Global Growth
and Infrastructure
Agenda

• International Expansion Strategy – Our Differentiation


• Enterprise Enablers
   – Supply Chain
   – Business T...
Panel
• Bob Willett – CEO International & Chief
  Information Officer
• David Berg – COO International
• Dan Currie – Glob...
Differentiate Through Co-Creation,
                      Services and Solutions



                                       ...
Enterprise Enablers– Supply Chain
                               and Global Sourcing
• We set out three years ago to devel...
Enterprise Enablers – Business Technology
The transformation of our IT platform started three years ago, when we began a
j...
International - Canada
Our Canadian dual brand strategy has been built out over
the past years, and now is positioned to o...
International - China
– Our dual brand strategy is building a solid foundation utilizing customer
  analytics and research...
International Expansion plans were developed using
 the Global Prioritization Index, among other things




              ...
Filter the Results for Developing Markets

Developing Markets - GPI Rank vs. Ease of Setup / Operation Rank




          ...
International - Mexico
                                                                         Market Demographics
We are...
International - Turkey
                                                                             Market Demographics
We...
International Partnerships for Growth
     •   We are leveraging Accenture’s capabilities in all
         countries, utili...
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Global Growth & Infrastructure Breakout

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Global Growth & Infrastructure Breakout

  1. 1. Global Growth and Infrastructure
  2. 2. Agenda • International Expansion Strategy – Our Differentiation • Enterprise Enablers – Supply Chain – Business Technology – Partnerships 2
  3. 3. Panel • Bob Willett – CEO International & Chief Information Officer • David Berg – COO International • Dan Currie – Global Supply Chain • Jennifer Driscoll – Investor Relations • Kevin Layden – Canada • John Noble – CFO International • Jeanine Thompson – Human Resources • Redmond Yeung – China 3
  4. 4. Differentiate Through Co-Creation, Services and Solutions Geographic Format / Channel Reach Channel New channels Services Extension .com Global Geek Squad Extension Tesco BBY * New formats ns e.g. Five Star io s BBY Mobile ut e ol vic Europe (Geek Squad) S er S China, Mexico , Turkey Call Centers Target * (BBY, Five Star, Geek Squad) Range Magnolia Most Wal-Mart * Extension Future Shop Canada (BBY, Future Shop, Geek Retailers Squad) Core Format US (BBY, Geek Squad) Product and Mass Exclusive Private Label Exclusive Brand Products Brands (Insignia, Rocketfish) 4
  5. 5. Enterprise Enablers– Supply Chain and Global Sourcing • We set out three years ago to develop a “best of Customer Availability breed” supply chain under the “Panorama Program,” modeled after the European food industry. 94.00% 92.2% 93.0% 92.00% • Phase I focused on the cemand side, with Phase II looking at the physical logistics and distribution 90.00% 89.2% • The Panorama Program has delivered substantial 88.00% SG&A reductions and gross margin benefits through a combination of: 86.00% 85.00% • Space Management 84.00% • Improved Availability 82.00% • Forecast Accuracy • Replenishment & Allocation 80.00% • Collaborative Pricing and Forecasting FY04 FY05 FY06 FY07 • Purchase Path • Tailored Market Assortment On Time Right Quantity • Network Optimization • Supplier Management • Direct Importing 80% 75% • LEAN Project 73% 75% 72% • Additional benefits will be realized as we continue to 70% roll-out the capabilities to all categories and expand OTRQ % internationally 65% 61% 60% • Enterprise Global Sourcing revenue up 32% YOY 55% • SG&A reductions by partnering in goods not for resale 50% (GNFR) FY04 FY 05 FY06 FY 07 5
  6. 6. Enterprise Enablers – Business Technology The transformation of our IT platform started three years ago, when we began a journey to simplify our technology environment and create a nimble, service- oriented architecture. – Our activities focused on five objectives: • Adding new capabilities • Infusing new skills • Reducing risks • Simplifying the IT architecture and infrastructure • Reducing Total Cost of Ownership (TCO) – Currently we have delivered substantial cost reductions from a simplified environment, while enabling new capabilities: • Service environment to support Geek Squad • Store POS system • HR Portal for all employees • Enterprise Data Warehouse • International Footprint – Additional investment in corporate transformation is still ahead that is expected to further reduce costs and increase speed to market – The development of an Enterprise IT blueprint that encompasses Canada, China, Mexico and Turkey 6
  7. 7. International - Canada Our Canadian dual brand strategy has been built out over the past years, and now is positioned to optimize on this investment: – The leadership team in Canada has shaped a very focused agenda concentrating on the core activities and optimizing their form – Future Shop and Best Buy are both growing market share and producing comparable store sales growth – Brand differentiation work is accelerating to create options for dual brands in Canada where financially appropriate – The future Future Shop – Implementing new capabilities of labor and price optimization and goods not for resale (GNFR) – Private label global sourcing improving margin – Infrastructure investment accelerating in parallel with clarity around differentiation – Source of future leaders for International 7
  8. 8. International - China – Our dual brand strategy is building a solid foundation utilizing customer analytics and research – Our China leadership team is now moving into the growth phase after initially focusing on harmonization and stabilization; building our brand; cultures; and values – Our Best Buy store in Shanghai is expected to enter the top 50 stores in the first year and is expected to break even – We expect our China operations to deliver an operating profit in FY08 – We are creating a new operating model leveraging customer centricity and services – Recruited local leadership team to drive the company forward – Beginning infrastructure investments to support new store program pipeline – Great support has been received from the Chinese government – Creating an Academy of Retailing to build new leaders of the future – Reinforcing legal and integrity standards – Applying customer centric analytics – Five Star is meeting our expectations, including significant improvement in same store performance 8
  9. 9. International Expansion plans were developed using the Global Prioritization Index, among other things 9
  10. 10. Filter the Results for Developing Markets Developing Markets - GPI Rank vs. Ease of Setup / Operation Rank 10
  11. 11. International - Mexico Market Demographics We are entering the Mexican market Average 1 in 12-18 months Mexico Mexico is the 14th largest economy in – Best Buy Market Size ($m) $11,416 $6,785 GDP terms and represents a relatively low risk and ease of entry Home Office Equip Market $5,256 $2,428 – Consumer purchasing power is growing faster than the US and Canada, Appliances Market $2,913 $1,696 sustained by rising income levels – Interest rates and inflation have fallen Entertainment Softw are Market $1,646 $ 568 sharply in recent years as the economy grows and matures – The market for BBY is approximately $14B: an organized market of $11B and Note 1: “Av erage” refers to av erage of all 36 emerging countries included in the an informal market of $3B ATKearne y Gl obal Prioritization Index tool. – Increasing prosperity has increased the Mexican Shift toward Organized Retailers availability of credit and home equity borrowing 1991 2003 – There are no comparable retail models to BBY in the Mexican consumer electronics retail market Organized Organized – We will leverage our US Technology Retailers Informal and supply chain Retailers 30% Retailers Informal 50% – Presents a future global sourcing Retailers 50% opportunity 70% – Track record of major retailers entering with success – Local leadership in place Source: Santander, InfoAmericas 11
  12. 12. International - Turkey Market Demographics We are entering Turkey in 12-18 months: Average 1 Turkey Turkey is the 6th -fastest growing – Best Buy Market Size ($m) $4,921 $6,785 economy in the world and the 10th “most important” in terms of growth in the world, Consumer Electronics Market $791 $2,093 moving up from 19th the previous year – GDP growth has been running at 5% since 2002; the market for our products both formal Home Office Equip Market $2,511 $2,428 and informal is approximately $7B, and growing annual retail sales of 12% in 2005. Appliances Market $1,195 $1,696 – Turkey has approximately 70 million people and Europe’s youngest population $ 568 Entertainment Softw are Market $ 424 with over 50% below 27 years of age – Turkey is also a manufacturing hub with Note 1: “Average” refers to averag e of all 36 emerging countries included in major investment increasing; today 60% of the ATKearney Glob al Prioritiz ation Index tool. all TVs sold in Europe and 15% of all TVs worldwide are made in Turkey The Shift toward Organized Retailers – Future Global Sourcing Opportunities The following retailers – Multi-national major retailers are in the have entered the market taking advantage of the major growth market in the last six in shopping malls across Turkey years: 28% 37% – A fragmented dealer CE retail market with •Tesco 55% few comparable retail models to BBY •Carref our •Migros – Strategically placed geographically to •Dixons exploit Eastern Europe, the Middle East and 72% •Makro 64% Russia 45% •Harv ey Nichols •IKEA – Customer segment analysis being •Media Markt undertaken 2003 2004 2010E They represent less than – Local leadership in place Traditional Retail Organized Retail 35% of the retail market 12
  13. 13. International Partnerships for Growth • We are leveraging Accenture’s capabilities in all countries, utilizing supply chain, IS infrastructure, sourcing and accelerating our transition • Carphone Warehouse – Jointly creating a Geek Services model in the UK and building a BBY Mobile capability • Dunnhumby – A fact based approach to our BBY and Five Star operating model and Customer Centric Strategy has been based on the analytics and segmentation model in China, Canada and now Mexico and Turkey • Tait Subler – We accelerated our relationship with Tait Subler who have helped us with our Brand Strategies in Canada, China and now Mexico and Turkey, renowned for their branding capabilities 13

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