Answer & Explanation:The Paper will be on the Business Macy’s and three main problems that the store brand is facing.You need to have a clear Introduction, and outline three main problem areas throughout the body of the paper and how they can be resolved. Each main problem area needs to be at least 1.5 pages long. There must be at least 5 references (3 scholarly). This paper needs to be in APA format with a title page and reference page included. I have attached a sample paper from one of my classmates who received a 90% on her paper, so please follow the main strategy she did, but DO NOT COPY her contents, I must come up with my own original paper!!Here is a link to a website that had some good info, but please do not copy word for word: http://www.businessinsider.com/macys-new-ceo-has-major-problems-to-fix-2016-6I’m on a strict deadline for this paper, please DO NOT ask for an extension!
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The Decline of Best Buy
Starshemac Simmons
Contemporary Business Issues
MGMT 4128
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Best Buy was founded in 1966 by Gary Smoliak and Richard Schulze. Its start was as a
general audio store, but gained a main focus as a consumer electronics store in 1983. Richard
Schulze began the store in 1966 in Saint Paul, Minnesota with the name Sound of Music and his
focus was high fidelity stereos. Richard’s starting costs for this company came from his own
personal checking’s account and a second mortgage that he took out on his family’s home. With
the acquisition of Kencraft HI-Fi and Bergo Company in 1967, Sound of music made revenue of
$1 million dollars in its first year with profits of $58,000. Due to its success, Sound of music had
expanded to nine stores by 1978 that were all located in Minnesota and was dubbed one of the
most profitable stores and then it suffered a major blow. While some would have folded under
this pressure, Sound of Music had a great response after they were hit by a tornado. Richard
Schulze rebounded from this by having a damaged goods sale on his electronics and called it
“Tornado Sale”. The success of the company continued and in 1983, Sound of Music reamed
itself Best Buy, at this time they were operating seven stores and were seeing annual sales of
more than $10 million. With its headquarters located in Richfield, Minnesota, Best Buy is now a
multinational consumer electronics corporation. The smart decision-making by the company and
great marketing put Best Buy in a position to see annual revenues of $1 billion dollars by 1992.
Who would of thought this small mom and pop electronic store would blow up to become what it
did. With more major acquisitions in the 2000’s with Sam Goody, Sun Coast Motion Picture
Company and British Columbia, Best Buy was setting itself up to be a major contender, if not the
leader of electronic sales.
The good times for the company wouldn’t’ last forever. Best Buy experienced many
factors contributed to the decline of the retail giant. The year 2016 was attributed by declining
sales of tablets and mobile phones. The business saw a 5% decline in sales of tablets and mobile
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phones that decreased revenue by 1.5%. Foreign currency effects and store closures affected
their business in Canada greatly with a decline of 26%. The cause of this is said to be because of
the decrease in oil prices the resulted in a reduced GDP, which is something the country was
heavily dependent on. Because of this Best Buy expects to see further decline in international
revenue in the next quarter ranging from 15% -2 0%. Ongoing competition continues to be an
issue also with retail giants Amazon and Wal-Mart. But the decline of the economy has affected
many companies and not just Best Buy solely. The first major decline in Best Buy sales was
experienced during the 2014 holiday season where they witnessed a 2.6 decline in their holiday
sales. Later, a credit card agreement the company made in 2013 with Citibank responded with a
negative impact to their gross profit. Due to decline of the credit market at that time the
agreement they made with Citibank was less favorable that the one they had previously. The
decline in the need of sales the warranties that Best Buy provided on their cellular phones
increased in late 2014 which resulted in 1.25% income decline. The president of their retail
stores Shawn Score resigned without warning in early 2014 after having just being promoted to
the position 7 months earlier. After his resignation Best Buy saw their stock decline by 6%.
Best Buy is not the only company suffering from the decline of electronic sales. Other
companies are dealing with these issues also, such as Wal-Mart, Sears and Kmart. All of these
retailers have experienced decline in sales of televisions, computers and especially tablets. The
one plus that the other companies do have is that they sale more than just electronics. They pride
themselves on the sales of clothing, personal need items and even groceries. These are things
consumers will constantly need and will continue to buy regardless of the impact of lower
income or the economy. These retailers are supplying basic need survival items. Where, Best
Buy specializes in electronics, which are more of a want instead of a necessity. Best Buy sales
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items that consumers feel they can do without, even though they may want them. Having a
television to watch is not a necessity, having the new iPhone is not a necessity. These things will
come second to something such as food to eat, deodorant or women personal needs. These are all
things that we must have and although the sales of these items may decline a little they will never
dissolve. Amazon continues to be a major competitor to Best Buy. Every time Amazon obtains a
Prime customer it is viewed by Best Buy as a customer that will never shop with them again, due
to their commitment to Amazon. Currently there are at least 30 million Prime Amazon customers
located here in the United States.
Although Best Buy has increased their online sales, they have not increased it enough to
where it will offset the in-store retail sales. This has not deterred Best Buy at all, they feel that
they can recover from this downfall and to do so they have implemented many different
techniques. Best Buy established their “Low Price Guarantee” policy in 2013. This allowed them
to price match some of their major competitors if the customer were to find a product they
carried at their store for a cheaper price. The objective of this was to maintain and recruit the
customers who look to order products online because they felt that they could find better prices.
Although this allowed Best Buy to be a competitor to these other companies it also affected them
negatively. In 2012, they saw a decline in their gross profit margin from 24.2% to 23.3%. This
trend continued with a drop consecutively of 22.8% in 2013 and 2014. Reports in 2016 have
shown that Best Buy has grown its online sales to make up for some of its loss and has even
improved on employee employment scores that result in a lesser turnover rate for the company.
Due to Best Buy being able to reduce their turnover rate they have been able to make and
maintain strong alliances with very important companies in the technology industry. Maintaining
and building its relationship with its customers is also one of Best Buys main focus. They better
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they keep their customers informed of sales and new and upcoming products with help them
build a better relationship and keep the customers coming back. With the help of their new CEO,
Hubert Joly, best buy is trying to reinvent their selves, by providing their customers with
experience and expertise that cannot be duplicated by purchases online. Online purchases are
good for customers that want to find the best deal and compare. But it cannot duplicate in instore atmosphere and the convenience of being able to ask questions and get advice if you do not
know which or what is the best to purchase. There are still some customers who prefer to
purchase from the store. Customer such as the elderly who are not so computer savvy rather
speak to someone in person and know if they have a question about the purchase of if they have
a problem someone can help them. Best Buy is trying to provide their customers with just that
with hopes that will keep customers coming back. Providing them with a warranty and if
something happens to that device a tech will come to you and help you. Online purchases cannot
provide customers with this. Now if you order online you can return it, but that is an
inconvenience and you will be without for some time the item you wanted to purchase so badly.
There are perks to bot situations, cheaper price online, but with no tech support. Or to purchase
in store for a slightly higher price, but have the luxury of having tech support. Either way, Best
Buy does not want you to count them out. They still feel they are a major contender who wil
make a comeback.
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References
https://en.wikipedia.org/wiki/Best_Buy
http://www.forbes.com/sites/greatspeculations/2014/04/25/factors-that-led-to-a-40-decline-inbest-buys-stock-price-in-2014/#77a5bf6f6b10
http://www.forbes.com/sites/greatspeculations/2016/03/09/best-buy-and-its-battle-againstdeclining-trends-in-tablets-and-mobile-phones/#3d568fdf7b28
http://www.usatoday.com/story/tech/news/2016/02/25/best-buy-revenue-falls-lower-electronicssales/80919132/
http://www.cnbc.com/2016/01/14/dont-give-up-on-best-buy-just-yet-analysts.html
…
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