Best Buy Purchasing and Supply Management Term Paper

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Purchasing and Supply Management at Best Buy Today

Headquartered in Richfield, Minnesota and founded in 1966, Best Buy Co., Inc. (hereinafter alternatively “the company” or “Best Buy”) is a leading retailer in electronics and other consumer products that competes throughout North America and Mexico today. As of early 2019, Best Buy operated nearly 1,200 large format as well as 51 small-format retail stores (Company profile, 2019). Despite its success in growing its market share in its existing market, the company is faced with the same existential threats as other major retailers, including most especially e-commerce operators such as Amazon (Wack, 2017). The purpose of this paper is to provide a review of the relevant literature to develop an informed and timely discussion and explanation concerning Best Buy’s new competitive environment and an analysis concerning how Best Buy's purchasing and supply management strategies contribute to their competitive advantage. In addition, an examination and some salient examples concerning Best Buy's impact of building relationships with their suppliers as well as a discussion and examples concerning how Best Buy drives innovation .and how Best Buy improves their quality and reputation to remain competitive are followed by a summary of the research and important findings concerning this major retailer in the conclusion.

Discuss and explain Best Buy's New competitive environment

Best Buy competes as a retailer of technology products and services as well as offering a wide array of other consumer products throughout its North America and Mexican markets in two main business segments: (1) domestic and (2) international (Company profile, 2019). Besides these retail outlets, Best Buy also offers and products through its Web sites using the Best Buy, bestbuy.com, GreatCall, Geek Squad, Best Buy Mobile, Best Buy Direct, Magnolia, Pacific Kitchen and Home, bestbuy.ca, bestbuy.com.mx and the Best Buy Express brand names (Company profile, 2019). In addition, the company also offers range of consumer products and services using mobile apps and a network of call centers (Company profile, 2019).

The company’s top leadership team has been highly successful in keeping track of changes in consumer trends and Best Buy’s combination of a big-box store format and specialty retailing has made it one of the top major retailers in the world today. Indeed, Murphy (2009) emphasizes that:

Today, with annual revenue exceeding $25 billion and more than 780 stores in the U.S. and Canada, Best Buy is North America's number one retailer of consumer electronics, personal computers, entertainment software and appliances. It was named Forbes's 2004 Company of the Year and has been cited by AMR Research as having one of the nation's best-run supply chains. (para. 2)

At present, though, the company also plans on closing all 250 of its smaller retail stores in the United States (Canada will not be affected) that are dedicated to the sales of mobile phones (Ong & Ong, 2018). A growing number of industry analysts caution that these store closures may just be the tip of the store closure iceberg, especially based on the closures of other big-box stores in recent years (Wack, 2017). Moreover, the existing retail market has become increasingly competitive in recent years, due in large part to the proliferation of e-commerce retailers such as Amazon (Chan, 2011). Against this backdrop, it is clear that Best Buy is at a critical juncture in its corporate history going forward and it is equally clear that the company must implement and sustain purchasing and supply management strategies that contribute to its competitive advantage and these issues are discussed further below.

How does Best Buy's purchasing and supply management strategies contribute to their competitive advantage?

On the one hand, Best Buy enjoys a political climate that is conducive to its retail operations. In this regard, Mitchell (2009) emphasizes that, “The playing field has been tilted by government policy, which, for more than two decades, has fostered and underwritten the expansion of big-box retailers while systematically undermining the survival of independent businesses” (p. 35). In fact, nearly half of all of the states in the U.S. have some type of tax relief or loophole provisions on their books that encourage big-bog stores such as Best Buy to locate new retail outlets in their jurisdictions based on the perception that these retailers will create hundreds of new jobs and attract other businesses to the area (Mitchell, 2009).

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On the other hand, though, these advantages have not prevented the closure of other big-box retailers operating in states with tax loopholes on their books (Chan, 2011), but Best Buy has managed to avoid this eventuality except for the aforementioned closure of its mobile phone stores in the United States to date.

It is reasonable to suggest, though, that this undesirable outcome looms large in the minds of decision-makers at Best Buy, making the need for other purchasing and supply chain management strategies all the more important. To this end, the company has also been taking advantage of its purchasing clout and economies of scale to force its supply chain partners to provide it with substantial discounts in order to undermine its main competitors and smaller retailer enterprises (Mitchell, 2009). For instance, Mitchell (2009) reports that companies such as Best Buy “They win not by being better competitors, but by using their size and power to gain an unfair advantage. They pressure suppliers to give them special deals that are not available to independents” (p. 36).

In addition, the company uses a purchasing and supply management strategy in which its mega-stores are stocked to excess,…

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…explained that, “I think on balance we can do a better job than our vendors of managing transportation costs and bringing exceptional value to the organization” (as cited in Murphy, 2009, para. 6). The success of the initiatives that followed has been proof positive that the company possessed in in-house expertise to take advantage of third-party recommendations to add value to its supply chain operations.

One innovative approach that was adopted company-wide by Best Buy that achieved significant cost savings and efficiency was the transition from pre-paid to collect terms for inbound shipments. In addition, Best Buy also achieved impressive cost savings by improving the company’s computer-based transportation suite’s ability to coordinate, schedule and monitor its loading and consolidation capabilities. This innovation not only generated cost savings through improved inbound transportation operations, it also succeeded in eliminating the need for the antiquated tools that its supply chain team had relied upon in the past for these activities (Murphy, 2009). These innovations have helped the company remain competitive during an especially perilous period in history for traditional retailers, but Best Buy has not rested on these corporate laurels alone as discussed further below.

How does Best Buy improve their quality and reputation to remain competitive?

As noted above, the company has a proven track record of performing aggressive market research to monitor trends in consumer preferences and using outside resources when it believes it is in their best interests, but Best Buy has also has a formal commitment to its corporate social responsibilities as well. In this regard, the company’s statement on corporate responsibility and sustainability emphasizes that: “At Best Buy, we aim to positively impact the world, enrich people’s lives through technology and contribute to the common good. We are an organization with a heart and soul that is built upon purposeful, values-driven leadership” (2019, para. 2). In support of this statement, the company has established ambitious goals for greener operations over the next several decades as follows: (1) reduce carbon emissions in its operations by 75% (over 2009 baseline); carbon neutral by 2050; and (2) reduce carbon emissions by 20% (over 2017 baseline); saving $5 billion in energy costs by 2030 (Corporate responsibility and sustainability, 2019).

Conclusion

Today, Best Buy Co., Inc. is a leading retailer competing in North America and Mexico, with more than 750 retail stores. The company’s wide array of value-priced products and services, combined with its world-class leadership team, have help fuel the company’s growth to date and have enabled the company to survive and even thrive in a competitive environment that has driven many of its top competitors out of business in recent years. Complementing its stellar marketing efforts has been the company’s focus on developing a streamlined supply chain network and forging….....

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