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Case Study ??? Electronics Industry As a leading consumer electronics retailer, Best Buy continually is strategically analyzing their business and examining their performance in the retailing market. They face challenges from the competition and other future prospects, so it is important for them to understand opportunities and threats facing their business and the factors that will drive their success. One of the major opportunities facing Best Buy in the electronics industry is the lack of competitors in the industry due to the current financial crisis.
Circuit city has long been a direct competitor with Best Buy and one that Best Buy would need to seriously evaluate until recently. Circuit City has faced serious financial losses over the last year. According to Bigcharts. com, Circuit City’s stock price has dropped from $16. 52 in May 2007 to $. 31 in October 2008. Unfortunately, Circuit City will not be able to continue to operate with the losses they have faced. According to McIntyre (2008), “the company will either have to close a large number of its stores and cut staff or file for Chapter 11” (www. money. aol. com).
This opportunity is very big for Best Buy; Best Buy’s pricing power will improve from the moderation of competition. In the absence of Circuit City, price battles will no longer transpire. Possibly the most significant outcome will be the transfer of bargaining power from suppliers to Best Buy. A major threat that Best Buy and the electronic industry faces is the potential entrants into their industry. When there is a high threat of potential entrants for an industry it is negative because profitability will be divided up among more competitors. Many retailers, such as Wal-Mart and Target have begun selling electronics in their stores.
This should be a major concern to the electronics industry. One major step that Best Buy has taken to avoid such a threat is by “adding on the service”. Instead of trying to deal directly with the new entrants they have added a support service and installation as a competitive strategy. Even though potential entrants are a threat in the electronics’ industry, Best Buy shouldn’t spend too much time strategically analyzing new entrants. A majority of entrants have difficulty being successfully because of factors such as economies of scale, capital requirements, product differentiation, and switching costs.