The roots of Best Buy Co. , Inc. can be traced back to St. Paul, Minnesota.
This is where founder Richard Schulze opened the doors of his Sound of Music store in 1966. Understanding a demand for consumer audio components and systems in the St. Paul area, Schulze managed to provide a combination of great prices and excellent service, thus building a strong customer base, which quickly prompted an expansion into home appliances and video products. The eighties prompted change as well as the opening of Best Buy’s first superstore. During 1983, a new corporate name was approved and the Sound of Music Company became known as Best Buy Co. , Inc.
With mounting consumer support Best Buy continued its road to expansion by opening an additional five stores. In 1985, the newly named company was being publicly traded under the symbol BBY. The late eighties brought forth additional change for the continuously growing company. Best Buy adopted a new concept in retail merchandising with the opening of massive superstores. The new concept shifted the placing of all inventory on the sales floor and hiring a specialized staff of non-commissioned service representatives (FAQ).
Such adaptations have fueled the company into progression and continued to promote the company’s corporate vision of “Making life fun and easy” (Fact Sheet).
Philanthropy plays a huge part in the success of Best Buy Co. , Inc. During 1994, The Best Buy Children’s Foundation was founded (FAQ).
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... are professional repair re-modelers, general contractors and tradesmen.The Company also offers products through two direct marketing subsidiaries: Maintenance ... all stores”.Another current strategy is the new store openings to expand both national and international markets, placing the ... purchase products and complete their own projects and installations; buy-it-yourself (B-I-Y) customers, who are ...
The foundation offers support to communities by way of contributions to several organizations found nationwide. This support strengthens communities by integrating interactive technology into everyday experiences. All of the programs funded by the Best Buy Children’s Foundation are easily accessible to students.
These programs also provide social services and disaster relief support in connection with non-profit organizations like the Red Cross and United Way. They also offer and support community volunteerism. Best Buy Children’s Foundation also has a scholarship, which offers scholarships to students who have exceptional academic achievement and outstanding community service. Annually more than $2 million in scholarships are granted to over 1, 300 students.
The scholarships are evenly disbursed in each U. S. Congressional District and the District of Columbia. Three students who will be attending an accredited school are selected from each district and receive a scholarship for $1, 000 or $2, 000. In recent years, Best Buy Co. , Inc.
has stretched its grasp to the international retail technology industry. Acquisition of Canada’s largest existing consumer electronics retailer, Future Shop, spearheaded the international expansion in early 2001. This paved the path for the official launch of the Best Buy’s independent label, Redline Entertainment. Within the Canadian sector two separate superstores exist, Best Buy (Canada) and Future Shop, both of which target a broad costumer base. Understanding the recognition and loyalty amongst Canadian consumers, Best Buy has continued the use of the Future Shop named superstores.
Since the acquisition of the Future Shop, Best Buy Co. has expanded the Future Shop locations to its status of 114 stores across Canada. In addition to Future Shop stores, Canadian Best Buy stores have continued to expand within the past three years; numbering 30 to date. The company truly extended itself worldwide in 2003 with the unveiling of a global sourcing office in Shanghai, China. Currently Best Buy operates three offices within China. They are located in Shanghai, Beijing, and Shenzhen.
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I. MissionBest Buy has been changing their mission statement through the years which can be looked at as their weakness not being able to provide a stable one. “Our formula is simple: we’re a growth company focused on better solving the unmet needs of our customers-and we rely on our employees to solve those puzzles. Thanks for stopping. “Company’s mission in 2005: &# ...
The primary function of the China locations is to buy the products in which Best Buy Co. , Inc. sells. Over the next year and a half, Best Buy Co. , Inc. is planning on opening what they refer to as “lab stores” (Best Buy Geeks Run amok).
The company is taking every opportunity possible to acquire as much information it can about Chinese buying patterns prior to the expansion. United States operations include the ownership and operation of two types of consumer electronics retail stores. These stores are designed to acquire the business of a large retail market. Each Best Buy location is quite large, ranging anywhere from 20, 000 to 45, 000 square feet (FAQ).
Best Buy locations provide a familiar place to shop for any number of products targeted to meet the needs of a broad consumer base. As of February 26, 2005, Best Buy Co.
, Inc. reported 668 Best Buy stores in operation within the United States. In addition to the Best Buy stores the company operates, Magnolia Audio Video centers that are smaller locations fashioned to meet the needs of customers with high-end preferences. There are currently twenty Magnolia Audio Video locations in throughout America. Best Buy Co. , Inc.
has recently released an expansion plan in which they plan to open additional smaller stores nationwide as well as in Canada. At this time there are approximately 673 Best Buy stores. This number is said to increase to about 1, 000. Additionally, Future Shop stores will also be included in this new growth period.
Future Shop stores are said to grow from 145 stores to approximately 200 (Best Buy Expansion Plans Include China).
The new smaller stores are seen as being more profitable. With a 10% reduction in construction costs and the operating costs being much less, the new smaller stores will be much more profitable then the super stores that we are used to seeing. The growth period is said to last about 5 years and will not only include the new smaller stores, but also a transformation on the current stores. Among the estimated 105, 000 employees worldwide, Best Buy Co. , Inc.
enlists the expertise of a centralized marketing staff to purchase store merchandise (FAQ).
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Stationed at the company’s corporate office in Richfield, Minnesota, this team is responsible for all aspects of merchandising; including assortment, pricing, and promotion. Product lines carried within store locations fall into four principal categories: consumer electronics, home office, entertainment software, and appliances. Consumer electronics including but not limited to TV’s, DVD players, home theater systems, personal audio and video, cameras, mobile audio, satellite systems provide 39% of annual sales. Home office products such as computers, printers, paper, wireless communications, scanners, ink contributed to 34% of revenues. Providing 22% of the company’s revenue, the entertainment software segment includes DVD’s, CD’s, video games, and computer software.
Approximately 6% of the company’s reported revenues results from the sales of appliances, which include all major household appliances, microwaves, vacuums, refrigerators, and more (FAQ).
In addition to providing brand name products to the consumer retail market, Best Buy store locations provide customers with a large selection of accessories designed to complement the principal products as well as boost revenues. Additionally, store locations provide installation and service programs on many products sold. Another consumer favorite, Geek Squad, was purchased by Best Buy Co. , Inc. in the year 2000.
From in-store service desks to in-home services, the Geek Squad provides dependable computer service at an affordable cost, regardless of where products were purchased. They call their service technician’s “double agents.” They are required to follow a dress code that includes tube socks, and the look is completed with clip on ties. There are approximately 7, 000 technicians currently serving computer consumers. Best Buy has plans to add an additional 5, 000 technicians to its payroll over the next year. Many of these new technicians will be working out of new Geek Squad stores that will soon be popping up in all geographic areas, including Canada. Due to the company’s broad customer base, Best Buy’s competition is tremendously large worldwide.
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The use of advertising by companies today is an integral part to the relationship between businesses and consumers. Companies that know why their customers act the way they do can gear their advertising accordingly and thus gain a competitive edge. A popular technique businesses use to conduct research on customers is through the Values and Lifestyles (VALS) system. VALS categorizes U. S. adult ...
Circuit City (Best Buys most direct competitor), Radio Shack, Wal-Mart, and Target compete with the company’s consumer electronics business. Computer stores including Comp USA generate competition with Best Buy’s home office sector, along with office-specific retailers such as Staples and Office Max. Tower Records is currently Best Buy’s largest entertainment software competition for music sales. In addition to competition with fellow retail merchants, Best Buy Co. , Inc.
contends with direct consumer suppliers as well such as Dell and e Bay. Best Buy Co. , Inc. also offers service through the use of the internet. Websites can be accessed for all of the subsidiaries in the Best Buy, Co. , Inc family which include Best Buy, Magnolia Audio and Video, Future Shop, and Geek Squad.
The websites are Bestbuy. com, Geek squad. com, Future shop. ca, and Magnolia av. com. The company offers its customers the opportunity to shop from within the privacy of their own homes.
The site gives consumers everything they might find in the actual store without the hassle of ever leaving their homes. Best Buy’s website in particular has weekly ads which are posted for convenience on the website as well as weekly specials and even gift ideas. Not only is this a convenient way to shop, but there is a plethora of information. The research center directs you to a vast selection of information, which allows consumers to become educated about products they own or wish to buy. A very useful link on the site is the Research Center. Within this section one can see valuable information that relates to computers, electronics, cameras and camcorders, home appliances, phones and communication, office products, and last but definitely not least music, movies, and games.
Each specific area offers a FAQ section, glossary, and user guide. The music, movies, and games section includes movie reviews and game demos. Operating in such a complex and competitive marketplace requires an intense marketing and promotional strategy. Best Buy Co. , Inc. states specifically that such strategies are considered confidential and therefore are do not disclose additional information.
However, it is apparent that the company invests heavily in advertisements within a variety of media. Newspapers, television, internet advertisements, radio, and magazines transmit promotions designed to spark enthusiasm and interest for the company and its products and services. With a reported 5 million visitors to the company’s United States stores and 80 million to Canadian locations it is understandable that Best Buy Co. , Inc.’s reported market share is fifteen percent of consumer electronics products (FAQ).
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As with all great success, there are challenges that must be faced in order for a business to succeed. Recently JP Morgan Securities lowered their rating of Best Buy Co.
, Inc. from “overweight” to “underweight.” This relates back to unstable financial’s within the company. The fourth quarter of 2004 offered a raise in profit due to the sales of products that carry a smaller margin such as MP 3 players and laptop computers. With their gross profit margin shrinking, sales must be increased to make up for the lower profit margins. The increase in profit was not the only direct link to sales but also a tax settlement, which increased revenue. The $50 million tax settlement came from the dissolution of Best Buy’s Music land division.
Best Buy Co. , Inc. announced that their first quarter forecast would be disappointing and on April 1, 2005, they announced that they would not meet Wall Streets projections for 2005. The current financial struggle with the ratio of debt to assets has been worsened by the decreasing profit margins. Overall profits have to be looked at deep within the financial statement of any company, but the bottom line always remains the bottom line. Within Best Buy, we see that the company’s total liabilities are 60% of total assets.
Liabilities have increased from March 2003 at 177, 000 to February 2004 at 765, 000 (Quotes & Info- Best Buy Co Inc (BBY) ).
This puts their liabilities at a high risk for investors. Their top competitor, Circuit City, holds only 30% liabilities to assets. This creates a big challenge for Best Buy Co. , Inc. to overcome.
As the financial forecasts decline in profit and shares tend to drop, investors will look for new investments. Some believe that one of the major causes for reduced profits is that expansion and remodels that are currently underway. These remodels, which are designed to target specific consumer groups, are eating profit faster than it is being made. Several analysts believe that this expansion program is causing great risk for Best Buy Co. , Inc. Although the profits have declined cash flow is at steady hike.
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With only a small portion of cash flow being used for the expansion plan Best Buy Co. , Inc. has opted to take part in some what of a trend of purchasing back its own stock. Companies believe that this is the best way to rid them of the excess cash. Not only does it benefit the company, but it also gives high returns to its investors. The process reduces the number of outstanding shares and by doing so; it increases the prices per share.
Best Buy Co. , Inc has a current buyback program authorized to use 1. 5 billion for repurchasing its stock. Recently Best Buy Co. , Inc.
decided to phase out their mail-in rebate program. The phase out decision is a result of multiple consumer complaints nation wide. The mail-in rebate program was something that Best Buy Co. , Inc. had worked into its promotional flat form to compete with competitors.
Consumers are aggravated about paying higher prices in the stores and having to mail in receipts and proof of purchases in order to request the rebate. The waiting game then begins for several weeks until the rebate is received and at times, it can be hundreds of dollars. The phase out process will take place over approximately two years in order for the vendors to make necessary changes. Best Buy Co.
, Inc. is hoping to come up with a phase out plan that will not give competitors an upper hand. Best Buy’s marketing team is always focused on the consumer. One of the biggest challenges they deal with is the promotional platform. The strategy has always been one that concentrates on the consumers’ needs and wants, and as with most companies how to one up its competitor.
With mail-in rebates on its way out Best Buys has directed its promotional focus to the “Rewards Zone”, which is discussed later on. The consumer is the target of every single marketing concept that is thought up and used. Marketing sells the company and its products to the consumers. The key to Best Buy’s marketing strategy is that they market to everyone. It is not a store strictly for teenagers, or one strictly for adults; it welcomes all. However, one major age group is being overlooked-children.
Best Buy should include a section of their store dedicated to children’s electronics. This section would be selling the newest video games, mini televisions, child sized computers and radios. Like everything else in the Best Buy store, these devices and electronics would be out on display for the children and adults to look at; the only exception is that they would be placed at a child’s height for viewing. These days, it is not uncommon for elementary school children to have their own computers and cell phones.
Therefore, overlooking such a key demographic seems almost ridiculous. Best Buy could collaborate with local theme parks to be used a special promotional offers. For example, for every major purchase over two hundred dollars purchased from the children’s section, the customer would receive a free children’s ticket to an amusement park of their choice. This is a win-win situation for the theme park, Best Buy, and the consumer.
Children would not be going to theme parks alone; therefore, the theme park would still be gaining the admission of the adults taking the child, not to mention the food and souvenirs purchased. More products would be sold in Best Buy, and the customer would once again, feel like they are getting more for their money. This idea is just one way for Best Buy to be expanding their profit margin. Profit Margins have been the downfall in financial’s for Best Buy throughout the last quarter. The ideal products to sell are the ones that have a huge profit margin because that results in huge profits.
Recently the big sellers have been of those with a lower profit margin. Perhaps it is time that Best Buy creates a product line of its own. For instance, when you shop at places such as Radio Shack or even Target, you have the option of buying name brand products or store brand products. The main reason that profit margins are lower on specific products is because the manufactures have to have a specific margin to sell the product at. Then there could be a middle man like a OEM dealer who also has to mark up the product. By the time that the products gets to Best Buy there has already been two cuts into the original cost of the product which results in a lower profit margin for the retail price.
If Best Buy were to manufacture there own products then they would be eliminating the middle man or men in some instances and would be able to increase there profit margins and still sell the products at the industry average price. Nothing is worse than walking into a store, asking a sales associate a question, and getting a blank stare in return. Loyal customers are those that will give their business to a corporation like Best Buy in return for knowledgeable answers. Though Best Buy does have the Geek Squad to answer computer questions, there are hundreds of more electronics that are being sold.
One recommendation is for Best Buy to mandate a certain amount of learning hours a month. By having an employee be forced to learn about the latest technology with the electronics they are working with, Best Buy would gain a competitive advantage. In order to do this, we suggest that Best Buy offer eight hour seminars to keep staff members informed about the innovations. In exchange for the employee going to the seminar, they would be being paid for an eight-hour workday.
Customers would be guaranteed that their questions were going to be answered with honest answers. Although Best Buy would have to pay employees to take the day off and attend these seminars, we believe the long term benefits outweigh the short term loss. Customers who have received bad service tell everyone they know not to go to that certain store or location. Likewise, consumers who receive great service, tell everyone they know about that certain place or location.
Being able to assure customers that there would be no blank stares, just honest, up to date answers, Best Buy would surely increase their sale. Another recommendation for Best Buy deals with warranties. Most, if not all major electronics come with a certain warranty. However, as we all know, nothing is free in this world. We usually have to pay extra for them. Our recommendation for Best Buy is to include a free one-year warranty on all electronics.
Any extended warranty the customer would pay. Just having the peace of mind that should anything happen to the new electronic device in its first year Best Buy would provide required repairs at no charge. To be honest, most electronics never have any problems within the first year, thus, there would be no big loss on Best Buy’s part. However, by throwing in a free one year warranty, the consumer feels as though they are getting more for their money, and therefore, are willing to make more major purchases at Best Buy. Best Buy has come a long way from its humble beginnings in St. Paul, Minnesota.
Transitioning from The Sound of Music to Best Buy, the company has truly become a corporation with staying power. If Best Buy continues on its pathway, it is sure to become an even greater success. Their dedication to serving the community along with their devotion to technology is what keeps the company in business. Best Buy’s corporate vision involves four main items: having fun while being the best, learn from challenge and change, show respect humility and integrity, and unleashing the power of their people. The drive to have fun while being the best, encourages employees to help incorporate technology into the average person’s life in a way that brings about fun. Technology is not used for work alone.
It is also used for entertainment. Best Buy’s value of having fun not only applies to adults, but to children as well. Every year Best Buy donates over 1. 5% of their total gross income to schools across the nation in an effort to upgrade the technology in schools (Fact Sheet).
In spring of this year, Best Buy Co. , Inc gave over $3 million to over 1, 000 schools nation wide through its Teach program.
Teaching technology in the classroom with educational computer games emphasizes that learning is not purely scholastic; it can be fun too! Best Buy uses their vision to learn from challenge and change to better suit their customers. Best Buy’s greatest example is in the company history. Best Buy originally started as a store called The Sound of Music. The Sound of Music installed 8 tracks into car stereos.
As the technological market grew and changed, so did the business. The store began to sell video appliances and electronics. They literally changed everything, from what they sold, to what they were named. Expanding out of the Twin Cities and throughout North America and in Canada was the greatest change for Best Buy. They were no longer going to be seen as a “ma and pa” shop. Showing respect, humility and integrity is another key to Best Buy’s success.
The company is the number one retailer in consumer electronics, and they achieved and the number one position for a reason. Best Buy realized that with their massive growth they had to do business on a different scale, yet maintain the balance and quality of a store that consumers would still feel comfortable. Perhaps this is why Best Buy employees do not work off commission. They want to ensure the customer that they are getting the best deal on the best product in a pressure free environment. This very integrity has consumers coming back time and time again for their electrical and technological needs. Best Buy also has a program designed to reward their loyal customers.
The program is designed to give frequent shoppers points, for every purchase, and give them five dollars off for every purchase over $125. 00. In today’s economy, everyone is looking to save a penny and with Best Buy’s enticing rewards program, consumers are given just yet another reason to choose Best Buy over their competitors. Best Buy’s employees are also utilized in a way to display their talents in technology.
Their greatest success is that of the Geek Squad. The entire focus is to assist the average person with any computer crisis 24 hours a day through a support and repair hotline. However, the Geek Squad is not just a hotline. It in itself runs like a business. They are on-call at Best Buy store’s for walk-in help and they make personal trips to residences and businesses. They are most widely recognized by their clip on ties — truly carrying around the persona of a Geek.
But don’t be fooled by appearances, their knowledge on computers is in no ways lacking in abundance. With the passion for the latest and greatest technological knowledge, and the charisma and devotion towards the youth, Best Buy is sure to continue on the high road to success. Best Buy will be changing and advancing to accommodate the ever-changing field of technology. They are truly a testament to upholding and exceeding their vision statement of “meeting the customer at the intersection of technology and life” (FAQ).
Works Cited Best Buy TM “Fact Sheet Fourth Quarter- Fiscal 2005 (ended Feb 6, 2005) ” 6, 200) web Fact Sheet Q 4. pdf Best Buy TM “FAQ” 6 web Telegram “BEST BUY GEEKS TO RUN AMOK” 4/28/05 web (c) 2005 The Associated Press “Best Buy Expansion Plans Include China” 4/27/05 web story 117101956. html Yahoo Finance- “Quotes & Info- Best Buy Co Inc (BBY) ” web.
