Introduction
Best Buy is one of the largest electronics retailers in the US and Canadian markets. While the technological segment is developing and becoming more prominent every year, multiple retailers with a similar strategy to Best Buy have failed to remain competitive. Furthermore, the existing competitors, such as Amazon and Target, have certain advantages that Best Buy cannot replicate. The changes in leadership have also not facilitated stability. The current external and internal analysis will determine the steps that can generate corporate success in reaching higher competitiveness. Namely, the argument for a more prominent online presence, a more aggressive location management strategy, as well as maximization of staff competencies will be emphasized.
External Analysis
Best Buy’s external environment is extensive, yet as a retailer that operates in two countries, the company avoids a variety of threats and opportunities. For example, the researchers highlight that technological retailers benefit from having a global presence (Choo et al., 2021). However, the said strategy was not successful for Best Buy in the past (Rothaermel et al., 2017).
Nonetheless, the current trends for globalization imply that the external environment facilitates circumstances that are rather negative for the corporation. Furthermore, it is essential to examine the competitors since competition is one of the driving factors concerning Best Buy’s strategy in regard to its external environment. In order for the said concept to be assessed, PESTEL and Porter’s Five Forces will be applied. These frameworks will assist in determining potential threats and opportunities that can be strategically integrated into the business plan.
PESTEL
The PESTEL Analysis facilitates the assessment of external factors, including political, economic, social, technological, environmental, and legal ones. From a political standpoint, Best Buy only operates in stable, democratic countries (USA and Canada), which is a favorable factor. The economic segment is similarly relatively stable, yet crises can occur, as experienced during the recession or the COVID-19 pandemic. Socially, Best Buy invests in programs aimed at providing youth with tech education (Best Buy, 2022).
Thus, the corporation is involved in community work by giving young people opportunities to acquire knowledge that will be monetized on the job market. The technological segment is similarly powerful as the tech retailer operates in a constantly expanding market through new products and services. Environmentally, Best Buy has several programs aimed at recycling and disposing of electronics (Wang et al., 2020). Additionally, the legal environment is stable due to the democracy in the countries in which Best Buy operates.
Porter’s Five Forces
Porter’s Five Forces is an assessment of the external environment by examining rivalry, suppliers, buyers, new entrants, and substitutes. As a tech retailer, Best Buy experiences major competition, especially with brands such as Amazon, a company highly focused on selling and designing technological innovations such as Alexa (Farah & Ramadan, 2020). The bargaining power of suppliers, on the other hand, is moderate.
On the one hand, brands may sell their products to Best Buy for higher prices, but this would imply a less attractive price for consumers, which is not the goal of the suppliers. The threat of substitutes is high as the products that Best Buy sells, except the exclusive ones, can be found from suppliers on online platforms such as Amazon. The bargaining power of buyers is moderate as the tech market is relatively stable. Last but not least, entering the market requires extensive resources, which is why the threat is moderate.
Internal Analysis
Needless to say, an internal environment analysis is another step towards determining the most efficient strategy the CEO, Corie Barry, can employ to reach high competitiveness. Best Buy’s internal environment generates both strengths and weaknesses, which can be maximized or minimized. For example, researchers highlight the importance of intellectual capital within the corporation (Huang & Huang, 2020).
Best Buy does, indeed, have a well-trained staff that highly impacts consumer experience with the brand. By focusing on such strengths and maximizing them, Best Buy can maintain its position on the competitive hierarchy or improve it by diminishing its internal weaknesses, such as a lack of an online presence. Competencies, resources, and capabilities will be determined, and the VRIO and the value chain framework will be applied to examine the said environment.
Competencies, Resources, and Capabilities
Best Buy is an organization with an extensive experience in the retail business. Its main competencies consist of having a learning culture as well as a customer-centricity. The case study highlights that staff members are highly trained and resilient in a variety of circumstances. Similarly, employees are helpful to consumers by providing them with maintenance and installation services (Sheth et al., 2020).
Concerning resources, both intangible resources, such as employees and intellectual property, and tangible ones, such as stores, finances, and products, are the strengths of the corporation. Furthermore, Best Buy has proven to have the capability to manage potential risks and threats as it has survived market changes, unlike its competitors. Additionally, the company has efficient pricing techniques to attract new consumers and retain existing ones. Last but not least, Best Buy successfully manages staff members, promotes them, and trains them accordingly.
VRIO and Value Chain
The VRIO framework highlights the value, rarity, imitability, and organization itself. Best Buy offers accessible prices and showcases a variety of brands, which is its value. Furthermore, the rarity aspect is emphasized by the fact that Best Buy manufactures affordable electronics through the brand Dynex (Dynex, 2023). Nonetheless, its imitability is relatively high, with brands such as Amazon selling similar products online and companies such as Target offering a wider variety besides electronics.
The internal management, however, is stable and effective. The value chain framework highlights a positive internal environment as the logistics and operations are well-organized, sales remain stable, the service is high quality, and tech development and HR management remain effective. Thus, based on the analysis, the strengths consist of effective internal management, while weaknesses remain the lack of an extensive online presence and originality.
Positive/Negative Competitive Aspects
The elements that are most supportive of the pursuit of sustainable competitiveness include affordable prices, internal management, and staff. The prices attract consumers, giving Best Buy a competitive advantage. Similarly, internal management, such as the distribution is tasks and objectives among different departments, ensures a smooth work process. It is also critical to highlight that well-trained employees and a consumer-centered approach generate customer loyalty and satisfaction (Sheth et al., 2020).
On the other hand, Best Buy’s sales are mostly from in-store transactions, which implies that the online presence is relatively small. This is a major weakness as the main competitor, Amazon, is an online retailer. Furthermore, compared to Amazon, Best Buy does not effectively advertise its own products. Amazon has been successful in releasing Alexa. Best Buy, on the other hand, fails to develop or market its products to reach the same market coverage as its competitor.
Recommendations
Several recommendations can be provided to Corie Barry to maintain the balance between affordable processes, product differentiation, and trained staff. First and foremost, Best Buy would benefit from having a more prominent online platform. This is essential for maintaining competitiveness against major online retailers such as Amazon. Furthermore, investing in marketing, especially when it comes to Best Buy’s exclusive products, would generate further consumer interest.
Last but not least, Best Buy is to invest in tech development and improve its house brand from the perspective of a manufacturer rather than solely a supplier. This would similarly help achieve the success of Amazon’s Alexa. As a result, the CEO will maintain the success achieved by the previous Chief Executive Officer while aiming for new goals that align with current market trends.
Conclusion
Best Buy can maintain a competitive advantage despite the market transition and the high competition. A positive external environment partially facilitates success through a stable political, economic, and legal setting. However, the Brand’s opportunities to have a more extensive online presence and generate more profit through exclusive products are missed.
Best Buy can further improve its competitive advantage by becoming more active online, marketing products of the company’s own brands, and developing innovative goods. Moreover, improving online sales is a long-term solution to market trends and dynamics. Since Amazon is the biggest competitor in electronic retail, investing in competitiveness in areas where the corporation lacks experience and resources would generate the most efficient results.
References
Best Buy. (2022). Social impact. Best Buy Corporate News and Information. Web.
Choo, E. Y., Choo, E. Z., & Ping, N. T. S. (2021). A critical analysis of internal and external environment: Case study of Apple Inc. Journal of International Business and Management, 4(10). Web.
Dynex. (2023). About Dynex. Dynex. Web.
Farah, M. F., & Ramadan, Z. B. (2020). Viability of Amazon’s Driven Innovations Targeting Shoppers’ impulsiveness. Journal of Retailing and Consumer Services, 53. Web.
Huang, C.-C., & Huang, S.-M. (2020). External and internal capabilities and organizational performance: Does intellectual capital matter? Asia Pacific Management Review, 25(2), 111–120. Web.
Rothaermel, F. T., King, R. D., & Arthaud-Day, M. L. (2017) Best Buy Co., Inc. Harvard Business Review.
Sheth, J., Jain, V., & Ambika, A. (2020). Repositioning the customer support services: The Next Frontier of competitive advantage. European Journal of Marketing, 54(7), 1787–1804. Web.
Wang, J., Zhang, T., & Fan, X. (2020). Reverse Channel Design with a dominant retailer and upstream competition in emerging markets: Retailer- or manufacturer- collection? Transportation Research Part E: Logistics and Transportation Review, 137. Web.