BestBuy case study

In pursuit of the new model, the society was making efforts only struggling to shift their focus on marketing operation from selling products to customers (product-out approach) to addressing customer needs (market-in approach) while still leveraging its scale merit in merchandising. Before customer- eccentricity model, Busty was a merchant driven smart set. Merchant organization primarily 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 around key target customer segments to better Inform the merchant teams and store organizations of the customer needs. Although the new model required the three functions to work in harmony, the company was ending it difficult to align different perspectives and goals of the three organizations due to a lack of clarity on which functions was the true owner of customer insight (Ala, 2006, p. 2-13). Eventu all in ally, the company found itself getting stuck into focus on everything strategy being unable to effectively leverage Its scale power to optimize the merchandising strategy (Ala, 2006, p. 14). In devote to remain competitive in the market, future challenge for the company after the introduction of customer- eccentricity model was to find a new governance structure (I. E. demonstration ofIntegrated business teams) that enables alignment of the three organizations to focus resource and scale merit of the company on profitable key customer segments. In sustaining competitive returns in increasingly competitive consumer electronics market, silk hat profane should continue to pursue customer-foc implementd solutions with multi- channel gross revenue strategy by leveraging existing store and diffusion network, and online sales platform. Nation-wide store network is one of the biggest competitive advantages of go around misdirect.These stores should be fully leveraged to prov ide customers tit tangible in-store experience (touch products and compare them to other models) as well as differentiated end-to-end solutions by knowledgeable sales force and technical staff (e. G. Geek Squad). In the course, best(p) steal should march on evolve its marketing strategy to more rigorously narrow down in-store target customer segments to those who look for higher-end products with more quality end-to-end services. This would help tramp the company In differentiated market positioning among the competitors (e. . Wall-Mart) and help avoid inefficient scale/power game to make profits with efficient use of resources (Figure 1). While continuing to crystallize the in-store operations, Best secure should also be committed to continue investments in online sales platform, not only to expand admission fee to customer segments which are not covered In the stores efficiently, but also to defend erosion of In-store sales form other online retailers in such cases where cus tomers scram in to stores, experience 1 OFF eventually coif on-line from one of those competitors. Briggs, 2013) Owning strong network of physical stores, strategically located distribution centers and online sales platform, Best deal is well positioned to pursue unique new market offerings that average synergies between the two sales channels and distribution networks. For example, Best bribe has launched ship from stores service in 2013 that utilizes existing stores as mint-warehouse to improve the speed of delivery. While amazon continues to build warehouses nationwide to improve the time for deliveries, Best subvert has Just leveraged existing infrastructures of stores and distribution centers.As a result, Best Buys average total days to delivery became shorter than Amazon (Stella Service, 2014). In another example, Best Buy bear consider incorporating a system in TTS online sales platform, with which customers are able to book Geek Squad services for products they purchas ed on the website. As in these examples, Best 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 stub make all these can happen with engaged and customer-focused employees, the level 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 system, Best Buy bar-coded and scanned all inventory for tracking purpose, and used a computerized inventory replenishment program for managing inventory level at each store (Best Buy one-year 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 target 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 easy to be imitated by competitors and its competitive advantage was short-term. It was neither strategic enough and nor embedded into the core business. The war-ridden Forces Framework Out of five forces, Best Buy faced four threats industry competitors, substitutes, suppliers and buyers. Threat of potential entrants was not particularly observed.Industry competitors-High Best Buys direct disceptation was Circuit City, followed by Wall-Mart and Target, big-box retailers, and DELL, direct on-line computer manufacturer as shown in Exhibit AAA (Ala, 2006, p. 18). Substitutes-High E- comm erce 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 give notice price.Suppliers-Medium Both bargaining power of suppliers and its five major suppliers accounted for nearly 33% of the total merchandise offered. Best Buy did not usually have semipermanent written contracts with these major suppliers (Best Buy Annual Report, 2005, p. 8). On the other hand, products were not differentiated in general, and shift 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 increased in a great deal.Cost-sensitive buyers could seek 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 weave 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 bet technology and consumers together 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). This clear direction was set for the following reasons. First, there was a growing fear of losing competitive advantage over rivalries.Secondly, customer put more ferocity on customer se rvice and support instead of technical aspect 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 style 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 assistance 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 behavior accurately and quickly. Best Buy also required information system to share their experience with customers among all stores. IT strategy was to give employees flexibility when interacting with customers. First, through reporting system, daily chalk twaddle 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 training 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 supply chain and technological infrastructure such as RIFF tag. According 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. traditional IT in order to connect with customers. Best Buy has been actively using companionable 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 B uy 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 hardly a(prenominal) 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. Monitoring and responding to such posts are costly.