Renew Blue: Best Buy's Winning Strategy
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Case Code: BSTR444 Case Length: 14 Pages Period: - Pub Date: 2013 Teaching Note: Available |
Price: Rs.400 Organization: Best Buy Co., Inc Industry: Electronic Retail Countries: USA Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Best Buy Fails to Remain Connected
Dunn came up with a strategy called 'Connected World'. He said, "We believe that the promise of technology has never been greater to help people realize their dreams. This thing we call 'technology' is really a constant backdrop in people's lives, at home, at work, on the road, and literally in the palms of their hands. We call it the 'connected world' and as exciting as it is, it's also increasingly complex, and difficult to keep pace with."
In line with the 'Connected Stores' concept, Store layouts were remodeled. Special hubs of Smartphone applications; 4G personal Wi-Fi; Google TV and Android technology were arranged at store’s central walkways. Knowledgeable staff assisted helped customers understand the product features. As a part of this strategy, services like the Internet service and cable subscriptions were sold with computers and televisions respectively. And Dunn's strategy appeared to pay off. Best Buy recorded a 37% jump in the fourth quarter profit for 2009-10. The increase was attributed to the growing demand for flat panel televisions, computers, and mobile phones. Dunn said that though the prices of these gadgets had fallen, their unit sales had increased considerably, resulting in comparable sales gains. Online sales also increased by 20% to US$ 2 billion...
New Leader's Challenges
In August 2012, Joly was appointed as the CEO. He was chosen for his expertise in turning around several companies in different sectors like media, technology, and services. Hatim Tyabji (Tyabji) Chairman, Best Buy, said "Hubert's (Joly) range and depth of experience in transforming companies is exactly what the company needs at the moment, as is his energetic, imaginative, and experienced leadership in executing strategies." Some of the Analysts were, however, not impressed with the new CEO and were skeptical about his ability to turn Best Buy around. Michael Pachter (Pachter), analyst Wedbush Securities, opined “We find Mr. Joly's résumé unimpressive, and believe he lacks sufficient experience to engineer a turnaround at Best Buy. Mr. Joly’s experience in U.S. retail is virtually nonexistent, with all of his experience in the media, technology, and hospitality sectors."...
Renew Blue
Renew Blue, a five-pronged strategy concentrated on ways to enhance the customer’s experience; regain the employees' support for improving sales; improving vendor relationships; exploring the possibilities for raising returns on invested capital; and ultimately maintaining Best Buy’s leadership role.
In order to reinvigorate the customer experience, Joly planned to improve the online shopping facilities of Best Buy. Its e-commerce arm bestbuy.com was revamped. Search engine optimization was done to improve the website’s visibility during search and improve its ranking in the top organic searches. Special options like product navigation, recommendations, details, and also unique content like product ratings and customer's comments were included. Efforts were made to improve the website’s credibility to make it one of the best online retailers. The improved site was synchronized with various sources like tablets and mobiles. Emphasis was put on marketing bestbuy.com and online customers were provided with special sale offers...
Road Ahead
Joly won the trust of Best Buy's investors with 'Renew Blue'. hoped the initiative would help the struggling retailer regain its previous glory and reputation of being the ultimate destination for electronic purchases. Joly's plan came in for appreciation from analysts. Joe Feldman, analyst, Telsey Advisory Group, said, "If they can execute on some of the [initiatives], there's upside. Joly has clearly demonstrated his knowledge and his intellect. He’s gained confidence of a lot of investors."
But analysts were skeptical about Best Buy's resurgence. According to them, the practices implemented at Best Buy were easy to replicate and would neither create a competitive-edge, nor differentiate it. R.J. Hottovy, analyst, Morningstar, said Best Buy’s competitors had "competitive countermeasures at their disposal, like their own loyalty programs, digital content libraries, and competitive prices." Apart from restructuring plans, a few analysts were not sure how the 'matching online prices' initiative would work and were of the view that it would actually shrink the company’s profit margins. Brian Yarbrough, an analyst with Edward Jones, said, "Nothing they said tells me what's going to stem the current negative sales and how they're going to stem the losses to Amazon and other Internet retailers."...
Exhibits
Exhibit I: Quarterly Financial Summary of Best Buy
Exhibit II: Comps and Revenues of Best Buy
Exhibit III: 5 Year Financial Summary of Best Buy
Exhibit IV: Stock Price Chart of Best Buy 2009-2012
Exhibit V: Renew Blue for Best Buy's Revival
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