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... or Best Buy Co., Inc. to overcome. As the financial forecasts decline in profit and shares tend to drop, investors will look for new investments. Some believe that one of the major causes for reduced profits is that expansion and remodels that are currently underway. These remodels, which are designed to target specific consumer groups, are eating profit faster than it is being made.
Several analysts believe that this expansion program is causing great risk for Best Buy Co., Inc. Although the profits have declined cash flow is at steady hike. With only a small portion of cash flow being used for the expansion plan Best Buy Co., Inc. has opted to take part in some what of a trend of purchasing back its own stock. Companies believe that this is the best way to rid them of the excess cash. Not only does it benefit the company, but it also gives high returns to its investors.
The process reduces the number of outstanding shares and by doing so; it increases the prices per share. Best Buy Co., Inc has a current buyback program authorized to use 1.5 billion for repurchasing its stock.Recently Best Buy Co., Inc. decided to phase out their mail-in rebate program. The phase out decision is a result of multiple consumer complaints nation wide. The mail-in rebate program was something that Best Buy Co., Inc. had worked into its promotional flat form to compete with competitors. Consumers are aggravated about paying higher prices in the stores and having to mail in receipts and proof of purchases in order to request the rebate.
The waiting game then begins for several weeks until the rebate is received and at times, it can be hundreds of dollars. The phase out process will take place over approximately two years in order for the vendors to make necessary changes. Best Buy Co., Inc. is hoping to come up with a phase out plan that will not give competitors an upper hand.Best Buy's marketing team is always focused on the consumer. One of the biggest challenges they deal with is the promotional platform. The strategy has always been one that concentrates on the consumers' needs and wants, and as with most companies how to one up its competitor.
With mail-in rebates on its way out Best Buys has directed its promotional focus to the "Rewards Zone", which is discussed later on. The consumer is the target of every single marketing concept that is thought up and used. Marketing sells the company and its products to the consumers.The key to Best Buy's marketing strategy is that they market to everyone. It is not a store strictly for teenagers, or one strictly for adults; it welcomes all. However, one major age group is being overlooked-children. Best Buy should include a section of their store dedicated to children's electronics. This section would be selling the newest video games, mini televisions, child sized computers and radios. Like everything else in the Best Buy store, these devices and electronics would be out on display for the children and adults to look at; the only exception is that they would be placed at a child's height for viewing.
These days, it is not uncommon for elementary school children to have their own computers and cell phones. Therefore, overlooking such a key demographic seems almost ridiculous. Best Buy could collaborate with local theme parks to be used a special promotional offers. For example, for every major purchase over two hundred dollars purchased from the children's section, the customer would receive a free children's ticket to an amusement park of their choice. This is a win-win situation for the theme park, Best Buy, and the consumer. Children would not be going to theme parks alone; therefore, the theme park would still be gaining the admission of the adults taking the child, not to mention the food and souvenirs purchased.
More products would be sold in Best Buy, and the customer would once again, feel like they are getting more for their money. This idea is just one way for Best Buy to be expanding their profit margin. Profit Margins have been the downfall in financials for Best Buy throughout the last quarter. The ideal products to sell are the ones that have a huge profit margin because that results in huge profits. Recently the big sellers have been of those with a lower profit margin. Perhaps it is time that Best Buy creates a product line of its own.
For instance, when you shop at places such as Radio Shack or even Target, you have the option of buying name brand products or store brand products. The main reason that profit margins are lower on specific products is because the manufactures have to have a specific margin to sell the product at. Then there could be a middle man like a OEM dealer who also has to mark up the product. By the time that the products gets to Best Buy there has already been two cuts into the original cost of the product which results in a lower profit margin for the retail price. If Best Buy were to manufacture there own products then they would be eliminating the middle man or men in some instances and would be able to increase there profit margins and still sell the products at the industry average price. Nothing is worse than walking into a store, asking a sales associate a question, and getting a blank stare in return.
Loyal customers are those that will give their business to a corporation like Best Buy in return for knowledgeable answers. Though Best Buy does have the Geek Squad to answer computer questions, there are hundreds of more electronics that are being sold. One recommendation is for Best Buy to mandate a certain amount of learning hours a month. By having an employee be forced to learn about the latest technology with the electronics they are working with, Best Buy would gain a competitive advantage. In order to do this, we suggest that Best Buy offer eight hour seminars to keep staff members informed about the innovations. In exchange for the employee going to the seminar, they would be being paid for an eight-hour workday.
Customers would be guaranteed that their questions were going to be answered with honest answers. Although Best Buy would have to pay employees to take the day off and attend these seminars, we believe the long term benefits outweigh the short term loss. Customers who have received bad service tell everyone they know not to go to that certain store or location. Likewise, consumers who receive great service, tell everyone they know about that certain place or location. Being able to assure customers that there would be no blank stares, just honest, up to date answers, Best Buy would surely increase their sale. Another recommendation for Best Buy deals with warranties. Most, if not all major electronics come with a certain warranty. However, as we all know, nothing is free in this world.
We usually have to pay extra for them. Our recommendation for Best Buy is to include a free one-year warranty on all electronics. Any extended warranty the customer would pay. Just having the peace of mind that should anything happen to the new electronic device in its first year Best Buy would provide required repairs at no charge. To be honest, most electronics never have any problems within the first year, thus, there would be no big loss on Best Buy's part. However, by throwing in a free one year warranty, the consumer feels as though they are getting more for their money, and therefore, are willing to make more major purchases at Best Buy.
Best Buy has come a long way from its humble beginnings in St. Paul, Minnesota. Transitioning from The Sound of Music to Best Buy, the company has truly become a corporation with staying power. If Best Buy continues on its pathway, it is sure to become an even greater success. Their dedication to serving the community along with their devotion to technology is what keeps the company in business. Best Buy's corporate vision involves four main items: having fun while being the best, learn from challenge and change, show respect humility and integrity, and unleashing the power of their people.The drive to have fun while being the best, encourages employees to help incorporate technology into the average person's life in a way that brings about fun. Technology is not used for work alone.
It is also used for entertainment. Best Buy's value of having fun not only applies to adults, but to children as well. Every year Best Buy donates over 1.5% of their total gross income to schools across the nation in an effort to upgrade the technology in schools (Fact Sheet). In spring of this year, Best Buy Co., Inc gave over $3 million to over 1,000 schools nation wide through its Teach program. Teaching technology in the classroom with educational computer games emphasizes that learning is not purely scholastic; it can be fun too! Best Buy uses their vision to learn from challenge and change to better suit their customers. Best Buy's greatest example is in the company history. Best Buy originally started as a store called The Sound of Music.
The Sound of Music installed 8 tracks into car stereos. As the technological market grew and changed, so did the business. The store began to sell video appliances and electronics. They literally changed everything, from what they sold, to what they were named. Expanding out of the Twin Cities and throughout North America and in Canada was the greatest change for Best Buy. They were no longer going to be seen as a "ma and pa" shop.
Showing respect, humility and integrity is another key to Best Buy's success. The company is the number one retailer in consumer electronics, and they achieved and the number one position for a reason. Best Buy realized that with their massive growth they had to do business on a different scale, yet maintain the balance and quality of a store that consumers would still feel comfortable. Perhaps this is why Best Buy employees do not work off commission. They want to ensure the customer that they are getting the best deal on the best product in a pressure free environment. This very integrity has consumers coming back time and time again for their electrical and technological needs. Best Buy also has a program designed to reward their loyal customers.
The program is designed to give frequent shoppers points, for every purchase, and give them five dollars off for every purchase over $125.00. In today's economy, everyone is looking to save a penny and with Best Buy's enticing rewards program, consumers are given just yet another reason to choose Best Buy over their competitors.Best Buy's employees are also utilized in a way to display their talents in technology. Their greatest success is that of the Geek Squad. The entire focus is to assist the average person with any computer crisis 24 hours a day through a support and repair hotline. However, the Geek Squad is not just a hotline. It in itself runs like a business.
They are on-call at Best Buy store's for walk-in help and they make personal trips to residences and businesses. They are most widely recognized by their clip on ties-- truly carrying around the persona of a Geek. But don't be fooled by appearances, their knowledge on computers is in no ways lacking in abundance. With the passion for the latest and greatest technological knowledge, and the charisma and devotion towards the youth, Best Buy is sure to continue on the high road to success. Best Buy will be changing and advancing to accommodate the ever-changing field of technology. They are truly a testament to upholding and exceeding their vision statement of "meeting the customer at the intersection of technology and life" (FAQ).
Works CitedBest Buy TM "Fact Sheet Fourth Quarter- Fiscal 2005 (ended Feb 6, 2005)" 6, 200) http://www.bbycommunications.com/newscenter/FY05 Fact Sheet Q4.pdfBest Buy TM "FAQ" 6www.bestbuy.comStar Telegram "BEST BUY GEEKS TO RUN AMOK" 4/28/05www.dfw.com/mld/dfw/11511402.htmWCCO (c) 2005 The Associated Press "Best Buy Expansion Plans Include China" 4/27/05http://wcco.com/localnews/local story 117101956.htmlYahoo Finance- "Quotes & Info- Best Buy Co Inc (BBY)"http://finance.yahoo.com/a/ct?s=BBY&annual.
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