Best Buy’s Organization Strengths
The company focused on the consumer experience in its retail stores. It remained competitive because consumers appreciated a genuine concern of their shopping experience. This was dissimilar to sales tactics of employees trying to influence consumers to buy. Here, Best Buy was doing something that made its retail shops different from the competition.
Consumers began associating the shopping experience at the company, with a sense of satisfaction. The company focused on centricity and relied on demographics as well as segmentation to come up with a focus for each outlet. This allowed the company to satisfy the needs of the most lucrative customers and ensure high sales volumes (Griffin 265-266).
Recommended Porter’s Generic Strategies
Best Buy should adopt a defender’s strategy and a related-diversification strategy. As it continues to be profitable, the company will attract new players into the industry. The new contestants will likely have an advantage over it, in terms of their new relationship with customers or suppliers. A market disruption would make it hard for Best Buy to get back to its leadership position.
Thus, the corporation should look at lowering the cost of current products. It has already established a reputation of customer centeredness. Lowering costs would go further in making the point of customer focus.
The new defender strategy would aim at improving the performance of current products. Already, the firm has customer relation services such as the geek squad, and it should focus more on that to ensure that its customers continue to visit its outlets (Griffin 250).
Under related diversification, the company should let the success of some of its products and services influence the performance of other products or services in its outlets. Amidst new competition in the industry, the company would be protecting its reliance on a single product.
Currently, the company implements specific segmentation and centrality strategies for each of its outlets. Under the related diversification, the company would continue with the segmentation, but manage it centrally.
Best Buy would then be able to lower its overall costs of operation and increase its economies of scale. The new economies of scale savings can then support it in increasing employee compensation, and improving customer experience to frustrate new competitors into the industry (Griffin 252).
How Two Strategies Increase Best Buy’s Differentiation Strategy
A focus on customers by employees is encouraging creativity and innovation on different outlets. Customers find each shopping experience a little better and more personal than their previous one. The company analyzes the demographics and segments its customers, to have the most lucrative ones get the greatest attention.
Thus, customers expect, and indeed find, products related to their tastes and preferences given a prominence in the outlets. In addition, they get personal shopping assistants who are knowledgeable enough to offer them quality advice on the products they are purchasing.
The differentiation advantage allows the company to realign the inventory in an outlet in quick response to changing peculiarities of customer segments (Griffin 266). The power of front line employees to override inventory management plans ensure that Best Buy remains a unique company to customers, focusing on them in a different way than the competition. This differentiation advantage comes from the reengineered supply chain.
How Two Strategies Increase Best Buy’s Low-Cost Advantage
A reengineered supply chain allows the company to hold high volumes of fast moving goods and reduce its inventory for goods that are not core in a particular outlet. Therefore, the company remains lean and saves on stock that would otherwise fill its outlets and not move.
A customer-focused interaction with buyers, acts as a market research resource for the company allowing it to be responsive without having to hire external market researchers. Thus, it saves on costs associated with research and development. The additional savings pass to employee compensation or profit margins, which allow the company to continue offering low prices.
The customer services offered by the company allow it to reduce additional marketing expenses for its flagship products. For example, its geek squad departments offer complete technical solutions to new and experienced customers of electronics.
In return, the customers praise the superiority of the outlets customer service and recommend it to other consumers. The company saves on advertising campaigns whose success would not be as viral as the quality, customer service recommendation (Griffin 266).
Customer segmentation, which allows the company to focus on the most lucrative customers, reduces additional operation costs associated with a general focus on sales. Segmentation ensures that only necessary products and initiatives get to specific outlets, and the employees of the outlets receive specialized training on dealing with the particular customer segment.
In addition, the company has good relationships with high-tech suppliers who offer prime product flows into its outlets allowing it to jump ahead of competition and remain a low-cost outlet. The development of its own products also allows the company to compete with other retailers by offering low priced products. Massive economies of scale brought by new stores likewise increase the company’s low cost advantage.
Expected Characteristics of Mature Home Goods Industry
The mature home goods industry has little room for more creativity and innovativeness than what existing players already offer. The number of outlets in a given location is enough to serve the present population and there is no room for additional stores. Therefore, market entry is only by acquisition of existing outlets (Jeffs 89).
In the mature industry, sellers compete on product differentiation and quality of customer care, rather than price. This happens because the number of sellers offering the same product at matching prices spoils consumers for choice.
Strategies that Best Buy Should Use
Best Buy as an international company continues to explore new markets, for its retail outlets. The company needs to embrace global efficiencies buy locating stores where they enjoy the lowest distribution costs or offer the best quality to customers.
To reduce further costs associated with distribution and inventory management, the company should have regional distribution centers for its worldwide business (Griffin 258). Although the company already undertakes customer segmentation in its specialized stores, it might need to move additional inventory for its international stores to cater for the diversity of consumers.
The company should continue being flexible to customer demands in different segments. Products that are fast moving in one segment offer it insights on the preferences of those consumers.
It would then use the market intelligence to introduce or strengthen products in other markets and sustain high sales volumes. The company should continue using worldwide learning to rethink its specific and overall competitive strategy (Griffin 259).
As market dynamics change, its strengths and weakness alter depending on the introduction or elimination of opportunities and threats. Thus, the company should continue with its home replication strategy to shield off new participants in current markets and obtain an early advantage in new markets (Jeffs 100-102).
Griffin, Ricky. Management. 10th ed. Mason: South Western Cengage Learning, 2008. Print.
Jeffs, Chris. Strategic Management. London: Sage Publications, 2008. Print.