Best Buy Co Inc Case Solution

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.

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).