BestBuy SWOT Analysis

Due

BestBuy SWOT Analysis

Overthe years, the business environment has experienced volatile andrapid changes due to the improved technology, emerging consumermarkets, enhanced competition, and the increased demand of consumerproducts. Due to this, organizations must modify their strategies toattain market sustainability. They should do this through theevaluation of both their internal and external environments making itpossible to come up with the necessary changes. The harsh environmenthas not spared Best Buy since they are also experiencing the pressureto adapt to the current market. Therefore, in this paper, I willevaluate Best Buy using the SWOT analysis tool and providerecommendations that will help them achieve sustainability in themarket.

CompanyOverview

BestBuy serves as a retailer multinational company, which deals withconsumer electronics, mobile phone and computing products,appliances, entertainment, and related services. Best Buy is amongstthe largest electronic specialty company found in the United Statesof America and is venturing into the global markets as it attainssubstantial bargaining power around the globes suppliers. The companyhas 1779 locations within the United States with revenue of about39.49 billion dollars around 31 July 2015 (Best Buy Co., Inc. SWOTAnalysis, 2016). It is a primary player in the ecommerce world withits website ranking sixth having approximately thirty one millionusers every month. The company remains among the few electronicretailer organizations that have managed to survive and thrive in thehighly competitive market experienced today. It has held its positionand made respectable profits even when faced with increasedcompetition from worthy rivals. Even though Best Buy has survivedwhere its’ historic rivals including Circuit city and Radio Shackhave failed, it faces potential disasters in the dynamic market,which may negatively influence their profitability and revenuegrowth. Therefore, utilizing a SWOT analysis tool can help Best Buyevaluate its position and come up with strategies to stay ahead oftheir competitors.

SWOTAnalysis

Accordingto Santos &amp Laczniak (2015), the SWOT analysis is a tool that iseffective in the evaluation of both the intrinsic and extrinsicenvironment of any company. Through this tool, any company can manageto hold on to their strengths and opportunities while they strive toimprove their weaknesses and reduce any threats they may save. As theacronym suggests, SWOT stands for strengths, weaknesses,opportunities and threats with strengths and weaknesses assessing thecompany’s internal environment while the threats and opportunityassessing a company’s external environment.

Positive

Negative

Internal

Strengths

  1. The Best Buy Company serves as the main electronic specialty retailer

  2. Company Brand Name

  3. Having the Consumer Centered Business Model as a Primary Differentiator

  4. Durable Supporting Infrastructure

Weaknesses

  1. Third Party Manufacturer and Vendor Dependency

  2. Dependency on In-store Locations

  3. Luxury Item Dependency

  4. Credit Dependency

External

Opportunities

  1. High Private Label Penetration increases margins and differentiation

  2. Rising ecommerce popularity

  3. Globalization

  4. Failing Competitors

Threats

  1. Pressurized margins due to increased competition

  2. Increased labor wages

  3. Online Delivery Platforms

  4. Shopping decline

Strengths

  1. The Best Buy Company serves as the main electronic specialty retailer

Thecompany is recognized globally as the chief retailers of consumerelectronics having both online and retail operations in the UnitedState, Mexico, and Canada (Best Buy Co., Inc. SWOT Analysis, 2016).It operates websites and retail stores under Best Buy as a brandname, Best Buy Mobile, Future Shop, Geek Squad, Best Buy Express,Pacific Sales, Cell Shop, and Magnolia Audio Video (Best Buy Co.,Inc. SWOT Analysis, 2016). Best Buy thrives due to its good brandimage and positive reputation. It positions among the main a hundredmultinational corporations in the United States associated with itsrevenues (The Statistical Portal, 2016). Additionally, it waspositioned with the top fifty retail brands found in the US. Best Boyhas a positive record of accomplishment managing to overcome therecession successfully.

Dueto the company size, the company has significant presence hencecaters for an even larger consumer base. According to Santos &ampLaczniak (2015), this minimizes the vulnerability associated with asingle economy ensuring participation in a broad emerging market.Further, the company possesses a high supplier bargaining powerespecially in the global market, which is fragmented due to the lackof well-established players in the marketplace.

  1. Company Brand Name

BestBuy enjoys a good brand name, which has played a huge role in theirsuccess in the market. Due to this, emerging markets are willing toaccept their services initiating a prompt market penetration.Moreover, their brand name has enabled them effectively penetrate theglobal markets since consumers want to be associated with thecompany.

  1. Having the Consumer Centered Business Model as a Primary Differentiator

TheCompany incorporates a consumer centric approach giving support andservice high prominence to ensure that they differentiate from otherretailer companies (Best Buy Co., Inc. SWOT Analysis, 2016). Best Buyoffers their consumers seamless shopping experiences using in-storetechnical support services. Through this, the company establishes apositive two-way relationship with their consumers ensuring that thecustomers receive concise product detail and information. Therefore,Santos &amp Laczniak (2015) point out their increased serviceprovisions and knowledgeable sales force helps them differentiatefrom many online retailers and mass merchants that compete with thecompany on price.

  1. Durable Supporting Infrastructure

Thecompany strived to put up durable supporting infrastructures. Itoperates its distribution centers across the United States enablingthem ship their products from manufacturers to their vast variety ofstores (Best Buy Co., Inc. SWOT Analysis, 2016). The company’sstore products found in Canada are directly shipped from Best Buy’ssuppliers to their stores via the distribution centers in Canadawhereas Mexican Best Buy stores follow a similar distribution methodas the U.S. Through these distribution methods, the company reducesoperation risks and has better control of their inventory costs.

Weakness

  1. Third Party Manufacturer and Vendor Dependency

BestBuy sells products sources from different international and localvendors. According to Best Buy Co., Inc. SWOT Analysis (2016), in the2015 financial year, the company’s bough 73% of its merchandisefrom their top twenty suppliers where LG Electronics, Apple, Sony,and Hewlett-Packard, are accounting for 47 percent of thosemerchandise purchase. Due to this reason, the company has minimalcontrol over any products quality. Therefore, if its suppliers failto meet the company’s high standards, Best Buy will experiencewithdrawals, product recalls, cost overturns, and productioninterruptions or delays, which harm its business. The effect countresult in losing their brand loyalty and lose their ability to retaincustomers.

  1. Dependency on In-store Locations

Despitetheir venture into the ecommerce world, Best Buy still dependsheavily on their in-store locations. Through this dependency, thecompany falls behind in venturing into the now popularized ecommercesector, which is receiving even more users as time passes.Additionally, due to their use of in-stores, the company has higheroperation expenses, which causes a strain on their finances due toproperty taxes, employee salaries, rent, and utilities.

  1. Luxury Item Dependency

Asa company, Best Buy depends highly on the sale of high-class itemsthat include video games. However, with such products, the demand caneasily decrease especially in times of ailing economies making thecompany’s profit margin to sink.

  1. Credit Dependency

Thecompany is highly dependent on supplier credit meaning most of theirstore products are on credit. Therefore, a manufacture distributesits products in the stores and receives payment when their goodssell. However, if these products fail to sell, Best Buy Company maycarry the payment over a certain period.

Opportunity

  1. High Private Label Penetration increases margins and differentiation

Themain differentiation factors associated with electronic retailersinclude their broad exclusive variety of products. Best Buy managesto provide exclusive label merchandise under Modal, Dynex, Platinum,Insignia, Rocketfish, and Init, which are mainly contractmanufactured by southeastern Asian, based Vendors (Best Buy Co., Inc.SWOT Analysis, 2016). Through these exclusive brands, Best Buy mayexperience increased company sales. Therefore, the company willmanage to differentiate itself from rivals attracting even moreconsumer base.

  1. Rising ecommerce popularity

Currently,the online market has attracted significant attention in the businessworld due to their low pricings and conveniences. With this, Best Buyis striving to strongly establish its brand name in the online marketto pose proper competition to its rivals. Through the internet, itreaches large consumer pools that prefer the online environment. WhenBest Buy manages to hack the online market effectively, it will enjoygreat benefits, which will be reflected in their profit margins

  1. Globalization

Theworld has become a global village therefore, electronic devices willreceive higher demands in the near future. Through globalization,Best Buy may be able to reach a wide variety of untapped markets withgreat demand for electronics including video games and smartphones.With this, they will increase their market share in the internationalarena and ensure increased revenues.

  1. Failing Competitors

BestBuy has managed to stay in the market despite the disappearance ofmain competitors known as the Circuit City and Radio Shack. Due totheir ability to adopt in the harsh business environment, Best Buyremains the only primary customer electronic retailer in a variety ofmarkets.

Threats

  1. Pressurized margins due to increased competition

Theelectronics retailing sectors is experiencing increased competitionas discounters, online retailers, and mass merchants attempt to gainan even larger market share. Competition in this industry isattributed to the over-dependency on product innovations, whichresult in the switching of costs. Therefore, favorable pricings andquality products make the background of consumer purchases whereconsumers may prefer alternative vendors. With this, Best Buy mayexperience negative registrations of profit margins and revenuegrowths.

  1. Increased labor wages

Inthe United States, the labor cost has experienced a significant rise.The company needs to pay its workers as per the federal minimum wage,which varies from one state to the other due to high costs of living(Best Buy Co., Inc. SWOT Analysis, 2016). Therefore, the growth inlabor cost increases Best Buy’s overall operation costs influencingtheir profit margins.

  1. Online Delivery Platforms

Theworld has seen an increase of online delivery platforms includingApple iTunes, Netflix, Amazon.com, and Google Play, which delivermedia to the public. These platforms have replaced in-store shops astop entertainment source products as far as movies and video gamesare concerned. Due to this, consumers are less likely to buy moreelectronics presenting Best Buy with negative margins

  1. Shopping decline

Overthe years, shopping has seized to be a leisure activity especiallywith the ailing economy. Due to this, most consumers prefer to buynecessities other than electronics, which are mainly forentertainment making Best Buy sales to decline.

Recommendations

Itis true that in order for companies to survive the ever-changingbusiness environment, they need to make certain alterations to theirnormal operations. Below are some recommendations that will ensurethe survival of Best Buy in the future years.

  1. Best Buy should make sure that they start developing their own electronic devices to avoid consequences attached to the distribution of low quality products in the market.

  2. Best Buy should strive to venture more online and reduce their dependency on the in-store shops, which will make them reduce their operation costs.

  3. The company should subject their employees to training so that they are fit to handle any changes in the business environment, which may need prompt action.

  4. Best Buy should work on ways of reducing supplier credit dependency, which mainly subjects them to loss especially when a product does not sell.

  5. The company should appoint a strategy team, which will help them analyze the emerging markets enabling them to expand their market share successfully.

Conclusion

BestBuy is a company that is experiencing success in the currentenvironmental market however, it needs to come up with strategiesthat will ensure its sustainability. Through the analysis, it isevident that Best Buy has an ability to grow even further as acompany if only they solidify their strengths and take advantage oftheir opportunities. Further, they should strive to improve theirweaknesses and be weary of the threats that face them by establishingeffective strategies. Once this is done, Best Buy will enjoy itsposition as a consumer electronic retailer for a long time.

References

BestBuy Co., Inc. SWOT Analysis. (2016). BestBuy Co, Inc. SWOT Analysis,1-8.

Santos,N., &amp Laczniak, G. (2015). Marketing to the poor: A SWOT analysisof the Markey Construction Model for engaging impoverished marketsegments. SocialBusiness,5(2), 95-111.

TheStatistical Portal. (2016). Most popular retail websites in theUnited States as of September 2015, ranked by visitors (in millions),retrieved online, on 18thJuly 2016, fromhttp://www.statista.com/statistics/271450/monthly-unique-visitors-to-us-retail-websites/