Best Buy Shop Incorporated

Background of Company

The company is the largest retail firm that has its origins in the Northern part of the United States of America. It was established in the year 1966 under “Sound of Music” business name for its stores. It was founded by Richard Schulze and Gary Smolia in 1966, and its business operations were retailing of audio components. In the year 1969, much of its stock became publicly traded. It was later renamed to ” Best Buy Company ” in the year 1983, due to a natural calamity, specifically a tornado, that hit one of its Roseville stores forcing its directors to reform its business model. Shortly after, the company began expanding its product offering and employing mass marketing strategies to promote its products becoming a superstore that provides electronic appliances of all kinds.

In 1985, it first appeared on the New York Stock Exchange (NYSE) platform where it was offering eight million three hundred shares. By the year 2000, it launched an online retail store by the name that gave its customers an opportunity to choose between purchasing the products online or physically visiting the shops (Lee 20). Its first entrance into the international market was in the year 2001 in Canada making it acquire a “Future Shop” local chain. After the lapse of eight years, the company has become one of the largest stores dealing with electronics on the east coast.

The firm deals with electronic items such as office products and entertainment software. Today it has more than one thousand nine hundred stores and locations that include Best Buy Mobile and large-format stores. It also provides technical support under the brand name of Geek Squad. It has its headquarters in Richfield, Minnesota (Best Buy Co, Inc 14).

CEOs of Previous Years and Their Impacts on the Company

Hubert Joly played a critical role in the turnaround of the firm by using a strategy he called “renew blue” (Gibson and Billings 114). The plan focused on increasing same-store sales, strengthening its relationships with vendors, eliminating unnecessary expenses and ramping up its online businesses. He assumed the CEO role in September 2012, the time the company was immersed in challenges ranging from intense competition from other online retailers such as Amazon and Wal-Mart, rapidly declining sales, and a scandal that involved former CEO Dunn Brain, who was alleged of inappropriate conduct.

After taking over the reins of the company from the interim CEO Mike Mikan, the stock appreciated by one hundred and eleven percent. Brian Dunn resigned following an allegation of having a relationship that was inappropriate with an employee in April 2012. Joly brought stability to the firm and addressed the declining same-store sales that were caused by competition from online retailers. Brad Anderson and Richard Schulze promoted the company’s growth by implementing some strategic plans where Schulze had an understanding of what and how the consumers at that time wanted to buy as well as the marketplace within which it was operating (Best Buy Co, Inc 16). He designed the stores with displays in such a manner that an item was exposed. The technique allowed the customers to pick quickly an item they wanted to purchase in a swift manner.

How the Company Kept Growing

The company has developed by capturing a big share of the market in the financial world. Since 1983, the company had been operating in Canada and the U.S. In the past few years, it has expanded its business operations globally by launching its operation in China. It also focused on growing its online business by extending the network of distribution of its online sales with its concept of ship-from-store that has rolled out one thousand four hundred store locations so far. The concept increased the delivery speed and scenarios of out-of-stock were reduced, and it increased online conversations (Best Buy Co, Inc. Swot Analysis 121). Opening up a store within a store has enhanced the relationship with its suppliers rapidly expanding its retail businesses and helped in mitigating the effects of intensified competition welcomed from the supplier’s retail stores. It achieved this by partnering with Samsung Company to open up one thousand four hundred Samsung store within a store that is named as “Samsung experience shops”. The similar arrangement was reached with Microsoft Company that opened four hundred Windows stores within a store.

The store has grown due to the turnaround strategy that involves renovating: repairing or restoring its shops and attempting to promote more robust store dealings (Gibson and Billings 114). The use of “renew blue” plan has improved its margins and fostered growth by reducing the expenses and increasing the chain efficiency supplies (Best Buy Co, Inc. Swot Analysis 118). The strategy has led to the enhancement of its merchandise by expanding its selection on the private labels and brand products that are exclusive. By closing down unprofitable stores to reduce expenses as the earnings are increasing and focusing on improving the experience of shopping by using attractive vendor displays, it has optimized it’s retail store and an effect that aided in promoting its growth.

The Major Competitors of Best Buy

Its competitors include Wal-Mart Stores, Amazon, Radioshack, Apple Retail Stores, Dell and Circuit City Stores.

How does Best Buy Compare to its Competitors, Example of Sales, Number of stores, Working for the Company

Number of store employees Revenue ($)
Best Buy 1,779 125,000 40.11 billion
Wal-Mart 11, 156 2,200,000 485.6 billion
Amazon 487,000 154,100 100.59 billion
Apple Retail Stores 850, 000 110,000 233.72 billion
Dell 9,145 49,300 31.24 billion
Radio shack 7,100 40,800 10.13 billion
Circuit City Stores 1,000 42,258 $9.75 billion

Best Buy is a Growth Company

The firm is a growth company as supported by the following facts. The company management team has high ambitions for the business especially in addressing its customers’ needs. The ambition is not out of personal greed but for growing and building the company to delivers unique quality services and products. The company’s experiences in handing off leadership to other CEOs who can deliver clearly indicate that it is directed towards operationalizing its ideas that enhance growth. Having over reins also is an indicator of growth as it is a way of balancing of expertise and skills within its workforce. It has remained to focus on what they know they have perfected in and kept growing and expanding into territories that it is familiar with. Its execution of blue plan strategy has built its capability of turning great ideas such as the turnaround plan into a business success (Gibson and Billings 1).

The company has engaged in association with other partners in developing its operations and growth and also increasing their profitability and brand popularity. The joint ventures are bringing new customers who are in search of exclusive products. The company is not afraid of taking risks as it has a risk management plan that continually identifies the threats that are likely to hinder its continuity. The strategy prioritizes the risk as it sets the thresholds so that informed decisions can be made on how best mitigation measures can be implemented to reduce the risks associated with projects. It has ventured into other new production lines like offering technical support a feature that is paramount in growing companies as it provides excellent services in customer support. The company keeps moving forward. Although tornado hits one of its stores, it is not discouraged but adjusts the way it operates the business by using store within a store plan.

To counter competition from other retailers, it has employed a differential tactic by sharpening its organizational focus on the customers. The approach has helped it to stand out in many ways such as venturing into new business ideas and personalizing its services through blending to provide satisfaction to specific customer needs to increase its customer base translating to increase in growth and giving out expertise opinions to customers about their products.

The company has entered into emerging markets that provide an opportunity for educating its customers and increasing its online e-commerce marketing. This is part of making customer continue being interested in buying their products, making its employees more efficient and lowering the training costs while remaining focused on delivering high-quality, profitable goods and services to its customers. All these approaches are geared to increasing its customer base by wanting to develop demand for their products from customers.

The sheer size of the company is a feature of a growing company. The attribute enables them to produce large showrooms that have merchandise that is extremely high in volume. The wide range of products presents a “hand on” strategy in marketing making the buying experience to customers appealing translating to continuous company growth.

The continuous growth in the demand for consumer electronic products like smartphones and video games ensures that the company is ever growing to meet the customer’s needs. The disappearance of Circuit City and Radio Shack companies leaves the company as the only major electronic retailer in most of the market places. This gives room for growth rather than being a mature company that is not prone to any form of growth.

Analysis of Financial Statements

The accounting firms such as Deloitte and Touche analyze the financial report of Best Buy Company by carrying out an audit. The recent financial statement has expressed an opinion that is unqualified as concluded by the auditors. It means that the declarations do not fairly represent the company’s financial position that results from its operation. The kind of this scenario arises when an auditor from outside is unable to convince the client in amending the financial statement that they are in line with his or her outcome to the events in the future that adhere to Generally Accepted Accounting Principles (GAAP). For the larger part, the auditing firm agrees with the company on its calculations and numbers on its financial statements. They confirm that the audit conducted is done in agreement with the public company standards (Corporate Financial Reports 98).

The gross margins of its stores based in the United States declined from twenty-five percent to twenty-two percent between the years of 2011 and 2014. A further decrease in the gross margins is expected in the coming years to a figure of about eighteen percent by the year 2020. The implementation of “Renew Blue” strategy that was launched in 2012 has significantly improved the margins for the second quarter in 2015 to 24.6 percent as compared to that of 2014 that was twenty-two percent (Corporate Financial Reports 58).

What is the value of the Company

The value of the company is $31.54 per share.

The Current Status of the company, How was It far out as Compared to its Other Years

Domestic Revenue. The $8.1 billion in revenues increased by 1.2 percent when compared to that of last year. Comparable sales attributed to the rise by 0.5 percent (Corporate Financial Reports 78). The $ 709 million in domestic online revenue increased by 18.3 percent as a result of higher rates of conversions and increased traffic. The online revenue also increased on a one hundred and thirty point basis translating to an 8.8 percent increase compared to a 7.5 percent in the year 2014 (Corporate Financial Reports 78).

Domestic Gross Profit Rate

The company has announced a profit rate of 24.1 percent that is higher as compared to the 23.0 percent achieved last year. The increase was contributed by the changes that positively impact the mobile warrant plans resulting in lower costs due to less severity and claim frequency (Corporate Financial Reports 80).

The Domestic Selling General and Administrative Expenses (SG & A)

The costs are worth $ 1.70 billion translating to 21.0 percent of revenues as per 19 of November this year when compared to $1.63 billion in expenses or 20.4% of the revenue that was recorded last year (Corporate Financial Reports 80).

International Revenue

The company has announced a decline in its internal revenue collection in comparison to that of 2014. It decreased by 29.9 percent, and the cause was losing revenue that was associated with closed stores in the implementation of Canadian brand consolidation plan (Corporate Financial Reports 80).

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