PowerPoint Presentation
Turnaround strategy 1By Rajendra Yadav CEO:Hubert
JolyFounder:Richard M. SchulzeFounded:1966,Minnesota, United
States
2Best Buy at a Glance3Stores1,447 (305
mobile)Employees167,000Revenue$50B (5% from Online stores)ROE(28%)
(18% in 2011)D/E34%Gross Profit Margin23.4%Net Profit
Margin(2.4%)Inventory Days55A/R Days16A/P Days51Cash to Cash
Cycle20Unfavorable Situation for BigBox
BusinessesInternalExternalSales growth is decliningEconomic
situation: Reduced Consumer spending across industries Management A
new Turnaround CEO has been hired by the companyConsumer behavior
Shifting towards online & mobile Big-box stores are being
shutdownPerception about big box brands turning negativePresident
for Online Business hired to revamp Best Buys Internet
strategyPeople are pessimistic after the collapse of CircuitCity
Founder and majority shareholder Best Buy, Schulz, offered to buy
the company at a price higher than the market valueSales per store
are declining Lower footfallsNon-Competitive pricing 4Continued
Underperformance will lead to Bankruptcy5Infancy Stage
StagnationEarly Stage UnderperformingMidstage Significant
Performance ImpairmentLate Stage CrisisExpected PerformanceCompany
PerceptionSame Store SalesManagement TeamCash & Cash
EquivalentsShareholder ValueDeep Yogurt!Strategic & Operational
challenges hindering sales growthStrategic:Weak positioningValue
proposition not compelling enoughPrice disadvantageNegative
customer perceptionNo clear visionFrom Brick & Mortar to Brick
& Click changing business model
Operational:High overheadsPoorly designed online store
interfaceToo many productsCluttered service modelUnstable
leadership/management
6Stabilize, Analyze & StrengthenNew Store Formats:Best Buy
ExpressBest Buy StudioOnline Store
Change in Focus:Competing on PriceProduct MixIn-store
experienceServiceLoyalty
7Turnaround ImplementationReduce Big Box Outlets:Best Buy Studio
stores in major cities Store in Store modelUsing Market analysis,
consolidate stores based on customer behavior - Online
purchasesSignificant reduction in overheads8Turnaround
ImplementationBest Buy Express: Small stores in high traffic
locationsProduct Mix: Small & fast moving goodsActs as Geek
Squad (Service center) branch
Online Store:Exploit Amazons lack of focus in
electronicsRedesign User InterfaceDevelop competencies in faster
delivery for loyalty program members
9Turnaround ImplementationPrice Matching:Price comparison part
of core sales process in storesMatched to direct competitors
-AmazonConsistent in all store formatsPrice checking kiosksProduct
Mix:Trim product categories and linesFeatured Products section for
high margin products
10Turnaround ImplementationLoyalty ProgramAnnual feeCovers
services for all productsFocus on Geek SquadOffer a flat fee off
servicesNotional discount on matched prices initially Free shipping
of products 11Why it will work?Experience, Convenience &
PriceRevenues:Capitalize on the Show rooming nature of customers -
Store ExperienceMobile store offers convenience for
servicingMembership program serves to locking in customers
Competitive pricing will boost sales Additional revenue from
partners in studio model
Costs:Consolidation of stores: Reduction in rent
expensesReduction in employeesLower Overheads
12Financial Estimates20122013201420152016Revenue $50,705 $51,681
$50,131 $49,630 $49,630 Revenue Growth2%2%-3%-1%0%Gross Profit
(75%) $12,592 $12,834 $12,533 $12,407 $12,407 SG&A $(10,242)
$(10,439) $(8,522) $(7,444) $(7,444)Operating Income $2,350 $2,395
$4,010 $4,963 $4,963 Operating Profit
Margin4.6%4.6%8.0%10.0%10.0%Interest Expense $(134) $(134) $(198)
$(165) $(132)Restructuing Costs $(58) $(250) $(400) $(400)
$(400)Net Profit $(1,231) $1,193 $2,239 $2,880 $2,902 Net Profit
Margin-2%2%4%6%6%13Assumptions: - 13
