Best Buy Case Study

MKT2316
Section 315

SWOT Team
Tanika St. Pierre, Melissa Falsetti, Fidaa Hajobeid, Michelle
OReilly, Hayley Mccurdy, Devon Brown, and Anahita Fooladi

April 4, 2011
 Table of Contents

Executive Summary ........................................................ 3

Situation Analysis ........................................................... 4
Assumptions ................................................................... 5
Central Problem ............................................................. 5
Evaluative Criteria .......................................................... 5
Alternatives .................................................................... 6
Analysis of Alternatives ................................................ 10
Decision and Justification ............................................ 11
Implementation............................................................ 12
Appendices ................................................................... 13
Bibliography ................................................................. 14

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 Executive Summary

Best Buy is the #1 big box electronic retailer that offers a wide variety of electronic
goods and products (Case Assignment: Best Buy). Since it caters to a niche consumer
market there is a high demand for our products, which causes a downward pressure on
prices. An opportunity for Best Buy to increase revenue would be to offer longer
guarantees on products and financing options. However, natural disasters and
manufacturing defects pose a great threat to maintaining our high quality inventory and
image. Our leading competitor, Wal-Mart Superstores, also poses a threat as they
continue to climb the electronic market share.

In order for Best Buy to differentiate themselves from any other competitor, SWOT
Team is investigating ways to build on its business-to-consumer success and move into
the business-to-business world.

SWOT Team recommends that Best Buy includes personal, door-to-door selling of
products to businesses. The reasons behind this decision would be the competitive
advantage over Wal-Mart Superstores. An increase in the quantity of products sold will
positively increase Best Buys profits. The amount of revenue as opposed to the costs of
implementation will result in a high return-on-investment. A major factor in this
decision is the creation of personal relationships and strategic alliances with business
consumers. These strategic alliances will create a cooperative agreement between Best
Buy and business clients (Lamb, Hair, McDaniel, Kapoor, Klaise, & Appleby, 2010).

An issue that may arise from this chosen alternative could be from hiring sales
representatives that do not meet their sales quota. This issue could be dealt with by
careful screening and selection of individuals who meet specific criteria.

Many benefits would be a result by implementing this alternative. One such benefit
would be an increase in profits and goods sold. Strategic alliances with businesses
would also be beneficial for future sales and purchases. An increase in market share for
Best Buy would arise since it would be catering to not only to individual consumers, but
to large businesses, institutions, and the government as well.

In order to put this plan into action Best Buy will need a marketing team to create an
implementation plan and timeline. A financial analysis will be conducted of all the new
costs. Sales representatives will be hired and specially trained to sell the products
directly to selected business clients. Vehicles will be purchased for sales representatives
to travel to their assigned locations to sell our products and create business consumer
relationships.

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 Situation Analysis

Internal Environmental Analysis as applied to Best Buy:

- Strengths:
- electronic items more affordable and common
- began big box retailing
- #1 retailer in its segment
- In-store uniformity
- Commercials accurate to real-life experience
- 16% share in $130 billion market
- 600 stores in US & still growing
- open later on weekends, outsource products
- allows in-store privileges online

- Weaknesses:
- Cant sell all available electronics in store
- Negative pressure on prices/revenue
- Dizzying array of products
- Downward pressure on prices because of high demand
- Casual looking staff
- Only go if you have a purpose (electronics only); niche market

External Environmental Analysis as applies to Best Buy:

- Opportunities:
- Sell more up-scale items
- Greater international expansion (including Canada)
- Redesigning new stores
- Constantly upgrading products
- Longer guarantees
- Financing
- Price-match system
- Personalized selling to businesses

- Threats:
- Wal-Mart
- Natural disasters in outsourced countries cause a production delay
- Manufacturing incidents
- Relationships with providers (strategic alliance)
- Manufacturing costs

Sources: Case Assignment: Best Buy; www.bestbuy.com

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 Assumptions

Assumptions applied to Best Buy:

Best Buys prices are 10-15% lower than its leading competitors regarding
electronic goods.
This represents an enhancement for Best Buy.

Best Buy doesnt cater specifically to businesses already.

This would represent a constraint.
(www.bestbuy.com)

Best Buy can afford additional financing to expand their marketing objectives.
This represents an enhancement.

Central Problem

How can Best Buy build on its Business-to-Consumer success and move into the
Business-to-Business world? (Case Assignment: Best Buy)

Evaluative Criteria

Evaluative Criteria as applied to Best Buy:

Criteria: Criteria Quantified:
1. Return on Investments 0.35
2. Short-term Profits 0.30
3. Image 0.20
4. Ease of Implementation 0.15
1.00

Return-on-Investments was chosen because you want to know that you make more
than what you put in to it.
Short-term profits were chosen because it is a glimpse of what you could be making in
the future.
Image was chosen because having a good image is important for status.
Ease of implementation was chosen because its helpful to know if the outcome will be
beneficial compared to the time and money used.

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 Alternatives

List of Alternatives as applied to Best Buy:

Status Quo
Website Redesign
Business Section In-Store
Personal Selling of Best Buy Products
1. Status Quo

Primary Target Market:

- Business to consumer
- 16 to 35 years old
- Both genders
- Middle class and up

Secondary Target Market:

- Parents
- 36 to 50 years

Positioning Statement:
This status quo of Best Buy is an electronic retail store that provides an
array of high quality and low-cost electronics and accessories for
consumers 16 to 35 years old with expendable income who desire the
newest innovations in the technological industry. Unlike Wal-Mart our
large selection of electronic goods cater to the specific needs of this niche
market (Lamb, Hair, McDaniel, Kapoor, Klaise, & Appleby, 2010).

Marketing Mix, 4 Ps:

Product:
Affordable common electronics to the consumer between the
ages of 16 and 50

Promotion:
Best Buy will utilize social media, such as TV and Internet, to
advertise to the consumer market

Place:
Best Buy will provide affordable common electronics to the
consumer through their big box retail stores

Price:
Prices will be 10% to 15% lower than its leading competitors

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2. Website Redesign

Primary Target Market:

- Business to business
- Small businesses, locally-run business, and small institutions that
purchase smaller, rather than larger equipment

Secondary Target Market:

- Medium enterprises
- Rural businesses

Positioning Statement:
This newly designed Best buy website is a business oriented selling tool
that is convenient and user-friendly for small and locally-run businesses
who need easy access to the product selection. Unlike Wal-Mart, our
newly designed business website will offer a wide variety of electronic
goods.

Marketing Mix, 4 Ps:

Product:
Business website that caters to small, local businesses and
institutions

Promotion:
Best Buy will utilize social media, such as Facebook and Twitter to
advertise to the consumers

Place:
Best Buys website provides desk to door service to its business
consumer

Price:
Businesses receive a 20% online discount and free shipping

3. In-Store Business Section

Primary Target Market:

- Business to business
- Small to medium businesses
- Institutions

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 Secondary Target Market:
- Larger businesses
- Price conscious businesses (looking to compare prices)

Positioning Statement:
This in-store business section is a consulting service that is a customized
buying experience for businesses who need expert purchasing advice.
Unlike Wal-Mart, our in-store section is tailored to provide the business
solutions that purchasers are looking for.

Marketing Mix, 4 Ps:

Product:
Section within Best Buy that caters to servicing business
consumers

Promotion:
Best Buy will utilize signs, flyers, and word-of-mouth advertising
to reach these business consumers

Place:
The service section will be located within Best Buy retail store

Price:
The in-store service will be complimentary for business
consumers

4. Personal Selling of Best Buy Products

Primary Target Market:

- Business to business
- Large business and corporations within capital region
- Government
- Institutions
- Resellers
- Producer (facilitating operations)

Secondary Target Market:

- Large businesses and corporations in surrounding areas

Positioning Statement:
The personal selling of the Best Buy product is a door-to-door service
offering products that are more convenient and cost effective for large

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 businesses who need the best possible service quality. Unlike Wal-Mart
our personalized selling of our Best Buy products creates and strengthens
customer relationships.

Marketing Mix, 4 Ps:

Product:
Low cost Best Buy electronic products catering to large businesses

Promotion:
Best Buy will utilize selling representatives who go to businesses
to personalize advertising

Place:
The promotion and distribution of the Best Buy products will take
place at the business consumers location

Price:
The Best Buy brand will be a cost effective alternative to other
major brands

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 Analysis of Alternatives

Analysis of alternatives as applied to Best Buy:

Criteria Rate 1- Status 2- Website 3- Business 4- Personalized

Quo revamp Section Selling to
businesses
ROI 0.35 0.35(2)=0.7 0.35(8)=2.8 0.35(7)=2.45 0.35(9)=3.15
Short-term 0.30 0.30(4)=1.2 0.30(5)=1.5 0.30(7)=2.1 0.30(9)=2.4
profits
Image 0.20 0.20(7)=1.4 0.20(7)=1.4 0.20(8)=1.6 0.20(9)=1.8
Ease of 0.15 0.15(10)=1.5 0.15(9)=1.35 0.15(7)=1.05 0.15(9)=1.35
implementation
1.00 4.8 7.05 7.2 8.7

Advantages and Disadvantages:

Alternative #1 Status Quo

Advantages: No changes are required since everything remains

the same, easy to implement, low risk

Disadvantages: No new benefits, no direct increase to profits, no

improvements to customer satisfaction

Alternative #2 Website Redesign

Advantages: Easy to implement, low cost, high ROI

Disadvantages: May not reach as many customers as predicted,

wont create a large profit increase, possible technical issues

Alternative #3 In-store Business Section

Advantages: Widens market share to include businesses, better

customer service for businesses, increase profits

Disadvantages: High risk, in-store space is minimized for other

products, additional costly expertise needed

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 Alternative #4 Personal Selling of Best Buy Products

Advantages: High ROI, greater short-term profits, better image,

easy to implement

Disadvantages: High cost to train specialized sales people,

traveling costs, time consuming

Decision and Justification

Decision and Justification as applied to Best Buy:

SWOT Team recommends that Best Buy develop a marketing strategy that will focus
on alternative #4 - personalized business-to-business selling.

Using personal selling of products will allow Best Buy to surpass its main threat, Wal-
Mart, as the leading electronic retailer for businesses.
Selling personally to businesses will increase the quantity of goods purchased which
would lessen the negative impact on prices and revenue.
Selling directing to a business will help influence future purchasing decisions.

There is a high return-on-investments and greater short-term profits. Creates a better

image because the market share includes businesses as well. It is easy to implement
because the only change needed is to hire and train specialized employees.

Some possible downsides to this alternative would be the training and traveling costs.
This process will also be very time consuming.

The increase in sales of large quantities will cover the costs and bring in a profit. Also,
by going to the businesses first Best Buy is creating new consumer relationships.
Personalized selling is not a service that Wal-Mart provides and therefore making it a
competitive advantage for Best Buy.

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 Implementation

Implementation as applied to Best Buy:

As identified in the decision and justification, Best Buys marketing strategy is
personalized selling directly to businesses. The step-by-step process to successfully
implement the marketing mix is identified below with the proper tactics.

Marketing Research: Secondary research is required to identify all the large

businesses and corporations within the Ottawa and surrounding regions which
we want to target out personalized selling towards.

Product/Service changes: We will be adding the service of personalized selling

which includes sales representatives going directly to business locations. Fifty
sales representatives will be hired and specially trained to sell our products to
these businesses.

Pricing strategy: To maintain our status as the leading retailer in the electronic
segment we will continue to offer the lowest costs while providing businesses
with a 20% discount and free shipping.
Refer to Appendix A for a brief financial analysis.

Communications plan: Best Buy will create a potential client database and utilize
our new sales representatives to promote this new marketing strategy.

Distribution plan: The distribution of the products will take place at the business
consumer locations.

Refer to Appendix B to view a detailed timeline of our action and implementation plan
for our first two quarters.

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 Appendices

Appendix A
Financial Analysis:
One-time costs Annual Costs
- Training - Salaries
- Marketing research - Operating cost
- Travelling vehicles - Product and inventory
- Communications - Vehicle maintenance

Appendix B
Implementation time line for the First Quarter:
Steps What Who When
1 Select marketing Director of January
team marketing
2 Create marketing Marketing team January
plan
3 Determine financial Finance February
aspects to department
implement plan
4 Research potential Marketing team March
client database

Implementation time line for the Second Quarter:

Steps What Who When
1 Hire sales Sales April
representatives supervisor/manager
2 Train sales Sales manager April
representatives
3 Purchase travelling Finance May
vehicles department/Marketing
team
4 Begin selling to Sales representatives June
businesses

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 Bibliography

Best Buy. (2010). Retrieved April 2, 2011, from Best Buy Canada:
http://www.bestbuy.ca/en-CA/home.aspx

Case Assignment: Best Buy

Lamb, C. W., Hair, J. F., McDaniel, C., Kapoor, H., Klaise, H., & Appleby, R. (2010). MKTG,
Canadian Edition. Toronto: Nelson Education Ltd.

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