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Best Buy Co Inc Case Solution

Solution Id Length Case Author Case Publisher
2269 1379 Words (8 Pages) Frank T. Rothaermel, David R. King McGraw-Hill Education : MH0066
This solution includes: A Word File A Word File

BestBuy is currently facing cutthroat competition in the electronics market. Previously, it was concentrating on excellent customer service to attract more customers with its slogan being “Expert Services. Unbeatable Prices.” Now it was facing issues with striking a balance between differentiated customer services and competitive pricing, as giants like Amazon were entering the market, and targeting customers through e-commerce whereas BestBuy was predominantly a brick and mortar model. Corie Barry, the CEO was faced with this hard decision and she along with Hubert Joly, who is a previous CEO and sitting chairman, would need to combine their collective strategies for BestBuy’s success in the market. With the rise in competition and growing preference of online shopping, the situation can be seen to be worsening. Many brands have been forced into extinction, however, BestBuy is still above the water (Rothaermel & King, 2019).

Following questions are answered in this case study solution:

  1. Problem Description

  2. Problem Analysis

  3. Porter’s Five Forces

  4. Alternative Solutions

  5. Recommendation

Case Study Questions Answers

2. Problem Analysis

Although on the surface it seems that the company is facing intense competition, however, the problems are multifold. Some of these problems may include the following, along with various tools that can be used to identify and analyze these problems.


Possible Causes

Tools for analysis/ Frameworks or models

Artificial boost in sales; can give an inaccurate representation of the company’s health.

Other traditional retailers were struggling, hence BestBuy’s performance was considered better than the rest.

Competitors’ analysis can be done through SWOT analysis.

US-China trade tensions impacting BestBuy’s supply of consumer electronics

Too much focus on one product category with little to no product diversification

BCG Matrix can be used to evaluate the performance of different products in the market.

The business is dependent on five main suppliers for half of its inventory

BestBuy mainly concentrates on consumer electronics, limiting its suppliers to the big 5; Apple, Samsung, LG, Hewlett-Packard, and Sony

Porter’s five forces can be used to conduct an analysis on BestBuy and how its bargaining power is impacting supplier and consumer relationships.

Mode of shopping and retail is changing, consumers are moving away from brick and mortar structures to e-commerce.

Advancement in technology has made online shopping easier and approachable.

Strategic Group Analysis may be used to see how much money competitors are investing in paid media and search.

3. Porter’s Five Forces

In this section, the Porter’s five forces will be applied to BestBuy for a qualitative and quantitative analysis.

a. Threat of New Entrants

This is somewhat low for new companies, as it is increasingly difficult to penetrate the electronics market and to compete with the already existing giants such as Amazon and BestBuy. Hence, it is difficult for new players to enter the market. Here is a depiction of the sales of BestBuy, Apple, and Amazon, in the consumer electronics category and the changes from 2017 to 2018 (Statista, 2021).

b. Bargaining Power of Suppliers

BestBuy is currently dependent of five major suppliers namely; Apple, Samsung, LG, Hewlett-Packard, and Sony for more than half of its inventory, which means that gives a high bargaining power to suppliers. However, with increasing competition from Amazon, it has the option to go for private labels as well, which would reduce the power of these suppliers (Begley & McOuat, 2020).

c. Bargaining Power of Buyers

This is high for BestBuy as it mainly concentrates on consumer electronics. Consumers are highly sensitive to price changes and have low switching costs due to other options available in the market, especially with the emergence of Amazon. Hence, BestBuy needs to focus on its great customer service and incredible prices to pull consumers away from the competition (Cavallo, n.d.).

d. Threat of Competition

There is the increasing and cutthroat competition that BestBuy is facing, especially through Amazon. There is a price war between BestBuy and other competition, especially those who are selling through different retail channels such as e-commerce (Cavallo, n.d.).

e. Threat of Substitutes

There is not an imminent threat of substitutes when it comes to consumer electronics, however, there is definitely a marked threat of substitutes in selling channels such as those selling on online platforms versus those selling in-stores.

Will Best Buy’s Renew Blue efforts be enough as the consumer electronics market continues to evolve?

The Renew Blue strategy has a focus on value proposition, with the main focus on after-sales services along with competitive pricing. This effort may work to BestBuy’s advantage because now the competition will shift from pricing to customer services. This strategy also involves the alignment of key stakeholders; customers, suppliers, employees, supply chain partners, and investors. This alignment will allow BestBuy to achieve operational efficiency and cost-cutting for competitive pricing (Lee, 2004).

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