Best Buy Case

Contents

A. INTRODUCTION 3

B. INTERNAL ANALYSIS 3

C. EXTERNAL ANALYSIS (INDUSTRY  Specialty Retailer) 9

D. PROBLEM(S)/ ISSUES(S) STATEMENT 11

E. STRATEGIC ALTERNATIVES 12

F. RECOMMENDATION 13

A. INTRODUCTION

Industry:

1973 Anderson was hired by Schulze as a stereo salesman

1996 The company had grown its U.S. sales at a 17% compound annual growth rate (CAGR) far outpacing the industry, which grew only at a 4.9% over the same period

2001 The company also acquired Musicland, which operated as Sam Goody, Media Play, and Sun coast stores. Best Buy had purchased this 1,300-store chain to reach new customer segments-teenagers and women, who tended to shop at malls

2002 - During the holiday season BestBsuy.com, It was ranked second among click and-mortar retailers

- Anderson had made customer centricity a key strategic pillar, soon after taking over as the company's CEO

2003 - The company continued to grow strongly and operated 679 stores

- Despite a recent drop, the company's share price had more than doubled

- Dell announced it would further expand in the consumer electronics market by launching a line of printers (through a partnership with Lexmark) and a Digital Jukebox music player (Dell DJ)

- Best Buy Corporate headcount was already down by 8% in fiscal year

- In early 2003, The Geek Squad, a service company acquired, would be Best Buy's new service arm. It offered complete PC services everywhere, 24 hours a day

- May 2003 the new customer-centric strategy was launched and was being tested in 32 of the company's stores, but so far no concrete results on their performance had been reported to investors

- November 2003 Anderson recalled the 22% slump in Best Buy's stock price while the stock was heading in the right direction; it had some catching up to do

- Gross margin climbed from 3.5% to 25% in 2003

2004 - Ending February 28, 2004, Sales were $24.5 billion for the fiscal year and the earnings per share was a record $2.15, or $2.44...