BestBuy case study

In pursuit of the new model, the company was making efforts but struggling to transfer their focus on foodstuffing operation from selling harvestings to nodes (product-out approach) to addressing customer demand (market-in approach) while still leveraging its scale merit in merchandising. forwards customer- eccentricity model, Busty was a merchant driven company. Merchant organization earlier had responsibilities for buying, pricing, assorting, and managing Inventory planning (Ala, 2006, p. 0). With introduction of customer-eccentricity model, Segment organizations were newly formed roughly key target customer segments to better Inform the merchant teams and pedigree organizations of the customer needs. Although the new model required the triple functions to work in harmony, the company was ending it difficult to align different perspectives and finishings of the three organizations out-of-pocket to a lack of clarity on which functions was the true owner of customer insig ht (Ala, 2006, p. 2-13). Eventually, the company found itself getting stuck into focus on everything strategy macrocosm unable to effectively leverage Its scale power to optimize the merchandising strategy (Ala, 2006, p. 14). In order to remain competitive in the market, rising challenge for the company after the introduction of customer- eccentricity model was to find a new governance structure (I. E. Introduction ofIntegrated business teams) that enables alignment of the three organizations to focus resource and scale merit of the company on gainful key customer segments. In sustaining competitive advantage in increasingly competitive consumer electronics market, exceed grease champions palms should continue to pursue customer-foc usaged solutions with multi- channel gross revenue strategy by leveraging existing store and distribution web, and online gross gross gross sales platform. Nation-wide store network is one of the biggest competitive advantages of outperform bargain.These stores should be in full leveraged to provide customers tit tangible in-store fellowship (touch products and compare them to other models) as come up as differentiated end-to-end solutions by knowledgeable sales force and technical staff (e. G. Geek Squad). In the course, outgo demoralise should further evolve its marketing strategy to more rigorously shrink down in-store target customer segments to those who look for higher-end products with more quality end-to-end services. This would help put the company In differentiated market localization among the competitors (e. . Wall-Mart) and help avoid inefficient scale/power game to draw and quarter profits with efficient use of resources (Figure 1). man continuing to crystallize the in-store operations, better(p) debauch should also be committed to continue investments in online sales platform, non only to expand access to customer segments which are non covered In the stores efficiently, but also to defend erosion of In-store sales form other online retailers in such cases where customers come in to stores, experience 1 OFF eventually order on-line from one of those competitors. Briggs, 2013) Owning plastered network of physical stores, strategically located distribution centers and online sales platform, better(p) acquire is well positioned to pursue unique new market offerings that ordinary synergies between the two sales channels and distribution networks. For example, surmount secure has launched ship from stores service in 2013 that utilizes existing stores as mint-warehouse to improve the f number of delivery. While Amazon continues to bring in warehouses nationwide to improve the time for deliveries, better(p) bargain has Just leveraged existing infrastructures of stores and distribution centers.As a result, scoop misdirects fair nitty-gritty days to delivery became shorter than Amazon (Stella Service, 2014). In another example, scoop Buy can consider incorporati ng a musical arrangement in TTS online sales platform, with which customers are able to book Geek Squad services for products they purchased on the website. As in these examples, outmatch Buy has many opportunities to differentiate itself from the competitors by offering customer- focused solutions leveraging its multi-channel sales strategy (Figure 1).In conclusion, if Best Buy can wanton all these can happen with engaged and customer-focused employees, the take aim of customer-eccentricity is hard to be imitated by the competitors like Amazon and Wall-Mart. Levels toward strategic use of IT In 2005 Best Buys use of IT was Level 2 offensive. In customer-eccentricity model, one of the key competitive advantages was its brick-and mortar stores where majority of sales were generated. To gear up for on-line sales, Best Buy remodeled its website in 2004 (Dickinson, 2004).In distribution form, Best Buy bar-coded and scanned all inventory for tracking purpose, and used a reckonerize d inventory switch program for managing inventory level at each store (Best Buy Annual Report, 2005, p. 7). Furthermore, in order to obtain better and reliable information, Best Buy initiated a three-year project to revamp its IT system (Cottrell, 2006). Geek Square, computer purport service in the stores and at home, expanded its service to network installation and server maintenance (Ala, 2006, p. ). Best Buy applied IT system in order to convert some selected stores to customer-eccentricity operating model. However, its adoption was loose to be imitated by competitors and its competitive advantage was short-term. It was neither strategic abounding and nor embedded into the core business. The Competitive Forces Framework Out of five forces, Best Buy faced four threats industry competitors, substitutes, suppliers and buyers. Threat of potential entrants was not particularly discover.Industry competitors-High Best Buys verbatim rivalry was Circuit City, followed by Wall-Mart and Target, big-box retailers, and DELL, direct on-line computer manufacturer as shown in Exhibit abdominal aortic aneurysm (Ala, 2006, p. 18). Substitutes-High E- commerce electronic retailers such as Amazon and e-Bay were growing threats to Best Buy. Their use of IT was essential to operate their core business. They provided customers with more detailed product information on a timely manner and offered the discount price.Suppliers-Medium both(prenominal) bargaining power of suppliers and its five major suppliers accounted for nearly 33% of the total merchandise offered. Best Buy did not usually admit long-run written contracts with these major suppliers (Best Buy Annual Report, 2005, p. 8). On the other hand, products were not differentiated in general, and switching cost was not very high. Since Best Buy owned large number of stores, its bargaining power towards suppliers was influential. As a result, threat of suppliers was medium. Buyers-High Bargaining power of buyers increas ed in a great deal.Cost-sensitive buyers could research and buy products at cheaper price on-line. Because consumer electronics became commoditized, prices were more or less the same regardless of whether these were old on line or stores. In other words, switching cost for buyers was very low. Potential entrants-Low Consumer electronics market was saturated where there were major competitors such as Circuit City, Wall-Mart, and Amazon. While buyers gained increasing bargaining power, potential entrants were hesitate to enter the market.Three strategy models in the context of IT Best Buys three strategies were consistent and strongly supported Best Buys transformation to customer-eccentricity model. Best Buys business strategy was to bring engineering and consumers in concert in a retail environment that focuses on educating consumers on the features and benefits of technology and entertainment products, while maximizing overall profitability (Best Buy Annual Report, 2005, p. 2). Thi s top off direction was set for the following reasons. First, there was a growing guardianship of losing competitive advantage over rivalries.Secondly, customer put more speech pattern on customer service and support instead of technical candidate of the product (Ala, 2006, p. 3). Lastly, the statistics showed that one third of customers left the stores with dissatisfaction (Citric, 2006). Clearly one stylus fits all approach no longer irked. IS business strategy was to build loyalty with profitable segments customers and leverage the companys existing assets (Ala, 2006, p. 4). To provide shopping assistant to customers, Best Buy required better information system on pricing, technical aspect of products, and availability.In customer-eccentricity model, it was crucial to understand unique needs of customers and appearance accurately and quickly. Best Buy also required information system to share their experience with customers among all stores. IT strategy was to give employe es flexibility when interacting with customers. First, by means of reporting system, daily chalk talk helped communicate the sales goal every morning between department supervisors and sales staff (Ala, 2006, p. 9). Secondly, in order to maintain quality service at store, on- line prep was introduced to share the best practice.Third, the use of price optimization software helped the stores to make rational pricing decision (Wolf, Bibb, p. 20). Finally, Best Buy re-engineered the global communicate chain and technological infrastructure such as RIFF tag. harmonize to Wolf (AAA, p. 20), Best Buy invested $200 million in infrastructure, including a new point-of-sale (POS) yester that provides more precise customer data and analytics. traditionalistic IT in order to connect with customers. Best Buy has been actively exploitation social media such as Twitter, Backbone, Blob, and other platforms.However, it is not recommended that Best Buy develops further its social media strategy because no additional values have been created to generate profits. Best Buys extensive engagement in social media has been well acknowledged. Unlike other companies, Best Buy has multiple Twitter pages, including Best Buy Deals and Best Buy Mexico, to cover different segment of customers. internally Best Buy has several forums to hare information among employees, which energies the organization as a whole (Bulls, 2010).However, the long tail, as one of the advantages of social media, may adversely affect its customer-eccentricity model. Because the long tail phenomenon contributes to accessing greater audience, Best Buy must understand and analyze broader customers needs. A few challenges have been observed in interacting with customers on Backbone. Technology-related issues are difficult to explain. Also Best Buy cannot control the feeds on Backbone. Customers post complains about their bad experiences at stores. monitor and responding to such posts are costly.