Best buy Minnesota-based
Posted: Mar 14, 2019
Best Buy is a Minnesota-based company founded by Richard M. Schulze. Richard and his partner established a Sound Music, Inc. and came up with their first store in Minnesota. They had the intent of capturing a share of the Twin Cities retail market (Derdak et al., 1988). After four years since the company’s inception Richard bought out his partner and continued to expand his retail outlets and he majored on audio components until the early 1980s. Richard realized that there was a limitation of his business due to the few buyers normally made of the young people between the age of 15 and 18. He decided to add more products so as to expand his offerings and in that effect he included other appliances and VCRs, and this saw him quickly increase revenue. His revenues reached up to $9.3 million in the year 1982 and in the following year, 1983 Richard renamed his company as Best Buy Co. Inc. In the year 1984 Richard made another leap forward by introducing the superstore format, and he nearly mastered half of the local market by capturing 42 percent.
The company operated eight stores in the Midwest during that time and by 1987 there were three times number of stores compared to those of 1984. At the same time, revenue and earnings also shoot up to &239 million. Best Buy went public in the year 1985, and it raised &8 million via an IPO, and the New York Stock Exchange put the company on their list. Richard introduced Concept II stores in the year 1989 whereby he reduced the number of employees to two-thirds, there was a limited number of sales help, no waiting for merchandise, and there was one-stop purchasing. The idea saw his company rise again to prominence after some years of stiff competition that made Richard lose revenue to his competitors. Best Buy reported the highest sales in the company’s history in the years 1992 and 1993, and after that Richard opened 38 new retail stores, and that increased sales by 19.4 percent.
Since then the company continues to open more stores and to expand their territory and market share. In 1997, Best Buy achieved its objective of becoming the industry leader though sales declined due to the number of unsold PCs as Intel introduced a Pentium MMX technology. By 2003, Richard had over 600 stores across the globe, and he opened a global office in China. Forbes magazine named the company in 2004 as the company of the year and the following year the magazine listed it in top ten most generous companies in the United States. The company bought Napster and Cinema Now so as to keep pace with the advancement in technology by enabling digital downloads. The Richard celebrated in the year 2008 when he was opening the 1000th store in Minnesota. The company announced a quarterly $1.7 billion loss in 2012, and Richard made plans of selling 50 of Best Buy stores in America that focused on the smaller cell phone sales and mobile stores. The company’s current CEO is Hubert Joly.
Products of the company
The company, domestic and international sales entail six categories which include appliances, consumer electronics, services, entertainment, and computer and mobile phones (reuters.com, 2015). The consumer electronics consist of home theaters and television, camcorders and cameras, DVDs, Blue-ray players, car stereo, satellite and navigation radio, headphones, speakers and related accessories. The category of computing and mobile phones consists of mobile phones, desktops, notebook computers, tablets, and other related subscription services and accessories. In the category of entertainment, there are digital downloads, gaming hardware, and software, computer software, CDs, Blue rays, and DVDs. In the appliances category, there are both small and large appliances, bath fixtures, and kitchen appliances. The services category entails technical support, warranty contracts, delivery, and installation. The company operates in America and its territories using different brand names such as Geek Squad, Pacific sales, best Buy Mobile, and Magnolia Audio Video. In the international segment, the company uses such brand names as Geek Squad, Future Shop, Cell Shop and Best Buy Mobile.
The company’s competitive environment
The rising competition from other online players likes eBay, Amazon, etc. is putting pressure on the sales and profits of Best Buy. Best Buy’s potential clients may be using brick-and-mortar stores to Window Shop Best Buy’s online products and then order them from other online stores at cheaper prices. That is what is forcing the company to lower its margins and match them with prices of other online stores. The company introduced a policy known as the ‘Low price Guarantee’ in March 2013 so as to price match the local competitors and online competitors in all their products. That is in an attempt to counteract the problem of showrooming. The company plans to make their prices to be more competitive I the near future. The company’s lower prices put a lot of pressure on the company’s bottom-line despite the prices enhancing its competitiveness in the market.
The company recently increased sales in the gaming console, and they expect the increase to have sustenance through GameStop are posing a stiff competition, thus becoming a threat to the company. GameStop is a well-established company in the market just like Best Buy, and they lead the market in their hardware, software and games such as the popular PlayStation 4 and Xbox One (Forbes.com, 2014). There are other companies competing with Best Buy such as the HH Gregg, Fry, Circuit City and CompUSA, just to name a few. The CompUSA and Circuit City went out of the market in 2008 and 2009 respectively. The electronic industry of Best Buy is different from other industries due to its variety of electronic inventory and physical size.
Direct Competitor Comparison
Qtrly Rev Growth (yoy):
Gross Margin (ttm):
Operating Margin (ttm):
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PEG (5 yr expected):
Fig 1 The comparison of Best Buy with competitors
AMZN = Amazon.com Inc.
AAPL = Apple Inc.
WMT = Wal-Mart Stores Inc.
Industry = Electronics Stores
The comparative forces model
Despite the fact that the company is holding a leading market share in the electronic industry, it is facing stiff competition, and it has been declining since 2008 (Moylan, 2011). Currently, there are 19 online companies with the same products offering and several other offline companies. Those strong forces in its industry are the ones that are causing it to be unstable in the competition. There are some industry dynamics that are substituting the company in its sales, they are known are the competitive forces model. One of the dynamics is showrooming that I mentioned before; the brick and mortar shopping to determine a preference for buying and then purchasing online with a lower price. There is also more information available to consumers through online as well as price comparison tools via mobile phones. Another dynamic is the price matching programs and these results in driving down price margins. There is also the shifting of consumer electronic spend, from the PCs to mobile phones and tablets. The last dynamic is the product substitutions such as the replacement of CDs and DVDs with streaming media and digital music (Mishra et al., 2013). The specific competitive forces model for Best Buy
Currently, the threat of substitute products is low. There are options such as Wal-Mart, Target, but their clients do not get the quality and variety of products that meets their desires. The new entrant’s threat is low to moderate because this business needs high investment and the name the company has well establishment that customers remain loyal while other companies are unable to capture the market. There are two online stores that are competing with the company, and they include Egghead and Electronics Boutique. The company acquires its products at low prices directly from the manufacturers such as Yamaha, Sony, Toshiba, and Panasonic, etc. These companies look to Best Buy to pass on that price benefit to the customers. In case the company fails to comply with its suppliers conditions, it is subject to face some serious consequences in the light of customer loss as their low price would no longer be a marketing strategy. That is because the suppliers may decide to increase prices of products at any time.
Because the company clients do not buy in large quantities, a customer cannot have bargaining power. The comparative low prices of the Best Buy make customers prefer it to other retail companies. The company in turn works hard to retain their customers by providing them with products of high quality at low prices to fight competition. Despite the fact that the company has rivals like radio shack, Wal-Mart, Circuit City, they outdo the other companies in offering service of high quality, variety, good prices and staff with electronic expertise.
Company’s current business strategy
The company launched some business strategy campaign in the year 2013, and it seems to be taking them somewhere in ascending the heights of competition (Forbes.com, 2013). They called the strategy as Renew Blue program whose big focus was to increase online traffic and conversion rate through the provision of a more interactive shopping experience. That means they have to keep track the user preferences by watching user activities on their website and consequently generate recommendations from the same. They will then enhance the browsing by revamping the site platform to make browsing easier by creating pages of goods that offer smooth and consistent navigable experience across
To reinvigorate customer experience is giving the customers better products and services that are much better than the offerings of their competitors. By monitoring the customers’ activity on the company’s website, they can understand the customer preferences and, therefore, propose to the customer some other products on the same line. They will become a social and community team that proactively monitors the blogosphere of their clients who need assistance and then help to resolve their questions. They want to engage with the customers in every channel and allow the customers to engage with each other through the same platform. The enhancement of Geek Sq1uad service model is also on the line of serving customers better through help desk agents to issues raised by customers via the Geek Squad site. The Geek Squad will help the customers in setting up ten appliances or the other electronics as well as carry out the repair of the customer products in case of any flaws in the products that may require repair.
SWOT analysis for Best Buy
The company is currently a leader in the sale of electronics in the USA, but it is expanding its territories elsewhere around the world. The company has numerous other stores in some countries such as Canada, China, Puerto Rico and Mexico, just to mention a few. It is using the online media to reach many of their customers, and that is making it drive their competition by a great deal. They have a wide brand of products that they sell to their customers and apart from those products, they also have other services and this helps them reach a wide range of clients. The products come directly from the manufacturers though they also include their brands, and those products are consumer durable. The company consists of a skilled workforce as well as sales persons, who are over 200,000 employees. It is among the largest distributor of music in the United States, and it can utilize that brand name for their sales. Best Buy Company also incorporates a strong performance service plan. Best Buy is going green because of the implementation of the buyback, and ten recycle program that aid in the reduction of waste. The company’s ability to create a connection with clients makes it have 16% of the market share of tee $130 billion northern USA market for electronics and related device.
Their brand recall has limitations in countries outside the USA and the company also faces stiff competition in the consumer durable category of products. The name Best Buy has an association with its initial positioning as sales in liquidating their merchandise. The reduction of prices to match competitors puts a negative pressure on the company’s revenue and prices. The company has been focusing in the market for affordable price products, ignoring the niche market for the products with high demand. Best Buy has established an image of lower quality products incorporating the signage types, lighting, fixtures, and even their uniforms an example of this.
The company can expand into lifestyle segments because the field has a wide number of consumers and by so doing they will expand their revenue to a great extent. The company also can further take advantage of the online media to attract more customers still. They can make use of such social media as YouTube, Facebook, Twitter, etc. and popularize their business the more than it is at the moment. There are also the opportunities for the company through the penetration into the economies that are emerging for it to increase its global visibility.
The pressure from the competition can lead to the reduction of the prices for their products, and that can be a downfall for the company. Wal-Mart is just 5 percent points behind the company, and it is climbing so rapidly so it may overtake Best Buy if no changes take place for Best Buy to help widen the gap further. The decision of the public sector for purchasing of goods depends on the cost, so if Best Buy do not offer goods of low prices than its competitors, then it is likely to lose the customers. The current purchasing behavior of buyers is reliant on the economical changes, and there are cut back spending in this current economy. In its segment, there are many companies, so it faces stiff pressure from the competitors. The buying patterns of business are usually repurchases instead of modification or making new purchases, and that makes the company penetrate the market. The competitors also have overwhelming promotional; tactics, and so the company needs to do more so as to outdo them.
Business opportunity that the company can avail to improve its competitive environment
I would like the company to have an RFID system implementation in their activities to support the accountability as part of their new opportunity. The RFID technology is in usage in many companies across the globe such as Wal-Mart, and that can help the company. For instance, exports have it that there is a lack of accountability of 50 cable card each month, and that is a big loss for the company. The introduction of the RFID technology will help the company to track all their products from receptions through the shipping to customers and when the items are in the stores. Through that technology, the company will be able to detect and track the trucks or store in which fraud is occurring and thus be able to mitigate the vice as early as possible. The technology helps retails to identify individual items, case or pallets wirelessly with richer data, and a line of sight of the items is needless. That will be an added functionality to the current bar code scanning that the company leverages.
It will make this organization in question more competitive with online sellers via multiple channel sales. RFID technology usage in retail helps in frequent inventory counting that in turn increases the accuracy of the inventory. Best Buy cannot be great in multichannel production without having high confidence at the store level. The tags of RFID technology that contain a simple chip and an antenna are in placement in goods pricing labels, and their Powering is via radio signals emitted from the card riders. The readers can be hand-held, or they can reside in some fixed place. The store associate can take advantage of the technology to check the inventory of the entire rack of the electronics, for instance by simply walking around the displayed items with a hand-held reader. The technology helps in tracking of items between the point of purchase from a supplier and the end point of products sale.
The technology will help the company in having real-time notification of the security team when the RFID tag embedded items leave without payment. It also provides a competitive advantage in that the saving of company from theft of items can allow the company to offer products at low prices, and that can be more attractive to customers. The RFID smart labeling ensures the monitoring of unattended inventory, automatic item identification, smart shelf systems, and shipping and receiving applications. In the shelf stocking of products the technology will aid in the real-time notification, and improved product replenishment. It can also help in retaining of the company clients who may turn to competitors in case item inventory is out of stock and it enables automated charting as well as tracing of the purpose product forecasting.
The RFID technology will help in the reduction of time spent in line, reduction of labor or time cost if employees and it streamlines the checkout process. That is because it can scan multiple products and pay for the product at once. In the area of overhead cost, the technology will assist in the tracking of product shipping and reception from one point to another automatically as compared to manual tracking and that saves cost and time. The RFID technology will help the company to know the number of inventory units is on-site versus the manual process and that consequently saves on labor and time cost. Also, the efficiency and error reduction cuts down the manual labor costs.
Contrast of the new business strategy from the current business strategy
The new business strategy is as an essential improvement to the company’s current strategy as it helps in automating of the system, and this culminates to improved inventory and reduction of manual labor. The new strategy will help the company to save a lot of money trough the reduction of employees and other intermediate personnel. That is because the technology helps in tracking of items from anywhere as long as they have the RFID tags embedded in them. The new strategy will help the company to curb the cases of theft in the stores and lack of accountability for the loss of items that may be prevalent in the company. The new strategy helps to facilitate faster items' checking when they arrive from the suppliers instead of using the current manual method and that saves time and money. So the new strategy is the way for BEST Buy to go because of the many advantages that come with it. It comes as an addition to the company’s existing strategy in that it automates most of the processes in the supply and retail chain.
Best Buy value chain analysis
The value chain of the company is the sequence of activities that the company provides in the delivery of products and services. The analysis of the value chain for the main company question will; break down its activities into basic elements like marketing, product development, etc. In this analysis, I will take each segment as a value-creating activity. The value chain for the company leads to a competitive advantage in the light of decreased costs, better product availability, increased efficiency, and increased sales. I will look at the internal activities that the company engages in when turning the inputs into the outputs. That will help unfold where Best Buy’s competitive advantages, as well as disadvantages, exist. I will make use of Importer’s generic value chain model that represents all the internal activities that an organization engages in top ensure production of goods and services. The value chain consists of primary activities and support activities that add value to the final product. The primary activities add direct value while the support activities add indirect value to the final product. The model looks like in the following diagram.
Best Buy engages in primary as well as the support activities that help them create differentiation and cost advantages over their rivals. The company endeavors to partner with their vendors. The company adapts the value chain activities to suit their particular type of business that is the sale of electronic products and by extension to offer related services such as repair to clients. Being a retail company Best Buy engages various primary activities such as partnering with vendors, purchasing of goods, managing and distributing inventory, operating stores, and marketing and selling. Best Buy has strong partnerships with their vendors as they know that this is the only way to continue to receive products with low prices to beat their competitors. That is one of the techniques that have been making them to out their competitors in terms of low prices of products to their customers. Some of their vendors are for Instance Samsung, HP, Microsoft, Yamaha, etc.
1. Inbound Logistics
Best buy has direct links with the actual manufacturers of products and by so doing they receive products at very friendly prices. They also have good ways of handling their products, ensuring the safety of the materials and high performance. They also provide after sale services to their customers like repair of the products. They have good policies for products handling while in transit and when in storage. They also have good techniques of inventory control by trying to optimize the inventory levels. Best Buy uses the system known as Retek support system (RSS) to control their inventory system (team1bestbuy.blogspot.com, 2013). The system has self-sufficiency, and it controls all activities making them neither too high nor too low. The company ensures that the materials do not remain in the inventory for too long before dispatch. They use the P system in controlling their inventory, meaning that they review their inventory periodically at fixed time intervals using the system mentioned earlier. Their inventory management is as in the following example.
The processes in the primary activities in the value chain of Best buy include the conversion, assembly, packaging and maintenance. They carry out the conversion of some products as to have better products that meet the needs of their customers though that is not always the case as they receive products from manufacturers. They ensure that their products have well maintenance so as to make them remain in good working conditions for a long time and to avoid complaints from their customers. They have staff with the required skills that ensures that the task has implementation in-house.
3. Outbound logistics
The primary activities that fall in this category include warehousing, order processing, picking, shipment, and delivery. The Company introduced the ship-from-store strategy last year whereby the company’s total days to delivery were around five. They improved to four days 18 hours (McMahan, 2014). The company makes use of their data warehouse for the provision of business insight to its numerous users across the globe. Te warehouse contains database-driven BI platform, and it enables the company to integrate the customer and product insights collected from its value chain. Then Teradata system serves around 40,000 people and the average processing rate per day is 2 million queries (Ohio, 2010). They provide a way to track the orders being shipped, and they also offer free shipping to their customers.
4. Marketing and sales
Best Buy is doing its best to connect better top their customers through the mobile channel, and they do it via the mobile site, banner ads, apps, and SMS. They use the ‘Renew Blue’ to the provision of employee engagement, supply chain, online stores, Geek Squad service, etc. They continue to add differentiated customer experience in several areas such as the home theater, appliances, and mobile. They plan to shift from their traditional TV advertising to digital marketing. The recent introduction of Athena big data service provides the marketing shift to more personalized Emails and offers to have a more customer targeted approach. The company plans to cut down its cost of the products sold via the increase of their supply chain efficiency. The company also uses Experian’s INSOURCE consumer marketing data to have a broader view of customers. The CRM helps them to analyze the customers’ data accuracy, completeness, and it has the capability to analyze customer purchase history (Experian.com, 2001). That ensures that there is the provision of insight into customers’ current and future needs.
The services that belong to this category include the installation, repair, and training. The company has agents known as Greek Squad, who helps customers with such services as setting up of wireless networks, repairing for them computers and laptops, scanning and removing viruses from computers and laptops, etc. The Greek squad agents help to set up computers for customers plus the hardware and software installations (bestbuy.com, 2015). The company also has well-skilled employees in all fields, and they train customers on the way to operate their machines and how to install software and hardware. The trainers are specific employees of the company, Geek Squad consultants and advisors in various fields.
Value chain support activities for Best Buy
The company has a procurement team that oversees the procurement of products from the suppliers for sale or internal use. The procurement team has the mandate of strategic sourcing, procurement operations, and vendor management. Eth co0mapny also provides paper procurement tat ensure sound environmental stewardship for the purpose of protecting the environment from pollution. The company strives to develop and contribute to the growth of their potentials suppliers via a fair and equitable procurement competition of all goods and services.
- 2. Technological development
The company relies on, knowledge management systems for the delivery of inventory management, distributions as well other functionalities. They have such IS as a customer management system, Social CRM, and process relationship management systems among others. They interact with customers using various current technologies.
3. Human Resources
The company ensures the hiring and recruitment of staff with the professional skills in various fields so as to support better the business functions and customer requirements. It also meant to help the customers in the resolving of issues regarding the functionality of the products they purchase from the company. The expertise knowledge also helps the company to offers after-sales services to customers. The company offers training to its employees whenever there is the introduction of new technology in the market. For instance when there was the introduction of Windows 8 in 2012, the company dedicated 50 hours of training to their employees so as to prove its value to customers (Gallo, 2012). The company endeavors to develop their employee skills through training and giving compensations to employees so as to boost their morale of working.
The company has clear management strategy with a clear division of authority, and it leverages leadership with relevant skills so as to ensure that the company continues to perform as expected. They regard morals of high level and have a strict code of ethics that guides the employee and management behavior to uphold the company’s reputation across the globe. The company has one team at every store equipped with the necessary skills, and on top of that the company sends plenty of information to all the stores with new product details and training DVDs. They also have proper finance, accounting and IT infrastructure that ensures all the processes and functionalities in the company take place in the required manner. They can track all the financial and accounting activities so as to have better accountability of all expenses and responsibilities.
How the new business strategy fits in the value chain?
The new strategy integrates very well in the company’s value chain because it is part of the primary activities in the category of products and technology development. It integrates directly with other primary activities so as to deliver more value to the value chain processes. It is among the key elements that are indispensable in leading the company’s profitability. The wish of any company is actually to reduce costs as much as possible and to increase profits, and so the new strategies will the company to achieve that. It helps the company to deliver more value to its customers as it mitigates many of the weaknesses that exist in the retail process such theft of items and other items lost to other benefits. It will be an additional system to the company’s information system that helps in the company’s technological improvement. The technology will positively impact other primary and support activities in the Best Buy value chain, thus making the company stay at the top of the competition. The following figure shows the integration of the new strategy in the company’s value chain.
Business process model for the new strategy
The business model demonstrates some of the functionalities of the new strategy and how it helps in the tracking of products. As much as there are tags on the products, the company can track the products during shipments or in the store using the RFID reader. The reader works even when the products are not on-site the case is with barcode readers that the company leverages currently. When some products are missing, there will be information delivery to the help desk so that the cause of the product can have tracking so as to know where the products are. The help desk can know if the products broke down are someone stole them or if the delivery of the goods went to the wrong people. The case takes an example of goods in transit; it does not include goods that are in the store, but the case is almost the same.
IT/IS elements of the new strategy
The database will handle the storage of information from the RFID tags. The database will consist of a good amount of space because of the enormous information in placement on the tags as they contain terabytes of information due to the many products in the store and those on transit. All the information regarding the products will be in storage in the databases, and the tags will be referring to the databases. The code on the tags will display all the information concerning the products as retrieved from the databases. All the products updates information will also go the database, for instance when there is the breakage of an item or sale of products.
The server handles processing of the information that is coming from the server. It makes it possible to configure as well as monitor the RFID devices without the need for the line of sight. The server also is for the monitoring of the RFID business processes and the adding of the device providers for usage. From the RFID, you can control the RFID system such as starting and stopping the RFID services. For instance when the company sells an item it can be upon the choice of the buyer top disable the services by the RFID tag or not and that can take place from the server. The activity takes place by stopping the services of the RFID system from the server and consequently deleting the products information from the database.
Plug and play Middleware
It includes the end user RFID devices as well as the end user RFID tag. That leads to the need for the application program interface RFID hardware. The plug and play middleware helps in the management of the RFID information from different hardware (Jian et al., 2009). The middleware manages information from all the third party RFID hardware, parse the information, and offer needed information to the corresponding applications. The parser for the plug and play middleware is the remote procedure call and the server client socket link.
Virtual private network
The VPN will be in place so as to interconnect the multiple retail stores with the main enterprise system, and this will make it possible for the RFID system information to be in a provision in all stores. The enterprise system is what interconnects the virtual private network with the enterprise operational data store (Sounderpandian, 2007).
The standard network for the RFID system is cat seven, 100-BASE TX cables because they provide a high-speed network fro tag readers. There can also be the powering of the RFID readers via the Power over Ethernet Standard, which is IEEE 802.3af. The technology reduces te number of wires as it obviates te need for frequently for placing batteries on the readers or charging them. That makes it easy to have substantial computing and communications capacity in smart tag readers connected to a wired network. The wired technology also enables te implementation of lightweight security mechanisms that counteracts the data alteration and falsifying information by the hackers.
The RFID technology can operate in a variety of wireless technologies like Wi-Fi and Bluetooth working in the free radio spectrum ranges of 2.4GHz, 900 MHz or 5.8 GHz. The Wi-Fi technology can be usage within the distance of 3000 meters with a distributed access to a wireless channel. The transmission rates of data can go up to 55 Mb/s. The Bluetooth is useful in small scale point control networks whereby there is single device acting as a master to coordinate all communications within its range. The Bluetooth technology works in distance of up to 10 meters whereby te data rate is 1-2 Mb/s. Because of the current adaptation trends and adaptations the Wi-Fi is preferable as an economical option for tag reader communications. ICombining wired, and wireless technologies will help Best Buty to enjoy te benefits of both technologies. In that case, the tag readers will utilize wireless communications between themselves, but there will also be an Ethernet connection among a small section of tags especially those that deal with the products in storage. The tags with the wireless connectivity will be mobile while the nodes with Ethernet as well as the wireless connection will be stationary.
The system is for authenticating the products information from intruder because some readers can read information from any RFID tags that are in the same environment. Authenticating te RFID system will ensure that it is only the readers in the company can access the information on the product tags. There will also be the data encryption and decryption system that encrypts the information o that there will be no interception of te information by third parties or intruders. That is virtual because the RFID systems work non-line-of-sight, and tey are also contactless. Therefore an attacker can work remotely, and passive attacks will not be noticeable. The main concerns for RFID tags include tag forgery, consumer tracking and also the accessing of te tag’s information authorization. The advanced encryption standards (AES) will be in usage as it is the one that ensures minimized intrusions and unauthorized access to the tags’ data (Feldhofer, 2004). Tracking of consumers will have avoidance by allowing tags only to communicate their identity to authenticate top readers only.
- Enhancements to Enterprise systems and Enterprise operational data store (EODS)
There will be enterprise resource systems, SCM, and CRM. These systems will work with the RFID system to provide the information required by the Bet Buy company to manage better its assets and customers. For instance, the RFID system works with the customer relationship management (CRM) here the information from the RFID system is useful for the CRM system in tracking of customer activities. The tracking can help the CRM system to suggest goods to the customers depending on the customers’ purchase history.
RFID and the Web 2.0 technology
The Internet of things (i.e. RFID) and the web 2.0 tools can be in integration to better manage the inventory. The RFID provides the communication between product while the web 2.0 technology is for communications among people. The RFId will have implementation alongside the Web 2.0 technology so that the company will have enhanced communication with p[rodcuts and also their suppliers and customers. The RFID middleware works by filtering any irrelevant or repetitive information and it then sends that data to the local server. The server then avails the object information on the Internet through a remote server. The following is an illustration of the RFID and the Web.
Fig 8: The RFID illustration in conjunction with the internet (Adapted from Shen, 25)
The analysis of Best Buy company business strategy is vital in helping to unravel any business opportunity that may help the company in making more profit. It also helps the company to gain competitive advantages as we are in a competitive world, and it is the seizure of opportunities that can bring the difference in the performance of the organization. The analysis will help the company to respond to issues unfolded so as to avoid the risk of encountering with business problems or even the entire business failure. Companies have an obligation of using better technology because it is this that makes them enhance their processes through the automation of tasks. The analysis of Best Buy provides a recommendation of the RFID technology that can be very helpful in making the company stay ahead of the competition. The technology brings many advantages to the company from better inventory control, saving time and costs, and many more. The analysis also helped to address the security issues that may be prevalent in the implementation of the new technology, and that can help the company know how to go in mitigating those security risks.
The implementation of the new strategy will make the company achieve benefits anticipated, and this has a description as below in the cost-benefits analysis. The analysis is for the first one year after the implementation of the RFID technology in the Best Buy Company Inc. From the recent study was done by Koh et al. (2006) the most significant advantages of the RFID implementation for any retail industry is the improved in-store operation, improved, inventory management, etc. Other is like the velocity of the retail cycle, integrated business model security of the products. The table below displays the importance of implementing the RFID in the retail industry. The major benefits include the operational efficiency and improved visibility in comparison to other benefits. The benefits also have the high potential to influence one another, and thus the company should not look at each of them independently but should have an integrated approach when analyzing those issues.
Benefits percentage increase
Operational efficiency 36.84%
Reduction of out of stock 16.23
Accuracy, efficiency and speed 6.14
Automation of shipping and receiving 4.39
Reduced inventory 3.95
Improved efficiency of store operations 3.95
Improved productivity of labor 1.75
Streamlined process achievement 0.44
Improved productivity 24.12%
Real-time visibility 6.14
Tracing and tracking 6.14
Improved inven5tory and order visibility 4.82
Better asset management 2.63
Recall management 2.63
Tracking of shopping behavior 1.32
Streamlined reverse logistics 0.44
Reduced cost 10.53%
Reduction of labor requirements/costs 6.14
Reduced overall cost 4.39%
Improved security 9.21%
Security against fraud/theft 5.26
Reduction of shrinkage 2.63
Supply chain security improvement 0.88
Elimination of return merchandise fraud 0.44
Improved service levels of customer 7.89%
Better accuracy of information 7.46%
Improvement of packing and shipment accuracy 3.95
Business intelligence 3.51
Sales increase 3.95%
The table shows the wide benefits categories as well as their subcategories of which they consist. The subcategories show the actual activities that have a contribution to the broader categories’ benefits. There exist inherent relationships as we can observe from the table between the different benefits categories that are interesting to address. One benefits category ban has usage in addressing the other category. For instance, the technology offers improved security for the business, and it ignores the potential of improved customer service levels. The improved customer service int turn influences positively the cost savings for customers. The improved visibility also has a potential of guarding against out of stock incidents that in turn have a direct improvement on customer service levels. The improved information accuracy impacts the demand planning positively that in turn boosts customer service levels. In the same way, the increase in company sales, as well as the reduction of cost for retailers, will consequently accrue to the customers’ savings. Thus, the benefits are somewhat related to one another.
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