markets and attempting to reach new customer streams (i.e.
International Expansion) (“Global Consumer Electronics…”, 4).

The flowing attributes are what is helping consumer electronics stay on top as new
technology unfolds and market segments change:

1. Increasing consumer income helps households and individuals invest in the latest
technology and personal electronics such as computers, phones and tablets.
2. Pushes for local manufacturing helps top name technology companies manufacture large
amounts of product and keep up with consumer demand.
3. Increases company revenue allows companies to ramp up the usage of marketing and
advertising to introduce new products and software.
4. The green movement has placed more of an emphasis on paperless communication, thus
requiring individual consumers to purchase consumer electronic products.
5. A more informed and connected community allows the messages of technology
companies and their products to travel faster between consumers.
6. The general population is beginning to become more technologically savvy and
demanding that companies continually push the forefront of what technology and modern
science can do.

Porter’s Five Forces Framework: Best Buy Corporation

The Porter’s five forces is a framework to analyze the level of the competition within an
industry and it helps to the company to develop its own business strategy. It determines the
competitive intensity and the attractiveness of an industry. The five forces consist of supplier
power, threat of new entrants, buyer power, threat of substitutes and degree of rivalry.

Forces Strategic Importance

Internal Market Rivalry HIGH
Threat of New Entrants LOW
Threat of Substitutes MODERATE
Bargaining Power of Buyers LOW-MODERATE
Bargaining Power of Suppliers MODERATE-HIGH

 Internal Market Rivalry:

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Internal Market Rivalry is the most significant sector in Porter’s five forces and it
is very high in consumer electronic retail industry. There are significant number of
competitors in this industry. For example, Walmart, Target, Apple, Costco, Amazon,
RadioShack are the main competitors in this field. With a market capitalization Best
Buy is the dominant player in the industry. However discount retailers such as
Walmart, Target and Costco are taking the lead in the consumer retail market. Also,
the online market retailer such as Amazon, E-Bay are taking a significant role in the
market. Competition is high because buyers can buy the products from different
electronic stores because the products are not differentiated. As a result, companies
start to compete not only on prices, but also on customer service, goodwill and so on.
The internal rivalry in this industry is becoming higher and higher. The players in
the market offer good locations, and online presence which leads to more competition
among players. The Circuit City was out of the business, because they couldn’t make
enough sales and the competitors become more effective and stronger.

 Threat of New Entrants:

The threat of potential new entrants into the consumer electronic retail industry is
relatively low. The entry and the exit barriers are rigid because of huge investments
required to enter and exit. According to the Best Buy FY2012 financial statements,
the firm spent 766$ million in capital expenditures on 300 new stores, remodeling
projects to existing stores, and upgrading its information technology infrastructure.
Firms in electronic industry spend millions of dollars on property, plant and
equipment to succeed in national and global markets and able to capture the market
share.
The market capital of the industry is lower than other industries such as apparel
retail and automotive retail. The low market capitalization implies that it would not be
difficult to enter the industry based on the capital required. However, a potential new
entrant would have to overcome the superior brand reputation that Best Buy has
established. It would be difficult for an entrant to challenge the company.
Furthermore, it would be difficult to entrants to become a buyer from firms who have
already established relationship with Best Buy and it going to be challenging to
purchase merchandize at the lowest price.

 Threats of Substitutes:

Electronics is something that will not be replaced by another product. For

instance, Coca Cola we can replace it by Pepsi, Nike t-shirt by Adidas T-shirt.
However, in electronic industry the competition is the main substitute. Substitutes
includes e-commerce retailers like Amazon, E-Bay or manufacture online stores,
discount retailers like Wal-Mart, Target and digital content distributors like Netflix,
X-Box.