Tough Decisions in the Workplace

Discussion: Handling Tough Decisions in the Workplace
Managers make numerous decisions on a daily basis. For some,
the best choice is easy or straightforward to determine. If a
machine breaks down, you either need to repair it or replace it.
In an increasingly interconnected and complex world, however,
the best decisions can often be unclear. Consider where you
would stand on the following scenario:
A company has developed a new product for which there is a
great demand. The consensus of the leadership team is that the
company should capitalize on this opportunity and hike up the
price to generate a 300% return on each sale. They feel that, as
long as the marketplace is willing to pay for it, then there is no
problem, especially since this would help solve recent
discussions of layoffs due to declining sales. Only one person in
the leadership team voices disapproval of this approach, saying
that this is a greedy action that would rip off customers and go
against the company’s values. The person feels that—despite
what it would mean for the business—the product should be
priced to generate a 40% return, which is an average return for
the company’s products.
Assignment:
Respond to two or more of your colleagues’ posts “See below”
in one or more of the following ways:
· Relate your own experiences to those of your colleague,
including similar or different approaches you took to address
your own situation and your reasoning for your decision.
· Provide an alternative viewpoint on your colleague’s situation
or on how your colleague might approach the situation in the
future. Include a rationale to support your response.
· 3 – 4 paragraphs

· No plagiarism
· APA citing
1st Colleague - Natasha Mills
Natasha Mills
Handling Tough Decisions in the Workplace
Top of Form
Whereas society in general and individual organizations have
ethical codes that guide the behaviors and actions of people
within these contexts, the concept of ethics still largely depends
on one’s personal values and moral principles. When
individuals lack these, their behavior is always subject to
manipulation, and they may easily compromise their ethical
beliefs in different situations. one of the psychological
dynamics that precede the crossing of ethical lines is justified
neglect. “When people don’t speak up about ethical breaches
because they are thinking of more immediate rewards such as
staying on a good footing with the powerful” (Wedell-
Wedellsborg, 2019). Justified neglect is the most predominant
psychological dynamic, followed by cultural numbness and
omnipotence when it comes to crossing ethical lines.
The ethical situation that I have experienced involved the
psychological dynamic of justified neglect. I was part of a panel
tasked with hiring a candidate that would fill a certain position
that had been left by an employee who had just retired. After
conducting interviews, my colleagues in the hiring panel and I
had identified a candidate that was a perfect fit for the position.
Not only was the candidate the best in the interviews, but he
also had good work experience, a glowing resume, and
innovative ideas that would positively impact the organization,
particularly since he had worked for a competitor. However, the
candidate’s salary demands were higher than that which the

organization was offering its employees in the same cadre. The
candidate refused to accept anything less than what he was
demanding, which made the hiring process complex.
On the one hand, the candidate was good for the organization
and there was no doubt that he would bring new perspectives
that would enhance the competitive advantage of the company.
Thus, hiring him was unquestionable. On the other hand, hiring
the candidate translated to the company’s acceptance of his
salary demands. This, however, required the company to
increase the salaries of employees in the same cadre, which it
was not ready to do. The result was an ethical dilemma that
involved deciding between hiring the candidate and keeping his
salary a secret from the other employees, or leaving out the
candidate and doing right by the other employees.
Ethical situations are always challenging no matter how much
you prepare for them. “Even if you’ve planned for an ethical
career and established safeguards, it can be difficult to face
moral challenges in the moment” (Kouchaki & Smith, 2020,
p.5). The situation was challenging and prompted the panel to
agree to hiring the candidate and keeping his salary a secret.
However, I strongly disapproved their decision. I was relying on
my core principles and values of fairness, integrity, and equity
during the situation, which I told them openly. In addition, I
outlined to them the potential repercussions of the decision if
any of the employees found out about the secret. This led them
to ponder on the situation instead of opting for the easy way out
that was unethical. In the end, they decided to hire the second-
best candidate who accepted the salary that the organization was
offering.
Looking back, I would have made the same decision if the
situation happened again. Nei & Nei (2018) talk about balancing
analysis plus action, which involves keeping in mind the
context and possible impact of a decision. My ability to analyze
the situation helped me to outline the potential impacts of either

decisions to the rest of the panel, causing them to make the
right choice. This balance of analysis and action also confirms
the concept of the power of one. Eyrich et al. (2019) posit that
an individual with the willingness to speak and a clarity of
conscience has the power to make a difference. In the situation
described above, the rest of the panel hastily made the decision
to hire the candidate while ignoring its possible subsequent
implications. However, by disagreeing with them, as well as my
willingness to let them know of that fact, I convinced them to
make the right decision, thereby proving the power of one.
Eyrich, N. W., Quinn, R. E., & Fessell, D. P. (2019, December
27). How one person can change the conscience of an
organization. Harvard Business
Review. https://hbr.org/2019/12/how-one-person-can-change-
the-conscience-of-an-organization
Kouchaki, M., & Smith, I. H. (2020). Building an ethical career
a three-stage approach to navigating moral challenges at
work. Harvard business review, 2020(January-February), 1-6.
Nei, K., & Nei, D. (2018, September 10). Don’t try to be the
“Fun boss” — and other lessons in ethical leadership. Harvard
Business Review. https://hbr.org/2018/09/dont-try-to-be-the-
fun-boss-and-other-lessons-in-ethical-leadership
Wedell-Wedellsborg, M. (2019). The psychology behind
unethical behavior. Harvard Business Review.
Bottom of Form
2nd Colleague - Sandra Patterson
Sandra Patterson
RE: Discussion - Week 8Bottom of Form
Handling tough decisions in the workplace
When I worked in a residential facility a few years ago, there
was a tough decision involving working overnight on a part-
time because they were short-staffed. There were understaffing,
underpay, and over-work issues for the overnight shift. My

options were to work overnight temporarily, replace an
overnight shift worker, or switch my morning shift to overnight.
After all, the residents were sleeping at the time. What almost
appealed to me was that since there was less to do after
changing them and writing their reports, I could even do
homework while they were sleeping. At the time, I was still
finishing my bachelor’s degree. My child was still finishing
high school. I did not want to be unavailable during that
vulnerable part of his life in the evening. I also always sleep
early. That shift would not have been convenient for me at all.
The guidelines, rules, and values of the facility influenced my
decision. First, I knew that the residential facility had
guidelines for all workers that gave them the option to accept or
refuse to do the overnight shift. I also knew that the residential
facility had rules that could either reduce the overnight hours or
ask workers from other facilities to come and assist. I knew that
the residential facility respected the workers’ values for their
preference for working hours (Seidman, 2017). As a single
Mom, I did not feel comfortable with the overnight shift. My
son was going to be unattended at home. I felt vulnerable
working overnight with single male colleagues. Based on those
facts, I politely contacted the manager on site who had posted
the offer. They told me to go to the office in person. Or I could
go to the office with a written note explaining my reasons. I
sent an explanation to the manager early enough. I wanted them
to have enough time to choose other workers for the overnight
shift. Then I followed through to make sure they received my
note. I was able to bypass working overnight that way.
I would still approach the situation the same way if it happened
again. That is why it is necessary to be humble to build trust
with my team. By building trust with my team early before the
circumstance occurred, I was able to gain their respect when I
voiced my opinion about the overnight shift. Many of my
colleagues even said that they knew that I slept early. They
knew that the overnight shift would not be comfortable for me. I
need to be steady and dependable. It will show my team that I

am suited for the morning shift. I did show that I was willing to
work until the early evening hours on a few occasions when
they needed help with the second shift. I also need to be
reliable, rule-following, and responsible. My dependable, rule-
following, and organized character traits prompted me to follow
through by sending a note to the manager (Kuligowski, 2020). I
explained my non-availability for overnights. I did emphasize
that I was available for occasional shifts in the second shift
because it ended early in the evening. It was evident to them
that I exercised caution. They also saw that I could take
calculated risks. In addition, I showed that I could adhere to
organizational principles. I gained their trust. Finally, modesty
is always the best option to choose. Professionalism is
necessary when at work. I should remember to balance analysis
with action. I need to be vigilant. My interactions have an
impact on others (Nei, 2018).
References:
Kuligowski, K. (2020) How to be an ethical leader: 7 tips for
success. Business News Daily. Retrieved
from https://www.businessnewsdaily.com/5537-how-to-be
Nei, K. (2018) Don’t try to be the “fun boss “ – and other
lessons in ethical leadership. Harvard Business Review Digital
Articles, pp. 2-4. Retrieved from http://hbr.org
Seidman, D. (2017) The four pillars of moral leadership.
Fortune, 176(4), pp. 90-92.
BEST BUY CO. INC., HEADQUARTERED IN RICHFIELD,
MINNESOTA, was a specialty retailer of
consumer electronics. It operated over 1,100 stores in the
United States, accounting for 19%
of the market. With approximately 155,000 employees, it also

operated over 2,800 stores
in Canada, Mexico, China, and Turkey. The company’s
subsidiaries included Geek Squad,
Magnolia Audio Video, and Pacific Sales. In Canada, Best Buy
operated under both the
Best Buy and Future Shop labels.
Best Buy’s mission was to make technology deliver on its
promises to customers. To ac-
complish this, Best Buy helped customers realize the benefits of
technology and technological
changes so they could enrich their lives in a variety of ways
through connectivity: “To make life
fun and easy,”1 as Best Buy put it. This was what drove the
company to continually increase the
tools to support customers in the hope of providing end-to-end
technology solutions.
As a public company, Best Buy’s top objectives were sustained
growth and earnings. This was
accomplished in part by constantly reviewing its business model
to ensure that it was satisfying cus-
tomer needs and desires as effectively and completely as
possible. The company strived to have not
only extensive product offerings but also highly trained
employees with extensive product knowl-
edge. The company encouraged its employees to go out of their
way to help customers understand
what these products could do and how customers could get the
most out of the products they pur-
chased. Employees recognized that each customer was unique
and thus determined the best method
to help that customer achieve maximum enjoyment from the
product(s) purchased.

24-1
C A S E 24
Best Buy Co. Inc.: Sustainable
Customer Centricity Model?
Alan N. Hoffman
This case was prepared by Professor Alan N. Hoffman, Bentley
University and Erasmus University. Copyright ©2010
by Alan N. Hoffman. The copyright holder is solely responsible
for case content. Reprint permission is solely granted
to the publisher, Prentice Hall, for Strategic Management and
Business Policy, 13th Edition (and the international and
electronic versions of this book) by the copyright holder, Alan
N. Hoffman. Any other publication of the case (transla-
tion, any form of electronics or other media) or sale (any form
of partnership) to another publisher will be in violation
of copyright law, unless Alan N. Hoffman has granted an
additional written permission. Reprinted by permission.
The author would like to thank MBA students Kevin Clark,
Leonard D’Andrea, Amanda Genesky, Geoff Merritt, Chris
Mudarri, and Dan Fowler for their research. No part of this
publication may be copied, stored, transmitted, reproduced,
or distributed in any form or medium whatsoever without the
permission of the copyright owner, Alan N. Hoffman.
Industry Six—Specialty Retailing
From a strategic standpoint, Best Buy moved from being a
discount retailer (a low price
strategy) to a service-oriented firm that relied on a
differentiation strategy. In 1989, Best
Buy changed the compensation structure for sales associates
from commission-based to non-

commissioned-based, which resulted in consumers having more
control over the purchasing
process and in cost savings for the company (the number of
sales associates was reduced). In 2005,
Best Buy took customer service a step further by moving from
peddling gadgets to a customer-
centric operating model. It was now gearing up for another
change to focus on store design and
providing products and services in line with customers’ desire
for constant connectivity.
24-2 S E C T I O N D Industry Six—Specialty Retailing
Company History2
From Sound of Music to Best Buy
Best Buy was originally known as Sound of Music. Incorporated
in 1966, the company
started as a retailer of audio components and expanded to
retailing video products in the early
1980s with the introduction of the videocassette recorder to its
product line. In 1983, the com-
pany changed its name to Best Buy Co. Inc. (Best Buy). Shortly
thereafter, Best Buy began
operating its existing stores under a “superstore” concept by
expanding product offerings and
using mass marketing techniques to promote those products.
Best Buy dramatically altered the function of its sales staff in
1989. Previously, the sales
staff worked on a commission basis and was more proactive in
assisting customers coming into
the stores as a result. Since 1989, however, the commission
structure has been terminated and
sales associates have developed into educators that assist
customers in learning about the prod-

ucts offered in the stores. The customer, to a large extent, took
charge of the purchasing
process. The sales staff’s mission was to answer customer
questions so that the customers
could decide which product(s) fit their needs. This differed
greatly from their former mission
of simply generating sales.
In 2000, the company launched its online retail store:
BestBuy.com. This allowed cus-
tomers a choice between visiting a physical store and
purchasing products online, thus expand-
ing Best Buy’s reach among consumers.
Expansion Through Acquisitions
In 2000, Best Buy began a series of acquisitions to expand its
offerings and enter international
markets:
2000: Best Buy acquired Magnolia Hi-Fi Inc., a high-end
retailer of audio and video products
and services, which became Magnolia Audio Video in 2004.
This acquisition allowed
Best Buy access to a set of upscale customers.
2001: Best Buy entered the international market with the
acquisition of Future Shop Ltd, a
leading consumer electronics retailer in Canada. This helped
Best Buy increase revenues,
gain market share, and leverage operational expertise. The same
year, Best Buy also
opened its first Canadian store. In the same year, the company
purchased Musicland, a
mall-centered music retailer throughout the United States
(divested in 2003).

2002: Best Buy acquired Geek Squad, a computer repair service
provider, to help develop a
technological support system for customers. The retailer began
by incorporating in-store
Geek Squad centers in its 28 Minnesota stores and expanding
nationally and then interna-
tionally in subsequent years.
2005: Best Buy opened the first Magnolia Home Theater “store-
within-a-store” (located
within the Best Buy complex).
2006: Best Buy acquired Pacific Sales Kitchen and Bath Centers
Inc. to develop a new cus-
tomer base: builders and remodelers. The same year, Best Buy
also acquired a 75% stake
in Jiangsu Five Star Appliance Co., Ltd, a China-based
appliance and consumer electron-
ics retailer. This enabled the company to access the Chinese
retail market and led to the
opening of the first Best Buy China store on January 26, 2007.
2007: Best Buy acquired Speakeasy Inc., a provider of
broadband, voice, data, and informa-
tion technology services, to further its offering of technological
solutions for customers.
2008: Through a strategic alliance with the Carphone
Warehouse Group, a UK-based provider
of mobile phones, accessories, and related services, Best Buy
Mobile was developed.
After acquiring a 50% share in Best Buy Europe (with 2,414
stores) from the Carphone
Warehouse, Best Buy intended to open small-store formats

across Europe in 2011.3 Best
Buy also acquired Napster, a digital download provider, through
a merger to counter the
falling sales of compact discs. The first Best Buy Mexico store
was opened.
2009: Best Buy acquired the remaining 25% of Jiangsu Five
Star. Best Buy Mobile moved into
Canada.
C A S E 2 4 Best Buy Co. Inc.: Sustainable Customer
Centricity Model? 24-3
Industry Environment
Industry Overview
Despite the negative impact the financial crisis had on
economies worldwide, in 2008 the con-
sumer electronics industry managed to grow to a record high of
US$694 billion in sales—a
nearly 14% increase over 2007. In years immediately prior, the
growth rate was similar: 14%
in 2007 and 17% in 2006. This momentum, however, did not
last. Sales dropped 2% in 2009,
the first decline in 20 years for the electronics giant.
A few product segments, including televisions, gaming, mobile
phones, and Blu-ray play-
ers, drove sales for the company. Television sales, specifically
LCD units, which accounted for
77% of total television sales, were the main driver for Best Buy,
as this segment alone ac-
counted for 15% of total industry revenues. The gaming
segment continued to be a bright spot
for the industry as well, as sales were expected to have
tremendous room for growth. Smart-

phones were another electronics industry segment predicted to
have a high growth impact on
the entire industry.
The consumer electronics industry had significant potential for
expansion into the global
marketplace. There were many untapped markets, especially
newly developing countries.
These markets were experiencing the fastest economic growth
while having the lowest own-
ership rate for gadgets.4 Despite the recent economic downturn,
the future for this industry was
optimistic. A consumer electronics analyst for the European
Market Research Institute pre-
dicted that the largest growth will be seen in China (22%), the
Middle East (20%), Russia
(20%), and South America (17%).5
Barriers to Entry
As globalization spread and use of the Internet grew, barriers to
entering the consumer elec-
tronics industry were diminished. When the industry was
dominated by brick-and-mortar com-
panies, obtaining the large capital resources needed for entry
into the market was a barrier for
those looking to gain any significant market share. Expanding a
business meant purchasing or
Internal Environment
Finance
While Best Buy’s increase in revenue was encouraging (see

Exhibit 1), recent growth had
been fueled largely by acquisition, especially Best Buy’s fiscal
year 2009 revenue growth. At
the same time, net income and operating margins had been
declining (see Exhibits 2 and 3).
Although this could be a function of increased costs, it was
more likely due to pricing pres-
sure. Given the current adverse economic conditions, prices of
many consumer electronic
products had been forced down by economic and competitive
pressures. These lower prices
caused margins to decline, negatively affecting net income and
operating margins.
$0
$5,000I
n
M
ill
io
n
s
$10,000
$15,000
$20,000
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
2005

2006
2007
2008
2009
2010
EXHIBIT 1
Quarterly Sales,
Best Buy Co., Inc.
$0
$200
$400
In
M
ill
io
n
s
$600
$800
$1,000

2005
2006
2007
2008
2009
2010
EXHIBIT 2
Quarterly Net
Income,
Best Buy Co., Inc.
leasing large stores that incurred high initial and overhead
costs. However, the Internet signif-
icantly reduced the capital requirements needed to enter the
industry. Companies like Amazon.
com and Dell utilized the Internet to their advantage and gained
valuable market share.
The shift toward Internet purchasing also negated another once
strong barrier to entry: cus-
tomer loyalty. The trend was that consumers would research
products online to determine which
one they intended to purchase and then shop around on the
Internet for the lowest possible price.
Even though overall barriers were diminished, there were still a

few left, which a company
like Best Buy used to its advantage. The first, and most
significant, was economies of scale. With
over 1,000 locations, Best Buy used its scale to obtain cost
advantages from suppliers due to high
quantity of orders. Another advantage was in advertising. Large
firms had the ability to increase
advertising budgets to deter new entrants into the market.
Smaller companies generally did not
have the marketing budgets for massive television campaigns,
which were still one of the most
effective marketing strategies available to retailers. Although
Internet sales were growing, the
industry was still dominated by brick-and-mortar stores. Most
consumers looking for electronics—
especially major electronics—felt a need to actually see their
prospective purchases in person.
Having the ability to spend heavily on advertising helped
increase foot traffic to these stores.
SOURCE: Best Buy Co., Inc.
0.00%
2.00%
4.00%
6.00%

8.00%
10.00%
2005
2006
2007
2008
2009
2010
EXHIBIT 3
Operating Margin,
Best Buy Co., Inc.
$0
$500
$1,000
In
M
ill
io

n
s
$1,500
$2,000
2005 2006 2007 2008 2009
Long term Debit
Cash
EXHIBIT 4
Long Term Debt
and Cash,
Best Buy Co., Inc.
Best Buy’s long-term debt increased substantially from fiscal
2008 to 2009 (see Exhibit 4),
which was primarily due to the acquisition of Napster and Best
Buy Europe. The trend in avail-
able cash has been a mirror image of long-term debt. Available
cash increased from fiscal 2005
to 2008 and then was substantially lower in 2009 for the same
reason.
While the change in available cash and long-term debt were not
desirable, the bright side
was that this situation was due to the acquisition of assets,
which led to a significant increase
in revenue for the company. Ultimately, the decreased

availability of cash would seem to be
temporary due to the circumstances. The more troubling concern
was the decline in net income
and operating margins, which Best Buy needed to find a way to
turn around. If the problems
with net income and operating margins were fixed, the trends in
cash and long-term debt would
also begin to turn around.
At first blush, the increase in accounts receivable and inventory
was not necessarily alarm-
ing since revenues were increasing during this same time period
(see Exhibit 5). However,
$0
$1,000
$2,000
$3,000
$4,000
$5,000
2005 2006 2007 2008 2009
Inventory
Accounts receivable
EXHIBIT 5
Accounts Receivable
and Inventory,

Best Buy Co., Inc.
Marketing
Best Buy’s marketing goals were four-fold: (1) to market
various products based on the customer
centricity operating model, (2) to address the needs of customer
lifestyle groups, (3) to be at the
forefront of technological advances, and (4) to meet customer
needs with end-to-end solutions.
Best Buy prided itself on customer centricity that catered to
specific customer needs and
behaviors. Over the years, the retailer created a portfolio of
products and services that comple-
mented one another and added to the success of the business.
These products included seven
distinct brands domestically, as well as other brands and stores
internationally:
Best Buy: This brand offered a wide variety of consumer
electronics, home office products,
entertainment software, appliances, and related services.
Best Buy Mobile: These stand-alone stores offered a wide
selection of mobile phones, acces-
sories, and related e-services in small-format stores.
Geek Squad: This brand provided residential and commercial
product repair, support, and in-
stallation services both in-store and on-site.

Magnolia Audio Video: This brand offered high-end audio and
video products and related
services.
Napster: This brand was an online provider of digital music.
Pacific Sales: This brand offered high-end home improvement
products primarily including
appliances, consumer electronics, and related services.
Speakeasy: This brand provided broadband, voice, data, and
information technology services
to small businesses.
Starting in 2005, Best Buy initiated a strategic transition to a
customer-centric operating model,
which was completed in 2007. Prior to 2005, the company
focused on customer groups such as af-
fluent professional males, young entertainment enthusiasts,
upscale suburban mothers, and techno-
logically advanced families.6 After the transition, Best Buy
focused more on customer lifestyle
groups such as affluent suburban families, trendsetting urban
dwellers, and the closely knit fami-
lies of Middle America.7 To target these various segments, Best
Buy acquired firms with aligned
strategies, which were used as a competitive advantage against
its strongest competition, such as
Circuit City and Wal-Mart. The acquisitions of Pacific Sales,
Speakeasy, and Napster, along with
the development of Best Buy Mobile, created more product
offerings, which led to more profits.
Marketing these different types of products and services was a
difficult task. That was why

Best Buy’s employees had more training than competitors. This
knowledge service was a value-
added competitive advantage. Since the sales employees no
longer operated on a commission-based
pay structure, consumers could obtain knowledge from
salespeople without being subjected to
high-pressure sales techniques. This was generally seen to
enhance customer shopping satisfaction.
Operations
Best Buy’s operating goals included increasing revenues by
growing its customer base, gain-
ing more market share internationally, successfully
implementing marketing and sales strate-
gies in Europe, and having multiple brands for different
customer lifestyles through M&A
(Merger and Acquisition).
Domestic Best Buy store operations were organized into eight
territories, with each terri-
tory divided into districts. A retail field officer oversaw store
performance through district
closer inspection revealed a 1% increase in inventory from
fiscal 2008 to 2009 and a 12.5% in-
crease in revenue accompanied by a 240% increase in accounts
receivable. This created a poten-
tial risk for losses due to bad debts. (For complete financial
statements, see Exhibits 6 and 7.)
Human Resources

The objectives of Best Buy’s human resources department were
to provide consumers with
the right knowledge of products and services, to portray the
company’s vision and strategy
on an everyday basis, and to educate employees on the ins and
outs of new products and ser-
vices. Best Buy employees were required to be ethical and
knowledgeable. This principle
started within the top management structure and filtered down
from the retail field officer
through district managers, and through store managers to the
employees on the floor. Every
employee must have the company’s vision embedded in their
service and attitude.
Despite Best Buy’s efforts to train an ethical and knowledgeable
employee force, there were
some allegations and controversy over Best Buy employees,
which gave the company a bad black
eye in the public mind. One lawsuit claimed that Best Buy
employees had misrepresented the
manufacturer’s warranty in order to sell its own product service
and replacement plan. The law-
suit accused Best Buy of “entering into a corporate-wide
scheme to institute high-pressure sales
techniques involving the extended warranties” and “using
artificial barriers to discourage con-
sumers who purchased the ‘complete extended warranties’ from
making legitimate claims.”10
In a more recent case (March 2009), the U.S. District Court
granted Class Action certifi-
cation to allow plaintiffs to sue Best Buy for violating its “Price
Match” policy. According to
the ruling, the plaintiffs alleged that Best Buy employees would
aggressively deny consumers

the ability to apply the company’s “price match guarantee.”11
The suit also alleged that Best
Buy had an undisclosed “Anti-Price Matching Policy,” where
the company told its employees
not to allow price matches and gave financial bonuses to
employees who complied.
managers, who met with store employees on a regular basis to
discuss operations strategies
such as loyalty programs, sales promotion, and new product
introductions.8 Along with do-
mestic operations, Best Buy had an international operation
segment, originally established in
connection with the acquisition of Canada-based Future Shop.9
In fiscal 2009, Best Buy opened up 285 new stores in addition
to the European acquisi-
tion of 2,414 Best Buy Europe stores, relocated 34 stores, and
closed 67 stores.
Competition
Brick-and-Mortar Competitors
Wal-Mart Stores Inc., the world’s largest retailer, with revenues
over US$405 billion, oper-
ated worldwide and offered a diverse product mix with a focus
on being a low-cost provider.
In recent years, Wal-Mart increased its focus on grabbing
market share in the consumer elec-
tronics industry. In the wake of Circuit City’s liquidation,12
Wal-Mart was stepping up efforts
by striking deals with Nintendo and Apple that would allow
each company to have their own
in-store displays. Wal-Mart also considered using Smartphones
and laptop computers to drive
growth.13 It was refreshing 3,500 of its electronics departments

and was beginning to offer a
wider and higher range of electronic products. These efforts
should help Wal-Mart appeal to
the customer segment looking for high quality at the lowest
possible price.14
GameStop Corp. was the leading video game retailer with sales
of almost US$9 billion as
of January 2009, in a forecasted US$22 billion industry.
GameStop operated over 6,000 stores
throughout the United States, Canada, Australia, and Europe, as
a retailer of both new and used
video game products including hardware, software, and gaming
accessories.15
The advantage GameStop had over Best Buy was the number of
locations: 6,207
GameStop locations compared to 1,023 Best Buy locations.
However, Best Buy seemed to
Online Competitors
Amazon.com Inc., since 1994, had grown into the United States’
largest online retailer with
revenues of over US$19 billion in 2008 by providing just about
any product imaginable
through its popular website. Created as an online bookstore,
Amazon soon ventured out into
various consumer electronic product categories including
computers, televisions, software,
video games, and much more.18
Amazon.com gained an advantage over its supercenter

competitors as Amazon was able to
maintain a lower cost structure compared to brick-and-mortar
companies such as Best Buy. Ama-
zon was able to push those savings through to its product
pricing and selection/diversification.
With an increasing trend in the consumer electronic industry to
shop online, Amazon.com was
positioned perfectly to maintain strong market growth and
potentially steal some market share
away from Best Buy.
Netflix Inc. was an online video rental service, offering
selections of DVDs and Blu-ray
discs. Since its establishment in 1997, Netflix had grown into a
US$1.4 billion company. With
over 100,000 titles in its collection, the company shipped for
free to approximately 10 million
subscribers. Netflix began offering streaming downloads
through its website, which elimi-
nated the need to wait for a DVD to arrive.
Netflix was quickly changing the DVD market, which had
dramatically impacted brick-
and-mortar stores such as Blockbuster and Hollywood Video
and retailers who offered DVDs
for sale. In a responsive move, Best Buy partnered with
CinemaNow to enter the digital movie
distribution market and counter Netflix and other video rental
providers.19
Core Competencies
Customer Centricity Model
Most players in the consumer electronics industry focused on
delivering products at the low-
est cost (Wal-Mart—brick-and-mortar, Amazon—web-based).

Best Buy, however, took a dif-
ferent approach by providing customers with highly trained
sales associates who were
available to educate customers regarding product features. This
allowed customers to make
informed buying decisions on big-ticket items. In addition, with
the Geek Squad, Best Buy
was able to offer and provide installation services, product
repair, and ongoing support. In
short, Best Buy provided an end-to-end solution for its
customers.
have what it took to overcome this advantage—deep pockets.
With significantly higher net in-
come, Best Buy could afford to take a hit to its margins and
undercut GameStop prices.16
RadioShack Corp. was a retailer of consumer electronic goods
and services including flat
panel televisions, telephones, computers, and consumer
electronic accessories. Although the
company grossed revenues of over US$4 billion from 4,453
locations, RadioShack consis-
tently lost market share to Best Buy. Consumers had a
preference for RadioShack for audio
and video components, yet preferred Best Buy for their big box
purchases.17
Second tier competitors were rapidly increasing. Wholesale
shopping units were becom-
ing more popular, and companies such as Costco and BJ’s had
increased their piece of the con-
sumer electronics pie over the past few years. After Circuit
City’s bankruptcy, mid-level
electronics retailers like HH Gregg and Ultimate Electronics
were scrambling to grab Circuit

City’s lost market share. Ultimate Electronics, owned by Mark
Wattles, who was a major in-
vestor in Circuit City, had a leg up on his competitors. Wattles
was on Circuit City’s board of
executives and had firsthand access to profitable Circuit City
stores. Ultimate Electronics
planned to expand its operations by at least 20 stores in the near
future.
Best Buy used its customer centricity model, which was built
around a significant data-
base of customer information, to construct a diversified
portfolio of product offerings. This al-
lowed the company to offer different products in different stores
in a manner that matched
customer needs. This in turn helped keep costs lower by
shipping the correct inventory to the
correct locations. Since Best Buy’s costs were increased by the
high level of training needed
for sales associates and service professionals, it had been
important that the company remain
vigilant in keeping costs down wherever it can without
sacrificing customer experience.
The tremendous breadth of products and services Best Buy was
able to provide allowed
customers to purchase all components for a particular need
within the Best Buy family. For ex-
ample, if a customer wanted to set up a first-rate audio-visual
room at home, he or she could
go to the Magnolia Home Theater store-within-a-store at any

Best Buy location and use the
knowledge of the Magnolia or Best Buy associate in the
television and audio areas to deter-
mine which television and surround sound theater system best
fit their needs. The customer
could then employ a Geek Squad employee to install and set up
the television and home the-
ater system. None of Best Buy’s competitors offered this
extensive level of service.
Successful Acquisitions
Through its series of acquisitions, Best Buy had gained valuable
experience in the process of
integrating companies under the Best Buy family. The ability to
effectively determine where
to expand was important to the company’s ability to
differentiate itself in the marketplace.
Additionally, Best Buy was also successfully integrating
employees from acquired compa-
nies. Best Buy had a significant global presence, which was
important because of the matur-
ing domestic market. This global presence provided the
company with insights into
worldwide trends in the consumer electronics industry and
afforded access to newly develop-
ing markets. Best Buy used this insight to test products in
different markets in its constant ef-
fort to meet and anticipate customer needs.
Retaining Talent
Analyzing Circuit City’s demise, many experts concluded one
of the major reasons for the
company’s downfall was that Circuit City let go of their most
senior and well-trained sales
staff in order to cut costs. Best Buy, on the other hand, had a
reputation for retaining talent

and was widely recognized for its superior service. Highly
trained sales professionals had be-
come a unique resource in the consumer electronics industry,
where technology was chang-
ing at an unprecedented rate, and was a significant source of
competitive advantage.
Challenges Ahead
Economic Downturn
Electronics retailers like Best Buy sold products that could be
described as “discretionary
items, rather than necessities.”20 During economic recessions,
however, consumers had less
disposable income to spend. While there was optimism about a
possible economic turnaround
in 2010 or 2011, if the economy continued to stumble, this
could present a real threat to sell-
ers of discretionary products.
In order to increase sales revenues, many retailers, including
Best Buy, offered customers
low interest financing through their private-label credit cards.
These promotions were tremen-
dously successful for Best Buy. From 2007 to 2009, these
private-label credit card purchases
Pricing and Debt Management
The current depressed economic conditions, technological
advances, and increased competition
put a tremendous amount of pricing pressure on many consumer
electronics products. This was a

concern for all companies in this industry. The fact that Best
Buy did not compete strictly on price
structure alone made this an even bigger concern. Given the
higher costs that Best Buy incurred
training employees, any pricing pressure that decreased margins
put stress on Best Buy’s finan-
cial strength. In addition, the recent acquisition of Napster and
the 50% stake in Best Buy Europe
significantly increased Best Buy’s debt and reduced available
cash. Even in prosperous times, debt
management was a key factor in any company’s success, and it
became even more important dur-
ing the economic downturn. (See Exhibits 6 and 7 for Best
Buy’s financial statements.)
accounted for 16%–18% of Best Buy’s domestic revenue. Due
to the credit crisis, however, the
Federal Reserve issued new regulations that could restrict
companies from offering deferred
interest financing to customers. If Best Buy and other retailers
were unable to extend these
credit lines, it could have a tremendous negative impact on
future revenues.21
Products and Service
As technology improved, product life cycles, as well as prices,
decreased. As a result, mar-
gins decreased. Under Best Buy’s service model, shorter
product life cycles increased train-
ing costs. Employees were forced to learn new products with
higher frequency. This was not
only costly but also increased the likelihood that employees
would make mistakes, thereby
tarnishing Best Buy’s service record and potentially damaging
one of its most important,
if not the most important, differentiators. In addition, more

resources would be directed at
research of new products to make sure Best Buy continued to
offer the products consumers
desire.
One social threat to the retail industry was the growing
popularity of the online market-
place. Internet shoppers could browse sites searching for the
best deals on specific products.
This technology allowed consumers to become more educated
about their purchases, while
creating increased downward price pressure. Ambitious
consumers could play the role of a
Best Buy associate themselves by doing product comparisons
and information gathering with-
out a trip to the store. This emerging trend created a direct
threat to companies like Best Buy,
which had 1,023 stores in its domestic market alone. One way
Best Buy tried to continue the
demand for brick-and-mortar locations and counter the threat of
Internet-based competition
was by providing value-added services in stores. Customer
service, repairs, and interactive
product displays were just a few examples of these services.22
Leadership
The two former CEOs of Best Buy, Richard Shultze and Brad
Anderson, were extremely suc-
cessful at making the correct strategic moves at the appropriate
times. With Brad Anderson
stepping aside in June 2009, Brian Dunn replaced him as the
new CEO. Although Dunn
worked for the company for 24 years and held the key positi ons
of COO and President dur-
ing his tenure, the position of CEO brought him to a whole new
level and presented new chal-

lenges, especially during the economic downturn. He was
charged with leading Best Buy into
the world of increased connectivity. This required a revamping
of products and store setups
to serve customers in realizing their connectivity needs. This
was a daunting task for an ex-
perienced CEO, let alone a new CEO who had never held the
position.
$ in millions, except per share and share amounts
February 28, 2009 March 1, 2008
ASSETS
Current Assets:
Cash and cash equivalents $498 $1,438
Short-term investments 11 64
Receivables 1,868 549
Merchandise inventories 4,753 4,708
Other current assets 1,062 583
Total current assets 8,192 7,342
Property and Equipment:
Land and buildings 755 732
Leasehold improvements 2,013 1,752
Fixtures and equipment 4,060 3,057
Property under capital lease 112 67
6,940 5,608
Less accumulated depreciation 2,766 2,302
Net property and equipment 4,174 3,306
Goodwill 2,203 1,088

Tradenames 173 97
Customer Relationships 322 5
Equity and Other Investments 395 605
Other Assets 367 315
Total Assets $15,826 $12,758
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $4,997 $4,297
Unredeemed gift card liabilities 479 531
Accrued compensation and related expenses 459 373
Accrued liabilities 1,382 975
Accrued income taxes 281 404
Short-term debt 783 156
Current portion of long-term debt 54 33
Total current liabilities 8,435 6,769
Long-Term Liabilities 1,109 838
Long-Term Debt 1,126 627
Minority Interests 513 40
Shareholders’ Equity:
Preferred stock, $1.00 par value: Authorized — 400,000 shares;
Issued
and outstanding — none
— —
Common stock, $0.10 par value: Authorized — 1.0 billion
shares; Issued and
outstanding — 413,684,000 and 410,578,000 shares,
respectively
41 41

Additional paid-in capital 205 8
Retained earnings 4,714 3,933
Accumulated other comprehensive (loss) income (317) 502
Total shareholders’ equity 4,643 4,484
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$15,826 $12,758
EXHIBIT 6 Consolidated Balance Sheets, Best Buy Co., Inc.
SOURCE: Best Buy Co., Inc. 2009 Form 10-K, p. 56.
24-11
$ in millions, except per share amounts
Fiscal Years Ended
February 28,
2009
March 1,
2008
March 3,
2007
Revenue $45,015 $40,023 $35,934
Cost of goods sold 34,017 30,477 27,165
Gross profit 10,998 9,546 8,769

Selling, general and administrative expenses 8,984 7,385 6,770
Restructuring charges 78 — —
Goodwill and tradename impairment 66 — —
Operating income 1,870 2,161 1,999
Other income (expense)
Investment income and other 35 129 162
Investment impairment (111) — —
Interest expense (94) (62) (31)
Earnings before income tax expense, minority
interests and equity in income (loss) of affiliates
1,700 2,228 2,130
Income tax expense 674 815 752
Minority interests in earnings (30) (3) (1)
Equity in income (loss) of affiliates 7 (3) —
Net earnings $1,003 $1,407 $1,377
Earnings per share
Basic $2.43 $3.20 $2.86
Diluted $2.39 $3.12 $2.79
Weighted-average common shares outstanding
(in millions)
Basic 412.5 439.9 482.1
Diluted 422.9 452.9 496.2
EXHIBIT 7 Consolidated Statements of Earnings, Best Buy Co.,
Inc.

SOURCE: Best Buy Co., Inc. 2009 Form 10-K, p. 57.
Wal-Mart
Best Buy saw its largest rival, Circuit City, go bankrupt.
However, a new archrival, Wal-Mart,
was expanding into consumer electronics and stepping up
competition in a price war Wal-Mart
hoped to win. Best Buy needed to face the competition not by
lowering prices, but by coming
up with something really different. Best Buy had to determine
the correct path to improve its
ability to differentiate itself from competitors, which was
increasingly difficult given an
adverse economic climate and the company’s financial stress.
How Best Buy could maintain
innovative products, top-notch employees, and superior
customer service while facing in-
creased competition and operational costs was an open question.
1. Best Buy Co. Inc., Form 10-K. Securities and Exchange Com-
mission, February 28, 2009.
2. Ibid.
3. Ibid.
4. Greg Keller, “Threat Grows by Ipod and Laptop,” The
Colum-
bus Dispatch, May 18, 2009, http://www.dispatch.com/live/
content/business/stories/2009/05/18/greener_gadgets.
ART_ART_05-18-09_A9_TMDSJR8.html (July 10, 2009).

5. Larry Magid, “Consumer Electronics: The Future Looks
Bright,” CBSNews.com. May 2, 2008, http://www.cbsnews
.com/stories/2008/05/02/scitech/pcanswer/main4067008.shtml
(July 10, 2009).
6. Best Buy Co. Inc., Form 10-K, 2009.
7. Ibid.
8. Ibid.
9. Ibid.
10. Manhattan Institute for Policy Research, “They’re Making a
Fed-
eral Case Out of It . . . in State Court,” Civil Justice Report 3.
2001,
http://www.manhattan-institute.org/html/cjr_3_part2.htm.
11. “Best Buy Bombshell,” HD Guru, March 21, 2009, http://
hdguru.com/best-buy-bombshell/400/.
12. Circuit City Stores Inc. was an American retailer in brand-
name
consumer electronics, personal computers, entertainment soft-
ware, and (until 2000) large appliances. The company opened
its first store in 1949 and liquidated its final American retail
stores in 2009 following a bankruptcy filing and subsequent
failure to find a buyer. At the time of liquidation, Circuit City
was the second largest U.S. electronics retailer, after Best Buy.
13. Z. Bissonnette, “Wal-Mart Looks to Expand Electronics
Business,” Bloggingstocks.com, May 18, 2009, http://www
.bloggingstocks.com/2009/05/18/wal-mart-looks-to-expand
-electronics-business/.
14. N. Maestrie, “Wal-Mart Steps Up Consumer Electronics
Push,”

Reuters, May 19, 2009,
http://www.reuters.com/article/technology
News/idUSTRE54I4TR20090519.
15. Capital IQ, “GameStop Corp. Corporate Tearsheet,” Capital
IQ, 2009.
16. E. Sherman, “GameStop Faces Pain from Best Buy,
download-
ing,” BNET Technology, June 24, 2009, http://industry
.bnet.com/technology/10002329/gamestop-faces-pain-from
-best-buy-downloading/.
17. T. Van Riper, “RadioShack Gets Slammed,” Forbes.com,
February 17, 2006, http://www.forbes.com/2006/02/17/
radioshack-edmondson-retail_cx_tr_0217radioshack.html.
18. Capital IQ, “Amazon.com Corporate Tearsheet,” Capital IQ,
2009.
19. T. Kee, “Netflix Beware: Best Buy Adds Digital Downloads
with CinemaNow Deal,” paidContent.org. June 5, 2009,
http://paidcontent.org/article/419-best-buy-adds-digital-movie-
downloads-with-cinemanow-deal/.
20. Best Buy Co., Inc., Form 10-K, 2009.
21. Ibid.
22. Ibid.
N O T E S
http://www.dispatch.com/live/content/business/stories/2009/05/
18/greener_gadgetsART_ART_05-18-09_A9_TMDSJR8.html
http://www.cbsnews.com/stories/2008/05/02/scitech/pcanswer /m

ain4067008.shtml
http://www.cbsnews.com/stories/2008/05/02/scitech/pcanswer/m
ain4067008.shtml
http://www.manhattan-institute.org/html/cjr_3_part2.htm
http://hdguru.com/best-buy-bombshell/400/
http://hdguru.com/best-buy-bombshell/400/
http://www.bloggingstocks.com/2009/05/18/wal-mart-looks-to-
expand-electronics-business/
http://www.reuters.com/article/technologyNews/idUSTRE54I4T
R20090519
http://industry.bnet.com/technology/10002329/gamestop-faces-
pain-from-best-buy-downloading/
pain-from-best-buy-downloading/
http://www.forbes.com/2006/02/17/radioshack-edmondson-
retail_cx_tr_0217radioshack.html
http://www.forbes.com/2006/02/17/radioshack-edmondson-
retail_cx_tr_0217radioshack.html
downloads-with-cinemanow-deal/
downloads-with-cinemanow-deal/
http://www.reuters.com/article/technologyNews/idUSTRE54I4T
R20090519
pain-from-best-buy-downloading/PART SEVEN: Cases in
Strategic ManagementSECTION D: General Issues in Strategic
ManagementINDUSTRY SIX : SPECIALTY RETAILINGCASE
24 Best Buy Co. Inc.: Sustainable Customer Centricity Model?

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