Best Buy case study


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Best Buy case study

  1. 1. Best Buy Case Study<br />MKT2316<br />Section 315<br />SWOT Team<br />Tanika St. Pierre, Melissa Falsetti, Fidaa Hajobeid, Michelle O’Reilly, Hayley Mccurdy, Devon Brown, and Anahita Fooladi<br />April 4, 2011<br />Table of ContentsExecutive Summary3Situation Analysis4Assumptions5Central Problem 5Evaluative Criteria5Alternatives6Analysis of Alternatives10Decision and Justification 11Implementation12Appendices13Bibliography14<br />Executive Summary<br />Best Buy is the #1 “big box” electronic retailer that offers a wide variety of electronic goods and products (Case Assignment: Best Buy). Since it caters to a niche consumer market there is a high demand for our products, which causes a downward pressure on prices. An opportunity for Best Buy to increase revenue would be to offer longer guarantees on products and financing options. However, natural disasters and manufacturing defects pose a great threat to maintaining our high quality inventory and image. Our leading competitor, Wal-Mart Superstores, also poses a threat as they continue to climb the electronic market share.<br />In order for Best Buy to differentiate themselves from any other competitor, SWOT Team is investigating ways to build on its business-to-consumer success and move into the business-to-business world.<br />SWOT Team recommends that Best Buy includes personal, door-to-door selling of products to businesses. The reasons behind this decision would be the competitive advantage over Wal-Mart Superstores. An increase in the quantity of products sold will positively increase Best Buy’s profits. The amount of revenue as opposed to the costs of implementation will result in a high return-on-investment. A major factor in this decision is the creation of personal relationships and strategic alliances with business consumers. These strategic alliances will create a cooperative agreement between Best Buy and business clients CITATION Lam10 l 4105 (Lamb, Hair, McDaniel, Kapoor, Klaise, & Appleby, 2010).<br />An issue that may arise from this chosen alternative could be from hiring sales representatives that do not meet their sales quota. This issue could be dealt with by careful screening and selection of individuals who meet specific criteria.<br />Many benefits would be a result by implementing this alternative. One such benefit would be an increase in profits and goods sold. Strategic alliances with businesses would also be beneficial for future sales and purchases. An increase in market share for Best Buy would arise since it would be catering to not only to individual consumers, but to large businesses, institutions, and the government as well.<br />In order to put this plan into action Best Buy will need a marketing team to create an implementation plan and timeline. A financial analysis will be conducted of all the new costs. Sales representatives will be hired and specially trained to sell the products directly to selected business clients. Vehicles will be purchased for sales representatives to travel to their assigned locations to sell our products and create business consumer relationships. <br /> <br />Situation Analysis<br />Internal Environmental Analysis as applied to Best Buy:<br />- Strengths:- electronic items more affordable and common<br />- began “big box” retailing<br />- #1 retailer in its segment<br />- In-store uniformity<br />- Commercials accurate to real-life experience<br />- 16% share in $130 billion market <br />- 600 stores in US & still growing <br />- open later on weekends, outsource products<br />- allows in-store privileges online<br />- Weaknesses:<br />- Can’t sell all available electronics in store<br />- Negative pressure on prices/revenue<br />- Dizzying array of products<br />- Downward pressure on prices because of high demand<br />- Casual looking staff<br />- Only go if you have a purpose (electronics only); niche market<br />External Environmental Analysis as applies to Best Buy:<br />- Opportunities:<br />- Sell more up-scale items<br />- Greater international expansion (including Canada)<br />- Redesigning new stores<br />- Constantly upgrading products<br />- Longer guarantees<br />- Financing <br />- Price-match system<br />- Personalized selling to businesses<br />- Threats:<br />- Wal-Mart <br />- Natural disasters in outsourced countries cause a production delay<br />- Manufacturing incidents<br />- Relationships with providers (strategic alliance)<br />- Manufacturing costs<br />Sources: Case Assignment: Best Buy;<br />Assumptions<br />Assumptions applied to Best Buy:<br /><ul><li>Best Buy’s prices are 10-15% lower than its leading competitors regarding electronic goods.This represents an enhancement for Best Buy.
  2. 2. Best Buy doesn’t cater specifically to businesses already.This would represent a constraint.(
  3. 3. Best Buy can afford additional financing to expand their marketing objectives.This represents an enhancement.</li></ul>Central Problem<br />How can Best Buy build on its Business-to-Consumer success and move into the Business-to-Business world? (Case Assignment: Best Buy)<br />Evaluative Criteria<br />Evaluative Criteria as applied to Best Buy:<br />Criteria:Criteria Quantified:<br /><ul><li>Return on Investments0.35
  4. 4. Short-term Profits0.30
  5. 5. Image0.20
  6. 6. Ease of Implementation0.15
  7. 7. 1.00</li></ul>Return-on-Investments was chosen because you want to know that you make more than what you put in to it. <br />Short-term profits were chosen because it is a glimpse of what you could be making in the future.<br />Image was chosen because having a good image is important for status. <br />Ease of implementation was chosen because it’s helpful to know if the outcome will be beneficial compared to the time and money used. <br />Alternatives<br />List of Alternatives as applied to Best Buy:<br /><ul><li>Status Quo
  8. 8. Website Redesign
  9. 9. Business Section In-Store
  10. 10. Personal Selling of Best Buy Products</li></ul>1. Status Quo <br /><ul><li>Primary Target Market:
  11. 11. Business to consumer
  12. 12. 16 to 35 years old
  13. 13. Both genders
  14. 14. Middle class and up
  15. 15. Secondary Target Market:
  16. 16. Parents
  17. 17. 36 to 50 years
  18. 18. Positioning Statement:</li></ul>This status quo of Best Buy is an electronic retail store that provides an array of high quality and low-cost electronics and accessories for consumers 16 to 35 years old with expendable income who desire the newest innovations in the technological industry. Unlike Wal-Mart our large selection of electronic goods cater to the specific needs of this niche market CITATION Lam10 l 4105 (Lamb, Hair, McDaniel, Kapoor, Klaise, & Appleby, 2010).<br /><ul><li>Marketing Mix, 4 P’s:</li></ul>Product: <br /><ul><li>Affordable common electronics to the consumer between the ages of 16 and 50</li></ul>Promotion:<br /><ul><li>Best Buy will utilize social media, such as TV and Internet, to advertise to the consumer market</li></ul>Place:<br /><ul><li>Best Buy will provide affordable common electronics to the consumer through their “big box” retail stores</li></ul>Price:<br /><ul><li>Prices will be 10% to 15% lower than its leading competitors</li></ul>2. Website Redesign<br /><ul><li>Primary Target Market:
  19. 19. Business to business
  20. 20. Small businesses, locally-run business, and small institutions that purchase smaller, rather than larger equipment
  21. 21. Secondary Target Market:
  22. 22. Medium enterprises
  23. 23. Rural businesses
  24. 24. Positioning Statement:</li></ul>This newly designed Best buy website is a business oriented selling tool that is convenient and user-friendly for small and locally-run businesses who need easy access to the product selection. Unlike Wal-Mart, our newly designed business website will offer a wide variety of electronic goods.<br /><ul><li>Marketing Mix, 4 P’s:</li></ul>Product: <br /><ul><li>Business website that caters to small, local businesses and institutions</li></ul>Promotion:<br /><ul><li>Best Buy will utilize social media, such as Facebook and Twitter to advertise to the consumers</li></ul>Place:<br /><ul><li>Best Buy’s website provides desk to door service to its business consumer</li></ul>Price:<br /><ul><li>Businesses receive a 20% online discount and free shipping</li></ul>3. In-Store Business Section<br /><ul><li>Primary Target Market:
  25. 25. Business to business
  26. 26. Small to medium businesses
  27. 27. Institutions</li></ul> <br /><ul><li>Secondary Target Market:
  28. 28. Larger businesses
  29. 29. Price conscious businesses (looking to compare prices)
  30. 30. Positioning Statement:</li></ul>This in-store business section is a consulting service that is a customized buying experience for businesses who need expert purchasing advice. Unlike Wal-Mart, our in-store section is tailored to provide the business solutions that purchasers are looking for.<br /><ul><li>Marketing Mix, 4 P’s:</li></ul>Product: <br /><ul><li>Section within Best Buy that caters to servicing business consumers</li></ul>Promotion:<br /><ul><li>Best Buy will utilize signs, flyers, and word-of-mouth advertising to reach these business consumers</li></ul>Place:<br /><ul><li>The service section will be located within Best Buy retail store</li></ul>Price:<br /><ul><li>The in-store service will be complimentary for business consumers</li></ul>4. Personal Selling of Best Buy Products<br /><ul><li>Primary Target Market:
  31. 31. Business to business
  32. 32. Large business and corporations within capital region
  33. 33. Government
  34. 34. Institutions
  35. 35. Resellers
  36. 36. Producer (facilitating operations)
  37. 37. Secondary Target Market:
  38. 38. Large businesses and corporations in surrounding areas
  39. 39. Positioning Statement:</li></ul>The personal selling of the Best Buy product is a door-to-door service offering products that are more convenient and cost effective for large businesses who need the best possible service quality. Unlike Wal-Mart our personalized selling of our Best Buy products creates and strengthens customer relationships. <br /><ul><li>Marketing Mix, 4 P’s:</li></ul>Product: <br /><ul><li>Low cost Best Buy electronic products catering to large businesses</li></ul>Promotion:<br /><ul><li>Best Buy will utilize selling representatives who go to businesses to personalize advertising</li></ul>Place:<br /><ul><li>The promotion and distribution of the Best Buy products will take place at the business consumers location</li></ul>Price:<br /><ul><li>The Best Buy brand will be a cost effective alternative to other major brands</li></ul>Analysis of Alternatives<br />Analysis of alternatives as applied to Best Buy:<br />CriteriaRate1- Status Quo2- Website revamp3- Business Section4- Personalized Selling to businesses ROI0.350.35(2)=0.70.35(8)=2.80.35(7)=2.450.35(9)=3.15Short-term profits0.300.30(4)=1.20.30(5)=1.50.30(7)=2.10.30(9)=2.4Image0.20 0.20(7)=1.40.20(7)=1.40.20(8)=1.60.20(9)=1.8Ease of implementation0.150.15(10)=1.50.15(9)=1.350.15(7)=1.050.15(9)=1.351.<br />Advantages and Disadvantages:<br /><ul><li>Alternative #1 – Status Quo
  40. 40. Advantages: No changes are required since everything remains the same, easy to implement, low risk
  41. 41. Disadvantages: No new benefits, no direct increase to profits, no improvements to customer satisfaction
  42. 42. Alternative #2 – Website Redesign
  43. 43. Advantages: Easy to implement, low cost, high ROI
  44. 44. Disadvantages: May not reach as many customers as predicted, won’t create a large profit increase, possible technical issues
  45. 45. Alternative #3 – In-store Business Section
  46. 46. Advantages: Widens market share to include businesses, better customer service for businesses, increase profits
  47. 47. Disadvantages: High risk, in-store space is minimized for other products, additional costly expertise needed
  48. 48. Alternative #4 – Personal Selling of Best Buy Products
  49. 49. Advantages: High ROI, greater short-term profits, better image, easy to implement
  50. 50. Disadvantages: High cost to train specialized sales people, traveling costs, time consuming</li></ul>Decision and Justification<br />Decision and Justification as applied to Best Buy:<br />“SWOT Team” recommends that Best Buy develop a marketing strategy that will focus on alternative #4 - personalized business-to-business selling. <br />Using personal selling of products will allow Best Buy to surpass its main threat, Wal-Mart, as the leading electronic retailer for businesses. <br />Selling personally to businesses will increase the quantity of goods purchased which would lessen the negative impact on prices and revenue.<br />Selling directing to a business will help influence future purchasing decisions. <br />There is a high return-on-investments and greater short-term profits. Creates a better image because the market share includes businesses as well. It is easy to implement because the only change needed is to hire and train specialized employees. <br />Some possible downsides to this alternative would be the training and traveling costs. This process will also be very time consuming. <br />The increase in sales of large quantities will cover the costs and bring in a profit. Also, by going to the businesses first Best Buy is creating new consumer relationships. Personalized selling is not a service that Wal-Mart provides and therefore making it a competitive advantage for Best Buy. <br />Implementation<br />Implementation as applied to Best Buy:<br />As identified in the decision and justification, Best Buy’s marketing strategy is personalized selling directly to businesses. The step-by-step process to successfully implement the marketing mix is identified below with the proper tactics.<br /><ul><li>Marketing Research: Secondary research is required to identify all the large businesses and corporations within the Ottawa and surrounding regions which we want to target out personalized selling towards.
  51. 51. Product/Service changes: We will be adding the service of personalized selling which includes sales representatives going directly to business locations. Fifty sales representatives will be hired and specially trained to sell our products to these businesses.
  52. 52. Pricing strategy: To maintain our status as the leading retailer in the electronic segment we will continue to offer the lowest costs while providing businesses with a 20% discount and free shipping.Refer to Appendix A for a brief financial analysis.
  53. 53. Communications plan: Best Buy will create a potential client database and utilize our new sales representatives to promote this new marketing strategy.
  54. 54. Distribution plan: The distribution of the products will take place at the business consumer locations. </li></ul>Refer to Appendix B to view a detailed timeline of our action and implementation plan for our first two quarters.<br />Appendices<br />Appendix A<br />Financial Analysis:<br />One-time costsAnnual Costs- Training- Marketing research - Travelling vehicles- Communications- Salaries- Operating cost- Product and inventory- Vehicle maintenance<br />Appendix B<br />Implementation time line for the First Quarter:<br />StepsWhatWhoWhen1Select marketing team Director of marketingJanuary 2Create marketing planMarketing teamJanuary3Determine financial aspects to implement planFinance departmentFebruary4Research potential client databaseMarketing teamMarch<br />Implementation time line for the Second Quarter:<br />StepsWhatWhoWhen1Hire sales representativesSales supervisor/managerApril 2Train sales representatives Sales managerApril3Purchase travelling vehiclesFinance department/Marketing teamMay4Begin selling to businessesSales representativesJune<br />Bibliography<br />Best Buy. (2010). Retrieved April 2, 2011, from Best Buy Canada: <br /><br />Case Assignment: Best Buy <br />Lamb, C. W., Hair, J. F., McDaniel, C., Kapoor, H., Klaise, H., & Appleby, R. (2010). MKTG, Canadian Edition. Toronto: Nelson Education Ltd.<br />