Strategic Case 2: Best Buy Co.

Abstract
Situated in Minnesota, Best buy Co is the world largest consumer electronics retailer with over 1400
stores that carry cellphone products, computers, televisions, appliances, cameras and much more. In
addition Best Buy also offers service contracts, extended warranty, and product repair. However due to
the advent of online stores and huge retailers that provide convenience, cheaper prices for the same
products and quick quality service; Best Buy Co.s Brick and Mortar business model is fast becoming
obsolete. In order to increase sales and avoid bankruptcy in the near future, it is in urgent need of
developing a detailed strategic plan through which it can resolve its recent issues and attain long term
loyalty from its market base (Consumers)

Sana Swaleh Khan , Ali Jafri, Adnan Qazi, Rameesha Jehangir, Haroon Ejaz
(Strategic Management)
 Best Buy Co.

Current mission statement

Our formula is simple: We are a growth company focused on better solving the unmet needs of our
customers and we rely on our employees to solve those puzzles. Thanks for Shopping

New Mission Statement

Our formula is simple: We are a growth company focused on better solving the unmet needs of the customers by
providing them the best possible deals in the market. We rely on our employees to solve those puzzles and serve
our customers with all their heart. Our sole concern is not only to satisfy the needs of the customers but also to
give our best to protect the environment and to keep it as healthy as it could get. Thanks for stopping.

Vision Statement

None

Proposed Vision Statement

To be the Top electronic consumer retailer in the World

To work Hard to provide top quality electronics to consumers all over the world

Best Buy Co. External Audit

Opportunities

1. Opportunity for mobile stand alone stores in the stand alone market , due to the increasing demand for
mobile phones and related gadgets. (During fiscal 2013, Best buy opened 105 U.S best buy mobile
stand-alone stores)
2. There is high customer interest in e-readers
3. The slowly improving housing market in some parts of the country can contribute to increase in revenue
generated by appliances sold by best buy.
4. There is an opportunity for Best buy to float its Best buy express concept in countries other than
Mexico , to increase profits/sales.
5. There is a viable opportunity for Best Buy to increase profits by expanding in Asia, as many other
retailers are also entering over seas markets (Asia)
6. Best buy as a Brick and mortar retailers can services such as in home installation as a way to
differentiate themselves from online merchants and Walmart.
7. It can focus on sustainability as a means of differentiating their business, as many of the products and
services are the same.
8. They can further expand their marketing of gift cards as similar to efforts of other retailers. (to increase
sales)
9. This represents an opportunity as in addition, after several years of a gift card full amount not being
used, companies are allowed to assume the cards unused credit as assets on their financial statements.
10. Radio shack is a huge competitor to Best Buy and its vague strategic plan can make it weaker therefore
it will readily agree to be acquired by Best Buy (In the future)
11. Online sales could reach 15% of total retail sales by 2015, but these numbers will still leave the majority
of retail sales to brick-and-mortar establishments.
12. There is an increasing tread of using social media as a tool by retail firms in order effectively market as
well as communicate with customers. Best buy is a proactive firm that in line with this overpowering
technological trend, and this could prove to be it edge against rival firms in the future.
13. Best Buy is betting on the increasing market for mobile phone in order to maintain its market share/ earn
high revenues in the future.(Forrester Research reports that there were 82 million smart phones in USA
in 2010 and it is expected to increase to 159 million by 2015)

Threats

1. Consumer electronics have been in a steady decline for each of the last 2 years, much of the
decline can be attributed to soft market for TVs and overall declining prices of TVs.
2. The entertainment segment continues to experience significant same-store declines as a result
primarily of the decline in the video gaming industry and decline in the sales of music and
movies because many more people are downloading music offline and watching movies
through outlets such as the Red Box ,Netflix, and Time Warner Cables movies on demand.
3. Some of Best Buys suppliers are also competitors (Such as Apple) which could potentially
crush Best buy if they desired.
4. Stores such as Walmart, the world largest retailer and Costco are expanding their selection of
electronics etc offering them at cheaper prices than available at traditional merchants such as
 Best Buy.
5. A sudden surge of online merchants creates a highly competitive and complicated market for
brick and mortar retailers such as Best Buy.
6. Office Depot generates close to 30 percent of its sales overseas, while Staples earns around 22
percent of sales, and amazon a 44 percent of 2012 sales (outside USA) respectively.
7. Radio Shack is a huge competitor to Best Buy with about 4475 stores in the USA , Mexico ,
Puerto Rico and the US Virgin Islands .
8. Walmart , a diversified competitor is able to withstand the economic downturn better than most
retailers (e.g Best Buy)
9. Amazons high revenue to employee ratio showcases how they are more successful in terms of
cost efficiencies, price and convenience.
10. Amazon experienced a 56 percent increase in electronic sales following an electronic
merchandise growth rate of 66 percent in 2010.
11. With Tax-free benefits still present for online sales coupled with convenience, lower prices and
more variety , online sales are increasing at a much faster rate than the traditional retail sales.
12. The mobile phone that Best Buy is largely betting on to generate revenues in the future is also
the device that allows customers to price shop competing firms for other products while
shopping in the Best Buy.
EFE

Key External Factors: Opportunities Weight Score Weighted

Score
1. Opportunity for mobile stand alone stores in the 0.06 4 0.24
stand alone market, due to the increasing demand
for mobile phones and related gadgets. (During
fiscal 2013, Best buy opened 105 U.S best buy
mobile stand-alone stores)
2. There is high customer interest in e-readers 0.02 4 0.08
3. The slowly improving housing market in some 0.02 3 0.06
parts of the country can contribute to increase in
revenue generated by appliances sold by best buy.
4. There is an opportunity for Best buy to float its 0.04 3 0.12
Best buy express concept in countries other
than Mexico , to increase profits/sales.
5. There is a viable opportunity for Best Buy to 0.07 4 0.28
increase profits by expanding in Asia, as many
other retailers are also entering over seas markets
(Asia)
0.02 3 0.06
6. Best Buy like other Brick and mortar
retailers can services such as in home
installation as a way to differentiate themselves
from online merchants and Walmart.
7. It can focus on sustainability as a means of 0.02 4 0.08
differentiating their business, as many of the
products and services are the same.
8. They can further expand their marketing of gift 0.02 3 0.06
cards as similar to efforts of other retailers. (to
increase sales)
9. This represents an opportunity as in addition, 0.03 3 0.09
after several years of a gift card full amount not
being used, companies are allowed to assume the
cards unused credit as assets on their financial
statements.
10. Radio shack is a huge competitor to Best Buy and 0.08 4 0.32
its vague strategic plan can make it weaker
therefore it will readily agree to be acquired by
 Best Buy (In the future)
11. Online sales could reach 15% of total retail sales 0.03 4 0.12
by 2015, but these numbers will still leave the
majority of retail sales to brick-and-mortar
establishments.

12. There is an increasing tread of using social media 0.02 4 0.08

as a tool by retail firms in order effectively
market as well as communicate with customers.
Best buy is a proactive firm that in line with this
overpowering technological trend, and this could
prove to be it edge against rival firms in the
future.

13. Best Buy is betting on the increasing market for 0.04 4 0.16
mobile phone in order to maintain its market
share/ earn high revenues in the future.(Forrester
Research reports that there were 82 million smart
phones in USA in 2010 and it is expected to
increase to 159 million by 2015
14. Schulze, age 71, offered about 10 Billion or 0.10 4 0.40
$25 per share to buy Best Buy and take the
company private
Threats
15. Consumer electronics have been in a steady 0.04 1 0.04
decline for each of the last 2 years, much of
the decline can be attributed to soft market
for TVs and overall declining prices of TVs.
16. The entertainment segment continues to 0.03 2 0.06
experience significant same-store declines as
a result primarily of the decline in the video
gaming industry and decline in the sales of
music and movies because many more people
are downloading music offline and watching
movies through outlets such as the Red
Box ,Netflix, and Time Warner Cables
movies on demand.
17. Some of Best Buys suppliers are also 0.04 2 0.08
competitors ( Such as Apple) which could
potentially crush Best buy if they desired.
18. Stores such as Walmart , the world largest 0.04 1 0.04
retailer and Costco are expanding their
selection of electronics etc offering them at
cheaper prices than available at traditional
merchants such as Best Buy.
19. A sudden surge of Online merchants create a 0.05 1 0.05
 highly competitive and complicated market
for stone and mortar buildings such as Best
Buy.
0.02 2 0.04
20. Office Depot generates close to 30 percent of
its sales overseas, while Staples earns around
22 percent of sales, and amazon a 44 percent
of 2012 sales (outside USA) respectively.
21. Radio Shack is a huge competitor to Best 0.05 2 0.10
Buy with about 4475 stores in the USA ,
Mexico , Puerto Rico and the US Virgin
Islands .
22. Walmart , a diversified competitor is able to 0.03 1 0.03
withstand the economic downturn better than
most retailers (e.g Best Buy)

23. With Tax-free benefits still present for online 0.06 2 0.12
sales coupled with convenience, lower prices
and more variety , online sales are increasing
at a much faster rate than the traditional retail
sales
24. Amazon experienced a 56 percent increase in 0.03 1 0.03
electronic sales following an electronic
merchandise growth rate of 66 percent in
2010.
25. The mobile phone that Best Buy is largely 0.04 2 0.08
betting on to generate revenues in the future
is also the device that allows customers to
price shop competing firms for other
products while shopping in the Best Buy.
Total Weighted Score 1 2.82
CPM
Best Buy Wal-Mart Amazon
Critical Success Weight Rating Score Rating Score Rating Score
Factors

Organizational 0.1 3 .3 3 .3 4 .4
Structure

Financial 0.15 2 .3 5 .75 4 .6

Position

Global 0.15 3 .45 5 .75 4 .6

Expansion

E-commerce 0.15 2 .3 3 .45 5 .75

Customer 0.15 4 .6 3 .45 4 .6
Service

Management 0.1 3 .3 4 .4 5 .5
Price 0.1 3 .3 5 .5 4 .4
Competitiveness

Product Quality 0.1 4 .4 3 .3 5 .5

TOTAL 2.95 3.9 4.35
SCORE

Best Buys Co. Internal Audit

Strengths
1. There were 1056 U.S Best Buy stores at fiscal year-end 2013 and 409 U.S Buy Mobile Stand Alone
stores.
2. Best Buy SBU teams are empowered to determine the most effective ways to market products and
services through Best Buys channels, retail stores/online and call centers.
3. Best Buy has a detailed code of ethics on its website , addressing the culture at Best Buy, outlining the
ethical behavior expected of all constituents of Best Buy and detailing how to report violations of ethical
behaviors.
4. Computing and mobile phones experienced a 6 percent increase in the same- store sales from fiscal
2011, primarily from tales and mobile phones.
5. Best Buys largest supplier is Apple followed by samsung , Hewlett-Packard , Sony and LG electronic
which together represent 45 percent of total merchandise purchased.
6. At fiscal year end 2013, Best Buy had 1503 domestic stores , up from 1447 the prior year - and had 2876
international stores , up from 2861 the prior year.
7. Without long-term contracts Best buy is more flexible regarding with suppliers to do business with.
8. Best Buy was recently named one of the greenest companies in the USA.
9. In 2006 Best Buys common stock closed at an all time high of $ 59.50
10. Best Buy continued international expansion in 2008/9 by opening stores in Puerto Rico , Mexico,
Shanghai, Turkey and United Kingdom.

Weaknesses
1. Sluggish growth of sales in the United Kingdom led to Best Buy closing 11 Best Buy Europe stores in
2011.
2. Dunn (Best Buy CEO 2012) behaved unethically and allegedly misused company funds in conjunction
with his inappropriate relationship with a female employee.
3. In August 2012, Hurbert Joly was hired as CEO but the stocks fell another 10 percent in response to the
announcement.
4. Best Buy does not have a written vision statement
5. Best Buy does not have a clear or detailed strategic plan. Without it, it might eventually have to
liquidate.
6. Customers often visit Best Buy or similar retail outlets to talk to experienced sales people and to view
the products before purchasing elsewhere.
7. For Best Buy, consumer electronic sales have been steadily declining for each of the last 2 years.
8. Best buy does not have long term contracts with suppliers, this can cause uncertainty/disturbance in the
supply of various electronic products which could result in less consumer satisfaction and low revenues.
9. In the fiscal 2013 there is a comparable store sales decline of 2.9 percent
10. Best Buys market capitalization is a fraction of both Walmart and Amazons.
IFE

Key Internal Factors Weight Rating Weighted

Score
Strengths
1. There were 1056 U.S Best Buy stores at fiscal year- 0.05 4 0.20
end 2013 and 409 U.S Buy Mobile Stand Alone stores.

2. Best Buy SBU teams are empowered to determine the 0.03 4 0.12
most effective ways to market products and services
through Best Buys channels, retail stores/online and call
centers
3. Best Buy has a detailed code of ethics on its website , 0.05 3 0.15
addressing the culture at Best Buy, outlining the ethical
behavior expected of all constituents of Best Buy and
detailing how to report violations of ethical behaviors.
4. Computing and mobile phones experienced a 6 percent 0.04 4 0.16
increase in the same- store sales from fiscal 2011,
primarily from tales and mobile phones.
5. Best Buys largest supplier is Apple followed by 0.05 4 0.20
samsung, Hewlett-Packard, Sony and LG electronic
which together represent 45 percent of total merchandise
purchased.
6. At fiscal year end 2013, Best Buy had 1503 domestic 0.07 4 0.28
stores, up from 1447 the prior year - and had 2876
international stores, up from 2861 the prior year.
7. Without long-term contracts Best buy is more flexible 0.02 3 0.06
regarding with suppliers to do business with.
8. Best Buy was recently named one of the greenest 0.06 4 0.24
companies in the USA
9. In 2006 Best Buys common stock closed at an all 0.04 4 0.16
time high of $ 59.50
10. Best Buy continued international expansion in 2008/9 0.06 3 0.24
by opening stores in Puerto Rico, Mexico, Shanghai,
Turkey and United Kingdom.
Weaknesses
11.Sluggish growth of sales in the United Kingdom led to 0.05 1 0.05
Best Buy closing 11 Best Buy Europe stores in 2011.
12. Dunn (Best Buy CEO 2012) behaved unethically and 0.06 1 0.06
allegedly misused company funds in conjunction with his
inappropriate relationship with a female employee.
13. In August 2012, Hurbert Joly was hired as CEO but 0.03 2 0.06
the stocks fell another 10 percent in response to the
announcement
14. Best Buy does not have a written vision statement 0.04 2 0.08
15. Best Buy does not have a clear or detailed strategic 0.12 1 0.12
plan. Without it, it might eventually have to liquidate.
16. Customers often visit Best Buy or similar retail 0.04 2 0.08
outlets to talk to experienced sales people and to view the
products before purchasing elsewhere.
17. For Best Buy, consumer electronic sales have been 0.06 1 0.06
steadily declining for each of the last 2 years.
18. Best buy does not have long-term contracts with 0.04 2 0.08
suppliers; this can cause uncertainty/disturbance in the
supply of various electronic products which could result
in less consumer satisfaction and low revenues.

19. In the fiscal 2013 there is a comparable store sales 0.05 2 0.10
decline of 2.9 percent

20. Best Buys market capitalization is a fraction of both 0.04 1 0.04

Walmart and Amazons.

Total Weighted Score 1 2.54

Financial Ratio Analysis

Dominos Pizza 2013 2012
1) Current ratio 1.11 1.16
2) Quick ratio 0.51 0.52
3) Debt and total assets 0.13 0.17
ratio
 4) Debt to Equity ratio 0.61 0.64
5) Long term Debt to 0.31 0.45
equity ratio
6) Inventory Turnover 6.86 (Times) 8.85 (Times)
7) Fixed Asset turnover 5.38 (Times) 6.14 (Times)
8) Total Asset turnover 2.69 (Times) 3.17 (Times)
9) Gross Profit Margin 23.62% 24.83%
10) Net Profit Margin - 0.98% -2.43%

Best Buy Co. Net Worth Analysis

Input Data: Best Buy Walmart Amazon
Revenue 45.1 B 455.7 B 51.4 B
Market Capitalization 9.29 B 244.7 B 97.08
Revenue/Employees 273 (000) 207 (000) 914 (000)
Net Income (441 m) 16,080 560 m
EPS ratio - 1.31 4.64 1.21
Number of Employees 165 000 2.2 m 56 200
EPS x Net Income - 577.71 m 74.61 B 677.6 m
Company Worth Analysis:

Net Income (x) (*5) -2.205 B 80.4 B 2.8 B

SWOT Analysis

Strengths Opportunities
1. (S4, O5) Incorporation with geek squad for technical support. Rising demand and market gap
for technical expertise.
a. So, Best Buy can use the aid from geek squad in the technical support to fill out the gap
of technical expertise in the market.
2. (S5, O2) Highly focused on giving customer services, relationship building. Best Buy
introduced its Best Buy Express concept in Mexico.
a. It can cash on its good relationships with the customers and try introducing different
new things which could help in earning more revenue.
 3. (S5, O1) Highly focused on giving customer services, relationship building. Best Buy Europe
opened 122 new stores in fiscal 2013.
a. Giving its reputation in having good customer relationships, there is a definite chance of
earning profits from these opening of new stores.

Strengths Threats
1. (S1, T1) Highly recognized brand and is named one of the greenest companies in USA. Rising
popularity of competitors like Amazon, eBay, Wal-Mart.
a. Best buy needs to cash on its contribution to the environment and try to get a
competitive edge in this department.
2. (S2, T3) Diversity in products .Its domestic segment break down SBUS into six different
revenue categories like consumer electronics, computing and mobile phones, entertainment,
appliances, services. There is a decline in sales in video gaming industry and decline in sales of
music and movies because many more people are downloading music offline and watching
movies through outlets such as Red Box, Netflix and Time Warner. Sales decline of 2.9 percent.
a. So Best buy break down its SBU into different separate categories so it can shift its
focus from music and video game category to other categories as the entertainment
industry is declining is sales.
3. (S8, T2) Amazon and Best buy are the most proactive companies when using and implementing
social media into their business operations. Indirect competitors in form of e-commerce, m
commerce.
a. It can utilize social media to stay ahead of its competitors.

Weaknesses Opportunities
1. (W1, O1) Financial constraints. Best Buy Europe opened 122 new stores in fiscal 2013 while
closing 126 other stores.
a. So, Best buy has been active in dealing with the financial constraints and trying to open
new opportunities through opening more stores to get more revenues. However, it just
needs to be careful to close stores and make changes at such a huge level.
2. (W8, O14) Many customers are unaware of the fact that Best Buys traditional stores offer
mobile devices. Forest research reports there were 82 million smart phones in USA in 2010 and
this number is expected to increase to 159 million by 2015.
a. So, there is a huge market available for smart phones and people are unaware of Best
buy stores selling it. All it need is advertising and marketing through different channels
to make its customers aware of it and get a good chunk of the customers for the smart
phones.
3. (W4,O3) Best buy faces stagnation in sales. Margin of product innovation in developing
countries.
a. So, there is a definite demand of innovation in the products in the developing countries
and Buy back can lash onto this opportunity and provide more innovative products and
hence could get a lot more revenues.
Weaknesses Threats:
1. (W4, T3) There is stagnation in the sales of Best buy. There is a decline in sales in video
gaming industry and decline in sales of music and movies because many more people are
downloading music offline and watching movies through outlets such as Red Box, Netflix and
Time Warner. Sales decline of 2.9 percent.
a. The Best buy must shift its focus from entertainment category to electronics and mobile
phone category to have more sales and earn more revenues.
2. (W6,T1) There is no stable management in Best buy. Rising popularity of competitors like
Amazon, eBay, Wal-Mart.
a. The instability in management in Best buy has provided room for its competitors to do
well. It should focus on getting its management right and bring in more efficient staff
and set a proper and clear hierarchy to get competitive again.
3. (W7,T6) Best Buy Company doesnt have written vision statement. Further online threat for
best buy is the increased use of smart phones for price checking.
a. There is no clear vision statement for Best buy due to which they dont virtually have
something unique to its competitors. It does not provide products at cheap costs nor does
it have any other competitive edge to its competitions which makes it difficult to survive
in the market. It needs to have a clear vision and devise its strategies accordingly.

SPACE Matrix: Best Buy Co.

SPACE MATRIX Best Buy Co
Competitive Position
Best Buy is the worlds largest consumer electronics retailer with 1400 stores -2

Geek Squad 24/7 support for any customer with a technological issue -2

Best Buy holds short term contract with rival Apple and has little power over them -6

Gift cards promote loyalty with balances mostly exceeding the amount on the card -2

Financial Position
The current ratio of Best Buy is 1.16 in 2012 as it dropped to 1.11 in 2013 +2

Best Buy EPS ratio is -1.31 which is very low compared to its competitors Wal-Mart and Amazon +1

Best Buys domestic revenues declined by 11.44% from 2012 to 2013. $37.6-$33.3 billion +1
 Debt to equity ratio increased from 2012 to 2013 with values of 0.52 to 0.62 respectively +2

Stability Position
A lot of technological changes with e-commerce and ease of order online and fast delivery -2

Wal-Mart and Costco offers low prices for all of their electronic products -4

A lot of competitive pressure from Amazon and Wal-Mart reducing growth for Best Buy -5

Best Buy used as information agent as purchases are made elsewhere such as Amazon -4

Industry Position
Wal-Mart has miniscule potential to grow as its store sales declined by 1.2% from 12 to 13 +1

Current long term debt increased 11.7 times from 43 to 547 in 2012 to 2013 respectively +1

Very difficult to enter into the market with declining TV, Console, and Movie sales +2

Proposed taxes on online sales could provide some relief for Best Buy +4

CP Average: ((-2)+(-2)+(-6)+(-2)) / (4) = -3 IP Average: (1+1+2+4) / (4) = 2 X axis -3+2 = -1

SP Average: ((-2)+(-4)+(-5)+(-4)) / (4) = -3.75 FP Average: (2+1+1+2) / (4) = 1.5 Y axis -3.75+1.5=
-2.25 F Best Buy displays
They will end up
filing for characteristics of a financially
bankruptcy if it troubled firm in an unstable
continues or they industry. Best Buy should
should take up an C IP divest its Entertainment
offer of the division with CDs, DVD, and
company being promote more of appliances
sold off for a within the company with
considerable installation as they have the
amount such as (-1,- technological expertise. The
Schulze but a S Geek squad can be further
 Grand Strategy: Best Buy Co.
Grand Strategy Matrix Best Buy Co.
It is clear from the case study that Best Buy Co is seeing slow market growth with an emphasis on
decline in many different aspects. They have over expanded in their opening stores between the first
two years in 2011 and 2012. They have a weak competitive position in the market as they stand no
chance as the fierce competition of Wal-Mart and Amazon.

Rapid Market
Growth

Quadrant III

Retrenchment

Related
Diversification

Unrelated
Diversification

Divestiture
Weak Competitive Slow Market Strong Competitive
 IE Matrix
Backward, forward or horizontal integration, Market Penetration, Market development, Product
Development, Grow and build

The IFE total weighted score

The EFE
total II
I
weighted III
score
Ii
 v V: Best
Buy VI
IV 2.54,

VII VII IX
I

Harvest or divest

Hold and maintain retrenchment

Market penetration divestiture

Product development

Company Segments Revenues (2013) EFE IFE

1 Whole $ 45085 (millions) 2.82 2.54

According to the IE matrix, Best Buy needs to Hold and Maintain (Between 4 th and 5th
Quadrant)

QSPM Matrix
Strategy 1: Acquire RadioShack
Strategy 2: Hold and Maintain the Current Best Buy stores (Focus on Product development or
supply chain management - suppliers) selling electronics apart from cellphones

Key Internal Factors Weight AS (1) TAS (1) AS(2) TAS

(2)
Opportunities
1. Opportunity for mobile stand alone 0.06 1 0.06 4 0.24
stores in the stand alone market, due
to the increasing demand for mobile
phones and related gadgets. (During
fiscal 2013, Best buy opened 105 U.S
best buy mobile stand-alone stores)
2. There is high customer interest in e- 0.02 1 0.02 4 0.08
readers
3. The slowly improving housing 0.02 - 0 - 0
market in some parts of the country
can contribute to increase in revenue
generated by appliances sold by best
buy.
4. There is an opportunity for Best buy 0.04 - 0 - 0
to float its Best buy express
concept in countries other than
Mexico , to increase profits/sales.
5. There is a viable opportunity for 0.07 - 0 - 0
Best Buy to increase profits by
expanding in Asia, as many other
retailers are also entering over seas
markets (Asia)
0.02 1 0.02 4 0.08
6. Best Buy like other Brick and
mortar retailers can services such as
in home installation as a way to
differentiate themselves from online
merchants and Walmart.

7. It can focus on sustainability as a 0.02 - 0 - 0

means of differentiating their
business, as many of the products and
services are the same.
8. They can further expand their 0.02 1 0.02 4 0.08
marketing of gift cards as similar to
 efforts of other retailers. (to increase
sales)
9. This represents an opportunity as in 0.03 1 0.03 4 0.12
addition, after several years of a gift
card full amount not being used,
companies are allowed to assume the
cards unused credit as assets on their
financial statements.
10. Radio shack is a huge competitor to 0.08 4 0.32 1 0.08
Best Buy and its vague strategic plan
can make it weaker therefore it will
readily agree to be acquired by
Best Buy (In the future)
11. Online sales could reach 15% of total 0.03 4 0.12 3 0.09
retail sales by 2015, but these
numbers will still leave the majority
of retail sales to brick-and-mortar
establishments.

12. There is an increasing tread of using 0.02 1 0.02 4 0.08

social media as a tool by retail firms
in order effectively market as well as
communicate with customers. Best
buy is a proactive firm that in line
with this overpowering technological
trend, and this could prove to be it
edge against rival firms in the future.

13. Best Buy is betting on the increasing 0.04 1 0.04 4 0.16

market for mobile phone in order to
maintain its market share/ earn high
revenues in the future.(Forrester
Research reports that there were 82
million smart phones in USA in 2010
and it is expected to increase to 159
million by 2015
14. Schulze, age 71, offered about 10 0.10 - 0 - 0
Billion or $25 per share to buy
Best Buy and take the company
private
Threats
1. Consumer electronics have been 0.04 1 0.04 1 0.04
in a steady decline for each of the
last 2 years, much of the decline
can be attributed to soft market for
 TVs and overall declining prices
of TVs.
2. The entertainment segment 0.03 - 0 - 0
continues to experience significant
same-store declines as a result
primarily of the decline in the
video gaming industry and decline
in the sales of music and movies
because many more people are
downloading music offline and
watching movies through outlets
such as the Red Box ,Netflix, and
Time Warner Cables movies on
demand.
3. Some of Best Buys suppliers are 0.04 1 0.04 4 0.16
also competitors ( Such as Apple)
which could potentially crush Best
buy if they desired.
4. Stores such as Walmart , the world 0.04 - 0 - 0
largest retailer and Costco are
expanding their selection of
electronics etc offering them at
cheaper prices than available at
traditional merchants such as Best
Buy.
5. A sudden surge of Online 0.05 1 0.05 1 0.05
merchants create a highly
competitive and complicated
market for stone and mortar
buildings such as Best Buy.
0.02 - 0 - 0
6. Office Depot generates close to 30
percent of its sales overseas, while
Staples earns around 22 percent of
sales, and amazon a 44 percent of
2012 sales (outside USA)
respectively.
7. Radio Shack is a huge competitor 0.05 4 0.20 1 0.05
to Best Buy with about 4475
stores in the USA , Mexico ,
Puerto Rico and the US Virgin
Islands .
8. Walmart , a diversified competitor 0.03 - 0 - 0
is able to withstand the economic
 downturn better than most
retailers (e.g Best Buy)

9. With Tax-free benefits still present 0.06 1 0.06 1 0.06

for online sales coupled with
convenience, lower prices and
more variety , online sales are
increasing at a much faster rate
than the traditional retail sales
10. Amazon experienced a 56 percent 0.03 - 0 - 0
increase in electronic sales
following an electronic
merchandise growth rate of 66
percent in 2010.
11. The mobile phone that Best Buy is 0.04 1 0.04 4 0.16
largely betting on to generate
revenues in the future is also the
device that allows customers to
price shop competing firms for
other products while shopping in
the Best Buy.

Strengths
1. There were 1056 U.S Best Buy 0.05 1 0.05 4 0.20
stores at fiscal year-end 2013 and
409 U.S Buy Mobile Stand Alone
stores.

1. Best Buy SBU teams are 0.03 1 0.03 4 0.12

empowered to determine the most
effective ways to market products
and services through Best Buys
channels, retail stores/online and
call centers
2. 3. Best Buy has a detailed code of 0.05 - 0 - 0
ethics on its website , addressing
the culture at Best Buy, outlining
the ethical behavior expected of
all constituents of Best Buy and
detailing how to report violations
of ethical behaviors.
3. Computing and mobile phones 0.04 3 0.12 4 0.16
experienced a 6 percent increase
in the same- store sales from fiscal
2011, primarily from tales and
mobile phones.
 4. Best Buys largest supplier is 0.05 - 0 - 0
Apple followed by samsung,
Hewlett-Packard, Sony and LG
electronic which together
represent 45 percent of total
merchandise purchased.
5. At fiscal year end 2013, Best Buy 0.07 1 0.07 4 0.28
had 1503 domestic stores, up from
1447 the prior year - and had 2876
international stores, up from 2861
the prior year.
6. Without long-term contracts Best 0.02 1 0.02 4 0.08
buy is more flexible regarding
with suppliers to do business with.
7. Best Buy was recently named one 0.06 1 0.06 4 0.24
of the greenest companies in the
USA
8. In 2006 Best Buys common stock 0.04 1 0.04 4 0.16
closed at an all time high of $
59.50
9. Best Buy continued international 0.06 - 0 - 0
expansion in 2008/9 by opening
stores in Puerto Rico, Mexico,
Shanghai, Turkey and United
Kingdom.
Weaknesses
1. Sluggish growth of sales in the 0.05 2 0.10 1 0.05
United Kingdom led to Best Buy
closing 11 Best Buy Europe stores
in 2011.
2. Dunn (Best Buy CEO 2012) 0.06 - 0 - 0
behaved unethically and allegedly
misused company funds in
conjunction with his inappropriate
relationship with a female
employee.
3. In August 2012, Hurbert Joly was 0.03 - 0 - 0
hired as CEO but the stocks fell
another 10 percent in response to
the announcement
4. Best Buy does not have a written 0.04 1 0.04 4 0.16
vision statement
5. Best Buy does not have a clear or 0.12 - -
detailed strategic plan. Without it,
it might eventually have to
 liquidate.
6. Customers often visit Best Buy 0.04 1 0.04 1 0.04
or similar retail outlets to talk to
experienced sales people and to
view the products before
purchasing elsewhere.
7. For Best Buy, consumer electronic 0.06 - 0 - 0
sales have been steadily declining
for each of the last 2 years.
8. Best buy does not have long-term 0.04 - 0 - 0
contracts with suppliers; this can
cause uncertainty/disturbance in
the supply of various electronic
products which could result in less
consumer satisfaction and low
revenues.

9. In the fiscal 2013 there is a 0.05 - 0 - 0

comparable store sales decline of
2.9 percent

10. Best Buys market capitalization 0.04 4 0.16 1 0.04

is a fraction of both Walmart and
Amazons.

Total Weighted Score 1.81 2.98

According to the QSPM matrix, Strategy 2 Hold/Maintain Best Buy Co through product
modifications and increasing efficiency is more appropriate at this point in time

EPS/EBIT Analysis for Best Buy Co.

EPS/EBIT Analysis Best Buy Co.
Input Data Number

$Amount of Capital Needed 1,237,000,000

EBIT Range -125,000,000 to 125,000,000

Interest Rate 5%

Tax Rate 0%

Stock Price $13.66

#Shares Outstanding 679676000

100% Debt 100% Stock 50/50 Debt/Stock Combo

$EBIT (125,000,000) 125,000,000 (125,000,000) 125,000,000 (125,000,000) 125,000,000

$Interest 61,850,000 61,850,000 0 0 30,925,000 30,925,000

$EBT (131,185,000) 63,150,000 (125,000,000) 125,000,000 (155,925,000) 94,075,000

$Taxes 0 0 0 0 0 0

$EAT (131,185,000) 63,150,000 (125,000,000) 125,000,000 (155,925,000) 94,075,000

#Shares 679,676,000 679,676,000 770,232,369 770,232,369 724,954,184.5 724,954,184.5

$EPS (0.193) 0.093 (0.162) 0.162 (0.215) 0.13

 0.
100% Stock 0.162. Best Option

0.1
50/50 Debt/Stock Combo 0.13. Worst
5
Option now second best option after

0.1 100% Debt 0.093. Second best option

now but worst option after EBIT
increases
0.0

-
(0.16

-0.15

(0.21
-
X axis =
(0.19
EBIT
- 3)

- 0 125,000,0
Recommendations: Best Buy Co.

1. It should reduce its costs by closing all the stores, which are underperforming. Bringing more
efficiency into the supply chain could also do it.
2. Best buy has unstable management. It should replace its inefficient staff with a more efficient
one and it should conduct training for its existing management team to be more competitive in
the market.
3. It should look for vertical growth through backward integration. It might increase existing
profit margins. Also it has the infrastructure and human resources to do the backward
integration.
4. It should focus more on the online selling of the products just lie Amazon. The increasing trend
of e-commerce and m-commerce is the reason they should look to take this step.
5. It should manage its inventory more effectively to cut down costs.
6. It should stop expanding its business any further and should focus more on the existing stores
and try to win back the confidence of the customers by providing best quality products at a
cheaper rate.
7. It should focus on having good relationships with the suppliers to have supply chain efficiency
and have a competitive edge over its competitors.
8. It should spend more on advertising and marketing to promote about its social image to the
customers as it is one of the greenest companies in USA.
9. It could also look for retrenchment to cut down its costs.
10. It should invest more in bringing the latest technology in order to be one step ahead of its
competitors.