Best Buy’s Business-Level Strategy
Best Buy has a strong business-level strategy: the development of offline and online segments allows the company to show stable financial results even in times of crisis. It is based on the division of the retailer into two parts: domestic and international segments. The company focuses on individual groups of consumers in the production and sale of products, and segmentation allows the business to determine its place in the market. In particular, Best Buy’s business-level strategy is based not on micro-segmentation, but on macro-segmentation (Leavy, 2022). Best Buy’s business-level strategy of market segmentation is based on two theoretical assumptions. Firstly, it is the recognition of the heterogeneous nature of commodity markets, i.e., the consideration of the market not as a whole, but as the sum of individual segments. Secondly, it is a reflection of specific variations in demand of different categories of consumers, differentiation of products and methods of its sale.
Main Value Drivers
The value of Best Buy does not depend on the financial and material resources it controls. It is the result of the use of intellectual and informational factors of an intangible nature. The level of innovation, technology, organizational culture, databases and knowledge are crucial for the long-term sustainable development of the company. It is these factors, called intellectual assets, that determine the real value of Best Buy (Leavy, 2022). Intellectual assets, having an intangible informational nature, have a number of unique properties. One of these properties is their presence at Best Buy both in the internal and external environment of functioning. The positive opinion of consumers and other public groups, partnerships with suppliers and contractors are the real assets of the company. They significantly influence the market’s assessment of the company’s value. These assets can be called Best Buy’s external intellectual assets.
Main Cost Drivers
Best Buy is both a subject and an object of relations in a market economy, and also has the ability to influence the dynamics of various factors. Therefore, both internal and external drivers are significant for this company. External factors include factors that do not depend on the activities of Best Buy, but may have an impact on the amount of income received. These include government regulation of prices, tariffs, tax rates, interest and penalties. The state of the technology market and the violation of discipline on the part of business partners will also have an impact. Internal factors include are directly dependent on the activities of Best Buy (Leavy, 2022). In turn, they can be divided into production and non-production cost drivers. Non-production factors involve procurement and sales activities, as well as pricing policy at Best Buy. Production factors characterize the availability, use of means, objects of labor, and labor resources of Best Buy.
Resources that meet all the requirements of the VRIO framework and are used effectively can make an invaluable contribution to achieving the Best Buy’s mission. Valuable resources allow the company to generate profits: an efficient production process allows to improve the quality of products. Since customers trust and remain loyal to Best Buy products and the brand as a whole, the rarity factor is respected (Leavy, 2022). Best Buy products are not unique and there are a large number of companies that make electronics, so the principle of uniqueness is not respected. The company effectively uses specific resources that are valuable; therefore, the principle of organization is observed. Thus, Best Buy has a competitive sustainable advantage, as it contains three of the four indicators of the VRIO framework.
Leavy, B. (2022). Multi-business value-adding strategies: Reconsidering the options. Strategy & Leadership, 50(1), 12-18.