Management Fundamentals 5th Edition by Robert Lussier

Exercise 29

Best Buy's origins date back to 1966 when the company was incorporated in the state of Minnesota as Sound of Music. They began as an audio components retailer and, with the introduction of the videocassette recorder in the early 1980s, expanded into video products. In 1983, Sound of Music changed its name to Best Buy and began using mass-merchandising techniques, which included offering a wider variety of products and operating stores under a "superstore" concept. Over 25 years later, Best Buy has grown into a multinational retailer of technology and entertainment products and services, operating more than 1,150 stores and employing approximately 180,000 people in the United States, Canada, Europe, China, Mexico, and Turkey. Following Circuit City's demise in 2009, it is the primary electronics retail store in the United States, offering everything from computers to DVDs to mobile phones to home appliances (refrigerators, washing machines, and dryers) in their stores. The addition of new stores has played, and will continue to play, a role in Best Buy's growth and success. What has also played a huge role in Best Buy's growth and success is acquisitions and partnerships with other companies. During the 2000s, Best Buy made numerous domestic and international acquisitions to help with their business strategy of expanding and diversifying their operations. For example, in 2001, Best Buy acquired Magnolia Hi-Fi-a Seattle-based, high-end retailer of audio and video products and services-to access an upscale customer segment. In 2005, Best Buy began operating Magnolia Home Theater store-withina- store experiences in their U.S. stores. In 2003, Best Buy acquired Geek Squad, who provides residential and commercial repair, support, and distribution services, to further their plans of providing technology support services to customers. In 2007, Best Buy acquired a 25 percent interest in Jiangsu Five Star Appliance Co., one of China's largest appliance and consumer electronics retailers, to further their international growth plans. In 2009, they acquired a 50 percent share in The Carphone Warehouse, which happens to be Europe's largest independent mobile phone retailer, for $1.1 billion to launch the Best Buy Europe joint venture. Also in 2009, Best Buy acquired Napster, which offers digital music downloads.
Best Buy's success is also dependent upon satisfactory and stable supplier relationships. In 2010, Best Buy's 20 largest suppliers accounted for just under 60 percent of the merchandise the company purchased. The loss of or disruption in supply from any one of these major suppliers could have a material adverse effect on Best Buy's revenue and earnings. Best Buy also operates a global sourcing office in China in order to design, develop, test, and purchase its own line of exclusive brands products in partnership with contract manufacturers in Asia.
Best Buy has not been without its share of criticism and controversy throughout the years, though. Best Buy was one of several large companies named by Greenpeace in 2007 for purchasing raw materials or manufactured products derived thereof from logging companies that, in the opinion of Greenpeace, contribute to unethical deforestation of taiga in Canada. Since that time, however, Best Buy launched what it calls Greener Together to increase the energy efficiency of its products as well as to reduce consumer waste through more recyclable packaging and proper disposal of certain electronic components. The initiative was introduced by CEO Brian Dunn, who states: "Sustainability for Best Buy means placing a focus on the people, technology, and the power to make the planet more connected and, in a word, better-but only if it is created to serve people and the things they care about." Since the implementation of the Greener Together program in 2009, Best Buy has seen remarkable results:
• In 2009, Best Buy met its U.S. carbon reduction goal ahead of its 2012 schedule, reducing its emissions by over 8 percent per retail square foot. In addition, while its total average square footage increased by about 5 percent in 2009, Best Buy reduced its energy consumption by 15 million kilowatt hours in its U.S. stores.
• Best Buy helped its customers purchase over 24 million ENERGY STAR® qualified products in 2010. As a result, the Environmental Protection Agency estimated that sales of these products resulted in customer savings of 796 million kilowatt hours of energy, equal to $96 million in electric utility bill savings, while preventing over 1.6 billion pounds of carbon dioxide from entering the atmosphere.
• In 2010, Best Buy's recycling program, in which customers can bring many consumer electronic products to its U.S. stores for free recycling, collected approximately 74 million pounds of consumer electronics and approximately 66 million pounds of old appliances.
Relatively neutral third parties have given Best Buy numerous accolades. Best Buy was named "Company of the Year" by Forbes magazine in 2004, "Specialty Retailer of the Decade" by Discount Store News in 2001, ranked in the Top 10 of "America's Most Generous Corporations" by Forbes magazine in 2005, made Fortune magazine's list of "Most Admired Companies" in 2006, and received the ENERGY STAR® Award for Excellence in Appliance and Electronics Retailing in 2009.
In Asia, Best Buy used which method of going global?
A) global sourcing
B) importing/exporting
D) contracting
C) licensing
E) joint venture
F) direct investment