Circuit City from Good to Great to Gone by Joshua Neil Banzon, University of the Philippines Strategic Management

1. FROM GOOD TO GREAT TO
GONE
T h e R i s e a n d F a l l o f C i r c u i t C i t y
J o s h u a N e i l V . B a n z o n
B A 1 9 0 - S t r a t e g i c M a n a g e m e n t
U n i v e r s i t y o f t h e P h i l i p p i n e s
P r o f . M i t a A n g e l a M . D i m a l a n t a

2. C
• Electronics retail store in the U.S.
• Founded by Samuel Wurtzel in 1949
• Formerly known as Wards Company until 1984
• First store was in Richmond, Virginia
IRCUIT CITY

3. GOOD GREAT GONE
• Within 10 years,
Wards became a
four-store chain
• Total sales: $1M per
year
• Lower prices than
smaller competitors
• Stores offered service
incentives
• By 1979, sales
reached $120M
• In 1987, annual sales reached $1B
• In the 1990s, was largest consumer-
electronics retailer in the U.S.
• Best performing company on Jim Collins’
Good to Great list
• Highly motivated and well-trained personnel
• Deployment of sophisticated point-of-sale
and inventory-tracking technology
• Ability to connect the flow of information
among geographically dispersed stores
• Detailed tracking of customer preferences
• Quick response to changing trends
• Implementation of 4S/5S business model
• Competitors were unable to replicate their
core competencies
• Neglected to upgrade and
protect core competencies
• Top management team was
distracted by pursuing
noncore activities
• Laid off 3,400 of firm’s
highest-paid sales personnel
• Best Buy recruited Circuit
City’s top personnel
• Best Buy upgraded its core
competencies
• Filed for bankruptcy
protection in November 2008

4. Questions
• Why was Circuit City so successful as to be featured in Good to Great?
What was its strategic position during its successful period? How did it
contribute to competitive advantage?
• Why did Circuit City lose its competitive advantage? What was Circuit
City’s strategic position during the time of its competitive disadvantage?
• What could Circuit City’s management have done differently?
• What is the future of Best Buy as the leader in big-box electronics
retailing as it faces tough competition with Amazon and other online
retailers? What core competencies in big-box retailing are critical not
only to survive but also to gain and sustain a competitive advantage?

5. Answers:
1. Because they exceeded Collins’ criterion, instead of
outperforming the stock market 6.9 times, they did 18.5 times.
High value for their products and low cost – large gap between
value and cost, resulting to competitive advantage
2. Overconfidence: ignored their closest competitor (Best Buy)
Poor decision making process: ventured out to other product
lines to regain lead
Laid off 3,400 of its most tenured employees
Core competencies lost their value  they lost their
competitive advantage

6. Answers:
3. They could have stayed in appliances while venturing out to
gaming and imaging department. They shouldn’t have laid off
their top employees.
4. They must hold onto their innovative customer-centricity
model. *This allows employees to identify and more effectively
and serve specific customer segments
Use of 4S/5S model to improve their customer service
Cost-leadership

7. REFERENCES
Hart, A., Matulich, E., Rubinsak, K., Sheffer, K., Vann, N., & Vidalon, Myriam.
(October 2012). The Rise and Fall of Circuit City. Journal of Business Cases and
Applications. Volume 6. Retrieved from
http://www.aabri.com/manuscripts/121101.pdf
Rothaermel, Frank T., Strategic Management, 2nd Edition, McGraw-Hill
Education, New York, USA.
Wulf, T. (2011). Good to great to gone. Training, 48(3), 20-20,22. Retrieved
from http://search.proquest.com/docview/878897800?accountid=47253