SWOT Best Buy Essay
SWOT Best Buy
Best Buy has been the leader in the American Market for consumer electronics. There strength lies in several sales methods, one being that they allow customers to browse their selection with little intrusion. Their target customer base is young adults that are tech savvy, and the store environment allows for general perusal with sales representative available for general inquiries. The company has sufficiently identified their targeted demographic and have positioned their marketing in order to appeal to their sensibilities.
They also have a service center, affectionately called the “Geek Squad” that are within each store to assist with technical issues and repairs, so customers do not have to use outside vendors when in need of product maintenance. This company is also successful in training and investing resources into internal “personal assistants”. These employees were trained to steer a certain customer base in order to generate profits. In addition to their internal culture, Best Buy has also been successful in taking over the Future Shop retail stores in Canada. They have a dual-market strategy that is growing the Best Buy Brand in Canada, while simultaneously not impeding on the profitability of the now acquired Future Shop stores.
Best Buy is positioning themselves to either fail or moderately survive in the Chinese market by branching their company and techniques into a new and foreign demographic. The company also has separate management teams, marketing and sales structures and cultures that exist between the Best Buy branches and the Future Shop stores in Canada. This could create some internal dissension in relation to leadership decisions and employee satisfaction.
Opportunities exist in the building of the Best Buy brand in China’s retail market. The company has acquired Five Star, which was a major competitor in the Chinese market, and intend on using the dual market strategy that has been so success in Canada. Five Star previously had a very “hands on” and guided sales strategy; Now with Best Buy’s entry, the company together has an initiative to either merge this strategy into Best Buy’s laid back sale technique, or to abandon the Best Buy culture in hopes of blending more with the Chinese market expectations.
The Chinese CE market, although fragmented (the top 5 competitors attest to less than 20% of the market share), is tough to penetrate, so creating a solid marketing plan and operational development would be an asset into gaining a healthy market share. Best Buy also has an opportunity in learning the steep differences in incomes and lifestyles within the Chinese market. In order to position themselves for success in China, they must have a large understanding of how intricately different their foreign demographic will be.
Best Buy has been successful in the CE market, but not without a few threats. Walmart and Costo are big box retailers that sell consumer electronics at reasonable prices. Also, Walmart in particular has a reputation of selling products that are easy to use and are less complex in installation and etc. Online shopping for these CE products is another threat. Online retailers allow consumers to compare price and value options.
Resources like Ebay where one can “bid” on new or gently used items, Amazon, where one can compare the same product from multiple online retailers at once, and factory direct retailers such as Apple or Dell. Other larger retailers also sell CE products such as Office Depot, Staples, and Lowes. In China, another competitor is Suning, which specializes in customer service (like Best Buy) and has 500 service stations in China, and also the retailer Gome- which offers competitive pricing from high volume.
Competition of CE goods in China is so intense, that the profit margins are reduced dramatically in order to compare and or compete with other vendors. The Chinese product and manufacturing vendors keep prices low, and make up for the loss of profit through the “rebates” afforded to them by the manufacturers. This means that these companies are making more money from the vendors rebate checks than they are from the actual sales of the product. It is also noteworthy that brand preferences in China are prevalent, but do not outweigh the price component. Best Buy must rely on more than brand recognition in order to sell a product. They need to ensure that their prices are competitive with the other retailers in the CE market.
-Building the Best Buy Brand through their acquisition of Five Star, a major CE retailer in China
Note the differences between Best Buy and FiveStar/ how can this be consolidated or implemented? Would this need to change? Will Best Buy’s essence become a new company altogether in order to stay competitive?
-China has 1.3 Billion Consumers. Best Buy is currently still growing and learning new marketing techniques to this dissimilar demographic.
-Learning the steep differences that exist in income and technology accessibility per region in China.
-Leader in American Market for tech superstore
-Geek Squad in all stores to provide service to consumer electronics (competition does not have in house service techs)
-Effective identification and marketing towards targeted demographic
I-dentifying and training “blue shirts” or employees that can operate as personal assistants to clients to assist with product selection
– thereby maximizing profits (in hopes of creating a shopping experience that customers would like to repeat)
-Purchasing the leading CE retailer in Canada, Future Shop, has enabled Best Buy to increase their marketshare into the Canadian market. While keeping Future Shop a separate entity, allows Canada customers who are faithful to the brand experience to continue shopping there, while curious consumers will branch out into the new retailer “Best Buy” to have an alternate shopping experience. (This also prevented several Canadians, who were aware of the brand, from choosing other vendors if Best Buy had outright changed the Future Shop into Best Buys)
Internally, Best Buy could see profit “cannibalism” due to the rise of its popularity and close proximity to Future Shop. -Lots of operational changes in culture, staffing and processes for the Chinese
-Building the Best Buy Brand through their acquisition of Five Star, a major CE retailer in China Note the differences between Best Buy and FiveStar/ how can this be consolidated or implemented? Would this need to change? Will Best Buy’s essence become a new company altogether in order to stay competitive? -China has 1.3 Billion Consumers. Best Buy is currently still growing and learning new marketing techniques to this dissimilardemographic. The Chinese CE market, although fragmented (the top 5 competitors attest to less than 20% of the market share), is tough to penetrate, so creating a solid marketing plan and operational development would be an asset into gaining a healthy market share. -Learning the steep differences that exist in income and technology accessibility per region in China.