Best Buy: Major Challenges - Research Paper Example

Best Buy has been among the best-performing retailers and had a strong performance in the year 2008-2008 despite a struggling economy and a comparatively lower economic growth rate.   

Best buy faces three major challenges on a short to the medium horizon:

1. Mitigate the risk of entering new overseas geographical locations: One of the most critical challenges that Best Buy faces is a successful entry in other overseas markets like China and Europe. Best Buy has invested huge sums of money trying to enter and expand in these new markets, and it has to de-risk the venture by speeding up the learning speed. The buying habits of consumers vary from region to region, and Best Buy has to ensure that it demystifies consumer preferences and replicates its US success in these new markets too. It can do so by implementing the same strategies – identifying the most optimal product line and offering a great shopping experience. 
   
   
2. Compete against lower-cost discount stores and Internet retailers: Best Buy faces steep competition from price warriors like discount stores and new Internet retailers. Given the present depressing economic scenario and decreasing spending ability of the consumer, Best Buy faces stiff competition from these competitors. Best Buy should leverage its traditional strength, offering an excellent buying experience, to blunt the challenge from cost warriors. Best Buy should strive to sustain the satisfying and exciting shopping experience it has always offered to retain its customers.     
   
   
3. Maintain growth rates: Technology is fast changing and the shelf life of a new product has decreased to extremely short periods. Also, the shopping preferences of consumers are changing very fast and it is important for a specialty retailer like Best Buy to be constantly ahead of the trend curve to ensure that it is able to identify future trends and stock consumer electronic products accordingly. This will help it prevent loss of business and leverage consumer preference trends to drive business. Additionally, Best Buy has to develop new differentiators to drive its growth rates in this depressing economic scenario. In addition to the present differentiator, offering a unique shopping experience, it should identify future probably differentiators and nurture them. For example, Best Buy is positioning responsible recycling and sustainable development as one of its differentiators. Similarly, it may also develop other probable differentiators like social responsibility and responsible citizenship.      

   (Carnathan J., November 2008)