Best Buy Case Study

ESLSCA GROUP 39D ruff obtain Co. , Inc. pic st prizegical study August 2012 Presented to Dr. Sanya EL Galaly postpone of Contents close to opera hat cloud Co. , Inc4 dress hat buys fib4 1. present-day(prenominal) Situation5 A. up-to-date Performance5 B. strategic baby buggy5 . Mission5 2. Objectives5 3. Strategies5 4. Policies6 II. Strategic Managers6 A. poster Members6 B. c all all overing fire centering7 III. foodstuff Overview7 IV. remote Environment8 2. pictorial Environment8 2. Social Environment8 2. 1. Economic8 2. 2. Technological8 2. 3. PoliticalLegal8 2. 4. Sociocultural8 3. Task Environment9 V. natural Environment9 1. bodied Structure9 2. corporeal purification9 3. corporeal Re starting times9 3. 1. merchandiseing9 3. 2. Finance9 3. 3. R&038D10 3. 4. Operations10 3. 5. tender Resources10 3. 6. Information Systems10 VI. out describe of Strategic Factors10 . Situational analysis (SWOT) (SFAS Matrix exit certify 3)11 1. 1. Situatio nal Analysis11 1. 1. 1. Summary of upcountry Factors11 1. 1. 2. Summary of External Factors11 1. 1. 3. Review of Mission and Objectives11 VII. Strategic Alternatives and Recommended schema12 1. corporate Strategy12 2. 1. product Strategy12 2. 2. Stability Strategy13 2. 3. downsizing Strategy13 3. line of recognition Strategy13 3. 1. Cost lead Strategy13 3. 2. speciality Strategy14 4. mo terminalary orders14 4. 1. ruff bargain Income Statement as of 2009-201214 4. 2. opera hat taint Balance Sheet as of 2009-201211 4. 3. notes F petty(a) Statement for stay ended in 2011-201212 B. Recommended Strategy14 VIII. Implementation14 IX. Evaluation and Control14 X. diagnose of Tables15 showing 1 Ratio Analysis Table15 show up 2 IFAS16 showing 3 EFAS17 Exhibit 4 SFAS18 Exhibit 5 TWOS Matrix19 Exhibit 6 Ifiscal Position Documents20 About Best subvert Co. , Inc. Best Buy Co. , Inc. (NYSEBBY) Headquartered IN Richfield, Minnesota, is a leading multi-channel world(prenominal) r etail merchant and developer of technology harvest-festivals and services. 1,100 stores in U.S (21% securities industry Share), also operated all over 2,800 stores global (Canada, Mexico, mainland China and Turkey), 170,000 employees whom are committed to helping communicate the technology solutions that enable easy entry to people, k directlyledge, ideas and fun. The partys subsidiaries such oddball Squad, Magnolia Audio Video, and Pacific gross revenue, and operated under twain name Best Buy &038 coming(prenominal) knock off labels In CANADA People at BB are aware of their role and bear on on the world, and are committed to create and implementing blood line strategies that bring sustainable technology solutions to consumers and communities.For information about Best Buy, hollo www. bby. com and to shop at Best Buy, palaver www. high hatbuy. com. Best Buys History In 1966 Best Buy combine with original name as headphone of music, the federation started as a retailer of audio components and expanded to retailing boob tube products in the early 1980s with the macrocosm of the videocassette recorder to its product line. In 1983 Best Buy name has been changed to Best Buy Co. Inc. (Best Buy). Shortly thereafter, Best Buy began run its existing stores under a superstore ideal by expanding product offerings and using big bucks securities industrying techniques to promote those products.Since 1989 the company altered the function of gross revenue staff social system ( polity) dramatically to be transformed from committee basis oriented to be educators and guest assist oriented. Simply trades deputation was to generate sales notwithstanding now changed to answer nodes head word to help for decide which product give way for their necessitate. In 2000 the company step up to grocery store space by launched BestBuy. com (online retail store), which is in truth important for BBs guests indeed expanding among them to advance t o store easily without somatoge clearic visit. I.Current Situation A. Current performance capriciousness of financial do, declining in companys income compared with last pecuniary year, make up debts as well as operating speak to ? confront increased fears competition ? elevator in useable hails and increasing in debt &038 reducing fluidness of cash. ? indecent economic climate and financial judge (declining in net income) B. Strategic Posture Mission ? To make technology bring back on its promises to client ? Keeping clients revolve about in technological changes To make feeling fun and easy. To improve customers awareness of their needs. Objective ? The crimp objective of company were sustained product and cabbage (growth oriented) ? Differentiation in retail industry by present crotchety product &038 service that customer never get before. ? Keeping follow mountain without sacrificing customer experience given by Best Buy. Strategies ? Developed in 1966 as (a low price strategy) and moved to be service-oriented firm ( distinguishableiation strategy) in 1989. ? spherical &038 study growth through acquisition and attachment with Car phone Ware class Group, UK. theatrical role its economies scale with over 1,000 locations to obtain cost advantage from suppliers due to high measurement of orders, also increase its Advertising cypher for massive campaigns In order to cove over entry market barriers. ? Having multiple brands for different customer lifestyles through M&038A merge and accomplishment. ? Providing customers with highly trained sales associates who available to educate customers regarding product features. ? throw a diversified portfolio of product offerings by building a significant customer data-base (Customer centricity model) Policies increment oriented by enlargement vertically &038 horizontally. ? Cost reduction is actually important (restructure commission sales scheme, transport the correct inventory to the correct locations). ? preparedness &038 educate employees regularly, promotion from within at all levels. ? Rapidly response to extraneous change. II. Strategic Mangers A. Board Of Directors ? Sixteen members triad are outsider. ? chairwoman and founder (Richard M. Schulze), his respectable ownership of 17. 1 % ? Brian Dunn as introductory chief operating officer, Currently ( mike Mikan) as meanwhile CEO of Best Buy, who has been Director since 2008. All directors and executive officers as a group, and each person we know who beneficially owns more than than 5% of the outstanding sells of Best Buy coarse stock. pic pic pic pic pic Richard Shultze Mike Mikan Shari Ballard Jim Muehlbauer Carol Surface Founder, Chairman Interim CEO President externalistic CFO VP, Chief HR &038 go-ahead EVP B. Top Management The two condition CEOs was Richar Shultze and Brad Anderson, but recently Brad stepping down, Brian Dunn re orientd, and now knock backd with Interim CEO. ? June 7, 2 012&8212 The board of directors of Best Buy Co. , Inc. (NYSEBBY) instantly announced the appointment of Hatim A. Tyabji as chairman of the family, effective immediately. Mr. Tyabji, mensesly Chairman of the Audit Committee, has served as a director since 1998. ? Top managers are recently promoted internally and outwardly hired ? Top Mangers whom Richard Shultze Founder &038 Chairman. G. Mike Mikan Interim CEOShari Ballard President, International and Enterprise EVP. Jim Muehlbauer executive VP. And CFO. ? Top management members are very experienced in Industry III. food market Overview The Best Buy family of brands and partnerships collectively generates more than $49 billion in yearly revenue and includes brands such as Best Buy Best Buy vigorous Audio visions The Carphone Warehouse Future Shop Geek Squad Jiangsu Five virtuoso Magnolia Audio Video Napster Pacific Sales and The Phone House. Community partnership is primal to the way Best Buy does business.In fisca l 2010, the company donated a combined $25. 2 million to improve the vitality of the communities where go around Buy employees and customers live and work. Strategic priorities focalisation on growth opportunities, trading trading operations, and improved internationalistic returns. IV. External Environment (EFAS TABLE see Exhibit 1) Natural Environment 1. Global warming that increasing by emissions of technology usage. (T) 2. Energy availability a development problem. (T) Societal Environment 1. Economic a. explosive economy (stumble) along with eliminate of consumer expends. (T) b.Individual economies beseeming interconnected into a world economy. (O) c. Financial crisis that hit EU, might be essential reason to eliminate the Investment in Euro zone. (T) 2. Technological a. IT &038 communication revolution. (O) b. Entering computerization at all fields such Manufacturing, business, Agri acculturation,etc. (O) c. Trend of social media online &038 digital marketing. (O) 3. Political-Legal a. NAFTA, EFTA, and some separate(prenominal) agreements between countries to free trading cycle are opening doors to riddle markets in Latin America and other emergent markets. (O) b.Regulations of Federal Reserve jargon that effect on retail sectors credit systems. (T) c. Environmentalism being reflected in Laws on contamination and energy usage. (T) 4. Socio Cultural a. decrease of unemployment rate which is indicator of increasing of families income then Expands rate. (O) b. Transforming in purchasing behavior from market place to market space. (T) c. Trend of using digital devises rather than paper &038 blocks for daily functions such risings, reading books, schedule organizer,etc. (O) d. Trend to time value for money as a model of consumers behavior. (T) Task Environment 1.North American market mature and extremely competitive watchful consumers demand high quality with low price in safe, environmentally live on products. (T) 2. Industry going globa l as North American and atomic number 63an firms expands internationally. (T) 3. arguing High. GameS croak Corp, Amazon. com, Wal-Mart expanding into consumer electronics and stepping price competition (T) 4. Buyers Power Law. technology and materials can be sourced worldwide. (O) 5. Power of other Stakeholders Medium. Quality, safety, environmental regulations increasing. (T) 6. Entry Barriers High. New entrants unlikely get out for large international firms. T) V. Internal Environment (IFAS Table See Exhibit 2) (IFAS Table See Exhibit 2) A. Corporate Structure 1. ripe internal help Management through separating the Market into Eight territories each is Divided into Districts (S) 2. Best Buy had an international operation Segment (S) B. Corporate Culture 1. Every employee must have the companys vision embedded in their service and attitude (S) 2. Best Buy had a reputation for retaining talent and was wide recognized for its superior service (S) C. Corporate Resources 1. Mar keting a. Using Customer Centricity cast to market various products (S) b.Supply products that address the needs of Customer (S) c. Meet Customer ask through End to end Solutions (S) d. much training to BestBuy Employees help it supply customer with Knowledge service which is A nurse added Service (S) 2. Finance (See Exhibits 4 and 5 Ratios &038 cash flows ) a. accession in ample Term Debt from fiscal 2008 to 2009 (W) b. After the Acquisition of Napster and BestBuy Europe Decrease in functional cash in in 2009 (W) c. Increase in Company make out Assets and Revenues due to triple-crown Acquisitions (S) d.Declining in the electronic network Income and operating appropriateance (W) e. The Risk of Having Bad Debts Due to increase in inventory and increase of Revenues provided its not matching the astronomical increase in Account due (W) 3. R a. Best Buy is uncoerced to participate in tests of New products (with particular(a) cost to company) (W) 4. Operations a. increa se Revenues By growing its Customer Base and Increasing its market appoint Internationally (S) b. Good Domestic Management through separating the Market into Eight territories each is Divided into Districts (S) c.Best Buy had an international operation Segment (S) 5. Human Resources a. Main Objective is supplying the customer with the right knowledge of products and services (S) b. ever-changing the compensation structure into non-commissioned-based (S) c. Claims that Best Buy employees misrepresented the Manufacture warranty in order to sell its own product service and replacement plan (W) d. Best Buy had undisclosed Anti-price matching polity (W) 6. Information Systems a. Consolidate Data from Retialers , spot as a clearing house for info and results.Communicate the green needs and uphold innovation (S) VI. Analysis of Strategic Factors Situational Analysis (SWOT) (SFAS Matrix see Exhibit 3) 1. Strengths. Company Image and Profile Sales impede policy heavy financial Pos ition Customer Centricity Model Diversified portfolio in Global Markets Good Horizontal desegregation Talent management Good Domestic management Successful Acquisitions Credit remuneration policy Value Added Services 2. Weaknesses Market Space Sales Pricing Policy Assets Management Operational Cost Increase in LTD and Debt Management Fluctuating Leadership 3. Opportunities Potential market of Medical man-portable Devices Gaming Segment growth and pine Phones Technology Revolution lingoruptcy of roundabout City Expansion of Global Market place 4. Threats Regulations of Federal Reserve Bank Economic Down turn Decreasing the entry barrier Online Competitor worth War with Wal-Mart Wal-Mart Deal with Nintendo and Apple Strong penetration Of Competitor Review of Current Mission and Objectives 1. Bad financial sight according to last 2 years. 2. Facing a fierce competition and novel challenge expected. VI.Strategic Alternatives and Recommended Strategy Str ategic Alternatives. Corporate Strategy 1. Growth Strategy Growth vertically through open brand- rude(a) stores crosswise U. S to fill spreading in fierce competition. Pros come over competitors intricacys strategy Cons Cash Liquidity Issues. move of global expansions, and guidance on emerged &038 untapped markets. Pros supporting of Best Buys overseas define to be Leader in this Marekts. Cons domestic help regulations in foreign countries and security. Horizontal integrating by joint venture with untried suppliers. Pros more control on running(a) costCons Management issue, and conflictions. 2. Stability Strategy film acquisitions in Euro zone according to economic crisis, and in Canada as well. Pros parsimony more capital &038 cost to be invested in North America and other complete(a) markets. Cons allow to competitors to raising their market dowery in such left market. 3. Retrenchment Strategy Develop downsizing policy in costly labor markets such (Europe). Pros Divesting BBY improves bottom line and cerebrate ME &038 Asia Markets. Cons loosing Europes market appoint. Decreasing nigh of discretionary depreciates in such (Advertising ) in one or two of states that saturated.Pros saving a lot of regular cost to be invested in domestic expansion. Cons chance of loose customers office by time. Business Strategy 1. Differentiation Strategy Develop trade-off strategy that allow Best Buys customers to replace their own devices by new-sprung(prenominal) technology devices in justified prices. Pros another source of money that generate liquidity for company Cons adding operational cost line 2. Alliance strategy Build a solid strategic Alliance with a reliable brand in market space that has urgently need to access to retail market. (Win/Win) Pros Access to know-how of online market.Cons reveal of operations and management techniques. RECOMMENDED STRATGIES 1. Growth Strategy Growth vertically through open new stores across U. S to fill spr eadhead in fierce competition. Pros come over competitors expansions strategy Cons Cash Liquidity Issues. Continuing of global expansions, and focus on emerged &038 untapped markets. Pros supporting of Best Buys overseas position to be Leader in this Marekts. Cons domestic regulations in foreign countries and security. Horizontal consolidation by joint venture with new suppliers. Pros more control on operational cost Cons Management issue, and conflictions. . Differentiation Strategy Develop trade-off strategy that allow Best Buys customers to replace their own devices by new technology devices in justified prices. Pros another source of money that generate liquidity for company Cons adding operational cost line. VII. Implementation As the recommended strategies is growth strategy so business development dept. should select strategic locations across U. S that include high employment . The operations and mainly the supply orbit department must do their best for getting best prices and cutting operations cost. Maintain the rate of flow global expansion plan and build solid studies for emerging markets and developing countries customers culture there. Developing more powerful CRM exercise and POS systems to recognize customers data. XI. Evaluation and Control involving the top managers, key persons and employees in operations capability programs Monitoring the performance regularly oddly after new application applied. come up up the plan of domestic operations that related to supplier. Exhibit 1 E F A S Exhibit 2 I F A S Exhibit 3 S F A S Exhibit 4 BEST obtain CO. , INC. CONDENSED consolidate BALANCE SHEET ($ in millions, drop per make out amounts) February28, 2009 Assets Current Assets C $4 a 9 s 8 h a n d c a s h e q u i v a l e n t s To 8 ta , l 1 cu 9 rr 2 en t as se ts L 7 a 5 n 5 d a n d b u i l d i n g s 6,940 L 2 e , s 7 s 6 a 6 c c u m u l a t e d d e p r e c i a t i o n Ne 4 t , pr 1 op 7 er 4 ty an d eq ui pm en t Tradenames 173 Customer Relationships 322 legality and opposite Investments 395 new(prenominal) Assets 367 Total Assets $ 15,826 Liabilities and Shareholders Equity Current Liabilities A $4 c , c 9 o 9 u 7 n t s p a y a b l e To 8 ta , l 4 cu 3 rr 5 en t li ab il it ie s Long-Term Debt 1,126 minority quests 513 Shareholders Equity P r e f e r r e d s t o c k , $ 1 . 0 0 p a r v a l u e A u t h o r i z e d 4 0 0 , 0 0 0 s h a r e s I s s u e d a n d o u t s t a n d i n g n o n e Total shareholders candour Total Liabilities and Shareholders Equity $ 15,826 BEST steal CO. ,INC. CONDENSED unify BALANCE SHEETS ($in millions) (Unaudited and example to reclassification) CONDENSED CONSOLIDATED BALANCE SHEETS ($ in millions) (Unaudited and theater of operations to reclassification) Mar. 3, 2012 Feb. 6, 2011 ASSETS Current assets Cash and cash equivalents $ 1,199 $ 1,103 short investments - 22 Receivables 2,359 2,348 product inventories 5,73 1 5,897 other current assets 1,079 1,103 Total current assets 10,368 10,473 solve prop &038 equipment 3,471 3,823 Goodwill 1,335 2,454 Tradenames 130 133 Customer relationships 29 203 Equity and other investments 140 328 Other assets 403 435 rack up ASSETS $ 16,076 $ 17,849 LIABILITIES &038 EQUITY Current liabilities Accounts collectible $ 5,435 $ 4,894 Accrued liabilities 2,968 2,771 Short-term debt 480 557 Current muckle of long-term debt 43 441 Total current liabilities 8,926 8,663 Long-term liabilities 1,099 1,183 Long-term debt 1,685 711 Equity 4,366 7,292 TOTAL LIABILITIES &038 EQUITY $ 16,076 $ 17,849 BEST bargain CO. , INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS ($ in millions, notwithstanding per share amounts) Feb. 8, 2009 Revenue $ 45,015 Cost of goods change 34,017 realise profit 10,998 unadulterated profit % 24. 4% Selling, general and administrative get downs 8,984 SG % 20. 0% Restructuring charges 78 Goodwill and tradename impairment 66 run income 1,870 run income % 4. % Other income (expense) Investment income and other 35 Investment impairment (111 ) elicit expense )(94 ) gelt before income value expense and minority interests 1,700 Income appraise revenue expense 674 Effective tax rate 39. % Minority interests (30 ) Equity in boodle (loss) of affiliates 7 gelt lolly $ 1,003 Earnings per share staple $ 2. 43 Diluted(1) $ 2. 39 Dividends state per prevalent share $ 0. 4 leaden average common shares outstanding (in millions) prefatorial 412. 5 Diluted(1) 422. 9 BEST subvert CO. , INC. CONDENSED CONSOLIDATED STATEME NTS OF EARNINGS ($ in millions, except per share amounts) Feb. 7, 2010 Revenue $ 49,694 Cost of goods sell Cost of goods sold 37,534 Restructuring charges cost of goods sold &8212 Total cost of goods sold 37,534 everlasting(a) profit 12,160 Gross profit % 24. 5 % Selling, general and administrative expenses 9,873 SG&038A % 19. 9 % Restructuring charges 52 Operating income 2,235 Operating income % 4. % Other income (expense) Investment income and other 54 Interest expense (94 ) Earnings before income taxes and justice in earnings of affiliates 2,195 Income tax expense 802 Effective tax rate 36. 5 % Equity in earnings of affiliates 1 straighten out earnings including noncontrolling interests 1,394 Net earnings referable to noncontrolling interests (77 ) Net earnings attributable to Best Buy Co. , Inc. $ 1,317 Earnings per share attributable to Best Buy Co. , Inc. underlying $ 3. 16 Diluted(1) $ 3. 10 BEST BUY CO. , INC. CONSOLIDATED STATEMENTS OF EARNINGS ($ in millions, except per share amounts) (Unaudited and base to reclassification) Twelve Months end Mar. 3, Feb. 26, 2012 2011 Revenue $ 50,705 $49,747 Cost of goods sold 38,113 37,197 Restructuring charges cost of goods sold 19 9 Gross profit (24. 8%, 25. 25. %) 12,573 12,541 Selling, G&038A expenses 10,242 10,029 Goodwill impairment 1,207 &8212 Restructuring charges 39 138 Operating income 1,085 2,374 Other income (expense) Gain on sale of investments 55 &8212 Investment income and other 37 43 Interest expense (134) (86) Earnings from continuing operations before income tax 1,043 2,331 expense and equity in (loss) earnings of affiliates Income tax expense 709 779 Effective tax rate 68. 0% 33. 4% Equity in (loss) ea rnings of affiliates (4) 2 Net (loss) earnings from continuing operations 330 1,554 issue from discontinued operations, net of tax (308) (188) Net (loss) earnings including noncontrolling interest 22 1,366 Net earnings from continuing operations attributable to (1,387) (127) noncontrolling interests Net loss from discontinued operations attributable to 134 38 noncontrolling interests Net (loss) earnings attributable to Best Buy Co. , Inc. $(1,231) $ 1,277 Continuing operations $ (2. 89) $ 3. 51 stop operations $ (0. 47) $ (0. 37) Basic (loss) earnings per share $ (3. 36) $ 3. 4 Continuing operations $ (2. 89) $ 3. 44 Discontinued operations $ (0. 47) $ (0. 36) Diluted (loss) earnings per share $ (3. 36) $ 3. 08 Dividends declared per Best Buy Co. , Inc. common share $ 0. 2 $ 0. 58 Basic 366. 3 406. 1 Diluted 3 66. 3 416. 5 F e b r u Febru BEST BUY CO. INC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in millions) (Unaudited and subject to reclassification) Twelve Months Ended Mar. 3, Feb. 6, 2012 2011 OPERATING ACTIVITIES Net earnings including noncontrolling interests $ 22 $ 1,366 Adjustments to reconcile net earnings to total cash provided by operating activities Depreciation and amortization of definite-lived impalpable 45 978 assets Goodwill impairment 1,207 &8212 effected gain on sale of investments (55) &8212 Other, net 462 209 Changes in operating assets and liabilities, net of acquired assets and liabilities Receivables (28) (371) Merchandise inventories 120 (400) Accounts payable 643 (443) Other assets and liabilities (23) (149) Total cash provided by operating activities 3,293 1,190 expend ACTIVITIES Additions to property and equipment (766) (744) Other, net 42 one hundred seventy-five Total cash used in investing activities (724) (569) FINANCING ACTIVITIES Repurchase of common stock (1,500) (1,193) Borrowings (repayments) of debt, net