Best Buy Marketing Analysis Presentation

This group presentation was delivered at the Rider University MBA Marketing Analysis and Planning Class in Oct. 2007

1. 1

ASWOTANALYSIS
http://www.youtube.com/watch?v=uAxG3lgRKUU

2. 2
BY

PRASHANTRAJOPADHYE

MIGUELEDWARDS

GERALDONUKWUGHA

RENECACCIABAUDO

ZAHIDMAQSOOD

ASWOTANALYSIS

3. 3

CompanyProfile
•
:
Best Buy is
–

The largest specialty retailerof consumerelectronics in the United

States and Canada
–
100
An innovative Fortune growth company continually striving to

create superiorcustomerservice
•
30, 2006, 1,100
As of November the company reported
, , ’
stores inthe United States Canada and the People s
.
Republicof China
•
44,000 ,
Locations average about square feet in size
, ,
offering consumerelectronics appliances entertainment
,
software and home office equipment and software
•
2006,
Inits fiscal year Best Buy reported total revenue of
30.85 . .
$ billion Bust Buy includes

4. 4

CompanyProfile
( .)
cont
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DistributionChannelandComplementary
/ :
Offerings Servicesinclude
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Asignificantonline presence leveraging
. , . ,
BestBuycom BestBuyCanada ca
. ).
FutureShopcom
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GeekSquad
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Magnolia AudioVideo
–
.
Ebayoutletstore

5. 5

RevenueMix
37%
35%
22%
6%
Consumer Electronics
Home Office
Entertainment Software
Appliances

6. 6

ConsistentGrowth

7. 7
Competitors
•

MajorRetailers
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CircuitCity
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WalMart
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Target
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Costco
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Online Retailers
–
.
Amazoncom

8. 8

Vision&Strategy
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Tomake life funeasyforconsumers
•
’
Believes that s its stores offerconsumers
,
meaningfuladvantages inatmosphere product
, ,
value productselection andcustomerservice
•
:
Besthas fourstrategicinitiatives
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CustomerCentricity
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Efficiententerprise
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Winwithservice
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Wininentertainment

9. 9

TheFutureRelieson
Expansion
•

Best Buy has seen large increases in revenues over the past few years
- . 12.45%
because of the demand for flat panel TVs Revenue increased overall
2006 16.49% 2007.
in fiscal and overall in fiscal It is unlikely that these

margins will continue due to slowed demand and decreased prices for the
.
TVs
•

Best Buy will focus on increasing stores both domestically and internationally
,
going forward which means that the company will have high costs
. ,
associated with its increases in revenue So far this strategy has worked as
21% 4 2006.1 ,
Best Buy reported a revenue increase in th quarter There is
,
however much more risk in this strategy than maximizing revenue margins
.
at individual stores
•
-
Best Buy will attempt to counter these decreases in demand for flat panel
, -
TVs with increased customer support especially from its computerrepair
.
service named the “Geek Squad ”
•
Afuture goal of Best Buy is to convert all of its stores into what the company
,
calls a “customer centricity” format which is expected to increase customer .
service and customer loyalty Best Buy defines customer centricity as
,
“treating each customer as a unique individual meeting their needs with
- - ,
end to end solutions and engaging and energizing out employees to serve
.
them ”

10. 10
-
Customercentric
Segmentation
•
:
Barry
, -
Affluent timestarved males looking for the
.
highestqualityproductandservices
•
:
BBFB

Small business owners with one to nine

employees looking for technical solutions to meet
.
theirbusiness needs
•
:
Ray

Married dads who spend a disproportionate

amount of their income on technology and
.
entertainmentsolutions
•
:
Buzz
20
Males in their s looking for the latest
.
entertainmentforthemselves andtheirbuddies
•
:
Jill
.
Stay at home moms with two ormore children
’ ’ She s looking to enrich her children s educational
.
andsocialdevelopment

11. 11
Strengths
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ProvenCustomerCentricModel
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GreaterCustomerLoyalty
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Improved Employee Retention
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Increased market share
•
– ,
Innovation bringing newtechnologytomarket
faster
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External PCDrive
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Slingbox
•

BreadthofOfferings
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Online Distribution
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Geek Squad offers support
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Magnolia offers higherend sales

12. 12

Weaknesses
( .)
cont
•
“
Devilcustomers” returnproducts afteralready

receiving the rebate orintendtorepurchase the

returneditematanopenboxprice
•
-
Highonetime conversioncosts toturnstores into

“customertestlabs”
•
,
The selling generalandadministrative costs were
,
higherinthe convertedstores resulting is lower

operating income
•
, ,
CEO BradburyAnderson admittedthatthe

companymayhave overestimatedits capacityfor

change andmovedtooquicklyintothe new

business model
•

Due tothe organizationalstruggles tomeet ,
demands forchange stores onlyenjoyedpartial

success inlimitedareas

13. 13
Opportunities
:
Products
,
Best Buy can benefit from the release of new items in the near future such as

the recently released computer technology like Windows Vista which can drive
, '
computer or software sales or the release of Apple s iPhone or the price cuts
360 / 3 / ,
in XBox Sony PS Nintendo Wii consoles release of new franchise
3, , .
games such as Halo NFL etc may also drive up sales of consumer electronics
.
as well as entertainment software
:
Global Expansion
' 2007
One of Best Buy s goals for fiscal was to examine the possibility of
, .
opening stores globally and that goal is becoming a reality Best Buy is
-2008,
currently planning on opening new stores in China by mid and its local
( .) 25 .19
partner Jiangsu Five Star Appliance Co will also open new stores Best
,
Buy already opened a store in China in December which reportedly exceeded
40%, 1 20,000
sales expectations by and on January st attracted more than
customers
:
Rich online Experience
83
Arecent national survey found that an overwhelming percent of consumers

would purchase more online if retailers provided more interactive and
.
interesting sites It is clear that by providing more engaging shopping
,
experiences based on customer segmentation it creates a huge opportunity for
. .
BestBuy com to gain a competitive edge

14. 14
Threats
COMPETITORS
, ,
Best Buy major competitors include discount stores like Target Wal mart
, .
Lowes Home Depot and Costco wholesale It also includes online recruiters
. ,
like Circuit City To a great extent Best Buy business is threatened by the
.
litany of competitors that offer a one stop shopping environment Acase
;
in hand Costco offers products at a reduced price with the purchase of a
.
membership This makes prices much more attractive to consumers who
’ .
don t want to spend a lot of money on top end products
GLOBALIZATION
,
In a bid to make up for store margins Best Buy plans to expand globally
, 2008.
come next year It plans on pursuing international growth
. .
opportunities This mission will not be an easy task Possible threat from
.
international business community abounds This mission is like threading
. ,
into an unknown zone However Best Buy is bent on taking this possible
.
risk

CONSUMERINCOME
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Best Buy deals only on discretionary items Based on this if consumer

income decreases or if there is an increment on other inelasticitems like
, ’ .
gasoline Best Buy s sales will be seriously affected

15. 15

Threats
( .)
cont

POORECONOMICCONDITION

The poorstate of the economy is anotherfactorthat could affect Best
.
Buy Some of the things that could affect Best Buy during a poor
;
economiccondition include but are not limited to the following
,
Decreasing growth in GDP Constant increase in CPIand an
.
unpredictable employment rate

NEGATIVEPUBLICITY

Negative publicity could be a majorthreat to any company that falls
. .
prey to it Best Buy has been a victim of this threat in the recent time

It has been alleged that Best Buy has misquoted prices to consumers a
.
couple of times This projection if affirmed could decrease future
.
consumerloyalty and eventually overall revenue

INFLATEDSTOREMARGIN
.
Best Buy experienced an inflated store margin overthe past year The
.
reason forthis was the high demand forflat panel TV In the same
, .
vein whatevergoes up must come down With the demand forTVas
,
well as the price of TVgoing down the store margin will most likely
.
be deflated

16. 16

MarketingGoals
•
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IncreasemarketshareinChina
–
300.
Increase storesinmainlandChinato
–
: 5 .
Period years
–
: :
Personresponsible President BestBuy
.
Chinadivision
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Createrichonlineexperience
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Implementcustomersegmentationand
.
site design
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: 1 . Period year
–
:
Unitresponsible ITDivision

17. 17
Recommendation
•
.
BestBuy comcanemploy some new strategies and

technologies to leverage the interactive nature of the
'
customers online experience to determine and respond to
. ,
customerneeds in real time Delivering a personalized

dynamiccustomerexperience caninstill loyalty and
:
increase customerconversionrates
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Leverage Intelligent Search interactions to engage online customers
.
in dialogue that uncovers current customer needs
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Delivermessages on merchandising focused on Ajax based product
.
detail panes and interactive imagery
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Implement business controls and automated processes to

understand and personalize marketing messages based on Best
' ' .
Buy s understanding of the customers purchase intent
–
,
Test measure and revamp the effectiveness of Best Buy marketing

campaigns and offers on the basis of how well those campaigns
.
satisfied specificcustomerneeds
–
" ",
Identify marketing leakage oropportunities forthe marketerto-
fine tune marketing messaging to appeal to previously
.
unrecognized customerneeds
•
( )
Targeted expansioninto emerging markets China