Best Buy Turn Around Strategy

Best Buy Turn Around Strategy (2013) Written Questions

Ben Hanson

MGMT 499-53

1. Describe the positioning of Best Buy relative to its main competitors.

        Best Buy positions themselves very differently from their main competitors. Most of their competition focuses on cost reduction to pass on benefits to their consumers, but Best Buy does things a little differently. Rather than focusing on price, and only price, the company adds value through their unique combination of physical and digital stores; something you won’t see at Amazon.com or Walmart. One of the main benefit to this outlined by the case is that 40% of Best Buys online purchases are picked up in stores. This provides ample opportunity for the blue shirts to attach more accessories and service plans (both of which are high in margin).

        Also unlike the retail giants Amazon.com, Walmart, and Target, Best Buy is a consumer electronics retailer. In a nutshell this means that walking into Best Buy you’re not going to find a grocery departments next to the tablet isle. This creates a sense of confidence in the consumers’ minds that they are in the right store, talking to the right people, and will ultimately leave with the product that is right for them.

        Another differentiator that Best Buy exercises is their line of private label brands. This is arguably their most important defense against online competition, since you cannot find them available on third party vendors’ websites. Geek Squad, acquired in 2002, is arguably Best Buy’s most important bran by providing assurance to the customer that they will have lifetime support for their product.

        Best Buy essentially positions and differentiates itself based upon three things: their blue shirts (knowledgeable store employees), exclusive private label brands, and the ultimate customer experience.  

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?

        After applying the VRIO framework, I came up with three things that Best Buy currently has as competitive advantages: private label brands, customer service, and the ability to physically touch and play with more products than competitors before purchasing them. However, determining if these three things are sustainable is a different matter.

        In terms of private labels brands, Best Buy’s competitors are quickly closing the gap by developing and selling brands of their own. For instance, target does not currently have an electronics brand of their own, but the company is no stranger when it comes to private label brands. In fact, Target has a number of them that generate well over $1 billion in revenue every year. It’s likely that the retail giant will develop an electronic brand sooner than later. Walmart is another large player in the private label game, and in fact already has an electronic brand of their own called “Onn”.

        So with the private label market becoming saturated, does best buy have a sustainable advantage in this realm? Yes, in the form of Geek Squad. This brand is so much more than a private label for Best Buy. They provide service, support, and products, which simply cannot be matched by the competition. Walmart has tried to imitate Geek Squad by providing its services in their stores, but has been anything but successful at doing it.

        The second competitive advantage revealed by the VRIO framework is Best Buy’s excellent customer service. I think most of us can agree that if you need real advice on consumer electronics, you’re not going to find it at Walmart, Target, or Amazon.com; instead you head to Best Buy. The company invests big dollars in training their blue shirts so that they can provide the ultimate experience for its customers. This is also an advantage that is sustainable due to the well-established brand image around these blue shirts, which cannot be clouded by any attempt from their competitors.