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This case study is designed to show the practical application of Porter's Five Forces Model. Dr. Porter's model is used widely at the undergraduate level to illustrate the importance of corporate strategy. Best Buy provides a good case example of the value of applying Porter's Five Forces model in practice. This case is designed for undergraduate marketing educators globally who seek a practical case study for in-class exercises. Discussion questions are provided.
Keywords: Porter's five forces, Strategy, Best buy.
INTRODUCTION
Best Buy is a leading specialty retailer of consumer electronics, computer software, home appliances, and home office products and service. With more than 1,150 stores, the company generated more than $49 billion in annual revenue and $2.235 billion in net profits in fiscal year ending February 27, 2010 (Yahoo Finance, 2010). One of the company's objectives is to educate consumers in the continually changing technological world. The Minneapolis-based company has diversified through an aggressive acquisition strategy; e-commerce; and is experiencing exponential growth in the professional services sector via their Geek Squad business unit.
COMPETITIVE FORCES
Best Buy operates in what would best be described as an oligopoly environment, with their primary competitors being Wal-Mart (Reibstein, 2009). Additionally, Best Buy's online division completes directly with formidable competitors such as Dell and Amazon.com. Using the Porter's five forces model (Porter, 1979) it is evident that Best Buy is positioned well for continued growth, but also faces significant competitive threats.
Intensity of rivalry among competitors
The competition among large electronics retailers is fierce and something that plays an important role in Best Buy's executive level decision making. For example, at Best Buy's corporate headquarters employees entering the building at one point were greeted with a mock triage unit, replete with bandages and litters. This is an unsubtle metaphorical reminder to employees of what will happen to the company if they take their eye offWal-Mart (Boyle, 2006).
Wal-Mart executives, of course, are also intensely focused on Best Buy. This is evident by the fact that Wal-Mart has been modifying a number of its electronics departments in an effort to create a more customer centric retail environment (Berner, 2005; Gulati, 2010). Best Buy's focus on customer centricity, which is essentially de-centralizing control and empowering store-level managers and employees to...