Best Buy: Management Essay

Question:

What is Best Buy? Explain.

Answer:

Best buy is an american multinational corporation that deals in consumer electronics and goods. The company has its headquarters in richfield, minnesota while it operates in the united states, canada and mexico. The company was founded in 1966 as an audio speciality store by richard m. Schulze and gary smoliak and shifted its focus towards consumer electronics during 1983. Recently, in 2011, the company closed all its stores in china and merged them with five star. The company deals in a variety of consumer electronics and merchandise, such as software, video games, smartphones, video cameras, digital cameras, home appliances, etc. In a non-commissioned sales environment. The company has a workforce of almost 125,000 employees and has around 1,050 stores throughout the world. The company earned revenue of $42.568 billion in 2016 ("about best buy - best buy corporate news and information", 2016).

The company has been criticised by the customers on a number of grounds, such as pricing and warranty issues but the company has been following ethical and green business practices since quite some time. The company is one of the many large companies that were criticised for purchasing raw material from companies that were causing unethical deforestation of taiga in canada. Since then, the company launched a greener together program, which was aimed at increasing the energy efficiency of its products and stores so that the company could play its role in saving the environment. The company is one of the top 50 companies that use green power. In 2011, best buy purchased around 119 million kilowatt-hours of green energy that was generated from renewable sources of energy.

Best buy structural changes

One of the major concerns for the company has been the rising competition in the industry. The company has been facing a lot of stiff competition from a number of companies, such as amazon, which operates throughout the world and is dominating the online retailing industry since quite some time. To meet with the increasing competition and to bring down the operating costs, the management at best buy has been restructuring and cutting down its workforce since a long time. The company has been shaking down the structures of its workforce, including some senior level managers, so that it can become more competitive and can strengthen its market position in the years to come. One of the biggest structural changes that the company has ever introduced was seen in the year 2014. The company shook up its entire workforce when the rumours about the company laying off thousands of employees came out in the media. Earlier, the company had introduced a great leadership change in the year 2012, when it also closed some of its stores ("best buy canada to close stores, cut jobs in restructuring", 2016).

Best buy co. Inc., in 2012, made an announcement about a change in the leadership of its united states operations, which also included the departure of two senior executives who had been working for a very long time with the company. The people who were being replaced were mike vitelli, who had been leading the company’s us business since 2010 and tim sheehan, the executive vice president of the company’s us operations (market, n.d.). The company also announced that its united states business would be divided into two channels, which were online and retail. The two new heads who were appointed to look after the channels were stephen gillett, president of digital and marketing, taking control of the online channel and shawn score, head of the company’s connectivity business group was made the head of the retail channel. A number of sources thus reveal that the company has been struggling a lot in meeting the challenges posed by the increasing competition and needs to introduce an effective change to deal with the problems ("forbes welcome", n.d.).

Designing a change program

Best buy is a company that had incredible results in the past but with the increase and rise in the industry competition, the company lost its business to big market players. The company is still struggling and facing a lot of problems in facing the stiff market competition and has been downsizing its workforce in order to reduce the operational costs and become more effective (sag, 2014). It is evident that the company requires a major change in its structure and operational activities so that it would be able to become more competitive in the year to come.

Some sources also show that best buy was able to experience improvements in their financial outputs after they started laying off their employees but the reasons behind the improvement were not just related to employee layoffs. The improved financial outputs were due to launch of new gaming consoles, high demand for smartphones and latest led tvs, which shows that best buy could not achieve the desired results even after laying odd thousands of employees and changing the leaders of the organisation, which is one of the biggest form of change for any company ("forbes welcome", n.d.). Let us discuss a change program that would help the company in reviving its market position:

First of all, the company needs to restructure its organisation from top to bottom. The company has been struggling with its organisational structure, which is evident from the fact that it has been changing its senior level executives and has been laying off thousands of employees year after year. The tendency of the company to lay off employees regularly fosters fear amongst the workforce that they might be laid off during the next downsizing. Such practices do not foster a good work environment. Therefore, the company needs to carefully analyse its human resource requirements and should try to keep only as many number of employees as are required for the proper running of operations. The downsizing should be done only once, rather than doing it year after year, and the workforce that is laid off should be properly compensated for being laid off. Once the company is able to maintain adequate workforce, it would not have to spend additional operating expenses in maintaining a larger workforce, which is not even required.

Secondly, the company needs to think of a paying scheme that would allow the company to pay variable salaries to the employees, rather than paying them fixed salaries. As the company is into consumer electronics sales business, the company can implement a variable pay scheme for some employees, if not all. This would greatly help the company in cutting down the operating costs as it would not have to pay higher salaries when the sales go down. The strategy would also help the company in increasing employee engagement as they would try to work harder to earn higher salaries.

The company accounts for almost one third of all the us consumer electronic purchases and is losing its market share quickly. It would not be wrong to anticipate that the company will lose all its business to the competition in the years to come. The sole reason behind the downfall of the company is that more and more retail stores are entering into the market and are increasing the competition. With the spread of apple retail stores across the world, the company further suffered a great loss in its business. One of the urgent changes that the company needs to introduce is to tie up with more and more electronic brands and introduce more products in its stores ("forbes welcome", n.d.). The company should be challenging the market competitors in terms of both price and variety. The company needs to change its strategy and lay a greater focus on pricing strategies as customers these days are looking for cheaper products. According to some resources, it has been found that the customers use best buy as a showroom to check prices of products while they make the final purchase from other online retailers, such as amazon. Multinational companies, such as wal-mart, amazon, etc. Have been able to capture the market by keeping their prices low and sticking to aggressive market strategies. Best buy too needs to regain its confidence and rather than focusing upon reducing operational costs by laying off employees, the company should now change its strategic focus and adopt strategies that would help it in providing better quality products at cheaper prices.

Change agents and organisational culture

The company is facing a critical situation where its business is at high risk due to increasing market competition. In such a scenario, a wrong step would do more harm to the company than the potential benefits of a successful change or strategy. Therefore, it becomes necessary for the management to carefully plan its moves, especially when it comes to downsizing of the organisation. The company needs to involve a number of change agents that would help the management in bringing about the change that it is planning to introduce. One of the

How to cite this essay: