Presentation #1 – Discussion Questions (each question must be answered in at least two paragraphs each) 1. Consider complementary businesses and products and industry convergence. Are there times when attempting to be “all things to every customer” isn’t beneficial to the company or conducive to growth? Or should a company always try and expand offerings and services? Explain your reasoning. 2. How has the internet changed Best Buy? How has Amazon changed the way the industry approaches online sales? 3. The consumer electronics industry when analyzed through Porters Five Forces Model made the assumption that the online retailer, is not a substitute, but a competitor (i.e. Amazon to Best Buy), since Best Buy offers e-retailing now. Do you agree? Can you identify any other potential substitutes to this industry or will we have to wait for the next technological (product or service) advancement for a true substitute? Presentation #2 – Discussion Questions (each question must be answered in at least two paragraphs each) 1. Through online retailers and large department stores, the consumer electronics industry has become more commoditized and price-driven. What room is there for smaller service-based stores in this industry? 2. The threat of online superstores such as Amazon threatens Best Buy’s strategic positioning. Could Amazon being solely online offer a comparative advantage to Best Buy? 3. Best Buy has hundreds of stores, showrooms, a very knowledgeable sales team, and price matching. What do you think is stopping them from gaining market share from Amazon? Case 2: Best Buy Best Buy – Expert Service. Unbeatable Price. Best Buy was founded by Richard Schulze in 1966 as Sound of Music. The company changed it’s name to Best Buy in 1983. Best Buy became a publically traded company in 1987 Best Buy has more than 1,400 locations and employs more than 125,000 people. Best Buy had revenue of more than $40 billion in 2015 Case Overview The Best Buy case outlines a turn-around strategy specific to Best Buy in the dynamic industry of consumer electronics. This case will look at Best Buy’s competitive advantage and strategic positioning in the market and how these events have affected Best Buy’s recent performance. We will analyze the rivalry among Best Buy’s competitors in the consumer electronics industry including Amazon and Walmart. Competitive structure of the industry will be discussed including industry dynamics, industry convergence and the consumer electronics industry life cycle. A strategic group map for the consumer electronics retailing industry has been plotted for this case. Included are details of how industry forces affect strategic groups differently in areas including profitability. Competitive Advantage Best Buy’s “Renew Blue” strategy focused on leadership, customers, employees, and differentiating products. Through this, they were able to gain a competitive advantage in 4 areas. Business model attr.

1. Presentation #1 – Discussion Questions (each question must be
answered in at least two paragraphs each)
1. Consider complementary businesses and products and
industry convergence. Are there times when attempting to be
“all things to every customer” isn’t beneficial to the company or
conducive to growth? Or should a company always try and
expand offerings and services? Explain your reasoning.
2. How has the internet changed Best Buy? How has Amazon
changed the way the industry approaches online sales?
3. The consumer electronics industry when analyzed through
Porters Five Forces Model made the assumption that the online
retailer, is not a substitute, but a competitor (i.e. Amazon to
Best Buy), since Best Buy offers e-retailing now. Do you
agree? Can you identify any other potential substitutes to this
industry or will we have to wait for the next technological
(product or service) advancement for a true substitute?
Presentation #2 – Discussion Questions (each question must be
answered in at least two paragraphs each)
1. Through online retailers and large department stores, the
consumer electronics industry has become more commoditized
and price-driven. What room is there for smaller service-based
stores in this industry?
2. The threat of online superstores such as Amazon threatens
Best Buy’s strategic positioning. Could Amazon being solely
online offer a comparative advantage to Best Buy?
3. Best Buy has hundreds of stores, showrooms, a very
knowledgeable sales team, and price matching. What do you
think is stopping them from gaining market share from
Amazon?

2. Case 2: Best Buy
Best Buy – Expert Service. Unbeatable Price.
Best Buy was founded by Richard Schulze in 1966 as Sound of
Music.
The company changed it’s name to Best Buy in 1983.
Best Buy became a publically traded company in 1987
Best Buy has more than 1,400 locations and employs more than
125,000 people.
Best Buy had revenue of more than $40 billion in 2015
Case Overview
The Best Buy case outlines a turn-around strategy specific to
Best Buy in the dynamic industry of consumer electronics.
This case will look at Best Buy’s competitive advantage and
strategic positioning in the market and how these events have
affected Best Buy’s recent performance.
We will analyze the rivalry among Best Buy’s competitors in
the consumer electronics industry including Amazon and
Walmart.
Competitive structure of the industry will be discussed
including industry dynamics, industry convergence and the

3. consumer electronics industry life cycle.
A strategic group map for the consumer electronics retailing
industry has been plotted for this case. Included are details of
how industry forces affect strategic groups differently in areas
including profitability.
Competitive Advantage
Best Buy’s “Renew Blue” strategy focused on leadership,
customers, employees, and differentiating products. Through
this, they were able to gain a competitive advantage in 4 areas.
Business model
attracting transformational leaders
Creating the ultimate experience for customers
Energizing employees
Investing in private –label brands.
Scale
Largest firm of big box electronics retail industry in terms of
sales and market cap.
Does strategic expansions to complement ecommerce sales and
deliveries.
Value Creation
The showrooms have useful information that eliminates having
to have salesperson for every customer.
Largest selection of electronics inventory in stores.
The number of physical locations .
Market Dominance
They have over 1400 locations globally and offer support and
know how that other retailers can’t provide.
They are price matching to eliminate customers shopping their
showroom and purchasing from rivals.

4. Strategic Positioning, Leader in Electronic Sales
Internal Forces
Workforce
Developing a highly trained tech support system in Geek Squad
Investing in floor employee trainings
Financial Positioning
Increased revenue from $12.5 billion to $50 billion
Mitigating costs
Closing several stores
Employee layoffs
External Forces
Competitors
Walmart – The declining electronic sales and reduction in
department space (retailer)
Circuit City – The price war attributed to the demise of business
(retailer/similar business model)
Amazon – The emergence of online superstores has jeopardized
the existence of physical locations (online retailer)
Threat to position as electronics leader
Economy
Positive economic conditions
Increased consumer confidence in spending
Recent Performance2015201420132012Best Buy Net Sales or
Revenues40.34B42.41B45.09B50.71BCost Of Goods Sold
(COGS)31.29B32.72B34.44B38.13BBest Buy Gross
Profit9.05B9.69B10.65B12.57BBest Buy Net Income
(Profit/Loss)1.23B532M-441M-1.23BBest Buy Earnings Per
Share Diluted Net3.491.53-0.73-3.36Dividend Per Share

5. Common0.720.680.660.62
Recent Performance
Best Buy’s competitive advantages have drastically increased
net income.
Through the firm effects “Renew Blue” focused on customers,
employee, leadership, and private labels, which allowed them to
sustain a competitive advantage.
The firm effect has totally transformed Best Buy. The strength
in leadership, the knowledge of the sales team, and private
labels are areas that helped provide this transformation.
Consumer Electronics Industry Rivalry
The Competitive Rivalry is low in the consumer electronics
industry, which is evident by the following:
The industry is made up of only a few competitors.
Brand Loyalty is significant to customers.
Retailers in the industry, such as Best Buy and Walmart, will
match prices from other retailers, so there’s reduced pressure to
offer the lowest price.
Companies in the industry offer differentiated products to set
themselves apart from others.
Competitive Structure of Industry
Best Buy is in an oligopoly industry. An oligopolistic industry
is characterized by few, large firms who have some pricing

6. power, differentiated products and high entry barriers.
Best Buy is in a market that is dominated by a few, large firms
such as Walmart, Amazon and Target.
Best Buy exhibits pricing power by matching competitors’
prices, therefore challenging their competitors to do the same.
Best Buy offers differentiated products in the form of exclusive
brands and customer service options such as Geek Squad.
High entry barrier in industry due to established customer and
brand loyalty. Also, the investments of real estate to open
stores and investment of electronics is costly for new ventures
to open stores and provide products and services.
Industry Characteristics
Industry Dynamics
Industry dynamics are evolving giving Best Buy incentive to
increase their profitability and reduce number of competitors.
Best Buy is trying to keep up with industry changes by aligning
customer’s needs and wants with their strategy plan, i.e.
offering two-day shipping and store to store pick up options.
Industry Convergence: a process whereby formerly unrelated
industries begin to satisfy the same customer need.
Retailers that are not known specifically for specializing in
electronics sales such as Amazon, Walmart, Target and Costco,
are now able to provide products similar to Best Buy and satisfy
consumer needs.
Best Buy offers the option of a subscription to its library of
content to customers who purchase their web-connected
televisions, similar to Amazon video.

7. Best Buy offers two day and faster shipping without a
membership, similar to Amazon Prime members.
Industry Life Cycle (Growth vs. Mature)
The consumer electronics industry in which Best Buy is a part
of is considered mature.
One of the few ways to show growth in the industry is to
capture market share
Another way to grow in this mature industry is to capitalize on
new technological products and be the retailer consumers go to
when electronics become out of date or need replacing.
Strategic Group Map Variants
Competitors
Online Retailers (Amazon, EBay)
Big-box / Large-store Discounters (Wal-Mart, Target, Costco)
Strengths
Locations, Economies Of Scale And Geek Squad
Service (Installation And Advice)
Cost Cutting/ Realignment
Minimize Store Footprints, Align Square Footage With Floor
Traffic
Store Space To High-growth Categories
Mobile Phones, Appliances, And Accessories Compared To

8. Declining Low-margin Products, (Music And Movies)
Expand Smaller format/footprint Best Buy Mobile Cell Phone
Stores
Expand E-commerce Channel
Go-forward Strategy
Concentrate On Niche (Trained Service Oriented Personnel)
Improve/Match On-line Delivery Time (Group Map)
Continue Cost Cutting And Improved Pricing Strategies
Worldwide Web Sales of Computers and Consumer Electronics
($B’s)
Source: eMarketer,
https://www.internetretailer.com/trends/sales/computers-and-
consumer-electronics-sales-forecast-//
Leading US Specialty Retailer ($B’s)
Delivery Time (Online Orders, U.S)
Delivery Time (Online Orders, U.S)
* Increased Distribution Centers, combined with utilizing Brick
& Mortar stores as mini-Distribution centers has nullified Days
to Delivery Variants

9. Source: Stella Service
Practical/Personal Example
From 2011 To 2014, I Was A Dedicated Amazon Prime
Customer
2 Days “Free” Shipping
Wide Variety Of Electronic Goods
Great Value Pricing
100% Of Christmas Presents Bought Thru Amazon
In 2015 , I Found Out About Best Buy 2 Day Shipping
Could Go To Best Buy To Test Drive
Given Excellent Service/Advice
Had A Choice To Buy At Site Or On-line
2015 Christmas Buying Distribution (Electronics), 80% From
Best Buy
In Some Cases, Utilized Same Day Shipping To Store
(Convenient Location)
Apple Mini-store Kiosk
Knew I Could Return Items To Store
Face To Face Service
Great Pricing
Practical/Personal Example
Competitor Analysis and Strategic Groups
State Farm is the #1 insurance company in the United States and
is the leader in auto and fire insurance. According to the 2015
Temkin Experience Rating, State Farm, along with USAA, ranks
as having the best customer experience in the insurance
industry. Recently, a State Farm policyholder took to social

10. media to voice his growing frustration with his claim handling.
GECIO, Progressive, and Allstate reached out to the
policyholder for free quotes and checking on the status of his
claim. Competitors utilized this exposed weakness in State Farm
to strategically position themselves for growing business.
Discussion Questions
Through online retailers and large department stores, the
consumer electronics industry has become more commoditized
and price-driven. What room is there for smaller service-based
stores in this industry?
How important is customer service to your buying experience
(both before and after purchase)? How important is test
driving/touching your electronic device before purchase? Would
these attributes/services drive you to become a Best Buy
consumer/customer?
The threat of online superstores such as Amazon threatens Best
Buy’s strategic positioning. Could Amazon being solely online
offer a comparative advantage to Best Buy?
Best Buy has hundreds of stores, showrooms, a very
knowledgeable sales team, and price matching. What do you
think is stopping them from gaining market share from
Amazon?
What can the consumer electronics industry do to increase the
rivalry between it’s competitors? Would this be beneficial to the
individual retailers or is it more beneficial to have less of a
rivalry?

11. References
https://corporate.bestbuy.com/about-best-buy/
http://thefinancialbrand.com/52924/state-farm-digital-customer-
service-test/
Atherton, A. (2010, February 3). What is the Definition of
Online Display. Retrieved from Andy's Blog:
http://andyatherton.com/tag/best-buy/
Group, U. o. (2011, January 8). Best Buy Co., Inc. Retrieved
from Consumer Goods: http://uoinvestmentgroup.org/wp-
content/uploads/2011/01/BBY.pdf
Porter’s 5 Forces model
with a focus on Best Buy
& the consumer electronics retailing industry
1
The 5 Forces:
What are they?
Threat of New Entrants
Threat of Substitutes
Power of Suppliers

12. Power of Buyers
Rivalry Among Competitors
Five Forces Analysis:
Consumer Electronics Industry
Bargaining Power of Suppliers - Low
Large network of suppliers of electronic components/goods
across the globe
Main industry for the suppliers revenues
Low cost to switch suppliers as a customer
Suppliers cannot easily forward integrate without significant
investment
No readily available substitutes
Bargaining Power of Buyers – Medium/High
Majority of products are relatively undifferentiated
Low switching costs for buyers
Some buyers purchase large quantities ( government, schools,
corporations etc.)
Average customer purchases small quantities, and there are
many of them
Cannot easily backward integrate without significant
investment
The bargaining power of suppliers can hurt the profit potential
of a company. If the suppliers have the power to increase price
or reduce quality, but maintain demand, their power is high and
can negatively effect the firm. Here we identify the supplier as
the manufacturers of the components or in some cases the
finished good, if contract manufactured, of the electronics. The
bargaining power of buyers acts in a similar fashion. If the
customers have the power to demand a lower price or better

13. quality, a firm’s profits if cost of production in turn has
increased. We identify the buyers as the “traditional customer”,
that is the end-user. However for the consumer electronics
industry we can also identify large corporations, government
agencies, schools etc. as buyers.
3
Five Forces Analysis:
Consumer Electronics Industry (Cont’d)
Threat of New Entrants - Low
High capital investment to enter
Buyers have brand loyalty
Incumbent firms can have preferential access to new
technology, distribution channels, desirable locations etc.
Current firms can see economies of scale benefits
Low network effects
Threat of Substitutes – Low/Medium
No direct substitutes in another industry
Low cost to switch - if one arises
The threat of new entrants to an industry, if high, can result in
either lower prices from current firms to detract them from
entering a “desirable” market, or promote spending more to
create value for customers but keeping the price the same. Both
of these result in lower profits for the firms in the industry.
Incumbent firms have the upper hand as economies of scale,
brand loyalty and the need for high capital requirements will
deter new entrants. The threat of substitutes is high if a
substitute from another industry has a better price and
performance, and the cost to the customer to switch is marginal.
For the consumer electronics industry there is no known
substitute. The product and service (maintenance, customer

14. service etc.) that this industry offers does not have a direct
substitute from another industry. One could argue a day
planner, board game, painting a scene (versus taking a photo),
or even hand washing dishes (versus a dish washer) is a
substitute but we would have to analyze on an individual
product and service basis. Since we analyze the “industry”
online and retail stores can be grouped together, whatever is
provided by the firms in that industry now.
4
Five Forces Analysis:
Consumer Electronics Industry (Cont’d)
Rivalry Among Competitors – High
Many competitors, few of similar, larger size
Exit barriers high
Current firms highly committed and invested
Industry growth is high
Summary & Profit Potential
Low power of suppliers
Medium/High power of buyers
Low threat of new entrants
Low/Medium threat of substitutes
High rivalry
Overall – Potential for above average profits and ability to
sustain a competitive advantage
Rivalry among competitors is dictated by many things,
including the structure of the competition, how fast or slow the
industry is growing, if large investments, or commitments are
needed to compete in the industry, and the level of exit barriers.
Rivalry is being discussed more in the other groups project.

15. However, there are many smaller firms in the industry as well.
Overall the five forces when analyzed can give a snapshot on
the profit potential a firm has when entering an industry. This
industry is desirable as Porter’s Five Forces are generally weak,
which means “the greater the industry's ability to earn above-
average profits, and correspondingly, the greater the firm's
ability to gain and sustain a competitive advantage”
(Rothaermel, p. 80). The industry has also seen a boom over the
past ten years, and in only five years saw a 20% increase from
2011 to 2016. (Rothaermel, p. 609). However, as determined
through the Five Forces Model, the incumbent firms reign
supreme in terms of capturing this growth and in turn the high
profit potential.
5
Competitive Advantage?
Customer Experienece
“Customer Centricity” data analysis and implementation for
specific regions and segments per store
Geek Squad - exclusive brand for Best Buy which is a team of
technicians that service and install home products
Ongoing training and staffing of sales associates to provide
superior service and knowledge for customers
Wide variety of products that customers can touch, feel, see
and demo
Customer accessibility- Best Buy has the most big box
electronics retail stores in USA, Mexico, and Europe
6

16. Strategic Positioning
Focused Differentiation
Exclusive Brands (Insignia, Dynex, Init, Rocketfish, and
others)
Geek Squad
1-2 year 0% financing
Customer Centricity
Best Buy’s strategic positioning in the market is focused around
defferentiation from other big box competitors in the market.
Best Buy plans to sell exclusive brands of portable electronics
and accessories. This will help eliminate “showrooming” which
is when customers come to learn about and test a particular
product in a Best Buy brick and mortar store and then turn
around and buy it online for the cheapest price. Geek Squad is
something Best Buy will continue and is the only big box store
that offers that kind of service. Along with customer centricity
and offering up to 2 years free financing, these exclusive
services will be a driving force in the company’s strategic
positioning in the market.
7
Recent Performance
Industry Effects
Strong customer programs that other companies lack
Geek squad- providing in home services and warranties in
house.
Firm Effects
Management pushes for training of products to make
salespeople more knowledgeable.
Personnel are specially trained in specific store areas
(computer, TVs, gaming, etc.)

17. The 6th Force:
Complements?
A complement is a product, service, or competency that adds
value to the original product offering when the two are used in
tandem. (Rothaermel, p.81)
The consumer electronics retailing industry is greatly
influenced by complements!
Google/Samsung
iTunes/iPhone
An interesting aspect to the electronics industry is that as more
things go “online” and/or become digital, the complements are
increasingly virtual. (other than hardware like physical
computers, protective cases, internet capable appliances, etc.)
Best Buy and other electronics stores benefit as the “internet of
things” grows and as the compatibility of software and hardware
become more intuitive.
As technological capabilities advance, successful companies
like Amazon, Apple, and Google are beginning to experience

18. industry convergence, where companies are becoming brands
within themselves, serving a larger range of customer needs,
and instead of complementing Best Buy’s business, they’re
quickly becoming competitors.
Porter’s 5 Forces:
Practical Applications
The hunt for a good laptop for grad school that I experienced
two years ago shows the high power for buyers, low for
suppliers and low threat of substitutes. Identifying myself as
the customer, I had many suppliers to choose from. The product
I was after was not too different (i.e. a Dell model versus an
ASUS comparable model) that was offered by each supplier, and
some offered the same product (i.e. same laptop different
retailer). I had high power, and the suppliers had low power, as
at this point I could chose based on price, customer service,
warranty and protection plans etc. Unfortunately, there is no
substitute for a laptop and what it can do to fulfill my needs. In
the end, I chose a Dell laptop from Office Depot who had the
best promotional price and best protection plan for the
computer.
In my profession the most experience I have with the 5 forces
model is with the rivalry among competitors. There are roughly
13 competitors in the telecommunications field that work for the
same vendors providing installation and maintenance services.
The process of bidding for jobs from these vendors is very
competitive as the companies range in size and often companies
will take a loss just to keep their employees working and have
the ability due to the number of employees and jobs they can
bid. The rivalry is seen when vendor training classes are offered
and we are all in the same classes. I would consider the
companies in telecommunications installation as monopolistic

19. competition, there are many firms ranging in sizes and there is
some power in pricing based on the quality of work a company
might excel in. Often we will work on a network that another
company has previously worked or had a hand in designing, the
rivalry shows when quality of previous work is critiqued across
industry standards. The competition to provide the best quality
work and the most projects under schedule is ultimately to
control the market share and grow as a company. Recently my
company has grown from 12 technicians 2 years ago to 21 this
year which allows us to compete with the bigger of our rivals.
10
Ask.
1. Consider complementary businesses and products and
industry convergence. Are there times when attempting to be
“all things to every customer” isn’t beneficial to the company or
conducive to growth? Or should a company always try and
expand offerings and services? Explain your reasoning.
3. The consumer electronics industry when analyzed through
Porters Five Forces Model made the assumption that the online
retailer, is not a substitute, but a competitor (i.e. Amazon to
Best Buy), since Best Buy offers e-retailing now. Do you
agree? Can you identify any other potential substitutes to this
industry or will we have to wait for the next technological
(product or service) advancement for a true substitute?
2. How has the internet changed Best Buy? How has Amazon
changed the way the industry approaches online sales?
How would you quantify a competitive advantage and strategic
position? In your professional experience, what data can you

20. provide that shows your companies competitive advantage in
it’s corresponding industry?
Citations
Rothaermel, Frank T. Strategic Management. 2nd edition. New
York: McGraw-Hill
Education, 2015. MHE Connect. Web. 14 Feb. 2016.
Plastow, Jason. "Best Buy Competitive Advantage (with
Images) · Jasonplastow." Storify. Web. 16 Feb. 2016.
Fitzsimmons, Kakie. "Best Buy Corporation Strategic
Management Analysis." Best Buy Corporation Strategic
Management Analysis. Web. 16 Feb. 2016.