Best buy industry analysis

You are asked to answer three questions about Best Buy:

Analysis: Focus on External and/or Internal Environments

Describe the positioning of Best Buy relative to its main competitors.
Apply the VRIO framework to determine whether Best Buy has a competitive advantage. If so, is its competitive advantage sustainable? Why or why not?
What is Best Buy’s business-level strategy? What are its main value and/or cost drivers?
How should Best Buy adjust its business-level strategy in light of recent changes in its external environment?Case study 1: Best Buy Practical information Your second case study will be about Best Buy. The deadline for submitting the case is Wednesday, April 4. Please submit as hard copy in class. The maximum length of your submission is 5 pages plus any appendices (e.g. figures or tables). Information about the case You are asked to answer three questions about Best Buy: Analysis: Focus on External and/or Internal Environments 1. Describe the positioning of Best Buy relative to its main competitors. 2. Apply the VRIO framework to determine whether Best Buy has a competitive advantage. If so, is its competitive advantage sustainable? Why or why not? Formulation: Focus on Business, Corporate, and/or Global Strategy 3. What is Best Buy’s business-level strategy? What are its main value and/or cost drivers? 4. How should Best Buy adjust its business-level strategy in light of recent changes in its external environment? Information about Best Buy and its industry Here is some additional information and sources to get you started, but you are also required to do your own research from various sources. Remember to reference your data sources. CEO Hubert Joly must devise a turnaround strategy that will enable Best Buy to survive in an increasingly competitive consumer electronics market. By year-end 2012, Best Buy’s stock price had dropped roughly 60 percent over a two-year period and same store sales and overall profitability were showing a consistent, negative trend. On the plus side, revenues were increasing (at a marginal rate), while Best Buy continued to dominate its competitors in terms of sales volume and U.S. market share. In addition, Best Buy’s online business was growing by 15 to 20 percent each quarter. Still, critics were doubtful that Joly could save the company, which seemed intent on following Circuit City down the fast-track to bankruptcy. Best Buy was founded by Dick Schulze as an audio specialty store (“The Sound of Music”) in Minnesota in 1966. It grew rapidly over the next few years, holding an IPO in 1969 and reaching $1 million in annual revenues by 1971. The company continued to expand by adding locations and product lines, changing its name to Best Buy in 1983. Shortly thereafter, Best Buy adopted its now-familiar superstore format with an increasingly diversified product range. It went public on the NYSE in 1987. Best Buy’s next retail innovation, named Concept II, combined a grab-andgo format with low prices and a wide assortment in 35,000-square-foot retail warehouses. The success of this approach propelled Best Buy to $1 billion in sales revenues and landed it on the Fortune 500 by 1995. In 2000, Best Buy entered a new phase of inorganic growth through acquisitions, purchasing multiple companies both domestically (for example, Magnolia, Geek Squad, Napster) and abroad. Best Buy’s history dovetails with the development of the consumer-electronics retail industry, which also expanded rapidly in the second half of the 20th century. Demand for home electronics increased with the post–World War II suburban migration, with strong growth continuing through the mid-1990s. As the electronics retail industry matured, smaller competitors went out of business while superstores like Best Buy and Circuit City increased their control of the market. The next major shift occurred when Amazon pioneered online retailing in 1998, leading to yet another period of expansion and market consolidation. Revenues tend to be both cyclical (tied to macroeconomic factors) and seasonal (dependent on holiday sales) in nature. Product life cycles have grown increasingly shorter, as manufacturers cannibalize their own products to maintain customer interest and loyalty. Prior to the 2008 recession, Circuit City was one of the top three consumer electronics retailers (along with Best Buy and Radio Shack). It likewise had meager origins, starting as a local appliance store named Wards Company in Virginia in 1949 and progressively diversifying through acquisitions. By 1974, performance problems caused the company to refocus around its core area of consumer electronics. To showcase its new strategy, Wards debuted a new “big box” format that proved so popular that sales increased ten-fold by 1983. It listed as Circuit City on the NYSE in 1984, while continuing to dominate the U.S. market. Circuit City’s problems began in the 1990s, when it again expanded beyond its core to include used car sales (CarMax) and credit card services.