BUSI690- Best Buy Business Case 3 - Best Buy Business Case...

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Best Buy Business Case 1 Best Buy Business Case October 2015 BUSI-690 Liberty University
Best Buy Business Case 2 1 Executive Summary Best Buy Co, Inc is a multinational consumer electronics corporation listed on the New York Stock Exchange as BBY. After having survived the changes in the consumer electronics market and bested competitors like the now defunct Circuit City, Best Buy struggles to maintain electronics retail market share in an environment with low-cost competitors (Wal-Mart) and alternative business models (Amazon) that Best Buy is unlikely to successfully replicate. This study has been performed to understand the current condition and capabilities of Best Buy and to propose alternative means of competing in this difficult market. Analysis and pro-forma projections of Best Buy’s performance was complicated by a 2013 balance sheet charge taken on international that led to a reported net earnings of $-259 million dollars. This analysis skewed results in the basic historical financial information analysis and an alternative approach was taken when generating Pro-forma financial estimates in Section 11 of this document. These values for the do-nothing- different case (determined using logarithmic regression) showed a net present value (NPV) of the DND case is $4,683 (M). Using an alternative strategy of service and branding focuses, revenue and net income increased, generating a NPV of $4,757 (M); all NPVs were calculated using a 3% discount rate. While this is only a 1.77% increase it is considered low-risk. Peak ROE is observed in FY2018, with an estimate of 34.1 for the DND case and 34.7 for the alternate strategy, indicating more efficient transformation of capital into profit. Alternate balance sheet metrics such as return on capital employed (ROCE) and
Best Buy Business Case 3 yield/earnings per share. Stock price would see a modest increase as well resulting in a modest increase in market capitalization This recommended strategy builds on the current strengths of Best Buy, its service staff and physical presence, and leverages those to use service as a differentiator. Paired with a new product branding strategy, Best Buy’s business model will be one in which customers seeking good value with solid support will find significant value. 2 Existing Mission, Strategy, and Objectives Although there is no explicit mission statement on the corporate website, Best Buy’s self-perception and assumed mission is evident in the statement that, “ The company offers expert service at an unbeatable price more than 1.5 billion times a year to the consumers, small business owners, and educators who visit our stores…” (Anonymous, 2015). This is accomplished through a combination of retail outlet, online, and mobile application driven sales strategies. The primary focus of the business is on sales and service for consumer electronics and solutions.

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