STRATEGIC MANAGEMENT

Assignment: Solu�on on Case Study Best Buy Enters the PC Market

Submitted to:

Maj General Prof. Alauddin M A

Wadud Faculty of Business Studies
Bangladesh University of Professionals

Submitted by
ADIB AL WASY, ID-2023011110,
Bangladesh University of Professionals,
Bachelor of Business Administration (General)
(BUP) Session: 2019-2020
Date of submission: 23rd September 2023
 Letter of Transmittal

23rd September 2023

Maj Gen (Retd.) Alauddin M A Wadud, Bir Protik
Bangladesh University of Professionals
Subject: Submission of assignment on ‘Best Buy Enters PC Market’
Respectable Sir,
I'm pleased to hand on the assignment on the 'Best Buy Enters the PC
Market' case to you. This assignment's goal is to examine the problems
Best Buy encountered when it entered the PC industry and offer remedies.
I've done my best to follow your instructions and meet all the standards. I
am looking forward to your valuable feedback on the paper.
Sincerely yours,
Adib Al Wasy
ID: 2023011110
 TABLE OF CONTENT

Executive Summary…………………………………………………………..1

1.0 Company Overview………………………………………………………2

1.1 Objective of the study……………………………………………………3

1.2 Case Summary……………………………………………………………3

1.3 Case Problems……………………………………………………………4

2.0 Case Evaluation…………………………………………………………..4

2.1 Strategy of Best Buy……………………………………………………..4

2.2 External Analysis…………………………………………………………5

3.0 Proposed Solution……………………………………………………….6

4.0 Recommendation and Conclusion……………………………………..7

 Executive Summary

The focus of the essay is an investigation of the case Best Buy: Enter the PC Market,
in which we first assess the business and then examine the facts of the situation. Later,
we pinpointed the issue and offered a potential fix along with a suggestion. The
argument is Best Buy's risky investment in the PC business with their private-label
laptops that have the same functionality as the industry leaders but are valued at a
lower price. Given the extremely poor state of the PC market at the time, many
observers predicted that the Thai endeavour wouldn't endure very long due to intense
competition, low profit margins, and weak brand awareness. Best Buy took the risk
and ordered 22,000 units in their first quarter, despite the fact that many stores who
started their own private label in the PC industry had previously failed. Even if their
financial statement is not mentioned, it is clear to me that this will fail because the
company's strength is not in creating computers.

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1.0. Company Overview:

One of the top shops for consumer electronics in the country is Best Buy. Richard
Schulze and Gary Smoliak launched the business in 1966. In addition to the US, Best
Buy also operates locations in Mexico and Canada. Best Buy currently operates more
than 1,800 locations, the majority of which are mobile stores. Greek Squad is the brand
name for technical support services that Best Buy also provides. The rapidly
expanding consumer electronics market is what allowed Best Buy to experience such
growth. Competitors such as GameStop, Radio Shack, and Conns Inc. joined Best
Buy in the market. Wal-Mart, Nebraska Furniture Mart, and other large superstores
are also competitors. Best Buy has been able to retain positive yearly sales as well as
a significant market share by being the industry pioneer.
All of this success can be directly attributed to Best Buy's goal and vision statements,
which place a high importance on customer pleasure while simultaneously
establishing their authority in the industry through distinctively differentiating client
services.
Mission Statement: Best Buy’s mission statement is “we’re a growth company
focused on better solving the unmet needs of our customers—and we rely on our
employees to solve those puzzles.” The emphasis of this mission statement is on
the customers and how the company impacts them with services that are a cut
above the rest.
Vision Statement: Best Buy’s vision statement is “to positively impact the world,
enrich people’s lives through technology, and contribute to the common good.” This is
an implied vision as outlined in the corporate responsibility of the company with a
timeline that goes up to 2020. The vision statement echoes the leadership position
Best Buy has assumed in the niche it operates.
Core Value: Best Buy’s core values include “unleash the power of our people,
learn from challenge and change, show respect, humility, integrity, have fun while
being the best.” These elements are credited for the great corporate culture that
identifies Best Buy.

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1.1. Objective of the study

The main objective of this study is to analyze and evaluate the situation Best Buy went
through as a contender in PC market; as well as answer the stated questions. Some
of the specific objectives of this studies are:
• Understanding market factors
• Analysing strategies of Best Buy
• Evaluating Best Buy’s Strategy
• Coming up with pragmatic solutions

1.2. Case summary

Best Buy announced the launch of the vpr Matrix PC brand at the beginning of 2000.
The brand was classified as private label, which refers to goods that are produced and
sold by two independent businesses. For instance, take the well-known electronics
retailer Radio Shack. However, despite employing a private label strategy, the
company utterly failed to win over its customers. There are tales of private label
success, like Walmart's. Private label, however, is not a suitable strategy in the PC
business, where customer relationships and brand loyalty are important factors.
Consequently, a lot of observers projected that Best Buy would likewise perform
poorly.
Best Buy, in contrast, was successful and achieved its objectives. Additionally, the
business entered the PC market as a significant rival and competed with established
PC giants like HP and Dell. Target market for Best Buy was in the medium-to-high
price range.
Markdowns were Best Buy's biggest danger. Markdowns fundamentally include
lowering a product's price; because electronics are becoming more affordable
generally, markdowns in this situation may have an impact on profit. Best Buy first
gave the impression that it had promise in the PC industry due to its early successes,
but dangers and other factors also pointed to its failure, which is evident in the current
situation.

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1.3. Case Problem

Through the case, many issues can be found, such as, private label’s advantage and
disadvantages and its effect on Best Buy, why vice president of Best Buy took such
decision knowing the risks, how Best Buy is doing in the PC market and what are the
factors behind their success or failure etc. The case also has stated some questions
that are the main focus of this paper, which are:
• Why do analysts feel that Best Buy’s entry into private label PC market is risky
and ill advised?
• What is Best Buy’s strategy?
• How favourable are the industry factor for Best Buy?
• Is Best Buy likely to succeed?
• What’s their strategy in Pandemic situation?

2.0. Case Evaluation

2.1. Strategy of Best Buy
For entering the PC market, Best Buy took different approaches to catch customer’s
attention and create a competitive advantage. One of the main strategies was to focus
to customer relationship building. Best Buy believed that technologically skilled and
friendly sale staffs will make difference. One top of that, they emphasized on non-
commissioned staffs. The company connected the staff’s goal with the product’s
improvement, commission. Best also made changes in supply chain model, which
another private label brand didn’t. They made some adjustment to get resources most
efficiently, as mentioned in the case, both Chinese and American company will be hired
for assembling the products. The company has also used expensive and quality
components to make the products, such as, Intel and NVIDIA. Best Buy was targeting
the broad market with high price expectation. According to Generic strategies, Best
Buy’s approach was Broad Differentiation, as the company was targeting the large
market who uses computers as commodity and at a medium to high price.

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2.2. External Analysis

For external analysis, Porter’s five forces has been applied to identify and understand
factors affecting the decision Best Buy has made.

Intensity of rivalry:
Intensity of rivalry among competitors in PC market is very high. As, Best Buy has
challenged both retailers and PC manufacturers, they have to face rigorous
competitions. Best Buy started to take market share of both retailers such as, Circuit
City and manufacturers for example, HP and Dell.

Barriers to entry:
Barriers to entry is low as a company needs adequate amount of capital and skilled
people to survive in the market. In addition, a proper supply chain, production line and
business model are needed to establish a well-known PC company.

Bargaining power of suppliers:

Bargaining power of supplier is low because there are many suppliers for resources
for PC industries now. So, they have many options to choose from.

Bargaining power of buyers:

Bargaining power of buyers is low because there are only few brands that provide
quality products. For example, HP, Microsoft, Apple, Acer etc. large companies focus
on their quality and branding. As a result, customers get few options to buy their
desired product.
Threat of substitutes:
Threat of substitute is increasing as technology is advancing. Smart phone, table etc.
are some major substitutes of PC.

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3.0 Proposed Solution

From the case evaluation, information regarding the stated questions have been
found, now, the answers of these question are discussed below with practical method
and strategies.

3.1 Why do analysts feel that Best Buy’s entry into private label PC market is
risky and ill advised?
As was previously said, private labelling did not work for businesses like Radio Shack.
Even the business went bankrupt. Analysts predicted that Best Buy would experience
a similar issue, leading to the development of a strong brand identity. A huge failure
for Best Buy could result from the company's status as a retailer, which has a different
supply chain model than PC makers. The corporation has also experienced issues
with its brand image. Many customers might not buy the PCs because they are sold
by the company in vpr Matrix rather than Best Buy, or they could even prefer Best Buy.
Solution:
Best Buy should focus on changing the brand image and change it to Best Buy; this
will create a strong position in customers mind as they are already known as famous
electronic retailer. The vice president of Best Buy has already changed its supply chain
model to support the production. However, a retailer’s supply chain and manufacturers
supply chain is different. So, they should create two different supply chain rather than
making only slight adjustments. The company should also refocus its target in PC
market, because, the company cannot take position of a retailer and manufacturer at
the same time. There is opportunity of trade of between these two, and according to
me, Best Buy should focus on building PC as the company showed potential to do well
in this business.

3.2 What is Best Buy’s strategy?

Strategy of Best Buy has already been explained in the second part of this paper. The
company is focusing on Broad Differentiation for entering the market. And their
strongest point is tech savvy and friendly employees to help customers.
Solution:
Even though the company promised quality customer service, they failed to do so.
According to many online feedbacks, the company could not provide the service they
promised to provide. On top of that, there were many malfunctions of the products that
bugged off the customers. In my opinion, the company should have focused on their
product quality rather than extensive which provide high quality products.

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The company could have taken back the products to repair or relaunch like Samsung
did after their malfunction in product. customer service the promised. Because, the
company were competing against Dell and HP.

3.3 How favourable are the industry factor for Best Buy?
According to External Analysis, Best Buy had good opportunity to thrive in the market.
However, without proper approach and strategy the company failed to do so.

Porter’s Forces Intensity

Intensity of rivalry High
Barriers to entry Low
Bargaining power of suppliers Low
Bargaining power of buyers Low
Threat of substitutes High

Solution:
The company had low intensity in entry barrier, supplier bargaining power and buyer
bargaining power. So, if the company focused on quality only, they could have created
a strong brand image like other competitors.
3.4. Is Best Buy likely to succeed?
Best Buy could not continue its success in the future. Many sources indicated that the
company had too many malfunctions in their products. The company failed to work on
their core visions and mission in this case.
4.0. Recommendation and Conclusion
Best Buy had the ability to succeed in the PC market, but its production and branding
strategies fell short. Best Buy tried to succeed with their private label strategy, which
was not necessarily a bad idea. Because the PC market is so competitive when it
comes to quality, the corporation should have concentrated on their product's quality.
In addition, Best Buy ought to have emphasised its own brand rather than vpr Matrix.