Beyond Blue a Strategic Planning Development for Best Buy

 

HISTORICAL BRIEF:

Best Buy‚ Birth & Development: Strategy & Intention

In 1966, Sounds of Music was founded by Richard M. Schulze and business partner, in West St. Paul Minnesota, selling home and car stereo systems, reaching $173,000 in sales (Chronology). By 1971, Schulze bought out his business partner, and becomes the sole owner of Sounds of Music. On two occasions, Schulze‚ company faced bankruptcy; first Sounds of Music faced it in 1979. Schulze appealed to family members and other supporters to support the business venture with capital to avoid facing further financial difficulties.

In 1982, Sounds of Music ‚Äúexpands offerings to include appliances and VCRs, revenues reach $9.3 M (Best Buy). However, that was short lived, because the company faced bankruptcy in 1983, the same year. It was rebranded and re entered the market as Best Buy. To combat going broke, Schulze ‚Äúasked suppliers and creditors to extend his lines of credits,‚ he also used a team to introduce a strategic plan, Concept I, to give strategic direction and action to Best Buy. Concept I‚focus was ‚the creation of a superstore and the concept of one-stop shop‚ (Gruley, Bryan; McCracken Jeffrey).

The following year brought both success and challenge for the company. A tornado destroyed one store. During this same year, the company created, promoted, and hosted a one-time sales event, which was very profitable, bringing in the foundation for today’s Best Buy. It was after this experience that Schulze created and rolled out the strategic plan, Concept Strategy, which was introduced and practiced from 1983-1988. Over these 5 years, the newly named Best Buy (Best Buy) focused on expansion of their bricks and mortar, developing a statewide chain of stores (Why Best Buy…, 2008).

1989 marks the implementation of Concept II strategic plan, which reigned until 1994. In these 5 years, Best Buy “Became every day, low price cost leader, expanded market reach and became much more operationally efficient through build and leverage” (Why Best Buy…, 2008). Concept III was introduced in 1995 and was a “hybrid strategy” which utilized both “low end and top end product offerings,” allowing Best Buy to leverage their competencies to expand their reach (2008).

1997 was a challenging year for Best Buy, as they faced extremely low profits of $1.7 M, compared to $48 M the previous year. Schulze reacted by hiring a consulting firm who assisted a complete “restructuring [of] the internal process of the company, reducing costs and increasing sales.” Two years later, the company registered $200 M in profits (Gruley, Bryan; McCracken Jeffrey).

During the next three years, Best Buy reacted to the boom in digital options available to consumers, and focused their strategy around working to become the “the retailer of choice to help consumers” (Why Best Buy…, 2008). This was from 1998 to 2000, Best Buy practiced Concept IV, which helped customers navigate the world of newly introduced digital products which were becoming more affordable for the average consumer (2008). In the three years following, Concept V lead the way, which was both growth and stability, [blending] “new skills to keep pace with technological change and acquiring new stores in new territories, along with leveraging retailing skills” (2008).

Since 2004, Best Buy has practiced Concept VI. Under guidance of a new CEO, Best Buy practiced an increased focus on the customer and “developed concentrations on different consumer groups to ward off being squeezed by general retailers such as Wal-Mart moving into electronic retailing” (2008).

 

II  CURRENT SITUATION

Renew Blue

In a strategic move to maximize its effectiveness, Best Buy launched Renew Blue. This plan laid out plans of action to strengthen relationships with vendors, revamp stores, increase same-store sales, eliminate unnecessary costs, and ramp up online business. The intent of this effort is incorporated in the vision: Best Buy, Renew Blue, the prefered authority and destination for technology products and services (Bailey, 2015). Five areas of focus of the Renew Blue strategy are: Reinvigorating and rejuvenate the customer experience; Attract and inspire leaders and employees; Work with vendor partners to innovate and drive value; Increase ROIC for investors; Continue leadership role in positively impacting the world.

Human Resources

Third party site, Glass Door, rates various organizations human resources. Best Buy received a score of 3.5 out of 5, which resulted from a review of Best Buy’s “company culture, values, work/life balance, senior management, compensation, and opportunity.” Generally, most Best Buy employees found their employment experience to be positive (Best Buy Reviews, 2015). There is opportunity for incentives to be built to motivate employees and attract talent.

        Beyond this specific rating of Best Buy, the internal management of employees is heavily focused on Best Buy’s code of ethics, which focuses on values of high moral character and human capital. Best Buy strives share that although strategies and employees may change over time, “Best Buy’s values as a company will never change” (Support E-Fairness, 2015). The code of ethics is: “Unleash the power of our people, learn from challenge and change, show respect, humility, and integrity, have fun while being the best”  (Support E-Fairness, 2015).

             This commitment to these values, with priority given to actions and service, Best Buy’s choice to focus on their responsibility to customers is evident and further identified through their statement regarding treatment of customers. Best Buy states on their website that employees are obligated to “treat all customers fairly and honestly, communicate with customers in a respectful and helpful manner, provide prompt and accurate customer service” (Support E-Fairness, 2015).

Website Evaluation, Online Existence, and SEO

             Although Best Buy is focused on providing their customers with high quality service and unmatched respect, their online presence and website strength is limited. Not only is the user-experience to be improved, the overall look and feel of the website can be enhanced, and must be in order to stay relevant in today’s market. Search Engine Optimization or SEO is one significant indicator of a company’s online web presence. Unfortunately, Best Buy does not have a strong rating for SEO. In fact, in 2010, leadership made a statement about the lack of focus and resource investment in SEO because Best Buy “is a rational choice for consumers” (Brinker ). Another factor which influences online presence is the Search Engine Results Page, or SERP. This is the order in which Best Buy information would fall, when products or related information was searched in an engine like Google—the higher on the list, the better.

This unfortunate oversight on their behalf was not beneficial to business, however, in recent years, Best Buy has made two significant changes which has been beneficial. Firstly, Best Buy’s team made its URLs more readable to both human beings and search-engine bots. This increased the relevancy and accessibility of the site and their products. Secondly, the web team created additional product descriptions, which gives greater context and information available during searches. These two changes alone resulted in a 61% rise in first-page rankings, a 16.8% increase in second-page rankings, and a 93% increase in third page rankings (Brinker). In reviewing the SEO results, the top 5 ranked keywords are “best buy,” “bestbuy,” “xbox,” “asus,” and “xbox 360” (Parry, 2010). These numbers indicate a substantial increase in market impressions per month. There is also opportunity to pay for online advertising, which lands in ‘sponsored search’ areas on SERPs (Brinker).

Currently, Best Buy website strength lies in the links to product pages, giving information about their merchandise. These pages are ‘decision-guiders,’ or tools to help empower customers with information about products assisting in the pre-purchase decision making process (Best Buy: Our Review of an E-Commerce Site). There is also strength in the online resources such as the Geek Squad, and other services. This is an area where the strength of the in-store experience can shine online—the site can offer technical repair information, advice, and tips and tricks for customers (Best Buy: Our Review of an E-Commerce Site).

Merchandising

        In light of an economic downturn in the broader market, which has caused many consumers to spend less on discretionary items like electronics, and the heavyweight competition of online retailers, the current situation of Best Buy’s product sales has undergone some makeovers to stay relevant (Bailey, 2015). Best Buy strength currently lies within the in-store experience. Knowledgeable, friendly customer-service oriented staff is one their biggest assets in comparison to competitors. Best Buy has also worked to breathe new life into their stores, to attract and encourage more vigorous traffic (Bailey, 2015). This benefit can result in consequences to be combatted: showrooming. This is the act of a consumer entering into a retail store to learn about product, its price, the pros and cons to purchasing the product, and then seeking out the product online for purchase (Fitzgerald, 2013).

A survey by Comscore revealed that 7 out of 10 consumers opt for showrooming because they can get better prices online, and 4 out of 10 consumers plan to buy the product online from the beginning, but want to touch it and experience it to some degree before ordering it (Bailey, 2015). Combatting showrooming has been a necessary priority for Best Buy, and in reaction to information and purchase being accessible and possible to virtually every customer, Best Buy has begun a offering a low-price guarantee online as well as at its retail stores—matching prices from Amazon.com, Apple, Dell, HP, Sears, Staples, and Wal-Mart (Bailey, 2015).

        Online sales for Best Buy made up a small portion of total sales in 2014 at 13%, which is an improvement since 2013. Best Buy has been making a renewed effort to compete for market share: in a turnaround strategy, there has been a focus on both customer experience and margins. Firstly, improvement has been on “enhancing customer experience by increasing speed, improving inventory available, and providing home delivery” (Bailey, 2015). To assist this strategy, in more than 1,400 locations, Best Buy implemented a ship-from-store program—which increases online conversation, mitigates the out-of-stock conundrum, and speeds up delivery time (Bailey, 2015). Following implementation of this program, Best Buy’s “domestic online same-store sales surged by 21.6% (Bailey, 2015).

        Product availability in stores is also benefitted from the ship-in-store concept, which assists particularly during the holiday season. In reevaluating the $400 million in annual losses from product returns, Best Buy has created programs to recapture some resources. Within their retail outlets, there are clearance sections and on their website, there are Outlet sections which allow open-box inventory to be purchased online, and picked up in store (Bailey, 2015).

        In 2014, Best Buy closed one of their first quarters of operating under their multi-year productivity program, which resulted in cost reductions of $965 million. Some action which occurred due to this program were: the closing of underperforming retail stores, “shrinking [their] workforce, and making supply chain efficiencies;” these cost-reduction initiatives have helped improve its operating margins (Bailey, 2015). This focus on improving margins has built a foundation on “cutting costs and supply chain efficiency” (Bailey, 2015).

In FY14, Best Buy‚Äôs domestic segment-revenue by category revealed that consumer electronics and computing and mobile phones made up almost 80% of domestic segmented revenues. Included in these categories are products like laptops, desktop computers, tablets, mobile phones and related accessories; TV‚Äôs, home theaters, digital cameras, DVD players, MP3 devices, and the like (Bailey, 2015). This reflects the consumer base which is currently shopping at Best Buy. Recognizing the current market allows for consideration about the market intended for the future. It is the display of a compelling selection of key products that is a current priority for Best Buy–this has been a primary area of focus in 3Q 2015.

In store product experience

As part of Best Buy’s Renew Blue strategy, in an effort to strengthen relationships with consumers and suppliers, Best Buy and Samsung established the Samsung Experience Shop, which is mutually beneficial. Samsung gleans the high-foot traffic and vast presence advantages from Best Buy’s retail outlets, while Best Buy has a strong connection to its vendor, and also enhance its presence in a high-growth category. A similar relationship and action was taken with Microsoft. When in Best Buy retail outlets, these companies and products help to elevate the feel of the store, and welcome consumers to shop and experience products.

Recent changes with inventory levels have been made to become more effective, as this was an internal weakness at one point in time (Chan, 2014). The optimization of inventory cut the number of days of inventory turnover ratio from 60 in 2010-2012 to 50 in 2014. This practice, which demands a delicate balance in action, not only frees up funds and also insures products are on the cutting edge and relevant to interested customers.

 

III. INTENT OF STRATEGIC OBJECTIVE: Beyond Blue

Over the last thirty years, Best Buy Company Incorporated has operated under 6 strategic plans. A new era of strategy has begun under Best Buy leadership. A seventh strategic plan, Beyond Blue, will launch in October of 2015, outlining strategy for BBY for the next three to five years. Pursuing excellence in operations, acquisition and investment, and action to carry Best Buy through the next thirty years.

Our leadership team has come together and created our strategy for the next generation at Best Buy. With considerations of Best Buy’s history, our current situation, and our intent for future existence, Best Buy’s strategic plan is one which will not only allow us to continue well into the future, but to thrive as a leader in our field. Best Buy’s movement forward with a new strategic plan is two-fold. We are pursuing redevelopment of our retail stores and also of our online website presence. Utilizing the foundational elements which already exist, we aim to build on our opportunities, and strengthen our weaknesses.

        Our strategies focus on profit development, customer experience, and a future vision for Best Buy. Using a variety of environmental scans, the realities of Best Buy’s current situation has been assessed. Merchandising, online website strength, and customer experience are three concepts which are further investigated as part of Best Buy’s strategic management.

We are also well aware of the challenges that arise from one of our largest competitors, Amazon, who practices in a non-traditional format. Looking at our foundational concepts which have brought us success in the past, and innovative action to continue our relevancy as the market evolves.

Vision

We envision a technological revolution where users of all knowledge levels come together to gain learn and to maximize the greatest use of technology for fulfillment of its ultimate potential.

Mission

It is our business to nationally embrace progressive products while continuing to competently orchestrate scalable catalysts for change.

ENVIRONMENTAL SCANNING FINDINGS (External/Internal)

Analysis of the customer experience compared to competitors revealed that Best Buy is a leader in some areas but there is also room for improvement. Best Buy‚Äôs strengths lie in the ability to provide services to consumers with friendly, approachable staff and customer service. The in-store experience was acceptable, with highlights being clean and tidy bathrooms, conscientious and knowledgeable staff, beautiful display areas for their big vendors like Samsung, Apple, and Google and finally, their store accessibility for customers of all kinds. There are aspects of the in-store experience which is not outstanding. The maintenance of the outside of their retail areas including the facade, the parking lot, and the main entry way. Unfortunately, the available products offered in the store appeared to be limited–many display cases were not well stocked.

 

Other internal and external environmental variables

There are both internal and external environmental influences which impact the market which Best Buy is a competitor–these are used to understand the market, and to be innovative in planning. By studying all factors, to build our understanding of the realities which we are operating under, allows our strategic plan to be most pertinent and effective. National and international regulation dictates particular action and outlines limitations, economic trends such as GDP, interest rates, and employment rates, social factors, and technological factors are all external environmental aspects which have been considered in plans. Further, there are significant internal factors which also impact strategy, well outlined by SWOT analysis.

As external regulation evolves, so does Best Buy’s methodology, supply chain management, and incentives. One particular example is the recycling operation offered by Best Buy, which is free to the consumer, and generates revenues for Best Buy (Aston). Legislation relating to the physical environment, Human Resources, and manufacturing are areas of interest as Best Buy projects and plans for the future. Topics like outsourcing, foreign trade regulations, and the general stability of the government are highly impactful on both daily and long-term operations.

Economic factors are also of high consideration. In 2015, GDP in the United States expanded an annualized 3.70% in the second quarter, which was higher than the advanced estimate (Taborda). Interest rates, when looking at national averages are lower than past years, providing good opportunities for consumers to gain financial strength (Today’s Interest Rates). ¬†The low unemployment rate is highly beneficial, as consumers have more discretionary funds for luxuries like the newest models of their technological pieces. Also tied to consumer disposition is influential social factors, like personal beliefs, attitudes, and education level achieved.

Advances in technology occur daily, and it is in Best Buy’s best interest to stay current on those developments. The accessibility of the internet and the frequency of its use demand different strategy from missions of strategies past. Some factors like government and industry spending for research and development, the accessibility of the internet, telecommunications infrastructure, and the design of new products drive the direction of strategy.

A SWOT analysis provides a good understanding of a general, big-picture display of Best Buy‚Äôs health. Currently, Best Buy is the largest brick and mortar electronics retailer, with a recognizable brand image. We offer a program of technology education for customers. These are strength. Conversely, weaknesses include the convergence rate, high senior management turnover, difficulties with inventory turnover, and the financial performance on the web. Further, there is a heavy dependence on a small number of vendors, all of whom operated free of contracts; in FY2015, the company‚Äôs 20 largest suppliers accounted for 73% of its total merchandise purchased. Five of these suppliers: Apple, Samsung, Sony, Hewlett-Packard and LG Electronic accounted for 47% of the total merchandise purchased (Why Best Buy‚Ķ, 2008). A final weakness: only 10.6% of Best Buy‚Äôs total revenue was captured in its overseas operations–this dependence on the US market is limiting, and reduces the impact that is possible on a global level.

Some of these weakness translate directly into opportunity. There is opportunity for Best Buy to expand its services offered, widening the potential customer base, and bringing greater benefits and loyalty to current customers. Corporate restructuring and growth on web-based store concept are two opportunities with game-changing potential. Finally, the threats presented by other retailers are present. Amazon and Walmart are two of the biggest players presenting challenges to Best Buy. Any expansions these companies make directly impact the positive outcomes Best Buy strives for. As previously discussed, showrooming is a growing threat.

Strategy Boundaries and Limitations

In using the previous information as the foundation for strategic planning, the leadership team used their best knowledge, research, and creative and critical thought processes to envision a brighter future for Best Buy.

Even though we were able to learn facts and use them in our decision-making process, there were assumptions were made based on the experience we had in research phase. Depicted below is an ansoff matrix showing the  of each strategy.

Ansoff Matrix

	Existing Products & Services	New Products & Services
Existing Market	Rebranding Pacific Sales	Sponsorships 3D Printing Home Batteries
New Markets	Leasing program Refurbishment Virtual Reality	Cafe Hackathons & workshops Best Buy Academy Acquisition

Strategy: Acquisition. A wearable software company

AUGUMENTA

Strategy Consideration, Alternatives & Formulation

“Wearable technology or wearables are small electronic devices embedded into items that attach to the body and possess computational capability. Devices can be integrated into clothing, recognizable personal accessories (e.g., glasses, contact lenses, watches) or additional devices (e.g., pocket device to count steps).”(Saleh, MacIntosh, Rajakulendran).

Within the last decade there has been an increasing interest over wearable technology. The goal of such technology is to amplify customers experiences, from exercise to work related tasks,  without the need of direct interaction with the device itself. This type of experiences are extremely valuable by consumers who are looking for a seamless transition into wearables.

According to a recent study conducted by ASI(Advertising specialty institute)  in 2014, the demand for wearable technology will increase tremendously. T-Shirt sales are expected to increase by 60.2 percent following previous years trends, Polos, 51.6% and outerwear 34.5%.

(http://www.asicentral.com)

The wearable industry is heavily fragmented without a leading company or product but multiple companies competing for marketshare with different products, apparel, clothing or accessories.

As it has happened before in multiple other industries, product convergence will be the leading cause of industry de-fragmentation. In Best Buy by internalizing our overall company value, our goal is to offer enhanced experiences to the world and we firmly believe that investing in leading wearable software instead of apparel or hardware, will offer Best Buy the opportunity to not just grow with the market but be capable of surpass customers expectations and redefine the wearable industry.

Risk Assessment (Market, Finance, Operations, HR, Compliance, Reputational, Tech, etc.)

As a world leading technology company the introduction of Augumenta to Best Buy will help Best Buy be part of the wearable movement. Augumenta self define themselves as a ”Software company that aims at turning wearable devices into powerful tools for enterprises by offering intuitive interaction that works”

The application of wearable technology surpasses the limits of fitness or health applications and could be heavily integrated in many daily tasks or professions. The application of such technology in the medical field is still not broad but many researchers predict its prompt implementation due to the immense benefits it could provide for both patients and health professionals. “Assistive and augmentative technology will dominate the early application of wearables in surgery, these devices may eventually allow better communication and decision-making by surgeons through the collection, interpretation, and presentation of context relevant patient-specific measurements of surgical disease”  (Shantz, Veillett). Although the applications and benefits may seem obvious for an early adoption of such technology in health centers worldwide, many legal and insurance issues need to be first addressed. Privacy policies and regulations haven’t yet implemented the proper changes to ensure proper its utilization and avoid the misuse of  personal information. On the other hand, insurances haven’t yet accepted the wearable technology as a medical advantage denying yet any reimbursement for early adopters of such technology. Some studies suggest that in the early future insurance firms will eventually accept such technologies (Akkad).

The eventually adoption of wearables in the workplace will offer augmented productivity reports, better analysis and more accurate data records as well as improved communications between and within employers, consumers and corporations. The risks associated with such implementation are still to be assessed but many analysts in the risks associated with cyber attacks and their security regulations ( Information Management Journal) and will force employers to adapt their regulations, norms and insurance policies to such changes.

Despite some of the above mentioned regulatory barriers still in place Best Buy must act quickly in the incursion into such emerging industry. The growth rate and consumer acceptance are increasing as noted before and becoming an industry leader is a feasible task due to Best Buy’s ample experience with technology, supply chain, marketing and consumer knowledge.

The acquisition of the company AUGMENTA will benefit Best Buy with its technology advantages, software knowledge and a broad customer portfolio including leading hardware firms and manufacturing firms. AUGMENTA specializes in wearable software and its professional applications. The company just released its latest program SDK, which enhances user performance by connecting human movements and gestures with software algorithms and offer multiple workplace benefits(e.g. improved communication with machinery or workflow assistance). After the purchase such technology could easily be implemented onto multiple growing industries like, medical, educational, fitness and many more.

The projected cost of the company acquisition has been estimated by considering recent market purchases for competing companies with similar sales and size

• Intel purchased Recon instruments for $120Million in june 2015
• Microsoft purchased Osterhout design group for $150 Million

AUGUMENTA have developed 48 patents and exponentially increased its sales since its foundation in 2012 to an estimated $90 Million.

The projected cost is of $140 Million.

The acquisition will not generate any business reorganization or alteration. Best Buy’s strategy of entering the wearable industry and becoming the leading company will require a strong business assistance and capital investment to provide the necessary tools for growth. The expected capital investment required by Best Buy after the acquisition of AUGUMENTA is estimated in $110 Million for a Five year plan. The estimation has been calculated by analyzing investments of competing firms regarding technology and software patents and R&D.

The expected profit generation for Best Buy’s shareholders is $500 Million within the next three years or the equivalent of 30 percent of the wearable industry market. The knowledge of the technology industry by Best Buy will reinforce business relationships with existing suppliers and strengtheneth Best Buy’s presence in the overall supply chain.   

Final Recommendations

The boundaries previously exposed regarding insurance, safety and personal regulations are generating a slow implementation of such technology in the market. As policy and law makers increase their awareness, the wearable technology is predicted to expand into many daily use tasks. Best Buy is forced to act promptly as some competitors are already investing in such technologies. Best Buy’s high technology reputation and capital influence, (500 Billion) will generate a wave of social awareness towards mentioned technology with positive impact to Best Buy’s brand.

 

Leasing the entire store

(Conglomerate Diversification)(New customers new products)

Strategy Consideration, Alternatives & Formulation

Over the course of the last decade, manufacturers have increased their presence in a market previously dominated by retail corporations.  The market trends have changed and since the previously powerful retail corporations have lost their consumer appeal and loyalty in which they were founded manufacturers have become the strategic key of the retail business. In 2001 Apple, the technology giant, opened its first retail store and creating an unprecedented statement, Manufacturers might not need retailers to sell their products anymore. Ever since Apple’s strategic move, the power of retailers over customers has decreased drastically. Since 2001, Circuit City (2009). KB Toys (2009), Radioshack(2014) Good Guys (2005) to name a few, have exited the market in most cases due to the above mentioned industry changes. With such an evolving environment and the loss of solid retail competitors, Best Buy faces an uncertain future. If manufacturers continue to expand their retail plans, Best Buy will face difficult times unless a drastic strategic change is implemented.

In 2011 Best buy created an revolutionary retail floor model that included the partially subleasing of floor space to manufacturers, creating what was later named as “mini-mall” In today’s stores (2015) four years after the implementation of the business model, a wide array of manufacturers lease a small portion of the stores, proven to be a successful business model and beneficial for both manufacturers and Best Buy.

Leasing floor spaces is concept adopted by various retailers, Macy’s and Best Buy have announced that during the holiday season of 2015 in a few selected Macy’s stores, Best Buy will lease some space with the intent of attracting a new clientele to the host store, Macy’s, at the same time that create awareness of Best Buy’s products and potentially benefit both firms.

The proposing strategy is the total implementation of ‚Äúthe mall concept‚Äù among each of Best Buy stores. Best Buy would lease the totality of their floor space to manufacturers and service providers to create a new shopping experience never seen before and unachievable unless these strategy is implemented. The goal of Best Buy is to enhance customer’s retail experience and this strategy will not only comply with the company‚Äôs vision but it will set an unprecedented mark and elevate Best Buy to the industry‚Äôs leadership.

Best Buy will select top performing technology manufacturers as well as up and coming firms and intuitively create an exciting space where customers will be offered products and services in an environment that promotes market competition and customer engagement recreating the excitement of any technology’s exhibition center annual event.

Risk Assessment (Market, Finance, Operations, HR, Compliance, Reputational, Tech, etc.)

Generating a Strategy that would transform Best Buy into a retail space landlord instead of a retailer will come with both risks and critiques but if managed properly, immense benefits.

Best Buy has over the years constructed over 1050 stores in the United States

The retail expansion strategy created by former CEO and founder Richard Schulze generated great success and expanded Best Buy’s retail possibilities. The outstanding long term leases still vigent in most locations and the online retail sites are creating a burden for Best Buy economic projections.  

Final Recommendations

Considering some of the most important risk factors expressed in our 2015 Annual report, the proposed strategy successfully implements procedures with positive outcomes to the overall corporate intentions. By becoming a space retailer and marketing corporation, the risks generated by the failure to anticipate to future consumer preferences will vanish and disappear since manufacturers will themselves consider display their products at our locations. Technological advances will become our strength instead of our weakness. Our customers will no longer be consumers but manufacturers and service providers. Our heavy reliance on some of our suppliers will decrease and our strategy will transform the actual buyers power which is present with the actual model and creates corporate risk to Best Buy, into providers power, benefiting Best Buy and generating new lines of stable revenue.

Considerations for Implementation, Performance Evaluation & Control Measures

In order to implement a strategy of such magnitude, an implementation plan is required. The strategy if applied successfully should be completely integrated within five years. The first year five stores within cities with over three million in population will undergo the previously explained changes. After a first year performance evaluation a thoroughly analysis of the recorded data should be undertaken.  If the results are positive, the strategy implementation should continue into cities with over one million in population the second year as well as increase the implementation of the strategy in the previously tested cities by 30 percent. By year three, every city with more than one store should have implemented the strategy already. Year four should affect eighty percent of Best Buy stores and by year five, the totality of the stores should have been transformed. After each year, a data analysis should be implemented and analyzed in order to asses the viability of such strategy and the needs for reassessment or reformulate. The parameters by which the strategy will be evaluated are:

• Increased store revenue
• business expansion
• risk assessment evaluation
• captation of new customers
• increased store traffic

The reduction of inventory should be progressive and implemented as the strategy is undertaken.

After the five year period, the expected reduction of inventory and assets should be relocated towards sales, marketing, and advertising to empower the newly defined strategy.

Best buy academy

1. Strategy Consideration, Alternatives & Formulation

Best Buy has strived to offer consumers an total purchasing experience. Clients are being educated by staff, guided during purchasing and helped troubleshoot technical difficulties. The increase in technology usage during society’s daily tasks has increased tremendously during the last decade and trends indicate that technology usage will expand into many new daily procedures. The expansion of wearable technology, drones and automated automoviles are just some examples of the intrusion of technology in our daily routines.

The assumption at Best Buy is that the increase in technology usage will require an overly educated society as well as an efficient and knowledgeable salesforce.

As an intention to lead the technological retail industry, Best Buy is committed to offer exemplar shopping experiences, in order to achieve such high standards in a revolutionized industry, Best Buy is in need of offering a top quality and extensive education to its employees.

Best Buy’s The Geek Squad Academy started as a pilot project in 2008 in the outskirts of Chicago. It’s main or core mission is to educate children and young adults in the safe usage of technology but  fails to overcome the main difficulties faced by society while adapting to new technologies and most important, it fails to educate its core competency, the Salesforce.

The proposed Best Buy Academy will create and shape the future of retailers by elevating standards and rising consumers expectations. The intent of such strategy is to create a differentiation from any competitor while maintaining our company’s vision and overall goal.

Best Buy Academy will take advantages of oversized stores in cities and offer two different types of lessons. Salesforce extensive training and community education to help achieve their goals to those who want to start a career in the technology retail industry and the training of consumers on the usage of recently purchased items as well as overcoming difficulties while adapting to emerging technologies. The outcome of such education process is a potentially educated salesforce as well as the correlation of the brand Best Buy with the positives of; technology leaders, community centers and education centers. These outcomes will act as catalyzers to improve our brand recognition and customer loyalty which then would presumably increase our sales, reduce our human resource costs and regain market share.

 

VII. Risk Assessment (Market, Finance, Operations, HR, Compliance, Reputational, Tech, etc.)

The demand for technical education is in high demand and data trends analysis represent such increase over the last decade.

(The Bureau of Labor statistics)

This trend shows an increased interest in technical education that Best Buy has to take advantage of.

The main difficulties the implementation of Best Buy Academy strategy will generate are purely internal. First, the budget required for such implementation has to consider the following, number of new employees and wages, number of required technology and space square footage, and overall marketing and merchandising budget. The staff required for the Academy will be of two full time instructors and three full time staff members. The duties assigned for instructors include creating lesson plans for differentiation and ongoing assessments and implementation of standard-based instructions. The support staff will be required to schedule classes,, create and develop outreach programs and assist with daily procedures. The wages should reflect industry competitive parameters. Instructors will be assigned a salary base of $46.020 annually and $34.750 for support staff. (Bureau of Labor Statistics). The required technology should represent the demand expressed by the community but never be less than eight computers and the required high-end gadgets at the time. The acquisition of such technology will not be the responsibility of Best Buy, but its suppliers. By doing so, Best Buy Academy will be ensured of the latest technology supplied by manufacturers and will act as a merchandise platform for the selected manufacturers or suppliers. The square footage required for the Best Buy Academy implementation will vary depending on the available store space but should never be less than 500 sq ft. The overall annual cost of such implementation considering wages and extra costs should not exceed $196.290  in wages (including taxes, medicare and workers comp.) and a budgeted $50.000 in marketing campaigns totalling $215.919 annually. The expected revenue generated by Best Buy Academy will be generated by educational sales. With a five student class space, at a 80% capacity during 8 hours daily six days a week at an average of $30 an hour, the total annual revenue is expected to be $479.232 before taxes.

 

VIII. Final Recommendations

Best Buy Academy is a concept that should implement Best Buy’s market presence while consolidating the concept of Best Buy as a leading provider for technology related merchandise. Such strategy will also ensure to strengthen business relationships with suppliers and overcome some of the risks associated with our regular business model like showrooming, reliance uncertainty with suppliers and vendors, portfolio management and brand recognition. Educational outreach campaigns can be developed as joint ventures with local community associations, churches, residences and sport teams to encourage the success of the program, create awareness and increase the demand for such services.

 

1. Considerations for Implementation, Performance Evaluation & Control Measures

The implementation of such strategy requires little capital as noted above but in order to assure the proper results, an incremental implementation is recommended. The three biggest stores in each state should implement Best Buy Academy at first. The results should be measured after the first year and  the viability of future implementation discussed. Within eight years, progressively each store should have a Best Buy Academy space of at least 550 sq ft. The Academy implementation growth should increase at a 12% annually. After each year, the strategy should be assessed and evaluated. Factors to consider during implementation are, capacity percentage demand, state and local laws considering educators and staff wages, insurance regulations and market demands.   

 

 

Refurbished products – Source of income – new customer base- Another store segment

1. Strategy Consideration, Alternatives & Formulation

The Bureau of labor statistics released earlier this year (2015) data revealing a 4.5% increase in consumer spending in relation to 2014, the news have been observed by many as a synonym of  economic recovery and well being of our society. The same data reveals an increase of 2.3 percent in expenditure in household appliances and electronics, a positive trend in comparison with  predecessors years . On the other hand, the average American household debt has increased to $7,768  a 3.9% change from last year (Federal Reserve Statistical release2015))while average disposable income has increased by 0.4% (U.S. Bureau of Economic Analysis, 2015 ).

 

The result is a situation composed of mixed signals for retailers as well as consumers. If the overall spending and household debt have increased, the first indicator signaled to retailers is the great advantages that financing options or credit options will create to motivate and engage consumers. Best Buy offers competitive financing options and has successfully implemented relationships with major credit card providers. One step further in the implementation of growth strategies is the captation of the societal quintiles incapable of affording full retail prices even through financing options. The implementation of a business division whose core competencies would be to engage new customers (lower quintiles) with low budget purchase options. To achieve such goal, the future division would purchase used and outdated electronic devices and appliances, after refurbishment, these devices would then be sold at below market prices, generating new lines of customers and increasing store traffic.

 

VII. Risk Assessment (Market, Finance, Operations, HR, Compliance, Reputational, Tech, etc.)

As sata reveals, the market reality is of difficult predictability and greatly unstable. Best Buy heavily relies on disposable income availability and credit debt percentages. By expanding the consumer portfolio and attracting a new line of clientele, Best Buy will assure its presence in the market by offering services and products to all quintiles of the population. The initial investment of such strategy is very low, since it only requires the utilization of resources (staff, floor space, knowledge) already in place. Each store will be responsible for the purchase of such products, several different possibilities are suggested. Exchange options for outdated products as purchase option for newer models for both business and consumers or direct purchase options are the two most recommended options.

“We show that for a wide range of service rates, the second-hand market coordinates the supply chain by either reducing the double marginalization effect or by offsetting it with extra profits gained by servicing the used goods.” (Kogan) Research shows the benefits of such enterprise but also the risks associated with product pricing “the pricing of the new device is based on the vintage of the device and the service rate is no different for new and used durables. Then, the pricing of the services is essential rather than the pricing of the devices” (Kogan) The proposed model explores the need for the capitalization of the service instead of the device. Best Buy would according to the exposed study rapidly become an industry leader due to its extensive service knowledge and low costs.   

 

VIII. Final Recommendations

The proposed strategy is exempt of high risks for Best Buy, the initial investment is extremely low and the projected revenues will help revalue the brand and help regain market share by positioning the company at all quantiles of the consumer society.

The ratio of refurbished products versus new models should never exceed 10 percent. The intention of such ceiling cap is to maintain the business core of Best Buy while increasing revenues as well as customer portfolio.

 

1. Considerations for Implementation, Performance Evaluation & Control Measures

The implementation of the strategy should be implemented at the store servicing the most quantity of consumers per state during the first year as an attempt to analyze the market and asses the product availability.  After the first year, if positive results are obtained, the implementation should be taken in every store of the chain. The ratio cap presented before (10%) should also be assessed regionally after the first year of implementation with the premises of better community engagement and increased overall profits.

 

 

 

Manufacturing batteries and energy alternatives – Tesla style

 

1. Strategy Consideration, Alternatives & Formulation

According to the just released 2014 data from Census of consumer expenditure, the average American household spends $1484 in electricity every year, 2.8% of their annual income. While electricity usage has been steady, a 0.003% increase since 2008, electricity prices have increased by 17.4% in the same period of time. This situation has raised concern amongst consumers and society itself. An interest in secondary sources of energy generation has created profitable industries like wind powered turbines, solar panels and many more. This solutions have always been focused in Business to Business applications leaving household consumers without possibilities of acquiring secondary energy sources due to its high costs or its unavailability. Data from EIA exposes the different price patterns that occur throughout the day, energy consumption costs are pattern throughout the day, Energy providers divide each day in three main categories, Peak, Super-Peak and Off-Peak. As data reveals, 2015 average prices per KWH during peak hours are $0.81 while Off-Peak prices are $0.22. Proper management of energy usage can greatly contribute to savings in energy expenditures. A battery device capable of charging during off-peak hours to provide consumers with off-peak prices during Super-Peak periods of time is the proposed strategy for Best Buy.

 

VII. Risk Assessment (Market, Finance, Operations, HR, Compliance, Reputational, Tech, etc.)

The possibility of acquisition of a leading firm in the battery industry is of no consideration during the first phases of the strategy. The selected strategy will consider establishing strong relationships and contracts with battery manufacturers that will assure product availability and price stability during the total extension of the contract. Contingency plans and side contracts should be designed to avoid product shortage. The relationship between companies should include, design cooperation, brand differentiation, supply chain development and marketing financing.

The mayor risks associated with such strategy are legality and regulatory changes regarding the energy grids and services. With the intrusion of solar panels in the early 2000’s many states imposed tax laws regulating its usage and slowing the growing demand trend of such technology. Pricing strategies from energy providers can create instability for such strategy and could generate loss in sales. Due to the importance of energy providers pricing strategies, Best Buy should incur in short term contracts with battery manufacturers in an effort to avoid or minimize the impact of long term unsuccessful investments.

The operational boundaries of the program will include proper local business relationships due to its crucial value for the success of the program. Technicians will be responsible of the proper installation, consumer education and possible maintenance services. Best Buy will need to include new business relationships with local electricians as a joint venture to be able to offer quality services.

The new competitors of such product will include, solar panel development companies and products and companies providing with similar products. An example is the Powerwall developed by Tesla, which offer similar services but requires the installation of solar panels, which then will be much more likely to be targeted by energy providers and lawmakers and heavily taxed subsequently losing market appeal. Our exposed product will on the other hand minimize its exposure to extra taxation and law reforms in order to maintain market appeal and competitiveness.

 

VIII. Final Recommendations

Already competitors of Tesla products like Boston-Power, Stem, Sunverge, AES Energy Storage, and SunEdison all offer energy storage solutions in commercial and industrial markets and have invested sums varying from $150 Million to $250 Million for product development to be able to access the consumers market. Best Buy should establish relationships with such mentioned companies to assure the proper product distribution and development. The leverage offered by Best Buy is its market presence, global reach and financial possibilities. Such assets should be utilized to Best Buy’s advantage while negotiating contracts and supply options.  

 

1. Considerations for Implementation, Performance Evaluation & Control Measures

The battery industry is an extremely competitive industry with immense investment requirements which might interfere with Best Buy’s overall goal and mission. In order to balance the risks and the market appeal of such innovative development Best Buy will create a joint venture strategy with a leading corporation mentioned above and create a partnership. The length of the first contract should not exceed more than 3 years. During the first time period the relationship between both companies should generate and develop a final product and create a strong and reliable supply chain connecting both companies and a seller compliance agreement should be drawn with the purpose of Best Buy being the only distributor. After the product launch a first year data analysis should be generated and a strategic decision should considered to either implement and continue with the relationship or terminate the venture. If decided to continue with the relationship, Best Buy should extend the agreement contract and increment its commitment. A three year reassessment is required to strategically create the best possible outcome for Best Buy.

 

Expanding Pacific Sales

Horizontal growth. Same Product to More People

1. Strategy Consideration, Alternatives & Formulation

 

Best Buy owns Pacific Sales since 2006. Best Buy bought California-based Pacific Sales Kitchen and Bath Centers Inc. for $410 million (Reilly, 2014). “They were originally opened with one store in Torrance, California. They offer high to mid range appliances as well as an assortment of home electronics and other home improvement products” (BUSINESS WIRE, 2005). The company has over 35 stores in California, Nevada & Arizona, and had opened stores within existing Best Buy stores in Texas and Hawaii as well as California, Texas, and Arizona to offer higher end appliances than are currently available in Best Buy. “As of July 2013, they operate 36 full-assortment stores in California, Nevada, Arizona and Texas. In addition to these 36, they also operate 55 appliance-only stores located within existing Best Buy locations in California, Arizona, Hawaii, Texas, Minnesota, Virginia, Maryland, and Iowa.” (2005).

Having Pacific Sales attracts more customers, as Chief Operating Officer Brian Dunn said “Pacific Sales extends Best Buy’s reach with high-end home improvement products. This acquisition enhances our ability to grow with an attractive customer base and premium brands” (2014).

Best Buy will focus on expanding more Pacific Sales in other states where they have a big presence already. Such as: North Carolina, Virginia, Michigan, Washington, Oregon, Ohaio, etc. The new Pacific Sales location will operate within existing Best Buy locations. This strategy would help Best Buy grow horizontally by investing more money and time in acquiring complementary products to what they already have. The Pacific Kitchen and Bath Centers would be implemented in the biggest Best Buy stores around the States. Best Buy it is usually associated with consumer electronics such as computers, cell phone, TV and now they will expand in appliances by offering mid to high end appliances.

What we know is that appliances are a good source of easy sales growth for Best Buy. Even though appliances account for only about 7 percent of Best Buy’s total sales (as shown in the chart below), when in other electronics chains like h.h. gregg, the share is more than 30 percent (Reilly, 2014). ¬†We also know that the housing market has started to climb again, appliances seem like they would follow suit. ‚ÄúThe data’s a bit confused on that score, though ‚Äî Appliance magazine reports that appliance-store sales were up in January, but General Electric recently announced it would furlough 500 people at its Appliance Park facility in Louisville, Ky., noting that appliance sales were sluggish so far in 2013. LG Home Appliance Co., meanwhile, reported flat Q4 sales‚Äù(2014).

Appliances play a key role in Best Buy’s next-generation “Connected Stores.” The smaller-format stores feature Pacific Kitchen & Home, a mid- to high-end appliance retailer Best Buy acquired in 2006. The chain is known for its skilled sales staff and carrying expensive brands like Viking, Wolf and Miele” (Lee, 2011).

Numbers show that since the fourth quarter of 2011, Best Buy “has averaged a quarterly same-store sales gain of 10.3 percent” (2011).

Growing the Pacific Kitchen and Bath locations it is a very strategic move for Best Buy because we will be targeting new homeowners and consumers that are remodeling their homes. “Selling large products like stoves and dryers also will help Best Buy pull away from Amazon, since people are reluctant to purchase such big-ticket items online”(2011).

When you think of Best Buy you usually think of TV, cell phones, computers, video games and now thinking of dishwashers, fridges, and vacuum cleaners might seem odd. “Even Best Buy didn’t really fashion itself as an appliance retailer. In fiscal 2012, appliances made up only 6.3 percent of the company’s $50 billion in revenue. Officials declined to give a target for revenue growth this year. “This was a business that we weren’t really serious about,” said Liz Haesler, vice president of appliances. “We were not on top of the latest and greatest trends” (2011).

        Best Buy thru this strategy is listening to the needs and wants of customers that love Sears, Lowes and Home Depot.

        Pacific Kitchen are a great support for Best Buy profit and by expanding upon it the profit will grow. “In fiscal 2012, appliance sales totaled $3.2 billion compared to $2.5 billion two years ago. In that same time period, Best Buy’s core consumer electronics sales fell to $16.2 billion from $17 billion” (2011). These numbers support the strategy of investing more money in expending Pacific Kitchen in more locations thru United States.

VII. Risk Assessment

Failure to anticipate and respond to changing consumer preferences in a timely manner could result in a decline in our sales.

Political factors could adversely affect consumer confidence and certain aspects of our operations.

Failure to attract, develop and retain qualified employees, including employees in key positions, the business and operating results may be harmed.

Consumer demand for our products and services could decline if we fail to maintain positive brand perception and recognition.

Our success is dependent on the design and execution of appropriate business strategies.

Failure to effectively manage our property portfolio may negatively impact our operating results.

VIII. Final Recommendations.
IX. Considerations for Implementation, Performance Evaluation & Control Measures

Best Buy has already invested million of dollars in this strategy that has proven to be successful now we need to expand upon it.

Best Buy will need to invest money in marketing in order to be recognized as a store that sells appliances. The marketing manager will need to link the customer to the products. The manager must therefore be concerned with the market position and marketing mix (Hunger, Wheelen, p. 60). Best Buy will need to create a full campaign that includes tv spots, radio spots, online ads and print ads to advertise appliances. Best Buy will need to train their staff to assist customers in making decisions which are the advantages in purchasing one item vs the other.

 

3D printing

1. Strategy Consideration, Alternatives & Formulation

 

Consumer Electronics Association, projects new product categories such as: 3D printers, 4K ultra-high-definition televisions, connected thermostats unmanned systems, and wearables are expected to grow 108% in 2015 (Mearian, 2015). Best Buy strategy will consist on providing 3D services for customers as well as retail medium to high-end 3D printers.

Today we know that the need for 3D printers is increasing every year. 3D printer shipments are doubling every year. Between 2016 and 2019, worldwide shipments are expected to reach more than 5.6 million, according to new research from Gartner (Mearian, 2015). According to Marian’s article ‚ÄúLast year, 106,761 3D printers were sold worldwide. This year, 3D printer shipments are expected to reach 244,533 units; next year, shipments are projected to reach 490,000‚Äù. Sawers in his article states that ‚Äú3D printing has yet to fully embraced by the mainstream, but it‚Äôs estimated that the global market grew by almost 70 percent last year, generating more than $3 billion in revenues. Indeed, a growing number of consumer companies are now embracing 3D printing and using tech to extend experiences‚Äù(2015).

Furthermore, Deloitte predicts that “in 2015 nearly 220,000 3D printers will be sold worldwide, with a dollar value of $1.6 billion, representing 100 percent unit growth versus 2014” (Predictions 2015).  Deloitte emphasizes that not every home will have a 3D printer but 3D printing can be seen as ‘the next Industrial Revolution’. According to Deloitte the real revolution is for the enterprise market, not consumers (2015).

3D printers are great tools for consumers who want to test out their ideas. Having access to 3D printer services encourages entrepreneurial thinking. ‚Äú3D printers can not only prototype new products and produce tools and fixtures that are used to make other items, but also print high-quality, short-run finished goods” (Marian).

       

3D printers are no longer expensive as when they first were produced now consumers can buy their own machines for under $1,000. Even Though 3D printers are accessible to consumers the quality of the end product of these machines it is not very good.

We are assuming that consumers want high quality product at affordable prices. Best Buy will make 3D printers accessible to consumers for them to print their 3D projects at affordable prices and great quality.

 

VII. Penetration of the market: Considerations for Implementation, Performance Evaluation & Control Measures

Best Buy will have to compete with UPS and Amazon. Both UPS and Amazon have lunched successful 3D printing services. UPS has launched successfully 3D printing services in six markets across the country. There is a demand for 3D printing. “The UPS Store® has expanded 3D printing services to meet the growing demands of its small business customers to nearly 100 additional locations nationwide” (3D Printing Services).

Best Buy will have to compete with the quality and prices of The UPS Stores.

On the other hand Amazon has partnered with Sandboxr, “a company specializing in 3D-printed collectibles, to let you create customized 3D printed figures of video game characters from Smite, Infinity Blade, and Primal Carnage” (Sawers, 2015). 3D printing services that Amazon has launched are a little different from UPS because Amazon is providing their customers with access to tools such as filament, computer aided design (CAD) software, and other related accessories. Furthermore Amazon has provided customizable 3D-printed products, such as jewelry, lamps, and Raspberry Pi cases (2015).

Best Buy similarly to Amazon will have the same principle behind offering 3D printing services. Customers will save money and will not have the need to procure their own expensive equipment, but they will used Best Buy’s powerful printers. Best Buy has the advantage of already having multiple locations around the country so adding 3D printing services in their already existing location will not be as expensive.

Amazon is focusing more in advertising 3D character production for personal use. While Best Buy will focus on advertising a broader range of usage for the 3D printers. 3D printers will be used by customers to create 3D mockups of their designs from jewelry, cosmetics, toys, electronics, guns, medical models, shoes, cases, holders, decorations and all sorts of innovative ideas. We believe that hitting all different uses of 3D printing would help us to engage with audiences that we did not especially targeted before. Best Buy will be encouraging entrepreneurs to visit the store more often.

Best Buy’s strategy will consist on selling Retail 3D printers and offering 3D printing services in multiple Best Buy Stores. Best Buy will face competition from Staples to UPS, Amazon to Home Depot, and now Sam’s Club. All these retailers are placing 3D printers on their store shelves. Best Buy already has some 3D printer options selling in the online store but not so much on the physical Best Buy locations.

 

VIII. Risk Assessment

Operators risk injury, from lifting and handling heavy objects, produced by the 3D printer.

Electricity operator’s potentially fatal injuries if they receive a shock from faulty electronic equipment or installation of the printers.

Failure to adapt to latest technology including software and hardware that make the 3D printing experience coherent.

 

1. Considerations for Implementation, Performance Evaluation & Control Measures

In order to offer 3D services Best Buy will need to test out the concept on their biggest stores in markets such as: California, Texas, Virginia, Florida, Georgia. Best Buy purchasing strategy in 3D printers will meet the needs of creative, educational, engineer and tech geek customers. Best Buy will be outsourcing the technology (3D printers). Best Buy after testing out this new service might consider applying a vertical strategy in developing their own 3D printers.

Best Buy will invest on educating staff in using and assisting customers in their 3D projects. Best Buy will invest on advertising their new services by targeting the right audience.

Best Buy will make a better use of their store space. According to Peisenieks article

in fiscal year 2013 ‚ÄúBest Buy operated 1990 stores with the total space of 55,785,000-square feet. The average space for a Best Buy store was 28,032-square feet. In 2013 Best Buy’s total revenue was equal to $45 billion. The average revenue per square foot was equal to $808‚Äù (Peiseniekl, 2013). As shown in the graph below Best Buy‚Äôs revenue per square foot in 2013 was the lowest it has been in the last four years.

By remodeling the store to offer a new service that will bring customers and profit to the store the average revenue per square foot will raise.

In order for Best Buy to successfully penetrate the market and compete with Amazon and other competition they need to aggressively reach the consumer on a full-scale by creating a mass marketing campaign that is fun, vibrant, catchy and that sets them apart from the competitors. Our best recommendation would be to apply this strategy to the top six Best Buy markets.

 

Rebranding

1. Strategy Consideration, Alternatives & Formulation and Penetration of the market: Considerations for Implementation, Performance Evaluation & Control Measures

 

Best Buy is a highly recognized brand. When a consumer is presented with the Best Buy logo chances are very high that they know what that logo stands for. As every brand Best Buy’s brand needs to be maintained and refreshed as trends change and new technologies are introduced.

Best Buy has not worked on a brand identity shift in the past 7 years. A brand to remain coherent and relevant to the market needs to identify weaknesses on the current identity and improve upon those. Usually it is recommended that every five years a company should take a close look at their brand and how it works in all different channels.

Best Buy Logo

        While looking at Best Buys’ logo evolution there is some disconnect between the identity shifts. If you see the two logos on the image below you can notice that there is certainly an evolution of the logo.

Yellow is a consistent color on all logos developed.
In 2008 Best Buy updated the logo from the one on the left to the logo on the right (below).

This logo was a “test logo” which was used in a few stores but it never became the new identity of best buy.  The logo on the right still maintains the price tag concept but in the meantime shifts a little bit away from it by focusing more on the name. The logotype introduces a new font that looks more technological, clean and very easy to read. The “old” logotype looks tacky. Best Buy offers unbeatable prices. At the same time Best Buy sells mid to high-level products. Consumers can find lower quality products in other stores. In that case the concept of the yellow price tag it is not that relevant anymore. It is time Best Buy shifts away from the yellow tag.

Our strategy consists on getting rid of the yellow price tag shape and focus more on the name.

The new logotype utilizes a coherent well-known typeface that will elevate the brand, keeping it clean, friendly and still recognizable. Best Buy’s new logo will have an arrow those points toward Best Buy. This arrow plays two functions one points Best Buy as the place where you can find the best prices and secondly arrows have become a symbol of speed and used very much in technology to illustrate latest trends, speed and electronics. The arrow has the Best Buy identity colors including the yellow as a highlight and connection to previous logo evolutions.

Web presence

The overall user experience at Best Buy it is a little outdated. Once you are on the website and start using it you can see many features that are outdated. You have to click on links instead of icons in order to go back to previous pages. Best Buy it is not very aware of their users. Once you go to their website the main menu it is not functioning correctly. The first item of the menu gets automatically selected. The hero image section it is not utilized very well. There is a single image slider that does not capture the attention of the user. When you go to Amazon or Walmart you get bombarded with visual information. On the other hand when you go to Apple’s website you have this unique elevated experience. Best Buy’s new identity shift will target towards an elevated experience that will provide the needed information to the used.

Best Buy’s website it is not responsive. Which means that does not provide an optimal viewing and interaction experience that includes easy reading and navigation with a minimum of resizing, panning, and scrolling. On Best Buys’ website you have to do a lot of scrolling and clicking to navigate from one section to another. As a user you get tired of the interface and many users leave the site from the frustration.

Even small things like creating an account at Best Buy requires multiple unnecessary steps and information that often users do not want to provide such as: telephone number. To create an Account at Best Buy you need to have a phone number while Amazon and Walmart make it easy for the user by just requiring for an email address.

Website redesign

        Best Buy will improve users online experience by providing a responsible, user friendly, and intuitive website.

Online ads

Best Buy currently does not invest a big capital on online ads. While using different social media websites users get bombarded with online ads that persuade you in visiting their websites and purchasing a product. The new marketing strategy will focus on elevating Best Buy’s presence. Best Buy will be more aggressive and will be showcasing many ads in many different channels targeting the right audience at the right time. For example Best Buy will run Facebook ads that will be customized to different demographics. For example video gaming systems ads will be targeting a younger male demographic while appliance ads will be targeting females from 30-50 years old.

In Store

Customer service

The overall customer service at Best Buy is very good. As soon as you enter the store you are greeted with a smile and welcomed into the store by one of the employees.

We want to build upon that and bring customer service to the next level buy encouraging our employees to be more helpful, friendlier and more approachable. This is what sets Best Buy apart from the competition: the human interaction. Amazon cannot compete with that. Best Buy has an advantage to meet the customer in person, to understand their needs and to make that connection. There is an opportunity right there to make a sale and acquire a loyal customer.

Product portfolio

Best buy had a wide variety of products. The products are for the most part accessible for the customer. Best Buy will expand upon the portfolio by adding a variety of products from mid to high-end products.

Merchandising

Best Buy has a hard time keeping their displays full with merchandise. Many sections are empty and the products are missing.  A lot of items are misplaced. Overall the store is not well organized. With the new brand identity shift Best Buy will provide a new experience for their customers. More merchandise will be accessible and right there for the customer to

In-store Layout

Best Buy has some nice displays for certain brands such as: Samsung and Apple. The specific sections look elevated from the rest of the store. The carpet, layout, tables made the experience more pleasant. Samsung and Apple both have invested in their overall look and feel in the Best Buy store. That will be the goal of Best Buy rebrand: to elevate the overall store feel. The signage at Best Buy it is not that easy to follow currently. The rebrand will change the overall layout of the store. There will be maps, signage and bigger price tags. Currently the store does not have a map so often time customers find theirs eves lost in the store. There will be designated sections for special sales and deals.

The signage will be improved. Currently, there are some signs that are translated in Spanish but for the most part English is the only language. The existing signs are not big enough or easy enough to facilitate the experience. The new signage will improve navigation of customers in the store.  

 

VII. Risk Assessment

Failure to predict new trends, needs and wants of customers.
Changes in our credit ratings may limit our access to capital and materially increase our borrowing costs.

 

Blue Ocean Strategy

Strategy Consideration, Alternatives & Formulation

The objective of implementing a blue ocean strategy is to find an uncontested space in electronics retail and ecommerce market (Blue Ocean, 2007). With such intense price competition amongst online retailers, Best Buy has decided to focus on finding and occupying a new market space. Blue ocean strategy allows business a way overcome intense price competition through the innovation of virtual reality customer experience.

 

Risk Assessment (Market, Finance, Operations, HR, Compliance, Reputational, Tech, etc.)

The recommendation for a blue ocean strategy for Best Buy stores would be tailored to the e-commerce side of the business.  Best Buy would allow preferred customers to sign up for Best Buy Virtual. After signing up as a preferred customer and completing a customer profile the customer would be sent a set of virtual reality equipment that would then be used on a smartphone. This would allow customers to experience the in-store shopping experience of customer support, real time product information and overall shopping experience from the comfort of their own home.

Once completing a detailed customer profile the customer would be able to set their shopping preferences based on their likes and dislikes. For example, if a customer is inclined to have large amount of product information they would be able to set up their experience to provide them with large amounts of information, while in contrast another customer may value aesthetics of the product and would be able to set their experience to show more products rather than educate the shopper on the product information. The goal would be for customers to design their ultimate shopping experience.

Customers would be able to view selected products in virtual reality allowing for a customer to get a better sense of product size and use, rather than viewing a product on a computer or phone screen. By allowing customers to have a virtually reality shopping experience they would no longer have the need to visit a retailer for the purpose of showrooming. Shopping in virtual reality would allow customers to access a much larger inventory than any retailer would be able to showcase.

 

Final Recommendations

        The expansion into the virtual reality retail market would be considered a growth strategy. Best Buy would be expanding their customer service experience in order to reach additional segments of the related technology industry. This type of growth would be considered concentric diversification (Hunger). The addition of a virtual reality shopping experience would be a strategic move for a corporation such as Best Buy because there is a strong competitive position in the retail and ecommerce electronics and technology related products market. It would allow Best Buy focus on the distinctive characteristic of customer experience (Hunger).

        We also believe that we would be able to engage with markets outside of our norm, as now we would be able to interact with markets that are unable to visit the stores for one reason or another. This includes, but is not limited to stay at home moms, employees who work from home, and those are simply too busy to make it the retail store. There are many major organizations that have already started to integrate virtual reality into their portfolio. Large retailers such as Walmart, Target and Tesco have started to experiment with idea that add visual and audio simulation using 3D computer simulations. (“Virtual reality to become a prominent shopping technology in near future”, 2014). Best Buy would like to heavily invest in the virtual reality shopping experience, to become the Best Buy Virtual Reality shopping experience that every consumer desires.

 

Considerations for Implementation, Performance Evaluation & Control Measures

As mentioned previously, many large companies are beginning to invest in virtual reality. Facebook recently purchased Oculus VR a virtual reality headset company popular in the gaming industry for two billion dollars. The social media site plans to use the virtual reality technology for communications, media and entertainment platforms. The founder of Facebook purchased the Oculus VR because he believes, “virtual reality has the potential to be the next great computing evolution, following the transition from desktop computers to mobile devices.” (Luckerson, 2014). Best Buy could even look to develop partner ads with Facebook using the technology.

Facebook founder Mark Zuckerberg stated that the value in the idea of being able to have users sharing more than just timeline moments with one another, but rather entire experiences together (Luckerson, 2014). Facebook is not the only organization looking to integrate virtual reality, other companies such as Sony and Microsoft have also become interested in the idea (Luckerson, 2014).  By exploring the virtual reality commerce market before other retailers, Best Buy would be able to set shopping standards.

Facebook has even suggested a business model that allows users to visit virtual worlds where they can buy products while experiencing advertisements to generate additional income (Luckerson, 2014). “Consumers are now eagerly using smartphones, tablets and other devices for shopping, research, leisure and virtually every other activity imaginable. Business leaders widely recognized that they must embrace these possibilities, or else they will inevitably fall behind their more technologically sophisticated competitors. Among the most significant upcoming trends when it comes to retail, according to the San Jose Mercury News, is virtual reality” (“Virtual reality to become a prominent shopping technology in near future”, 2014). “Virtual reality will likely become common once wearable computing devices, such as Google Glass, become widely popular. Customers equipped with such units will be able to see coupons, nutrition statistics and other information pop up before their eyes as soon as they view a given product. This information will also soon become visible to shoppers using tablets as they walk through the aisles” (“Virtual reality to become a prominent shopping technology in near future”, 2014).

“Virtual reality to have a positive impact on shopping for both consumers and retailers. In the former case, these technologies will provide greater information and insight to customers, enabling them to make better buying decisions. Additionally, the shopping experience itself will likely become more convenient and personalized, reducing frustration. For example, a department store may leverage information gleaned via this shopping technology to improve the layout of its store and even guide consumers as they shop” (“Virtual reality to become a prominent shopping technology in near future”, 2014).  Currently there are two virtual reality headsets that have been tailored for the retail consumer market, the Occulus Rift and Google’s Cardboard (Hoang, 2015).

There are very high expectations of the way virtual reality will transform retail. “In five years you will not walk into a retailer and get lost,” said Barbara Barclay, general manager of an eye-tracking software company, the news source reported. “They’ll know who you are and what your last shopping experience was. They will know where you’re looking on a shelf. The whole shopping experience in five years will be highly personalized. As a result, real-world shopping will be less time-consuming and more enjoyable. Consequently, one of the biggest benefits of virtual reality solutions for retailers is that the shopping technology can help brick-and-mortar compete with online shops, as real-world shopping will offer an experience that the Internet cannot match” (“Virtual reality to become a prominent shopping technology in near future”, 2014). “People are still going to want to physically buy something in a store, but virtual reality is the experience where they can envisage [the item], and use it more as a planning tool than a purchasing tool. Retail does have to change, and virtual reality is a big part of it” (Chang, 2015).

The implementation would require advanced software to create and maintain the reality offerings and products. This will be a complex process that will require a large financial and technological investment. Along with consideration of implementing the software, the element of security must be considered. Due to amount of data collected in regards to consumer shopping habits that can be used to used advanced retail intelligence and analytics importance on the security of our customers must be considered (“Virtual reality to become a prominent shopping technology in near future”, 2014). “Shoppers can tour the virtual store by focusing their gaze on products, browse items from different angles and socialize with friends online, bringing to life an e-commerce industry currently dominated by search boxes and static pictures” (Hoang, 2015).

Best Buy would slowly take steps to integrating virtual reality into their portfolio. First consumers would be asked to play and test the idea of virtual reality as the first step of a three-year process. “Data from CCS Insight reveals that the market for mobile augmented reality and virtual reality devices will reach $4 billion by 2018. To capitalize on the impending boom, companies should begin planning, developing and testing their VR strategy now” (Slobin, 2015).

The first steps would include customer testing and adding virtual reality enabled product experiences as an option for the most popular products. We would allow consumers to experience their purchase before they even make it (Slobin, 2015). Once online virtual reality has been launched, the mobile applications would be tackled. Every smartphone would have the ability to run an app for users to experience virtual reality with a simple adaptor. Social media sites such as Facebook and Youtube will be utilized as they currently allow 360 degree videos (Slobin, 2015). Slobin believes the future of retail will allow brands to use “virtual reality to create fully immersive, contextual experiences that reach beyond existing physical and digital channels to create a very new, and very real, type of shopping experience: v-commerce” (Slobin, 2015).

The largest limitations associated with incorporating virtual reality into the retail and e-commerce industry is cost. The largest cost would include the development of software, the virtual reality products, and marketing associated with gaining the attention of early adopters.  Anytime a new technology there is always a fear of how the general public will embrace the new technology, however many leading companies are betting on the success of virtual reality. “One of the largest disadvantages of virtual reality is that the technology required for an immersive or natural experience has remained elusive. Haptic systems that provide physical feedback or allow a fully articulated presence within an environment are clumsy and can cause problems during use. The type of hardware that even simple head-mounted displays use can break the sense of immersion as adjustments to the device need to be made and components such as wires and headphones turn into obstacles to natural movement” (P., E., & B., A.)

 

 

Café Franchise Partnership

Strategy Consideration, Alternatives & Formulation

In order to enhance the shopping experience, we believe partnering with a café franchise would help elevate the customer shopping experience.  Not only would adding a franchised coffee shop help elevate the shopping ambiance, but we believe it will help customers shop longer.  believe that optimizing the larger store footage by placing cafes in the stores will make the stores feel fuller and more inviting. “The in-store cafe concept is not a new idea, but the latest eateries to pop up are in hip shops with stylish food options to match. Shopping can be an exhausting experience, and these cafes offer a place to rest and contemplate your latest purchases” (Bock). Many retailers are adding coffee shops and cafes to their stores to give consumers another reason to visit and stay (Bock).

 

Risk Assessment (Market, Finance, Operations, HR, Compliance, Reputational, Tech, etc.)

The objective of this strategy is to enhance the current customers experience by offering them additional products to further develop the shopping experience.  Best Buy would benefit from the horizontal growth of the introduction of a café franchise partnership (Hunger).

The addition of a café allows for more intimate interactions throughout the consumers shopping experience. Supermarkets have been adding coffee shops inside the stores to help bolster the sense of community. It allows people a meeting place. Best Buy is at an advantage since many times coffee shops are seen as a place to use technology. Consumers go to coffee shops to use Wi-Fi, attend workshops, meet with friends amongst many other activities (Creating a modern coffee shop experience within the supermarket, 2012). “In 2011, the Specialty Coffee Association of America (SCAA) reported there were 22,549 coffee shops in the country Рan 18.4% increase from the previous three years. However, in the previous two years, 2,500 shops had to close their doors. And the SCAA predicted 6.6% more closing by the end of the year.” (Creating a modern coffee shop experience within the supermarket, 2012). Adding coffee shops to the Best Buy shopping experience would not only utilize the space of the stores, but also allow customers to shop longer and visit more frequently. Another benefit of the café is the sense of place, many consumers enjoy the café experiences offered by large retailers such as Target, Barnes & Noble, and even large department stores.

Other internal benefits of a coffee shop or cafe includes the employee’s ability to access fresh coffee and food. Employees would be able to purchase items on their break periods to be consumed in the breakroom. BBY would not want to encourage breaks to be taken in the cafe in order to maintain a cafe ambiance rather than a break room for employees. This would also generated additional income through employee purchases.

 

Considerations for Implementation, Performance Evaluation & Control Measures

The costs associated with purchasing a cafe or coffee shop franchise range from $250,000 to upwards of $500,000 depending on the brand recognition.  Otherwise BBY could start their own name brand cafe and coffee shops at  the starting costs of $30,000 per shop (Coffee Shop Equipment vs Buying a Franchise”). Another limitation would include consistent traffic flow of cafe customers. BBY would have to focus on developing an engaging and desirable atmosphere to ensure frequent repeat customers.  

 

 

Hackathons and Workshops

Strategy Consideration, Alternatives & Formulation

Best Buy is the leading electronics provider in the United States, we believe that hosting Hackathons and technology workshops would be an exciting new way to interact with customers. Hackathons typically take place over several days or weekend to bring together a large gathering of programmers and other tech savvy individuals to collaborate on technology enhanced ideas. The hackathons and technology related workshops would allow Best Buy to engage with the most tech savvy individuals in the area. “Some of the most innovative companies have embraced hackathons to promote innovation. A hackathon is an event held within a finite amount of time (typically 24 or 48 hours) where creatives get together in small teams to design, build, and demo a new product or feature” (Evans, 2014)

Risk Assessment (Market, Finance, Operations, HR, Compliance, Reputational, Tech, etc.)

        The addition of hackathons and tech workshops would be considered a diversification growth strategy.  Best Buy is already in the tech industry, however Hackathons and hosting tech related workshops fall into a related industry made up of slight different markets. Although we do believe there will be some market cross over, the interactions with the consumers will be diverse than the current. This growth would be concentric growth.

        The investment would require Best Buy to turn 20% of the store into a work space and hire staff including an event coordinator, trainers and develop relationships with leaders of the teach industry for speaker presentations.  The popularity of the large city incubator style approach could easily be applied to suburban areas that lack the ability to host such events (Vella, 2013).

 

Final Recommendations

        The benefits would include Best Buy’s ability to showcase the latest technology to the most tech savvy audiences. “While a customer may not be able to purchase the technology it will attract back the tech-oriented base that Best Buy has lost. This is similar to how car enthusiasts attend auto shows even though one cannot purchase a car at those events” (Vella, 2013).

        Another benefit from the introduction of hackthons and other tech related workshops is the creation of a tech community physically in the Best Buy stores. “Just offering lots of stuff in a big box is a losing formula in the world of electronics unless you create a compelling reason for people to show up and purchase there. Best Buy can create its own community network by hosting hackathons and other tech gatherings centered on their in-house incubator which will attract hundreds of potential customers for each event” (Vella, 2013).

 

Considerations for Implementation, Performance Evaluation & Control Measures

Many people that are interested in hackathons prepare far in advance so many recommend planning hackathons 6-9 months in advance in order to allow preparation time. “Hackathon act as an opportunity to build a long-term community which means keeping in touch with developers, updating them on your platform and encouraging them to continue working on their software” (Evans, 2014).

Although success, hackathons and workshops are comprised of many hours of time and lose of space in the store for periods of times. This may cause short periods of very busy times in the stores making it more difficult for shoppers looking for a calm atmosphere. The environment of these events are usually very loud, active and distracting. Another limitation is the amount of products attendees spend in the store during their event, since many of the attendees will come with their computers and equipment needed.  

 

 

Sponsorship

What is the idea?

Best Buy would like to become more involved in sponsorships in the tech world. This would include a launch of start-up and incubator style sponsorships and engagement programs for youth with limited access to technology.

Currently Best Buy does have a community relations department that is involved with Best Buy Teen Tech Center sites in larger cities. Best Buy believes, “The need for youth to be tech-savvy and develop the 21st-century skills to set them up for future career success is more important than ever. Yet too many teens have little or no access to technology and as a result, they fall behind their peers” (Community Relations). The current objective is to, “leverage our local community presence, our technology resources and our talented employees to provide new and creative programs to serve our communities” (Community Relations).

        We believe we could bring these national partnerships, Teen Tech Centers, Geek Squad Academy and EveryoneOn programs to a new level. By utilizing the large amounts of store space we would be able to bring learners to the technology. Best Buy would use the renovated area for learning purposes to ensure a permanent learning environment for those participating in the any of the programs.

        To enhance the current community relationships Best Buy would dedicate twenty percent of the retail store space to the enhancement of learning. We also believe this program would pair very well with the startup and hackathon workshops held. This will allow the youth to connect with tech professionals to gain a real world understanding of how business works. Best Buy would also launch a product innovation internship team. These teens would have the chance to gain on the job training and shadow professionals.  A large focus would be on youth in lower income areas that may not have access to the latest technology due to finances. Best Buy believes that it is important for the youth of today to become emerged in the latest technology. The better understanding the youth have of technology the more likely they are to continue moving forward in the growing field.  

What is the strategy?

Bolstering the community sponsorship program would require the introduction of two strategies. Through adding additional programing and sponsorship programs Best Buy would experience horizontal growth through joint ventures.

However, in order to implement the additional corporate engagement in the community the stores would have to enact a retrenchment strategy to allow for the use of the space. Best Buy would reduce the number of products offered to allow for the utilization of the twenty percent of the space for the utilization of learning.  Rather than carry a wide selection of products in every store the stores would only carry the items popular to the specific region. This would also allow for stores to specialize in items. “Best Buy should also expand beyond commodity products and begin focusing on innovative categories, for example, personal health monitoring and quantification. Everything from weight scales that are connected to Wi-Fi networks to pulse monitoring watches will be increasingly popular as consumers use technology to manage their health and lifestyle. Designated Best Buys could become health tech centers with partners including GE  GE 0.14% , Nike  NKE 0.02%  and others” (Vella, 2013). By using these strategies we would be able to reduce the amount of inventory held which is at our benefit due to the dated turnaround of obsolete products. The money saved by the reduction of held inventory will allow for the investment for innovation and educational programs focused on the service platform.

 

Final Recommendations

During the course of our research and development of the strategic plan, The Transformation of Value, there were several plans which were proposed, but did not make it to the final round. This is because of these strategies were weaker than deemed necessary for piloting the plan. Of the twelve strategies presented, only five pass extensive challenges to make it to the final recommendations. The following are the strategies which did not make the cut:

Best Buy Academy – This is an unknown industry for Best Buy, and we believe that the potential benefits that could be gained from this do not outweigh the cost of resources needed to start the project.

Refurbishment – Although it is inexpensive, it could negatively effect brand recognition, hurting overall sales.

Home batteries – This strategic plan is one for the near future, however, it is too risky for us to venture into at this time. The markets is volatile, there is competition and regulations which also influence the stability of this market.

Pacific Sales – Appliances makes only 5% of the total Revenues of Best Buy. Expanding the Pacific Kitchen and Bath strategy would not bring significant profit to Best Buy. The expansion can be quite costly and the ROI it is not there.

Sponsorship – The return on investment is not high enough. It truly only benefits our image and we are already making strides in community involvement.

Coffee Shop & Cafe РThe lack of through traffic to support the use of the space. The overhead of having staff during store hours.  Health codes related to food service.

This process of strategic planning for Beyond Blue, resulted in several ideas which developed into strategic plans. The final 6 strategies we recommend are:

Complete Rebranding – Best Buy will elevate the overall look and feel of the brand, by creating a valuable experience for our customers like no other.

3D Printing – It is a fastly growing multimillion dollar industry. There is a lot of potential to make good profit and for Best Buy to position themselves steps ahead of the competition.

Virtual Reality – Separating ourselves from other e-commerce sites to provide customers with a completely unique and engaged experience. This is our venture exploring a blue ocean.

Acquisition – Investment in an upcoming industry where Best Buy can become a leading player and exceed customers expectations.

Leasing Store Space РReducing the risk and management difficulties of portfolio and suppliers issues while positively utilize floor space.  

Hackathons – Connecting BBY with the tech community and being involved with the latest tech trends.

 

Conclusion

Over the course of 50 years, Best Buy Company Incorporated has provided access to the latest technology and related products to customers both nationally and internationally. The leadership team at BBY is proud to present a new strategic plan, Beyond Blue. This plan will position Best Buy in top of the competition through the next five years.

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