Best Buy's Value Chain Analysis: Strategies for Competitive Success

Erika Manche Management 479 Professor Morris September 20, 2023 Case Study 3 Best Buy Co, Inc. Value Chain A company’s value chain is various processes and activities which a firm goes through to create value for its customers and generate profit ultimately. Best Buy, a main electronic retailer in its industry’s value chain can be examined through its main framework, comprised of support and primary activities. One of Best Buy’s primary activities is inbound logistics. The company managed a large network of suppliers and distributing centers to make sure a constant flow of electronics and their related products into stores. These strategic partnerships with suppliers are crucial for the company’s success. Their operations include in store and online platforms where their products are sold and serviced. Their in store service, Geek Squad, provided significant value to the company (p. 162). The company’s outbound logistics has an extensive network of both stores and efficient online fulfillment ensure that the company’s orders are delivered in a timely manner and a vast availability of products to its customers. The company has also invested in marketing campaigns and in-store knowledgeable salesforce to strengthen customer experience and promote products. The company also offers post-sales services through product warranties, technical support with it’s Geek Squad, and repair services. Best buy uses a variety of support activities, including fostering favorable business activities from suppliers, ensuring good quality products, and managing a supply chain which

Erika Manche Management 479 Professor Morris September 20, 2023 maintains a competitive advantage (pg. 168). Best Buy invests in technology and digital platforms and e-commerce to enhance consumer shopping experience and improving operations. The company also invests and focuses on hiring and training knowledgeable staff. Best Buy particularly focuses on its Geek Squad to offer expert assistance to customers.

Erika Manche Management 479 Professor Morris September 20, 2023 Changes to the Value Chain While Best Buy has remained successful in the electronic retail industry, it is important that they continue to adapt to the exterior business environment and evolve their value chain to stay competitive. Best Buy should continue to invest in digital technologies and online capabilities to evolve with consumer preferences in online shopping and mobile applications. The company should also invest in data analytics to utilize customer data that offer personalized promotions and recommendations which would strengthen a customer’s shopping experience. Best Buy should also work to improve their supply chain optimization. Continually working on their efficiency in order to reduce costs, lower inventory levels, and provide timely product availability is crucial for success in their industry. The company should also focus on expanding their service offerings such as tech support and home instillations. This would set them apart from the growing number of competitors, such as Amazon and Walmart (p. 168). Best buy should also concentrate on sustainability initiatives. More than ever, consumers are looking to buy from companies who are more eco-friendly, and are more willing to support a company who advertises their environmental efforts. The company could incorporate sustainability practices into their value chain. This could be done through sourcing eco-friendly products, optimization of energy consumption in their retail stores and distribution centers, and focusing on reducing waste.

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Erika Manche Management 479 Professor Morris September 20, 2023 Focusing on customer service through employee training for in-store and online shoppers would create a more memorable shopping experience and set them apart from their competitors. Management Best Buy’s CEO Joly came up with a “turnaround strategy, ‘Renew Blue’ that focused a value proposition through providing “advice, service and convenience at competitive prices” (p. 171). This strategy has proved to be a successful approach to revitalizing the corporations operations and remodel its value proposition within the electronic industry. The company shifted focus to a customer-centric approach. They realized that creating exceptional customer service was vital to success. This focused on customer service, knowledgeable product information, and a comprehensive in-store and online shopping experience. Under these changes, Best Buy also invested more into its e-commerce capabilities and digital infrastructure. The company was then able to expand their online presence and provide customers with a seamless experience. Optimizing costs was also part of this initiative, working on supply chain efficiency improvement and adjustments to store footprints to contribute to further profitability. The company also recognized the need to strategic partnerships with companies such as apple and Samsung, and allowing them to offer special products and services which are not available through their competitors (p. 161).

Erika Manche Management 479 Professor Morris September 20, 2023 This initiative also includes the expansion of in-home services like the Geek squad, to add more value to their brand. This is also an area of their business that sets them apart from the competition. Customers saw the significant value to these services and positioned the company as a trusted technological advisors to its customers. I think the company is moving in the right direction through these changes and have a good understanding of what needs to be done in order to remain competitive within the industry. Marketing In 2019, Best buy focused mainly on leveraging its “total tech support” program, which provided customer with 24/7 support and technical services for their variety of products and devices (p. 162). This marketing tool placed Best Buy as a trusted advisor in the ever changing a complex world of consumer electronics. This was a pivotal move for the company’s marketing strategy. This program was initiated to offer consumers comprehensive technical assistant and support, creating a differentiated customer experience and promoted customer loyalty. This positioned the company’s reputation as a leader as a trusted source of technical proficiency. With marketing materials, online content, and in-store signage, there was emphasis on the company’s knowledgeable employees who can provide excellent customer service for a wide- range of technical issues. The company then introduced the membership fee for its “total tech support” program, and for an annual fee, customers would get access to 24/7 technical support, special discounts,

Erika Manche Management 479 Professor Morris September 20, 2023 and in-home services. The company marketed this membership by conveying the value of this membership and focused on highlighting how it would ultimately save customers time and money. This was a good move for the company to provide services that their other competitor’s did not offer, such as Walmart. This helped differentiate the brand and place them as a more desirable company to buy electronics from versus other big-box stores. I think the company could improve this movement by not chargin an additional fee for this membership. I think that the money they do not collect off the annual membership fee would ultimately generate more revenue if they offered this service for every product bought from the store. Consumers would not hesitate to buy from Best Buy, who offered tech support free of charge rather than buying from another company who did not offer tech support after the initial sale. Finance A main financing issue for Best buy in 2019 was a strong focus on increasing operational costs, mainly related to investments needed to continue to remain competitive in the ever- changing retail technology market. A major aspect of this focus on competitive pricing (p. 171). The electronic market is highly sensitive of price points, and consumers will usually shop around checking prices for different retailers and online platforms. Best Buy has felt pressure to remain competitive while also making investments to enhance customer experience.

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Erika Manche Management 479 Professor Morris September 20, 2023 The company recognizes that focusing on e-commerce was critical in order to stay relevant. To be able to compete with the pricing of online retailers such as Amazon, the company had to make a large investment into its digital infrastructure. This included changes to their website and mobile app, expanding its online products, and putting in place efficient supply chains and delivery systems. All these items required the company to make large capital expenditures. While the company focused on staying priced competitively, they also had to focus on investments into enhancing the consumer experience, which they did through “total tech support”. Finding balance for all these items proved to be financially challenging for the company. Trying to maintain a lower product cost can lower profit margins. I think the best way for Best Buy to remain successful in this area is to offer price matching. Consumers are checking a large variety of different electronic devices across a large variety of companies and online platforms. By ensuring that they will always match the same prices as companies such as Walmart and Amazon, they will generate more business. Although this will lower their profit margins, it will bring in more sales. They could ultimately make more profit through a higher volume of sales in the long-run. Information Systems In 2019, one major aspect of management information systems for Best Buy was utilizing data for analytics and business intelligence to help the consumers decision-making and show improvement in the company’s various operations. Best Buy realized the value of data as a main

Erika Manche Management 479 Professor Morris September 20, 2023 strategic asset. The company focused on leveraging MIS data-driven management in several different ways. The first was data-driven decision-making. The company invested in strong MIS systems and tools to collect, store, process and analyze large amounts of data from many sources. This included sales transactions, online behaviors, and inventory levels (p.171). MIS played a big role in optimizing inventory levels. By using data analytics, the company could forecast demand for certain products and manage inventory more efficiently (p. 170). This ultimately led to a reduction in carrying costs and ensuring that the right amount of products were in stock to meet specific demands. They also focused on consumer insights. By utilizing MIS Best Buy gained a deep insight into customer preferences and behavior. In doing this, the company could personalize marketing strategies, recommend specific products, and create a more personalized shopping experience. I think that the company should continue to invest money in management information systems. The company might want to invest in more complex ways to centralize and integrate data from a variety of sources. By knowing exactly how to tailor advertising and individual customer shopping experiences, they will be more likely to have a larger and more loyal customer base.

Erika Manche Management 479 Professor Morris September 20, 2023 Resources ([2019]). MGMT 479 5th ed. Case Studies. McGraw-Hill Create. phahttps://ccis.vitalsource.com/books/9781307604412

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