Reinventing Best Buy Case Solution

1. What strategic challenges did Best Buy face in 2012? Why was the company struggling in facing these challenges?

In 2012 Best Buy was facing a multitude of problems. This is because prior to 2012, Best Buy’s strategy had been adding more and more brick-and-mortar stores. It had made several acquisitions before 2012 including an 88-outlet competitor in Canada. Best Buy continued to increase its retail presence through the recession. Furthermore, it had opened several stand-alone mobile phone outlets in a joint venture with a British retailer, Carphone Warehouse. As a result, it had increased overheads to a great extent. Meanwhile, in this period several online retailers had gained market including Amazon. Walmart was also a fierce competitor, offering products at a lower profit margin than Best Buy. Amazon had an advantage of tax exemptions due to which it could offer lower prices. Apart from that, Amazon also presented the customer with price comparisons which developed a customer mind-set that Best Buy did not offer the lowest prices.

As a result, Best Buy followed the strategy of cutting costs to remain competitive. This was not a strategically sound solution because, in 2012, Best Buy required more than just cost-cutting to remain competitive. The company had not worked on developing its online presence as Amazon had. Furthermore, the increased store presence had increased its overheads to a great extent. Lack of focus on customer satisfaction and a poor price perception developed by Amazon’s price check app had been deteriorating to Best Buy’s brand image. As a result, the company was facing several strategic challenges and a change in strategy pertaining to developments in online businesses and changes in customer shopping preferences was essential. 

2. What were the strengths and weaknesses of Best Buy identified by Joly? Do you agree with Joly's initial diagnosis?

Joly identified that Best Buy had several strengths including a significant market share in North America which was growing. It had a strong customer base which was included in its loyalty program. Furthermore, he stated that the service proposition to its customers was unique. He also assessed the problems which included a decline in market share due to a shift in the product mix. He stated that the company had failed to capture online sales and satisfy customers. It had a poor price perception and its error of continuing to open stores during the recession led to a loss of sales. 

Joly’s initial diagnosis was correct to a great extent. He did not perceive showrooming as a strength of the company initially. However, as time passed, he formulated strategies based on this strength to improve store sales. Furthermore, the assessment that the company had failed to capture online sales and had a poor price perception was also correct. Joly also identified that changes in product mix by including Marketplace, a platform for third-party sellers, had contributed to this decline and cannibalized sales. The company needed a turnaround because Joly identified that the markets were structurally sound, and Best Buy had to resolve its internal challenges to cope up with the changing markets including developing an effective online sales model and focusing on developing a product mix that optimized sales. The initial diagnosis shows that Joly was well aware of the challenges that Best Buy was facing. His Renew Blue strategy based on this diagnosis proved to be a success which reflects the accuracy of his initial assessment. 

3. In your opinion, with the objectives of the Renew Blue plan, is it possible to resolve the difficulties faced by Best Buy? What Renew Blue initiatives have made the difference?

The Renew Blue strategy included five points which targeted customer experience, employee development, vendor management, cost-cutting, and a recycling program. I believe that with these objectives it was not possible to resolve the difficulties faced by Best Buy. This is because the objectives just served as a generalized guideline to developing strategies. Without Joly’s leadership, persistence, and strategic outlook, it would not have been possible to resolve the challenges.