BEST BUY INC.

Company Overview:

Best Buy is a specialty retailer of consumer electronics, home-office products,

entertainment software, appliances and related services. Best Buy Company is the

largest retail company, originated in United States. Best Buy is the brainchild of the

company's founder and chairman, Richard M. Schulze. It was established in 1966 with

the name “Sound of Music” and because of some natural disasters it renamed to “Best

Buy Company” in 1983. After a tornado hit one of its stores in Roseville, MN, it held a

“tornado sale”, and later reopened in 1983 under a new corporate name, “Best Buy.”

(Funding Universe). From 1983 the company is operating in United States as well as in

Canada. In last few years they expanded their business and made it globalize through

launching it in the market of China. Best Buy operates retail stores in many parts of the

US and through their web sites under the brand name BestBuy.com and

BestBuyCanada.ca. In addition to personal computers, computer peripheral equipment,

and consumer video and audio products, Best Buy outlets, which are on average about

44,000 square feet in size, offer large and small appliances, ranging from refrigerators to

coffeemakers, and entertainment software, including compact discs, video games, DVD

and VHS movies, and computer software. Each of the company's business units also

runs an electronic shopping web site on the Internet. Overall, The Company is always

proposing new ways to increase revenue and provide the best customer service to their

customers. (Funding Universe).

ORGANIZATIONAL STRUTURE: TOP MANAGEMENT
Brian J. Dunn, Chief Executive Officer

Shari Ballard, Executive Vice President, Retail Channel Management

Eduardo Garcia Fabregat, President, Best Buy Mexico

Rusen Kopmaz, Country President, Best Buy Turkey

Jim Muehlbauer, Executive Vice President - Finance and CFO

Kal Patel, Executive Vice President, Emerging Business

John Pershing, Executive Vice President, Human Capital

Mike Vitelli, Executive Vice President, Customer Operating Groups

Source: BestBuy.com
CEO: Brian Dun
Brian Dunn is chief executive officer of Best Buy Company. Mr. Dunn became Best

Buy’s CEO on June 24, 2009. Dunn began his retail education as a teenager when he

took a full-time job at a local grocery store. After graduating from high school, Dunn

continued to focus on the retail industry and started working at Best Buy. He started with

Best Buy in 1985 as a sales associate when the company operated just a dozen stores.

In more than twenty years since than, his career has grown simultaneously with company.

In 1989 he became a store manager and in 1990 a district manager in Minnesota. He was

promoted to regional manager for Ohio, Indianapolis and Philadelphia stores in 1996, and

in May, 1998 he became regional vice president of the northeastern region, leading Best

Buy’s entry into that market. He was promoted to senior vice president of division 3 retail

sales in March 2000, which handles all of Best Buy’s East Coast operations. He was

named executive vice president of U.S. retail in 2002, and president of retail, North

America, in December 2004. He was named president and chief operating officer of the

Best Buy enterprise in January 2006. Than eventually in June 2009 took over the

responsibility of CEO.
BEST BUY MISSION:
"Our goal is to create a flexible, high-velocity supply chain operating with better product
availability for customers at a lower total cost for the company."

Best Buy constantly lowers their prices by beating out all their competitors’ prices and
maintaining quality customer service. Best Buy uses price as a tool to increase sales.
They do this by making sure that they are offering competitor pricing, and making sure
that every week prices are updated by what their competitors are currently selling their
items for. By this method they are increasing their revenues. (BestBuy.com)

BEST BUY VISION:

"People. Technology. And the pursuit of happiness."

“Making life fun and easy”.

According to the management, the only way to get customers to come into Best Buy is by
word of mouth and the only way that is going to happen is by making sure that
relationships are being built between consumers and employees. Best Buy has a strong
belief that relationships between energized employees and satisfied customers will lead
to profits and growth. They want to help customers find the entertainment technology that
best meets their needs and that will integrate with their existing entertainment system to
maximize their enjoyment (BestBuy.com)
SWOT ANALYSIS:

“SWOT analysis will help to examine the condition of the company from internal as well
as external”
Strengths: The Best Buy is the specialized retailer store in the US and Canada dealing
with electronic items. The company is enjoying the leadership in the market because of its
highest share. It is one of the leading companies in States with total market share of 18%.
Because of its large operation, the company is able to capture the market and supply the
products on cheaper prices. They have high brand recognition. The company is capable
of performing strong operations during coming years.

Weakness: The revenue which is continuously generating by the Best buy’s are only
from one sector i.e. from flat panel TV’s. It is the biggest weakness for the company. The
company should not rely on one product. If the product is hotcake today, it can be
outdated tomorrow. Then it will harm the company as well as its revenues. Plus they high
a cost of maintaining mega warehouses like stores.

Opportunities: The constant innovation of electronic items in the market is an

opportunity for the Best Buy Company to increase their profits by offering new products.
Best Buy Company has an opportunity to expand their business globally. As electronic
items have a big consumer market, so there is also a chance of gaining more profits
inside the other countries. After successful operation in Europe and parts of Asia, it can
explore new markets in other parts of the world which they have not yet invaded namely,
India and South America.

Threats: Electronic items are mostly luxurious items. The consumer mostly buys these
items when his/her income is high. And high income is depended on good economy. If
the income of a person falls then he will definitely go for the basic items not for these
secondary items. So at this point the company can lose the profits

STRATEGIC PLANNING:
The biggest competitors of Best Buy Company are Office Max, Office Depot, Wal-

Mart, HH Gregg and all those retailers which are supplying those products on reasonable

prices. The company has also brought some changes in their business to stay in the top

line. Like, they offer their products online as other companies are doing to help overcome

online competitors, Best Buy allows consumers to purchase their items online.

Consumers then have an option of having the product shipped to their home or picking it

up at a local Best Buy store.

Best Buy has recently established several new partnerships bringing new products

to their stores. Apple, Dell, and Napster are some of the new partnerships. Best Buy

became the first retailer in the US to be able to sell the Apple iPhone. Apple sent trainers

to each store in order to make each employee more knowledgeable on the iPhone. They

became the only retailer able to sell Dell computers. They also recently bought in to
Napster in order to try to increase their subscribers and expand the capabilities in the

digital downloading business. Best Buy also bought 50% of a company called Carphone

Warehouse in Europe, which was done to expand Best Buy stores into European

countries. These very strategic decisions by Best Buy were another successful marketing

tool. They became an exclusive place for some of the products like Dell computers and

Apple iPhone. Their strategy bought in many new customers as well as increased their

repeated customer’s sales. (BestBuy.com)

FINANCIAL ANALYSIS:

Type (millions) 2005 2006 2007 2008 2009

Total Revenue 27433 30848 35934 40023 45015
Operating Income 1442 1644 1999 2161 1759
Net Income 984 1140 1377 1407 1003
Total Liabilities 5845 6607 7369 8274 11183
Total Assets 10284 118604 13570 12758 15826
Total Inventory 2851 3338 4028 4708 4753

Financial Strength
Current Ratio (MRQ) 1.05
Quick Ratio (MRQ) 0.34
LT Debt/Equity (MRQ) 0.24
Tot. Debt/Equity (MRQ) 0.34
EPS 2.62
Inventory turnover ratio 9.40

Management Effectiveness Growth

Return on Assets (TTM) 5.6% Sales (5Yr) 12.9%
Return on Equity (TTM) 22.0% Earnings Per Share -4.6%
Return on Investments 16.0% Dividend Growth (5Yr) 15.2%

P/E (forward 12 1 year EPS growth 5 year EPS growth

Market Comparison P/E mnth) rate rate
BEST BUY 13.9x 11.2x -23.53% 8.19%
INDUSTRY(TECHNOLOGY) 13.0 11.1x -8.23% 10.31%

SOURCE: MSNMONEY.COM
 Since Best Buy has a Current ratio of 1.05 and quick ratio of 0.34, I see there is
going to be some problem. Low values for the current or quick ratios (values less than 1)
indicate that a company may have difficulty meeting current obligations. Low values,
however, do not indicate a critical problem, if an organization has good long-term
prospects. It seems Bestbuy have a forward looking long term prospects with many new
markets to explore I believe debt oblugation would be taken care of. The inventory turn
over ratio of Best buy seems to be an Industry average of 9.0, which means it will take
(365 days / Inventory ratio) almost 40 days for inventory to sell. By looking at PE ratio of
13.9 it seems a healthy average since between 10-17 is considered a fair value of the
stock. (Wikipedia) Plus the browth rate of the sales of the company is well beyond
double digit of 12.9%. But the alarming information of the company is its return on assets
which is low 5.6%, which is a poor showing. But in its defense, companies that require
large initial investments will generally have lower return on assets. Since Best buy is in
constant expansion mode. Best buy has a very healthy return on equity, which is 22%
way above the industry norm. Except of 2009 most of the previous years the company
has perfrom well, its revenue were up, so as the net income, which rose about 30% in
last 5 years (except 2009). The stock price has gone up by $8 in previous year (currently
trading at 36.50). (Wikipedia)

HUMAN RESOURCES FUNCTION:

“Best Buy success is directly related to its people – their commitment, their innovation and
their passion. As we look to the future and the opportunity to serve our customers in the
digitally connected world, it is critical that we attract, motivate and retain experienced,
knowledgeable and creative employees,” said Best Buy CEO Brian Dunn (UPI.com). By
analyzing Best Buy website’s human resources department, I believe they value their
employees whole lot. The Human resources department is headed by Carol A. Surface
who reports directly to Mr. Dunn. She will be responsible for developing and directing
Best Buy’s global human resources organization. She will lead Best Buy’s overall human
resources strategy, including global talent attraction, staffing and retention, leadership
development, diversity, organizational design and cultural development, employee
education and development, compensation and benefits and employee relations. She
also will have oversight of Best Buy’s legal department. (Bestbuy.com) Best buy
believes in diversity in workforce, and an inclusive policy where they try to promote within
the company whenever posible. They sponsor an Employee Business Networks (EBN),
which emphasis on diversity such as age, race, gender or sexual orientation. The EBNs
provide opportunities for education, networking and personal development for their
employees. As the company looks forward, employee engagement will continue to be
core value and priority for Best Buy. They will continue to invest in their employees and
encourage their participation in the development of overall business. They are trying to
expand their efforts to make employee innovation a reality through investments in
technology, processes and training. Best Buy has approximately 100,000 employees,
including approximately 5,000 who work in the corporate office. Typical qualifications of a
Best Buy employee are to enjoy interacting with people and initiate conversation naturally
and show authentic interest in others. Many Best Buy employees, especially at the
corporate level, are under a policy of Results Only Work Environment, wherein
employees are paid for results rather than the number of hours worked. The executives
at Best Buy who proposed the strategy have since started a consulting group called
CultureRx. This model is increasingly being integrated at the store level. Best Buy does
not allow expensive gifts from vendors to be given to employees (SPIFFS, etc), nor does
it allow employees to collect tips or gifts from customers of any type. They pride
themselves itself on the fact that their sales people are not on commission. All this
policies have made Best Buy standout among their competitors, as there is a high morale
among employees and an emphasis more on the bottom line. They recruit most of their
employees from job fairs, which they hold constantly at college campuses. The second
best place for them to recruit is through their website.

INFORMATION SYSTEMS: WEBSITE

A website is effective when both the users and the owners achieve goals for the
site. For the users, normally some kind of sequence is involved. First, users must know
about the site, then they find the site on the web, then they find the page they want, with
the information they want. Going through the Best Buy website, it is way easy top
navigate and find what you are looking for with many options. Since Best Buy does a lot
of adverstising its name is very attractable and popular. The company does it well to
keep it updated with new information and deals what they offer on their website. Best
Buy delivers their advertisements in a very bright and joyful fashion. Most of the paper
advertisements have a blue background with several yellows and reds in order to grab
the consumer’s attention. Generally if they have a special for the week they will highlight
it in red and put it on the bottom of the cover page. Best Buy is most well known for their

yellow tag . All prices for the products are on a yellow tag whether you are
looking at one of their advertisements or a price tag in their stores. This unique way of
advertising helps them very much at time of promotions and sales to differ themselves
from their competitions. And their website is a very crucial part of all this operation.

OPERATIONS:

Best Buy has a certain way of targeting their customers by separating them into
several different lifestyle groups. The four groups include Urban Trendsetters, Upscale
Suburban, Middle America and Empty Nesters. The first lifestyle group is the Urban
Trendsetters; this group makes up about 26% of their customers and about a quarter of
their revenue. They are between the ages of 23-30 who is typically single. Their second
lifestyle group is Upscale Suburban; they make up about 22% of their customers and
about 25% of their revenue. The third lifestyle group is Middle America; they are made up
of 31.3% of their customers, and around 32.9% of their revenue. The final lifestyle groups
owns more than 80% of the personal savings in the US, controls 70% of the financial
assets, and are at the height of their earning power. This breakdown of their customers
profile helps Best buy understand their customer needs and their spending habits, which
they can use in their marketing strategies. Best Buy’s operating model “places greater
emphasis on customer-facing employees and provides more focus and clarity to the
leadership roles in the store,” according to Susan Busch, spokesperson for Best Buy.
(Twice) Best Buy launched what it calls Greener Together to increase the energy
efficiency of its products as well as reduce consumer waste through more recyclable
packaging and proper disposal of certain electronic components. (Best Buy) They have
well documented safety procedure, which they follow as well do a routine drill of those
guidelines inside the store. They also have a well documented code of ethics for their
employees on their website. It gives step by step directions about how to resolve any
problems which occur at store level among employees and their supervisor.
 CONCLUSION & RECOMMENDATIONS:

In conclusion one of successful electronics store of our time is utilizing all the

marketing strategies it needs to create new customers as well as maintain their regular

loyal customers. They use a very competitive pricing policy to give them upper hand with

their customers. They offer very exclusive products to their customers, which customers

usually cannot find anywhere else. They use all the publicity they can get through their

socially good deeds. They have done a very good research on their customers who

comes in their stores and shops on their websites. They are one of the pioneers in

advertisements as far as creating funny ads to make their point. All this marketing

strategies have made them very profitable companies of our time. The area they need to

work on is their service department, Geek Squad. The time it takes for their response to

a problem needs to be shortened. Since Best Buy is known for cheaper price, they need

to highlight more of the same items which are cheaper from their competitions. Looking

at the financial analysis, I would recommend them to improve their current ratio and quick

ratio, by reducing spending, which will help them ease some of their debts on the books.

The overall standard of the company is in good condition, with a good direction from their

CEO Mr. Dunn. I would still like them to focus on small things, like handling day to day

operations. There is a danger of loosing the golden touch of customer service, once a

company becomes big. Just look at their most immediate competition Circuit City, which

end up filling for bankruptcy and closing down stores. They should never forget, what

brought them to this level, competitive pricing and good customer service. No matter how

much the company grows, they should hold down to their vision:

"People. Technology. And the pursuit of happiness."

“Making life fun and easy”.

 WORK CITED

Solomon, M.R (2004). Consumer Behavior: Buying, Having and Being sixth edition.
Upper Saddle River, N.J.: Prentice-Hall.

Marketing Power June 30, 2008, from American Marketing Association Web site:
http://www.marketingpower.com/Pages/default.aspx

The Marketing Mix, the four P's of Marketing. June 28, 2009, from Net MBA Web site:
http://www.netmba.com/marketing/mix

Great Ads. (2008) Best Buy Inc. Commercial etc. Nov. 29th, 2008. http://great-
ads.blogspot.com/2008/11/best-buy-funny-commercial-2008-holiday.html

Funding Universe, November 2004, from Company History Best Buy Inc.
http://www.fundinguniverse.com/company-histories/Best-Buy-Co-Inc-Company-
History.html

MSNMONEY, March 2010 Detail Quote http://moneycentral.msn.com/detail/stock_quote?

Symbol=BBY

Wikipedia.org, March 2010 Definitions

http://en.wikipedia.org/wiki/Current_ratio/ Quick Ratio

UPI.Com February 2010, Analysis

http://www.upi.com/finance/?ChannelID=3191&GUID=11944452&Page=MediaViewer

Best Buy Inc. March 2010

http://bestbuyinc.com/corporate_responsibility/employee_engagement.htm

Twice, Best Buy Revamps Store Operations, March 2009

http://www.twice.com/article/252264-Best_Buy_Revamps_Store_Operations.php