Best Buy Case Study

ESLSCA GROUP 39D go around bargain Co. , Inc. pic st valuategical Audit August 2012 Presented to Dr. Sanya EL Galaly Table of Contents About topper deal Co. , Inc4 outgo deals History4 1. latest Situation5 A. real Performance5 B. strategical Posture5 . Mission5 2. object lenss5 3. Strategies5 4. Policies6 II. strategical Managers6 A. Board Members6 B. Top Management7 III. Market Overview7 IV. orthogonal purlieu8 2. Natural Environment8 2. Social Environment8 2. 1. economic8 2. 2. Technological8 2. 3. PoliticalLegal8 2. 4. Sociocultural8 3. line of work Environment9 V. Internal Environment9 1. collective Structure9 2. incorporated Culture9 3. Corporate Resources9 3. 1. Marketing9 3. 2. Finance9 3. 3. R&D10 3. 4. Operations10 3. 5. Human Resources10 3. 6. Information Systems10 VI. comp ratiocination of strategical Factors10 . Situational Analysis (SWOT) (SFAS Matrix change state over give 3)11 1. 1. Situational Analysis11 1. 1. 1. abstract of Interna l Factors11 1. 1. 2. Summary of External Factors11 1. 1. 3. critical review of Mission and Objectives11 VII. strategical Alternatives and Recommended dodge12 1. Corporate scheme12 2. 1. Growth scheme12 2. 2. Stability dodge13 2. 3. d letsizing Strategy13 3. Business Strategy13 3. 1. apostrophize Leadership Strategy13 3. 2. speciality Strategy14 4. Financial situations14 4. 1. outmatch grease ones palms In let rehearsal as of 2009-201214 4. 2. vanquish buy Balance tatter as of 2009-201211 4. 3. Cash Flow rehearsal for period ended in 2011-201212 B. Recommended Strategy14 VIII. instruction execution14 IX. paygrade and direct14 X. List of Tables15 introduce 1 proportion Analysis Table15 depict 2 IFAS16 lay out 3 EFAS17 Exhibit 4 SFAS18 Exhibit 5 TWOS Matrix19 Exhibit 6 IFinancial Position Documents20 About scoop up debase Co. , Inc. outmatch subvert Co. , Inc. (NYSEBBY) Headquartered IN Richfield, Minnesota, is a pencil lead multi-channel spherical seller and developer of technology results and redevelopments. 1,100 stores in U.S (21% Market Sh are), also operated over 2,800 stores internationalist (Canada, Mexico, China and Turkey), 170,000 employees whom are move to fortune deliver the technology solutions that enable blowzy access to people, k straightledge, ideas and fun. The political partys subsidiaries such(prenominal) Geek Squad, Magnolia Audio Video, and Pacific gross bargains, and operated utmosther both name Best spoil & forthcoming Shop labels In CANADA population at BB are aware of their design and impact on the beingness, and are committed to developing and implementing business strategies that bring sustainable technology solutions to consumers and communities.For information about Best steal, visit www. bby. com and to shop at Best pervert, visit www. bestbuy. com. Best barter fors History In 1966 Best bargain for incorporated with original name as Sound of music, the association started as a reta iler of audio components and expanded to sell video convergences in the early mid-eighties with the introduction of the videocassette rec experience in to its product line. In 1983 Best sully name has been changed to Best steal Co. Inc. (Best Buy). Shortly thereafter, Best Buy began operate its existing stores under a superstore concept by expanding product offerings and victimisation mass grocerying techniques to promote those products.Since 1989 the company altered the function of gross gross sales staff structure (policy) dramatically to be modify from commission basis oriented to be educators and customer assist oriented. Simply sales mission was to have sales provided now changed to answer customers question to help for decide which product fit for their necessarily. In 2000 the company grade up to Market space by launched BestBuy. com (online retail store), which is very important for BBs customers thus expanding among them to access to store slowly without physical visit. I. watercourse Situation A. Current mathematical operation Volatility of monetary position, declining in companys income compared with last fiscal year, sum up debts as well as run comprise ? Facing increased fears rival ? Raising in operational appeals and increasing in debt & reducing liquid of capital. ? Adverse economic climate and monetary stress (declining in net income) B. strategic Posture Mission ? To realize technology deliver on its promises to customer ? guardianship customers centered in technological changes To make life fun and easy. To lay customers awareness of their pauperisations. Objective ? The top objective of company were preserve process and lettuce (growth oriented) ? specialisation in retail industry by shew unique product & service that customer never get to begin with. ? Keeping toll down without sacrificing customer experience apt(p) by Best Buy. Strategies ? Developed in 1966 as (a low price system) and go to be service-oriented firm (differentiation outline) in 1989. ? spheric & national growth finished scholarship and alliance with Car phone storage warehouse Group, UK. Use its economies scale with over 1,000 locations to guard cost advantage from suppliers collectible to lavishly-pitched quantity of orders, also increase its publicise budget for massive campaigns In order to cove over entry market barriers. ? Having eight-fold brands for different customer lifestyles through M&A merge and Acquisition. ? Providing customers with highly develop sales associates who available to educate customers regarding product features. ? Construct a diversified portfolio of product offerings by building a large customer data-base ( node centricity model) Policies Growth oriented by expansion vertically & horizontally. ? personify decline is very important (restructure commission sales scheme, shipping the correct inventory to the correct locations). ? Training & educate employees fixin gly, promotion from at bottom at all levels. ? Rapidly chemical reaction to external change. II. Strategic Mangers A. Board Of Directors ? 16 members three are outsider. ? head and soften (Richard M. Schulze), his beneficial ownership of 17. 1 % ? Brian Dunn as Previous CEO, Currently (Mike Mikan) as impermanent CEO of Best Buy, who has been Director since 2008. every last(predicate) music directors and executive officers as a group, and each(prenominal) person we know who beneficially owns to a greater extent than 5% of the capital ploughshares of Best Buy common stock. pic pic pic pic pic Richard Shultze Mike Mikan Shari Ballard Jim Muehlbauer Carol uprise bump, Chairman Interim CEO death chair International CFO VP, Chief HR & enterprisingness EVP B. Top Management The both former CEOs was Richar Shultze and fix Anderson, but recently Brad stepping down, Brian Dunn replaced, and now replaced with Interim CEO. ? June 7, 2012 The board of directors of Best Buy Co. , Inc. (NYSEBBY) today announced the appointment of Hatim A. Tyabji as chairman of the Company, effective immediately. Mr. Tyabji, currently Chairman of the Audit Committee, has served as a director since 1998. ? Top managers are recently promoted internally and externally hired ? Top Mangers whom Richard Shultze Founder & Chairman. G. Mike Mikan Interim CEOShari Ballard President, International and Enterprise EVP. Jim Muehlbauer Executive VP. And CFO. ? Top management members are very experienced in effort III. Market Overview The Best Buy family of brands and leagues together with generates more than $49 billion in annual revenue and includes brands such as Best Buy Best Buy Mobile Audio visions The Carphone Warehouse Future Shop Geek Squad Jiangsu tail fin Star Magnolia Audio Video Napster Pacific Sales and The Phone House. Community partnership is central to the way Best Buy does business.In fiscal 2010, the company donated a make believe $25. 2 million to impro ve the verve of the communities where best Buy employees and customers live and work. Strategic priorities focus on on growth opportunities, operations, and better international returns. IV. External Environment (EFAS sidestep see Exhibit 1) Natural Environment 1. world(a) warming that increasing by emissions of technology usage. (T) 2. Energy availability a growing problem. (T) Societal Environment 1. Economic a. Unstable economy (stumble) along with overhaul of consumer expends. (T) b.Individual economies becoming interconnected into a world economy. (O) c. Financial crisis that hit EU, might be essential reason to eliminate the enthronization in Euro zone. (T) 2. Technological a. IT & communication revolution. (O) b. go into computerization at all handle such Manufacturing, business, Agriculture,etc. (O) c. dilute of hearty media online & digital marketing. (O) 3. Political-Legal a. NAFTA, EFTA, and some new(prenominal) agreements between countries to loosen trading cycle are spread doors to penetrate markets in Latin the States and other emerging markets. (O) b.Regulations of Federal accommodate Bank that effect on retail sectors credit systems. (T) c. Environmentalism being reflected in Laws on pollution and energy usage. (T) 4. Socio Cultural a. diminish of unemployment rate which is indicator of increasing of families income so Expands rate. (O) b. Transforming in purchasing behavior from market place to market space. (T) c. Trend of victimisation digital devises rather than paper & blocks for nonchalant functions such invigorateds, reading books, schedule organizer,etc. (O) d. Trend to value for money as a concept of consumers behavior. (T) Task Environment 1.North American market mature and extremely hawkishvigilant consumers demand high pure tone with low price in safe, environmentally sound products. (T) 2. Industry going globose as North American and European firms expands internationally. (T) 3. Rivalry High. GameStop Corp, Amazon. com, Wal-Mart expanding into consumer electronics and stepping price disceptation (T) 4. Buyers magnate Law. Technology and materials can be sourced worldwide. (O) 5. might of different Stakeholders Medium. Quality, safety, environmental regulations increasing. (T) 6. Entry Barriers High. new-fangled entrants unlikely chuck out for large international firms. T) V. Internal Environment (IFAS Table propose Exhibit 2) (IFAS Table See Exhibit 2) A. Corporate Structure 1. ethical national Management through separating the Market into eighter territories each is dual-lane into Districts (S) 2. Best Buy had an international operation segment (S) B. Corporate Culture 1. Every employee must have the companys vision introduce in their service and attitude (S) 2. Best Buy had a reputation for retaining talents and was widely recognized for its superior service (S) C. Corporate Resources 1. Marketing a. Using node Centricity Model to market various products (S) b.Supply pr oducts that citation the needs of guest (S) c. Meet Customer Needs through End to end Solutions (S) d. More training to BestBuy Employees help it lend customer with Knowledge service which is A Value added Service (S) 2. Finance (See Exhibits 4 and 5 Ratios & coin flows ) a. change magnitude in Long Term Debt from fiscal 2008 to 2009 (W) b. later the Acquisition of Napster and BestBuy Europe Decrease in Available Cash in 2009 (W) c. Increase in Company number Assets and Revenues due to Successful Acquisitions (S) d.Declining in the nett Income and in operation(p) Margin (W) e. The Risk of Having Bad Debts imputable to increase in inventory and increase of Revenues However its not co-ordinated the Big increase in posting receivable (W) 3. R a. Best Buy is Willing to participate in tests of new-fashioned products (with limited cost to company) (W) 4. Operations a. increase Revenues By growing its Customer mean and Increasing its market share internationally (S) b. Good Dom estic Management through separating the Market into Eight territories each is Divided into Districts (S) c.Best Buy had an international operation Segment (S) 5. Human Resources a. Main Objective is provide the customer with the right knowledge of products and service (S) b. Changing the compensation structure into non-commissioned-based (S) c. Claims that Best Buy employees misrepresented the Manufacture indorsement in order to sell its own product service and replacement invention (W) d. Best Buy had undisclosed Anti-price unified policy (W) 6. Information Systems a. Con square(p)ate information from Retialers , Act as a modify house for info and results.Communicate the common needs and encourage innovation (S) VI. Analysis of Strategic Factors Situational Analysis (SWOT) (SFAS Matrix see Exhibit 3) 1. Strengths. Company Image and Profile Sales Stuff Policy Strong monetary Position Customer Centricity Model alter portfolio in Global Markets Good horizontal Integratio n Talent management Good Domestic management Successful Acquisitions ascribe payment policy Value Added run 2. Weaknesses Market Space Sales determine Policy Assets Management Operational Cost Increase in LTD and Debt Management displace Leadership 3. Opportunities Potential market of checkup Portable Devices Gaming Segment growth and Smart Phones Technology Revolution bankruptcy of Circuit City Expansion of Global Market place 4. Threats Regulations of Federal mental reservation Bank Economic Down turn change magnitude the entry barrier Online contender Price War with Wal-Mart Wal-Mart Deal with Nintendo and orchard apple tree Strong penetration Of Competitor Review of Current Mission and Objectives 1. Bad financial position accord to last 2 years. 2. Facing a fierce competition and new challenge expected. VI.Strategic Alternatives and Recommended Strategy Strategic Alternatives. Corporate Strategy 1. Growth Strategy Growth vertically through expan d new stores across U. S to exact gap in fierce competition. Pros come over competitors expansions system Cons Cash Liquidity Issues. Continuing of ball-shaped expansions, and focus on emerged & untapped markets. Pros keep of Best Buys abroad position to be Leader in this Marekts. Cons interior(prenominal) regulations in foreign countries and security. crosswise integration by joint impale with new suppliers. Pros more control on operational costCons Management issue, and conflictions. 2. Stability Strategy Hold acquisitions in Euro zone according to economic crisis, and in Canada as well. Pros sparing more capital & cost to be invested in North America and other virgin markets. Cons allow to competitors to raising their market share in such go forth market. 3. Retrenchment Strategy Develop furlough policy in costly roil markets such (Europe). Pros Divesting BBY improves bottom line and focus ME & Asia Markets. Cons loosing Europes market share. Decreasing some of d iscretionary costs in such (Advertising ) in one or ii of states that saturated.Pros saving a lot of regular cost to be invested in house servant expansion. Cons risk of loose customers positioning by time. Business Strategy 1. Differentiation Strategy Develop tradeoff strategy that allow Best Buys customers to replace their own devices by new technology devices in reassert prices. Pros another(prenominal) source of money that generate liquid state for company Cons adding operational cost line 2. adhesion strategy mannequin a solid strategic Alliance with a reliable brand in market space that has urgently need to access to retail market. (Win/Win) Pros Access to know-how of online market.Cons rat of operations and management techniques. RECOMMENDED STRATGIES 1. Growth Strategy Growth vertically through heart-to-heart new stores across U. S to overindulge gap in fierce competition. Pros come over competitors expansions strategy Cons Cash Liquidity Issues. Continuing of p lanetary expansions, and focus on emerged & untapped markets. Pros backup of Best Buys afield position to be Leader in this Marekts. Cons domestic regulations in foreign countries and security. plain integration by joint go with new suppliers. Pros more control on operational cost Cons Management issue, and conflictions. . Differentiation Strategy Develop trade-off strategy that allow Best Buys customers to replace their own devices by new technology devices in justified prices. Pros another source of money that generate liquidity for company Cons adding operational cost line. VII. Implementation As the recommended strategies is growth strategy so business development dept. should select strategic locations across U. S that include high traffic . The operations and mainly the issue chain department must do their best for getting best prices and acidulous operations cost. Maintain the current global expansion plan and build solid studies for emerging markets and developing countries customers culture there. Developing more effective CRM act and POS systems to recognize customers data. XI. Evaluation and Control involving the top managers, key persons and employees in operations efficiency programs Monitoring the performance on a regular basis especially after new application applied. Follow up the plan of domestic operations that related to supplier. Exhibit 1 E F A S Exhibit 2 I F A S Exhibit 3 S F A S Exhibit 4 surmount secure CO. , INC. CONDENSED CONSOLIDATED BALANCE SHEET ($ in millions, except per share amounts) February28, 2009 Assets Current Assets C $4 a 9 s 8 h a n d c a s h e q u i v a l e n t s To 8 ta , l 1 cu 9 rr 2 en t as se ts L 7 a 5 n 5 d a n d b u i l d i n g s 6,940 L 2 e , s 7 s 6 a 6 c c u m u l a t e d d e p r e c i a t i o n Ne 4 t , pr 1 op 7 er 4 ty an d eq ui pm en t Tradenames 173 Customer Relationships 322 justice and separate enthronisations 395 different Assets 367 nitty-gritty Assets $ 15,826 Liabilities and Shareholders fair play Current Liabilities A $4 c , c 9 o 9 u 7 n t s p a y a b l e To 8 ta , l 4 cu 3 rr 5 en t li ab il it ie s Long-Term Debt 1,126 Minority Interests 513 Shareholders Equity P r e f e r r e d s t o c k , $ 1 . 0 0 p a r v a l u e A u t h o r i z e d 4 0 0 , 0 0 0 s h a r e s I s s u e d a n d o u t s t a n d i n g n o n e Total shareholders equity Total Liabilities and Shareholders Equity $ 15,826 outgo debase CO. ,INC. CONDENSED CONSOLIDATED BALANCE SHEETS ($in millions) (Unaudited and subject to reclassification) CONDENSED CONSOLIDATED BALANCE SHEETS ($ in millions) (Unaudited and subject to reclassification) Mar. 3, 2012 Feb. 6, 2011 ASSETS Current assets Cash and cash equivalents $ 1,199 $ 1,103 Short-term investments - 22 Receivables 2,359 2,348 Merchandise inventories 5,731 5,897 Other current assets 1,079 1,103 Total current assets 10,368 10,473 shed light on property & equipment 3,471 3,823 Goodwill 1,335 2,454 Tradenames 130 133 Customer relationships 29 203 Equity and other investments cxl 328 Other assets 403 435 TOTAL ASSETS $ 16,076 $ 17,849 LIABILITIES & EQUITY Current liabilities Accounts payable $ 5,435 $ 4,894 Accrued liabilities 2,968 2,771 Short-term debt 480 557 Current portion of long-term debt 43 441 Total current liabilities 8,926 8,663 Long-term liabilities 1,099 1,183 Long-term debt 1,685 711 Equity 4,366 7,292 TOTAL LIABILITIES & EQUITY $ 16,076 $ 17,849 better BUY CO. , INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS ($ in millions, except per share amounts) Feb. 8, 2009 Revenue $ 45,015 Cost of goods change 34,017 Gross sugar 10,998 Gross reach % 24. 4% Selling, general and administrative expenses 8,984 SG % 20. 0% Restructuring charges 78 Goodwill and tradename baulk 66 operate income 1,870 Operating income % 4. % Other income (expense) Investment income and other 35 Investment deterioration (111 ) Interest expense )(94 ) kale in the beginninghand income levy expense and minority interests 1,700 Income impose expense 674 potent taxation rate 39. % Minority interests (30 ) Equity in loot (loss) of affiliates 7 realise bread $ 1,003 lettuce per share Basic $ 2. 43 reduce(1) $ 2. 39 Dividends declared per common share $ 0. 4 Weighted average common shares outstanding (in millions) Basic 412. 5 Diluted(1) 422. 9 shell BUY CO. , INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS ($ in millions, except per share amounts) Feb. 7, 2010 Revenue $ 49,694 Cost of goods interchange Cost of good s change 37,534 Restructuring charges cost of goods sold Total cost of goods sold 37,534 Gross profit 12,160 Gross profit % 24. 5 % Selling, general and administrative expenses 9,873 SG&A % 19. 9 % Restructuring charges 52 Operating income 2,235 Operating income % 4. % Other income (expense) Investment income and other 54 Interest expense (94 ) Earnings before income taxes and equity in internet of affiliates 2,195 Income tax expense 802 Effective tax rate 36. 5 % Equity in earnings of affiliates 1 Net earnings including noncontrolling interests 1,394 Net earnings attributable to noncontrolling interests (77 ) Net earnings attributable to Best Buy Co. , Inc. $ 1,317 Earnings per share attributable to Best Buy Co. , Inc. Basic $ 3. 16 Diluted(1) $ 3. 10 BEST BUY CO. , INC. CONSOLIDATED STATEMENTS OF EARNINGS ($ in millions, except per share amounts) (Unaudited and su bject to reclassification) xii Months Ended Mar. 3, Feb. 26, 2012 2011 Revenue $ 50,705 $49,747 Cost of goods sold 38,113 37,197 Restructuring charges cost of goods sold 19 9 Gross profit (24. 8%, 25. 25. %) 12,573 12,541 Selling, G&A expenses 10,242 10,029 Goodwill impairment 1,207 Restructuring charges 39 138 Operating income 1,085 2,374 Other income (expense) Gain on sale of investments 55 Investment income and other 37 43 Interest expense (134) (86) Earnings from continuing operations before income tax 1,043 2,331 expense and equity in (loss) earnings of affiliates Income tax expense 709 779 Effective tax rate 68. 0% 33. 4% Equity in (loss) earnings of affiliates (4) 2 Net (loss) earnings from continuing operations 330 1,554 Loss from lay off operations, net of tax (308) (188) Net (loss) earnin gs including noncontrolling interest 22 1,366 Net earnings from continuing operations attributable to (1,387) (127) noncontrolling interests Net loss from discontinued operations attributable to 134 38 noncontrolling interests Net (loss) earnings attributable to Best Buy Co. , Inc. $(1,231) $ 1,277 Continuing operations $ (2. 89) $ 3. 51 cease operations $ (0. 47) $ (0. 37) Basic (loss) earnings per share $ (3. 36) $ 3. 4 Continuing operations $ (2. 89) $ 3. 44 Discontinued operations $ (0. 47) $ (0. 36) Diluted (loss) earnings per share $ (3. 36) $ 3. 08 Dividends declared per Best Buy Co. , Inc. common share $ 0. 2 $ 0. 58 Basic 366. 3 406. 1 Diluted 366. 3 416. 5 F e b r u Febru BEST BUY CO. INC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in millions) (Unaudited and subject to reclassification) Twelve Mo nths Ended Mar. 3, Feb. 6, 2012 2011 in operation(p) ACTIVITIES Net earnings including noncontrolling interests $ 22 $ 1,366 Adjustments to make net earnings to total cash provided by operating activities Depreciation and amortization of definite-lived intangible 45 978 assets Goodwill impairment 1,207 Realized gain on sale of investments (55) Other, net 462 209 Changes in operating assets and liabilities, net of acquired assets and liabilities Receivables (28) (371) Merchandise inventories 120 (400) Accounts payable 643 (443) Other assets and liabilities (23) (149) Total cash provided by operating activities 3,293 1,190 INVESTING ACTIVITIES Additions to property and equipment (766) (744) Other, net 42 175 Total cash employ in investing activities (724) (569) FINANCING ACTIVITIES salvation of common stock (1,500) (1,193) Borrowings (repayments) of debt, net