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Best Buy's Turn-Around Strategy (2013)

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Best Buy's Turn-Around Strategy (2013)

CEO HUBERT JOLY BREATHED A SIGH OF RELIEF as he reviewed the 2012 end -of-year holiday revenue figures for Best Buy. After perhaps the most tumultuous year ever in the life of the company, he knew the numbers could be much worse. Despite being the world 's largest retailer of consumer electronics with $50 billion in annual sales, Best Buy's financial situation was precarious. The company 's stock price had fallen from $45 to $ 15 per share over the past two years, a drop of roughly 60 percenl. 1 While revenues had been increasing at a marginal rate, both comparable store sales and overall profitability were showing a consistent negative trend. Earlier that year, Best Buy had been forced to report a 91 percent drop in profits during the second quarter compared to the same period in 20 II;" the third quarter showed a comparable 97 percent drop in operating income.'

So, yes, the fact that the company made $12.8 billion in revenues during the last nine weeks of20 12, compared to $ 12.9 million the year prior (a drop of just 0.4 percent), was welcome news indeed 4 As 10ly had previously told invcs tors, one of his lirs! priorities was to stabilize the company before he could implement ways to improve its overall performance:'

Still, 10ly was optimistic about Best Buy 's future. He had a knack for numbers, and behind all the red ink, he liked what he saw. After being appointed by the board in August, he spent his first week on the job in September working as a " blue shirt" in Best Buy stores in the Minneapolis/S !. Paul area. Shortly thereafter, he held a three- day retreat with the company's top managers, and once again emerged encouraged 6 As he said:

Best Buy is a co mpany with an amazi ng hist ory, e normous assets and great opporlunities . I am eager to start workin g

with eve rybody at Best Buy to define and take the act io ns that will allow us to win in the marketplace , and to be seen

by all of our stakeholde rs as the best buy7

As .Ioly saw it, Best Buy had a lot of strengths on which to build , in spite of its disappointing financials. It sold far more consumer elec troni cs than either of its largest competitors ($50 billion compared to -$30 billion for Walmart and $14 billion for Amazon), and dominated the PC, Cilmera, and tablet categories in terms of market share. It had state-of-the-art logistics, inventory, and support systems that enabled it to make same-day deliveries for online orders. Meanwhile, Best Buy 's online business was the 11th-largest e-commerce site worldwide, and was growing by 15 to 20 percent each quarter8 Whereas critics saw the company 's physical stores as cos tly over- head, 10ly firmly believed there was value in Best Buy's unique combination of physical and digital resources. Statistics showed that customers picked up approximately 40 percent of online orders in the store, which provided a perfect opportunity to se ll additional products and services9 Combine all those features with a well-trained sales force that converted more site visit s into sa les, and Best Buy could easi ly triple its operating profits ' 10

In prior jobs, .Ioly had engineered successful turnaround strategies for Vivendi and Carlson Wagonlit Travel, I I and he saw no reason why Best Buy would be any different. Still, based on those previous experiences. he knew that the path to success would be filled with sign ificant challenges. Competition in the consumer-electronics industry was cut-throat, with razor- thin margins. Best Buy was up against the low-cost king Walmart on one side, and was flanked by Amazon-the original online empire- on another. And then there was Apple with its

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premium gadgets and trendy stores, which dominated the market's high-end segment. Carving out a unique niche in this crowded, post-big-box, digital-retail world would not be easy, but it was the only way for Best Buy to avoid the same fate as the now-defunct Circuit City. The recent holiday results were encouraging, but investors were already clamoring for more details on what Joly 's next steps would be.

A Brief History of Best Buy

Together with his business pattner, James Wheeler, Richard Schulze founded Sound of Music, an audio spe- cialty store, in Minnesota in 1966. The fledgling company ended its first fiscal year with gross sales of $173,000, and continued to grow rapidly over the next few years. By the time of its initial public offering in 1969, the home- town enterprise had acquired twoof its local competitors l2 and had opened two new outlets near the University of Minnesota in downtown Minneapolis.

Schulze bought out Wheeler in 1971,13 shortly after Sound of Music hit the $1 million mark in annual rev- enues. 14 Subsequent years saw continued expansion through additional locations, new product lines, and novel promotional techniques. For example, in 1979 Sound of Music became the tlrst supplier of video and laserdisc equipment from companies such as Panasonic, Magnavox, Sony, and Sharp. After a tornado hit the Roseville, Minnesota, store in June 1981 , the company responded with a "Tornado Sale," which became an annual event, storm or no storm. This strategy boosted Sound of Music's average sales per square foot to $350, compared with an industry average of $150 to $200. 15

ARRIVAL OF THE SUPERSTORE

With ambitions to capture even larger market share, Sound of Music changed its name to Best Buy Co., Inc., in 1983. Shortly thereafter, it adopted its now-familiar superstore format, with an increaSingly diversified product range. Boosted by an infusion of cash from a successive series of public offerings, Best Buy proceeded to grow from 8 to 24 stores and saw its revenues increase from $29 million to $290 million from 1984 to 1987. 16 On July 20, 1987, Best Buy made its debut on the New York Stock Exchange (NYSE: BBY) with an initial offering of 8.3 million shares of common stock.

Best Buy changed its logo to the yellow tag in 1987, and in 1989 its stores adopted a new "grab-and-go" store format, called Concept II. Schulze's revolutionary new approach to big-box retailing combined Walmart's prices with Circuit City's assortment, in a shopping warehouse with a 35,OOO-square-foot footprint. 17 The new stores consisted of well-stocked showrooms with self-help information so that people could make their product selec- tions independently and check out in a single stop. Answer Centers were still available for people who desired assistance, but salespeople no longer needed to attend to each individual customer or fetch merchandise from storage. This change reduced Best Buy's employment costs by one-third, which compensated for the correspond- ing de-emphasis on service contracts. One analyst called Concept II "the most innovative thing to happen in this industry-ever.,,18

Spurred by the success of its warehouse format, Best Buy hit $1 billion in sales revenues in 1992. The company landed on the Fortune 500 list (debuting at 1t373) for the first time in 1995. For/une magazine named Best Buy one of the top 10 peliorming stocks from 1990 to 2000, and honored it as "Company of the Year" in 2004. 19

GROWTH THROUGH ACQUISITIONS

The year 2000 marked the launch of a new phase of inorganic growth through acquisitions. Best Buy grew its revenues from $12.5 billion in 2000 to nearly $51 billion in 201220 The company first purchased Magnolia, a high-end consumer-electronics chain with 13 locations throughout Washington, California, and Oregon, for

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$88 million in 200021 The nex t year, Best Buy purchased Musicland for $425.1 million. The acquisition of the mall-based music and entertainment retailer gave Bcst Buy access to an additional 1,300 stores across the United States and Puerto Rico, including 650 Sam Goody and 400 Suncoast Motion Picture outlets. [n 2002, the com- pany acquired Geek Squad, a 24-hour computer-support task force. By 2004, Best Buy had opened Geek Squad precincts within all of its stores. 22

In contrast to the rapid expansion of Geek Squad, Best Buy divested Musicland in 2003 due to declining mall sa les after 9/11, coupled with increased competition from Walmart and Target in the CD segment. Sun Capital Partners Inc., a private equity firm, purchased the failing finn for the assumption of Musicland 's debt and lease obligations. Brad Anderson, who succeeded Schulze as CEO in 2002. desc ribed the Musicland venture as "a very expensive but powerful learning experience for Best Buy."D

After the Musicland debacle, Best Buy took a two-year acquisition hiatus before purchasing AudioVisions, a custom integrator of electronic products such as nat-sc reen TVs and security solutions, in 2005.24 [n December of that same year, Best Buy acquired PacifiC Sales, a Los Angeles-headquartered company thM specialized in selling premium kitchen appliances, for $410 million 25 In 2007, Best Buy announced plans to purchase Seattle-based Speakeasy Inc., a broadband and VolP services provider, for $97 million26 This transaction was followed by the 2008 announcement of Best Buy's acquisition of Napster for $J 21 million in cash, in an effort to compete with Apple's 70 percent share of the digital-music marketp lace.27

INTERNATIONAL EXPANSION

In the meantime, Best Buy was also engaged on the international front. Its first cross-border expansion was the 200 I acquisition of Futureshop Ltd., a Canadian electronics chain, which added annual sales of $1.32 bil- lionn Maintaining Futureshop as a wholly owned subsidiary, Best Buy later strengthened its Canadian presence by opening 77 branded stores of its own. 29 Best Buy established an active presence in the growing Asian markets with its 2006 acqui si tion of a majority interest in the reta il chain Jiangsu Five Star Appliance Co., Ltd., China 's fourth-largest appliance and consumer-electronics retailer, for $180 million 30 A year later on January 26, 2007, the first Best Buy store in China- touted as the largest Bes t Buy in ex istence-opened in Shanghai." Other regions quickly followed. By 2008, Best Buy had announced the opening of its first pilot stores in M ex ico and Turkey, as well as multiple branded superstores in the United Kingdom and other European countries.'2

rn response to tile 2008-2009 recession and increasing competitive pressures, Best Buy started to shift its expansion efforts away from traditional "big box" stores to focus on its new "Connected Store" format and "Best Buy Mobile" concept stores at home and abroad. By the end of 20 12, Best Buy had closed all of its branded stores in China. Turkey, and the United Kingdom (while Illilintaining its presence in Canada and Mexico). Instead, thc company invested heavily in its Five Star subsidiary in China and its Carphone Warehouse and Phone House stores in Europe, opening 38 and 36 new locations in fiscal 2012, respectively3J

LEADERSHIP CHANGES

After having just two CEOs in ils first 43 years of operations (Richard Schulze and his successor Brad Anderson), Best Buy went through three top leaders in a six-month period in 201234 Brian Dunn had assumed the helm in June 2009 and had been trying to "right" Best Buy's "ship" for the past three years. Dunn likewise believed that the company's physical stores were an asset: " There are still things in the physical world that are going to be important: expert advice and the ability to see and touch the latest tablets."J5 But to cut costs, he announced in 2011 that Best Buy would reduce its "big box" real estate by 10 percent over five years, by closing some stores, renegotiating leases, and letting some leases expire36 Thousands of workers, including some 600 highly trained Geek Squad staffers , were laid orf.37 Moving forward, Dunn pJanned to open 600 to 800 new Best Buy Mobile stores, focusing on smartphones and other mobile devices38 Tile goal was to increase the number of retail points of contact while decreasing square footage, thereby increasing the company's flexib ility as a

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multichannel retailer39 He also increased Best Buy's online offerings by more than 20,000 items to broaden its "virtual" footprint. 4o

Unfortunately, Wall Street was not satisfied, and the company's stock price continued its precipitous decline. Analysts felt Dunn had been slow to recognize the company's problems, and was not being aggressive enough in shutling down underperforming stores 41 Thus, when Dunn announced his resignation in April 20 12 after 28 years as a Best Buy employee, many assumed it was due to the company's financial woes. In reality, he left in the midst of a board investigation into allegations of personal misconduct (a close relationship) with a female employee42

Ultimately, the independent investigators determined that there had been no misuse of company resources, but that Dunn's poor judgment and lack of professionalism had contributed to a negative work environment.43

The fallout did not stop there, however. Richard Schulze, who was then serving as Chairman of the Board, stepped down from his position at the June 2012 board meeting. The board "expanded his role" by granting him the honorary title of "Founder and Chairman Emeritus" and permitled him to finish out his term as director through 2013. The investigative report indicated that Schulze had learned about Dunn's actions, confronted him, warned him that such behavior was contrary to company policy, but then dropped the issue when Dunn denied the allegations. To rectify this breach of ethics, the board named Hatim Tyabji, chair of the audit committee, as the new Chairman44

and hired an external consultant to run the search process for a new CEO. In the interim, George Mikan Ill, another director, agreed to take on the day-to-day respons ibilities for running the company45 The board also recommended that shareholders approve the declassification of the board, making each director subject to annual re-election 46

Joly was hired in August 2012, and assumed active duty starting in September47 Several investors were still not happy. Some saw Joly 's lack of retail experience as a significant limitation, while others wondered if the company had rushed the search just so it could proceed with its restructuring plan.48 (See Exhibit I for Best Buy financial data for fiscal years 2008- 20 I 2.)

The Consumer-Electronics Retail Industry

A BRIEF HISTORY

The consumer-electronics retail industry grew rapidly in the second half of the 20th century due to several converging trends. At the end of World War II , a significant portion of the U.S. population migrated from cities to suburbs, creating a need for suburban retail centers. At the same time, the cost of technology decreased, generat- ing an increase in demand for televisions and other consumer electronics. Many of these new customers were price-sensitive, first-time homeowners, who were willing to accept decreased customer service in return for lower prices, leading to a rapid growth in discount stores 49

As the children of the WWII generation-the baby boomers-reached adulthood in the 1970s, demand for consumer electronics soared. Retailers shifted from carrying just one or two lines of equipment toward stocking a diverse set of product lines. Strong industry growth continued through the late I 980s, until the new VCR market became saturated and a recession slowed consumer sales. By 1991,98 percent of all homes had at least one color TV and 77 percent of those that owned TVs also owned a VCR. The United States alone had at least 10,000 radio, television, and cO)lsumer-electronics stores that had sprung up to meet the surge in demand. With market satura- tion , however, growth in the I 990s was limited to the replacement and upgrading of existing devices50 As a result, competition intensified and many companies, such as Highland Superstores Inc., left the electronics market51

Technology advancements and improved economic conditions in the mid- to late-1990s again Jed to·a period of growth that supported the rise of large superstores such as Best Buy and Circuit City. In 1998, sales at Best Buy and Circuit City increased by 21 percent and 48 percent, respectively.52 It was ~round this time that the industry faced yet another great shakeup-the birth of online retailing.

In J998, Amazon.com , a previously unheard of competitor, entered the consumer-electronics market by ori·er- ing music CD sales online53 Not willing to cede this potentially lucrative market, Circuit City, Tweeter Home

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Dest fiuy's Turn-Around Strategy (20t3)

Enterta inment Group, and Outpost.com all opened online consumer-electronics sites of their own within the next year. Bes t' Buy followed suit with Bestbuy.com in 2000, making it a relatively late mover in e-retailing54

The ability t'o reach new consumers online, coupled with increased interest in digital ca meras and DVDs, led to yet another period of rapid expansion throughout the early 2000s. This time, however, growth occurred primar- il y through acquisitions and industry consolidation. From 1994 to 2007, the three largest consumer-electronics retailers (Circuit City, Best Bu y, and Radio Shack) increased channel share from approx imately 22 percent to 45 percent. M eanwhile, the total number of firms in electronics retailing with over 100 employees declined by 4 percent per annum from 1998 to 2004 .. "

From 2005 to 2007, the industry compound annual growth rate (CAGR) was approximately 6 percent. With the onset of the global recession, growth fell to 3.4 percent in 2008 and -0.4 percent in 2009 (Exhibit 2). The economic contrac tion proved to be short-lived, however, and the industry quickly resumed a modest rate of growth in subsequent yea rs. As of 20 II, approximately 50.0 percent ($257 .3 billion) of the total market value of $5 14.2 billion was attributable to the audiovisual equipment segment, with computer hardware contributing 34.3 percent ($176.2 billion). Music and video comprised another 10.5 percent ($53.9 billion), and game consoles the rem ain- ing 5.2 percent ($26.8 billion). The global computer and elec tron ics industry was projected to reach a value of $620 billion by 2016, an increase of 20.6 percent over 20 II figures. 56

CURRENT TRENDS

The consumer-electronics retail industry is both cyclical and seasona l. Industry sales during the holiday season in the fourth quarter typically exceed sales from the other three quarters combined. As most consumer-electronics items are considered discretionary purchases, sa les are directly correlated with macroeconomic factors such as consumer confidence, unemployment, the housing market , and the abi lit'y to obtain credit57

Another distinctive trend in the consumer-electronics industry is that of ever-falling prices. These price decreases place constant pressure on consumer-electronics manufacturers to improve functionality, portability, and style as a way of dilferentiating their products from those of competi tors. As a resu lt, the product life cycle has grown increasingly shorter as manufacturers cannibali ze their own products in an effort to maintain customer interest and loya lty.

This cannibali za tion has led to the evolution of consumer electronics as a measure of soc ioeconomic status in countries such as the United States. Financial wealth buys access to the latest and greatest technology. As prices fall , the technology becomes affordable to a wider demographic , but the technological elite have already moved on to the next genera tion of devices. Cellular phones were once fantasy gadgets seen only in James Bond movies. In the 1980s, yuppies proudly di splayed their ce ll phones on their belts as a status symbol. These days, ne<l rly everyone has a cell phone whose design and funct ionality make those early " dinosaurs" laughable. Laptops, l<l rge-screen TV s, and smart phones have enjoyed a similar proliferation among the masses. Today's must-have is tomorrow's bargain commodity at Walmart, so retailers l11ust strike while the product is hot. A product will, in its bool11 days, attract a very different clientele than in the later, less -exc lusive phases of its shelf life. Consequently, understanding and predicting consumer dem<lnd is an imperative in the modern consumer-electroni cs industly.

Past and Current Competitors

Comparatively speaking, the consumer-electronics retail industry remains relatively fragmented. Prior to the 2008 recession , the top three consumer-electronics reta ilers (C ircuit City, Best Buy, and Radio Shack) accounted for 42 percent of thc u.s. market. Tn comparison, the top three finns in home improvement and office supply retail contro lled 58 percent and 79 percent, respecti vely. Globally, the market is even more divided, with Best Buy con - trolling just 3.2 percent of the worldwide market in consumer electronics in 20 I 1.08 Its major competi tors include

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Apple (11.3 percent), Walman (6.2 percent), and Metro AG (5.6 percent), with "other" stores accounting for the remaining 73.7 percent (Exhibit 3).59

With respect to online sales, Amazon dominates the U.S. consumer-electronics market with a60 percent share, followed by Walmart at 22 percent, and Best Buy at 14 percent. Amazon's lead in share of sales is somewhat smaller at 39 percent, compared to 33 percent for Walmart, 23 percent for Best Buy, and 4 percent for Target. However, Walmart 's value per order ($189) exceeds that of Amazon ($103)60

CIRCUIT CITY

The story of Best Buy is not complete without an account of the rise and fall of Circuit City, once the compa- ny's most formidable competitor. When Samuel Wurtzel, Circuit City's founder, learned that the first commercial television station in the South was soon to hit the airwaves, he decided that a store selling TVs sounded lucrative.61

He opened the first Wards Company store in Richmond in 1949. Soon thereafter, Wurtzel and his partner diversi- fied their product offerings to include a range of home appliances as well as television sets. As profits grew over the next decade, they opened three additional stores in the Richmond area 62 The company went public in 196J , selling J 10,000 shares at a price of $5.375 through a Baltimore stockbroker6J

Wards expanded across the Southeast and Midwest through a series of acquisitions from 1965 to 1970, after which Samuel Wurtzel passed the torch on to his son, Alan Wurtzel.64 In 1974, Wards arguably suffered adverse effects due to its rapid expansion and diversification, losing $3 million on overall sales of $69 million. In response, Wurtzel junior withdrew Wards from areas outside its core competencies, such as tire sales, and refocused the product line on consumer electronics. To showcase its new strategy, the company opened a 40,000-square-foot store called "The Wards Loading Dock.,,65 This "big box" format had ample room to display Wards' extensive selection of 2,000 products. As a result of its novel store design, Wards increased its sales ten-fold to $246 million by 198366

In 1984, Wards changed its name to Circuit City Stores and listed on the New York Stock Exchange. That sa me year, Richard Sharp succeeded Alan Wurlzel as CEO. Under Sharp, the company consolidated its operations in very large stores located in clusters throughout the Southeast. These "Circuit City Superstores" encompassed up to an acre of floor space67 Circuit City's approach of opening a number of large stores at once in the same region, accompanied by heavy advertiSing, represented a methodical determination to win the lion's share of sales. By 1987, the company was reaping $1 billion in annual revenues and dominated the U.S. market68

In 1.992, Circuit City expanded its offerings to include personal computers and recorded music. In 1993, Circuit City stretched its boundaries even further and opened the first Cm'Max used-car lot. About that time, Circuit City also found itself in an intense price war with Best Buy that pitted the companies' sales forces against one another. Circuit City was known for its hard-sell tactics, with salespeople working for commission. In contrast, Best Buy employees enjoyed a more relaxed, self-service-Driented sales environment, in which they were paid a flat hourly rate69 Best Buy's "We're here if you need us" approach was so popular that Circuit City was forced to adapt. Yet, despite dismissing 3,900 workers and implementing an hourly pay structure, Circuit City's 600 stores posted an annual loss of $89.3 million by the end of 2003. The company continued to restructure in 2004, closing dozens of stores at less-desirable sites and opening some 70 new stores in more ideal locations.

Circuit City 's reaction to the flat-screen price war in the early 2000s likely helped to seal its fate. A bubble in the U.S. housing market had led to a dramatic increase in demand for consumer electronics, which in turn created a flood of investment in new factories, resulting in excess supply and inventory for retailers. Then, in the fourth quarter of 2006, the housing market weakened, leading to a decline in consumer spending. To move inventory, discount retailers such as Walman began slashing prices of flat-panel TVs, and Circuit CilY followed suit. By the end of 2006, flat-panel TV prices had declined between 40 and 50 percent. Prices fell so quickly during the holiday season that Circuit City's weekly advertising circulars were often outdated by the time they reached customers70

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Circu it C ity was espec iall y vulnerable to eroding margins caused by the price war since nearl y 44 percent of its revenues came from TV sales. By November 2006, Circuit City reali zed a net loss of $1 6 million, down from a quarterly profit of$IO.1 million in 2005. (See Exhibit4 for Circuit City financial data.) Its share price plummeted 80 percent by the end of that year71 In an attempt to mollify investors, Circui t C ity CEO Schoonover fired some 3,400 of the firm's most experienced employees and replaced them with less-cost ly personnel. 72 Circuit City had hoped to save $110 million in fi sca l 2007 and $140 million in 2008, but in reality, the mass layoff led to poor sa lesmanship and lower salesn Some ana lysts alleged that the laid-off Circuit Ci ty employees took their experi- ence and their customers to Best Buy, bo lste ring the company's main compet itor.

On January 5, 2008, Herb Greenberg of The Wall Sf/·eer lournal named Philip Schoonover as the worst CEO of the yem·74 A few months later, Schoonover resigned ,md was replaced by James Marcum, who served as Circuit City's CEO and acting pres ident until the tirm 's demise. Circuit City filed for Section II bankruptcy in November 2008, closing 155 stores in an attempt to preserve a future for the rest7 , After failing to find a buyer, Circuit City began liquidation of the remainder of its assets in January 2009. The firm cited red uced consumer spending and an overa ll economic downturn as the reasons for its downfall. In May 2009, Systemax purchased the Circuit City brand and trademark for $6.5 milli on for use in on.line electronics retail 76

In t·he year after Circuit City closed, Best Buy reponed it 5.5 percent increase in market share, to approximately 22.9 percent of the $170 billion domestic market.77.78.79 However, other retailers and e-tai lers rapidly entered the fray and estab lished significant footholds in the increas ingly competitive consumer-electronics industry.

WALMART

As the world 's largest retailer, Walmart employs more than two million associates across more than 10,000 stores in 27 countries 80 Willman was founded by Sam Walton, who opened his first store in 1962 in Rogers, Arkansas. The young company expanded rapidly, reaching 24 stores and $ I 2.7 million in sa les within its first fi ve yea rs of operat ions. In 1969, it incorporated as Wal -M art Stores, Inc., going public short ly thereafter in 1970 at a sha re price of $ 16.50.81

Since then, Walmart has continued to grow aggress ively by leveraging its superior capabilities in logistics and supp ly chain management to provide consumers with a wide breadth of merchandise at low prices 82 Walmart stores carry products in areas such as family apparel, hea lth and beauty aids, toys, home furnishings, housewares, hardware, lawn and garden supplies, and au tomotive products, in add it ion to consumer electronics. In 2000, the company launched Walmart.com to compete with online retailers such as Amazon.com, and it now sell s more than a million products through its website. Walmart 's 20 12 tot<ll sales reached $443.9 billion with a net income of $ 15.7 billion (Exhibit 5)83

Walmart moved aggressively into the consu mer-electronics market in the wake of Circui t Ci ty 's collapse. In May 2010, the company announced th at it was significantly expanding its offerings of Blu-ray players, HD TV s, home theater systems, DVDs and Blu- ray movies, and wireless products for home net works. At the same time, Walmart rolled out a dedicated area for pay-as-you-go mobile broadband products from well- respected vendors such as Verizon, Virgin, and AT& T, as well as a new pay -as-you -go program with Sprint for ce llular users. The company also increased its smartphone offerings by close to 60 percent compared with 2009.

Gary Severson, senior vice pres iden t for Home Entertainment, explained Walmart's strategy as follows: "S tarting thi s month, customers will discover more high quality Internet-ready home entertainment products, new wireless technologies and new mobile devices in stores and online that offer simple, affordable solutions for creating a more connected life .. .. We also continue to design a well-defined shopp ing experience in entertain- ment that enables customers to find what they need quickly, learn about new technology, compare pri ces among top brands, and every day find amazing va lue. Our commitment to the best price and surprising value is always a top priority.,,84

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Whil e Walmart has proven more recession-proof than many of its competitors, the an ti cipa ted increase in consumer-e lectronics sales never materialized . By 2012, the company announced plans to reduce the amount of floor space dedicated to electronics in its stores, a striking reversal of its previous expansion efforts. Poor elec- tronic sales were considered a primary factor in seven successive quarterly declines in U.S sales at stores open for one year or longer. According to one consultant, " It' s something Wal-Mart has needed to do for a year. You don't need as much space in that area with products shrinking and purchases going online, and electronics has narrow protit margins. Floor space is a scarce commodity." Walmart executive Bill Simon echoed a s imil ar sentiment to investors in April 201 I, stating that the company "couldn't possibly sell enough TVs during the holiday season to justify the space allotted to electronics."ss

Walmart's st rength is that it trail s only Amazon in online sales of consumer e lectronics, with 22 percent mar- ket share and 33 percent of salesH6 As the lead ing discount retailer, Walmrut is also one of the few companies that stands to benefit from the commoditization of products such as HDTVs, Blu-ray players, computers, and smartphones.87

AMAZON. COM

Founded in 1994 by Jeffrey Bezos as an online book retailer, Amazon.com's sales grew from $8 billion in 1995 to over $61 billion in 2012 (Exhibit 6).88 Since the company went public in 1997, it has rapidly diversified into multiple product areas 89 In 1998, Amazon.com launched its online music and video store and began to sell toys as well as consumer electronics; it added clothing in 2002, health and personal care items in 2003, and beauty products in 200490 Amazon opened its marketplace to third-party vendors through the launch of its "Fulfillment by Amazon" service in 2006. This move enabled sma ll to mediulll-sized businesses to utilize Amazon's order fulfillment and customer service infrastructure, while further broadening Amazon 's own on line presence91 More recently, Amazon has extended its vast array of products and services beyond traditional retail boundaries by offering Amazon Web Services. Its foray into c loud computing includes both infrastructure (e.g., data storage) and applications such as database services and workflow software.92

Atthe same time, Amazon has engaged in an aggress ive string of acquisitions, purchasing or investing in more than 70 companies since 1998. Some of these deals are aimed at increasing the breadth of products offered, such as Amazon's acquisition of Zappos, the number-one online shoe retailer, for $890 million in 2009. Others, such as the 2012 purchase of Kiva Systems, are intended to enhance Amazon's business operations93 Importantly, the company has ample amounts of cash, as well as ready access to affordable debt, to continue its buying spree well into the future. 94 Through such deals, Amazon has already grown to more than 56,000 ful\- and part-time employees95 and climbed to number 56 in the Fortune 50096

Yet another prong of Amazon's expansion st rategy has been to enter the electronic device market directly, through the manufacture and sale of its Amazon Kindle e-reader series. As opposed to merely selling e lectronic books for customers to read on competitors' technology (e.g., the iPad), Amazon now can influence the develop- ment of both the content and the underlying technology, creating an interlocking ecosystem that enhances sales in both categories. In a move that would place it on an even more direct collision course with Apple, Amazon is reported ly planning to stru·t manufacturing smartphones.97

Amazon's competitive advantage comes from its breadth of selection, the convenience of online shopping coupled with same-day delivery services, and its abi lity to undercut competitors on price.98 Without brick-and- mortar stores, Amazon avoids the costs of retail real estate, inventory displays, and an onsite sales force. At least for the time being, Amazon also benefits from not having to charge sales tax, unless customers reside in a state where the company has physical operations (e.g., Washington). Meanwhile, traditional retailers such as Best Buy are frustrated to find that their stores are increasingly serving as showrooms for Amazon buyers. People come in to Best Buy to tryout the merchandise and speak with the trained sales associates, but then utili ze their smart- phones to compare prices and purchase directly from Amazon if its prices are lower99

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Best Buy's Turn-Around Strategy (201 3)

nest nll Y's Turn-A round Strategy (2013)

Amazon's strategy appears to be workin g. The e- tailer increased its electronics and non-media revenues by 66 percent in 20 I 0, reaching $18 billion . From 2007 to the end of 20 I 0, Amazon.com increased its share of LCD TV se ts from 1. 3 percent to 3.7 percent, and its share of portable audio-device sales increased from 4.6 percent to II percent. 100 According to Kantor Retailing, A mazon's brand value increased by 37 perce nt in 20 10, surpass ing Walman to become the most valuable retail brand worldwide. Target maintained its position at #5, while Best Buy fe ll two slots to # 13. 101 A study by Reo·evo which asked consumers, "When you think about buying electro ni cs, who comes to mind first'I" provided a strikingly similar profi le. In brief, many of Amazon's ga ins appear to have come large ly at Best Buy 's expense (see Exhib its 7 and 8) .1 01

APPLE

M eanwhile, Apple has rolled out nearl y 400 of its own retail stores worldwide since 200 I , creating direct competition for Best Buy and other firms that carry Apple products. A t a time when most tradit ional retailers are c losing stores or downsizing, A pple opened 33 new stores in 20 12, for a total of 250 retail locations in the United States and 140 international stores distri buted across 13 countries. Net retail sales grew to $ 18.8 billion, a 33 percent increase over 20 II fi gures, and accounted for approxi mately 12 percent of A pple's total sales acti v- ity.I03 By the end of 20 I 0, Morgan Stanley es timated that Apple had captured 9 percent of the U.S. electronics market, plac ing it second only to Amazon anel Best Buy. Since then, its numbers have continued to ri se in spite of less th an des irable economic conditi ons (Ex hi bit 9).104

In addition to providing consumers with hands-on access to the latest iPods, iPads, iPhones, and M acs, Apple's retail stores offer one-to-one tech support , as well as a variety of training workshops and youth programs. Apple places its stores in high-profile, high-traffic locat ions in quality shopping malls and districts, with the goal of att rac ti ng new customers and providing a customized shopping experience. Management believes that direc t cus- tomer contact is useful in demonstrating the superior quality of A pple's products. All of thi s comes at a sign i ficant cos t, however. The company has spent more th an $2.8 billi on in capital asset purchases since the inception of its retail segment, and had outstanding lease commitmen ts of $2.4 billion at the end 01' 20 11 .105 Appl e has also hired approx imately 42 ,400 full-time employees to staff its retail outlets. lOG

On the down side, Apple 's recent stock pe rformClnce has raised concerns that the company's products may be losing their "sex appeal " against increased competition, often at lower price points. Apple shares dropped 12 percent on a single day ill January 20 13, erasing some $ 175 billion from its market capitali zati on, compared to it s all-time high reached in September 20 12. Investors were reacting to the posting of the company's slowest growth in pro fits since 2003 and it s weakest sa les growth in 14 quarters. Sales boosts from recent new product launches have not been as significant in ei ther size or duration, prompting some analysts to question whether A pp le's era of rapid growth may be coming to an end .I07

TARGET

Target is the second-largest di scount retailer in the United States, behind Walman . Target was founded in 1962, when Dayton's, a Minneapoli s department store, expanded into a shopping mall in Rosev ille, Minnesota. The store was named Target, to distingu ish the discount retailer from Dayton's higher-end stores. From 1970 to 1990, Target grew from 24 to 420 stores th rough organic and inorganic growth, becoming the leading brand in the Dayton Hudson Corporation pol1fol io in 1977. In 1998, D ay ton Hudson increased the company's Internet pres- ence through the purchase of Ri vertown Tradi ng. In 2006, Target.com formed a partnership with A mazon.com's Enterpri se Solutions to develop better e-commerce technology that would enable it to compete more effectively online. The company continues to main tain a strong online presence as well as over 1,700 Target and Target Superstore outlets across all 50 states. Across all of its operating units, Target posted revenues of $68.5 billion in fi scal 20 II , with a net income of $2.9 bill ion (Exhibit 10)w8

9

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40 Strategy & Policy

Best Buy's Turn-Around Strategy (2013)

Following Circuit City's collapse, Target likewise increased its consumer-electronics offerings, focusing on TVs, video games, and digital imaging "as part of its electronics makeover." 109 Changes included the installation of new TV-merchandising walls to make side-by-side comparisons easier for customers, as well as expanding store inventory to include larger and more technologically advanced TV sets. At the same time, Target enlarged its video game section by a third and added demo stations for players to tryout new releases. Target was also the first physical retailer to carry Amazon's Kindle e-book reader. I 10 The company added a TV delivery and installation service in January 2010. I I 1

In August 20 I 0, Mark Schinele, senior vice president of Target, unveiled three new consumer-electronics services to further enhance consumers' shopping experience: 1-877-myTGTtech, Target Mobile, and Target Electronics Trade-In. In his words, "Our goal is to create the best and easiest shopping experience for our guests. As we continue to grow and enhance our consumer electronics business, we designed 1-877-myTGTtech to assist guests with any questions and technical support on their electronics purchases .... Target Electronics Trade-Jn offers our guests an opportunity to upgrade their consumer electronics items for less. And Target Mobile ensures a convenient cell phone shopping experience." I 12 All three services were rolled out nationwide in 20 II. In 2013, Target terminated its mobile partnership with RadioShack and inked new agreements with Brightstar and MarketSource, to ensure its customers with continued access to the latest mobile products and services. 1 13

Analysts like Target 's focus on phones because of the I imited footprint required, 114 and generally believe that there is room for Target's approach in the intensely competitive consumer-electronics market. While Walmart dominates in terms of brand recognition, breadth of selection, and low-cost priCing, Target caters to more of a middle- and upper-class clientele that is likely to appreciate its enhanced service offerings. I I.) As a general mer- chandiser, Target also sees much higher foot traffic than Best Buy, and can capitalize on spur-of-the-moment purchases and customers' desire for a one-stop shopping experience. 116

Signaling its future competitive intent in this arena, Target extended its holiday price matching policy year round starting in January 2013, promising to match prices offered by both physical and online competitors. It also announced that it would no longer carry Kindle readers as of May of that same year, in an apparent effort to limit Amazon's growth. Jnstead, Target forged a new agreement with Apple to sell iPods, iPads, iPhones, and related products in its stores, placing it in even more direct competition with Walmart and Best Buy. I 17

Best Buy's Comeback Strategy

Compared with its major competitors, Best Buy's stock price has taken a beating (see Exhibit II). Shortly after assuming office, CEO Joly shared a broad outline of his turnaround plan-dubbed "Renew Blue"-with inves- tors. Beyond some long-awaited improvements in operational performance and efficiency, his vision included attracting transformational leaders, reinvigorating the customer experience, energizing Best Buy's rank-and-file employees, and investing in private-label brands. 118

ATTRACT TRANSFORMATIONAL LEADERS

One of Joly's first objectives was to create a top management team with the necessary expertise and passion for leading Best Buy's transformation. Dunn had started down this pathway by luring Stephen Gillett away from Starbucks to serve as Best Buy's President of Digital and Global Business Services in March 2012. As Starbucks' CJO and head of Digital Ventures, Gillett was credited with integrating technology into the coffee shop experi- ence, by creating smurtphone apps, a mobile payment system linked to loyalty cards, and providing free Wi-Fi connectivity in stores. I 19 At Best Buy, Gillett's primary task was to create an integrated, multichannel retail expe- rience through the use of innovative technology while improving the company's operations. 120

Dunn's interim successor, Mike Mikan, was responsible for .hiring Matlhew Furman as the company's Senior Vice President of Communications and Public Affairs in June 20 I 2. Furman previously served as the Vice

10

Best Buy's Turn-Around Strategy (2013)

Ilest IlIlY's Turn-Around Strategy (2013)

President of Corporate Affairs at Mars Chocolate, and had also worked in various commu nica tions positions for Google, ChoicePoint , and even President Bill Clinton. His main objective was lO tell Best Buy's story- "where it's been, where it intends to go and how it 's goi ng to get there"-with "consistency, clarity and passion" to the tirm's multiple sta keholder audiences. 121

Still, Joly felt that several more key hires were needed. In October 2012, he recruited Scott Durchslag to Best Buy's growing executive team as President of Online and Global e-Commerce, reporting to Gillett in the technol- ogy division. He was given the reigns to BestBuy.com, along with instructions to create a world-class e-commerce experience. Durchslag hailed most recently from Expedia Worldwide, where he was responsible for managing strategy, product development, marketing, and operations for the company's 27 global sites. In prior posts, he served as the chief operating officer of Skype and corporate vice president of Motorola, where he helped launch the RAZR line of mobile phones. Durchslag started his business career at McKinsey & Company, ri sing quickly through the ranks and making partner in just four years. In When his boss, Stephen Gillett, left Best Buy for Semantec in December 20 /2, Durchslag assullled leadership for the entire online di vision. 123

Sharon McCollam joined Best Buy in November as the company's new Chief Administrative and Chief Financial Officer, with responsibility for all global financial activities. Earlier in 2012, she had reti red from a similar post at Williams-Sonoma, a U.S.-based home furnishings retailer. Sharon was regard ed highl y for her skills as a cross-functiona l leader and her track record of producing strong financial result s. She had worked in the financial field throughout her professional life, starting out in public accounting at Ernst & Young and then moving up through the controller ranks at Dole Food Company.124

With his lead players in place, Joly's next move was to restructure the business effective January I , 20 13. He created two channels , on line and retail, and promoted insider Shawn Score to lead the U.S. retail unit. Shawn had held a variety of positions over his 27-year hislOry with Best Buy, but most recently served as senior vi ce president ancl general manager of the Connectivity Business Group. In turn, Jude Buckley was promoted from chief operat- ing ofticer to head of the Connectivity Business Group. His prior experience included several years as managing director for the Carphone Warehouse and as an investment banker and tax accountant in Europe and Australia. There were no leadership changes for the two other business groups: Mike Mohan remained head of the Home scctor, and George Sherman cont inued to run the Services unit. All unit heads reported directly to Joly, at least for the time being. 125 Joly hoped that the simplifi ed organizational and reporting structure would enable Best Buy to become more flexible and responsive to market demands.

REINVIGORATE THE CUSTOMER EXPERIENCE

Best Buy's strategy had long been characterized by a commitment to customer-centrici ty attained through in-depth data analysis and systematic customer segmentation. The company's Purchase Path Solutions project with Accenture enabled it to collect and mine masses of customer data, which it then used to design its stores and train its sa lespeople. An internal analyst described the company 's goals as follows: " We needed to make sure that the district, territory, and store teams have the tools that they need to actually look at things like: what kind of traffic do they have coming in thei r stores today, how effectively are they selling to the people that are in the stores today, what do their close rates look like, what cloes their customer information look like, what segments do they have coming in , what kind of market share do they have for those segments .... We have invested in the right tools so that the field knows what to focus on and can identify what indicators to move a lillie bit that w ill help us a /01'.,, 126

The term customer-celltricity indi cates a business orientation that caters to spec ific customer needs and behav- iors. Compared to traditiona l product-centered marketing, customer-centricity looks at a business from the "out- side in ," asking what problems its customers are facing, and then providing solutions. 127 The lirm then customizes sales strategies to appea l to the more lucrativc customer segments ("angels") and to discourage the "devi ls" who actually cos t the store money (i.e., buying returned merchandise, loading up on loss leaders, insisting on price matching, and so on).1 28

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42 Strategy & Policy

Best Buy's Turn-Around Strategy (20t3)

Through market research, Best Buy had identified four overarching segments that accounted for 90 percent of its customer base: Urban Trendsetters, Upscale Suburban, Empty Nesters, and Middle America. Each was asso- ciated with a male and a female persona that encompassed all of the associated customer characteristics. 129 For example, "Jill" was an "Upscale Suburban" mom who appreciates personal shopping assistants who can help her find the right products for her family quickly. She usually purchased items with accessories and required help with inslaliation. 13o Stores were specifically configured to serve the needs of the predominant customer segment(s) in a given region.I'1 Despite renovation expenses that approach $1 million per store, former CEO and Vice Chairman Brad Anderson claimed that stores that were configured toward local demographics doubled their growth rate compared with other compnny stores.

The problem was that all of these data regarding in-store customers did not necessarily transfer to the online setting, which was an increasingly important purt of Best Buy's revenue stream. Instead, Joly recognized the need to creMe a "leading edge, multichannel shopping experience," where customers could move nuidly between "bricks" and " clicks." Though short on details, he promised to put the "pedal to the metal in digital" while "evolv- ing the design" of both the company's online platform and its physical stores. Joly also hoped to build more "engaged and rewarding relationships with customers" by strengthening Best Buy's membership programs. m Ultimately, Joly's goal was to increase both in-store and online conversion rates, so that each customer contact was more likely to lead to a sale. Currently, only 1.3 percent of customers who visited Best Buy 's website actually made a purchase, while approximately 15 percent of in-store visitors openly admitted to showrooming (shopping with the explicit intent to purchase from another vendor online). J33

ENERGIZE EMPLOYEES

To create a truly unique, multichannel customer experience, Joly knew he would need a nimble, educated, and motivated sales force. The "Blue Shirts" had played a key role in the battle for market share against Circuit City, and Joly believed they were equally essential to Best Buy's future. Fortunately, Best Buy already had a strong reputation for innovative human resource practices.

Soon after unveiling its customer-centricity program, the company realized that the same principles applied equally well to its employees. The corporate communications team therefore set up an employee-listening pro- gram that used open communication to better understand the needs of its workers. Techniques included simple tools such as annual company-wide surveys, a virtual discussion board ("The Water Cooler"), and one-on-one dialogue sessions. Best Buy filtered the data collected from these methods to discern issues that were important to employees but about which management was previously unaware. [34

Similarly, Best Buy was one of the first companies to experiment with implementing a "results-only work environment" (ROWE) in the retail industry. J)5 In place at the company's headquat1ers near Minneapolis since 2005, ROWE permitted employees to set their own schedules as long as they completed their tasks successfully. Bosses had no role in scheduling, and could judge only whether a task was accomplished on time and in a sa tisfactory manner, even if none of the work OCCUlTed nt the office. Best Buy estimated that employee productivity increased by 35 percent in departments in which the policy had been implemented, and also believed it helped reduce staff turnover. [36

In addition, Best Buy had been honored on multiple occasions for its efforts on behalf of minority groups. For example, the company had received recognition from the Rehabilitation Association and Springboard Consulting for its efforts in recruiting, hiring, and accommodating persons with disabilities. The Human Rights Campaign had repeatedly named the firm as one of the "Best Places to Work" based on its support of gay, lesbian, bisexual, and transgender equality in the workplace. J37 In 2010, the American Muslim Consumer Conference (AMCC) gave Best Buy its Multicultural Award for its acknowledgment of all gifting holidays from November to Janumy, including Eid. According to AMCC, Best Buy was the only retail company to recognize this important Muslim festival throughout all of its U.S. locations. [3R

12

Best Buy's Turn-Around Strategy (2013)

\lest Buy's Turn-Around Strategy (2013)

Yet one of the lirst things 101y noted during his week on the sales floor was the wide variance in Ihe quality of salespeople; clearly, more (and better) training was needed. instead of having general sales personnel who knew a little about many products, he envisioned a cadre of highly trained specialists who could answer questions related to a specific product calegory more quickly and more effectively than searching on the Internet. 139 Another signif- icant challenge was employee morale, which was at an all-time low after three years of poor sales, store closings , andlay-offs, not to mention the analysts' ongoing predictions of Best Buy's impending demise. 14o Joly made the controversial decision to end the company's ROWE at its Minneapolis headquarters out of the lirm belief that "all hands were needed on deck" at this time of crisis, but nevertheless worried about the potential negative effects on employee motivation and performance. 141

BUILD EXCLUSIVE BRANDS

Finally, Joly saw Best Buy's P0l1folio of private-label brands (Insignia, Dynex, Init, Rocketfish, Geek Squad, and others) as an increasingly imp0l1ant part of Best Buy's defense against online competitors. 142 Insignia focused on electronic equipment, including televisions, monitors, car stereos, home-theater systems, and portable video and audio players. Dynex produced a wide variety of economically priced computer and entertainment accessories such as storage media, data and power cables, webcams, and office wpplies, with recent forays into electronics such as high-definition LCD televisions. Init offered storage solutions for many of the products made by both Insignia and Dynex, including media storage, equipment bags, totes, and furniture for home theaters. Rocketfish's high-end cables were predominantly used in home-theater installation and setup as well as on computer accessories, providing another complementary product line. The Geek Squad was the most well-known of all of Best Buy's private brands, and provided both computer repair and installation services as well as high-end computer accessories and cables.

Having such "exclusives" not only protected against "showroollling," but also helped the company compete more effectively against competitors with their own branded productS. 143 In late 2012, Best Buy announced plans to introduce a new tablet called the insignia Flex to compete directly with the Amazon Kindle, Apple iPad, and other similar devices. 144 Joly was also considering acquiring or licensing even more name brands such as Hitachi or lYC as part of his turnaround strategy. 145

Decision Time

With the basic scaffolding of his turnaround plan in place, Joly knew the really hard work was just about to begin. Changing the organizational structure and bringing in new staff were relatively simple actions; by far the bigger challenge would be translating his vision into a strategic plan that could be implemented throughout the organiza- tion. What should Best Buy's new integrated "clicks" and "bricks" platform look like? What kinds of exclusive brands, membership programs, and services would be most effective in building customer loyalty and converting site visits to sales'! What new systems-information technology, accounting, operations, or otherwise-would be required') How could the senior management team get the rank-and-file employees to believe in a new and improved Best Buy and then equip them with the skills they would need to be successful in a multichannel retail world?

Losing Stephen Gillell in December, after only nine months on the job, was a huge blow for at least two reasons. First, the analysts loved him; even some of Best Buy's harshest critics saw hope for the firm as long as Gillell was in the picture. Without him, a financial blogger wrote, Best Buy's stock was "worse than a strong sell; you should Lake the name off of your radar. Don't touch it with your worst enemy's ten-foot pole and especially his or her trading plat- forlll .... Best Buy will fail as a retail company whereas it could have and should have given itself a fighting chance by morphing into a tech company like Starbucks.,,14" Second, the employees believed in him and his vision for integrating the digital and physical retail worlds, and had finally started to have hope for Best Buy's future again. Gillett's nick- name around the cOlllpany was Neo, after the hero in the movie The Matrix. 147 Scott Durchslag was perhaps equally as talented, but he had some big shoes to fiJI as the newly namcd head of Best Buy's global e-commerce division.

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Best !luy's Turn-Around Strategy (2013)

Yet another significant distraction was the ongoing battle in the boardroom between founder Richard Schulze and the rest of the directors (several of whom had been responsible for Schulze's ouster earlier in the year). Not content to see his "baby" suffer, Schulze approached the board with a bid to take the company private in August 201 2. He initially offered a price of $24 to $26 a share (a 47 percent premium) to purchase the remaining 80 per- cent of the company that he did not already own. Had the board accepted his initial proposal, the $8.8 billion deal would have been the largest buyout of a U.S. retailer in history. 148

Instead, Schulze and the board negotiated an agreement to allow him to conduct due diligence with access to nonpublic information about the company and then bring forth a second, fully financed proposal within 60 days. In the meantime, the board offered Schulze two board sea ts, in proportion to his ownership in the firm. 149 In December, the parties mutually agreed to extend the due diligence period again to allow Schulze to have access to year-end financials , pushing the date for a final offer back to February 2013. 150 Schulze failed to find enough private equity investors to broker the deal by the February deadline, however, and was starting to consider other options, such as taking a stronger minority stake in the firm. lSI

In the meantime, Joly had no choice but to proceed with his turnaround plan as if no major potential changes in ownership-or leaderShip-were pending. Either way, the stakes were high. Analysts were looking at Best Buy as a test case of how big-box retailers could adapt to a digital world. Under Joly's vision, Best Buy was trying to " be all things to all shoppers: a high-end customer-service experience to rival the Apple Store, an infinite online warehouse that can compete on price with the likes of Amazon, a retail chain for the personal-tech powerhouses, and a friendly retail partner for garage inventors. It [would] combine mass-market and niche in a way no store has ever been able to pull off." If it could successfully transform itself and "tind a place for traditional retai l in the smartphone age," Best Buy might just "provide a glimpse of what the future might look like for other big-box stores." Its failure, on the other hand, could well "signal their demise."IS2

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Best Buy's Turn-Around Strategy (2013) 4S

Best Buy's Turn-Arouud Strategy (21113)

EXHIBIT 1 Best Buy Financi al Data, 2008-2012 (in $ millions, except EPS data)

Fiscal Year 2008 2009 2010 2011 2012

Cash and short-term investments 996 2.398 1.613 1,658 2,189

Receivables-total 1,868 2,020 2.348 2,288 2.704

Inventories-total 4,753 5,486 5,897 5,731 6,571

Property, plant, and equipment-total (net) 4,174 4.070 3.823 3.471 3,270

Depreciation, depletion, and amortization (accumulated) 2,766 3,383 4,082 4,781 5,105

Assets-total 15,826 18,302 17,849 16,005 16,787

Accounts payable-trade 4,997 5,276 4,894 5,364 6,951

Long-term debt 1,126 1,104 711 1,685 1,153

Liabilities-total 10,670 11,338 10,557 11,639 13,072

Stockholders' equity-total 4,643 6,320 6,602 3,745 3,061

Sales (net) 45,015 49,694 50,272 50,705 45,085

Cost of goods sold 33,215 36,590 36,619 37,173 33,439

Selling, general, and administrative expense 8,984 9,873 10,325 10,242 9,502

Income taxes 674 802 714 709 231

tncome before extraordinary items 1,003 1,317 1,277 -1 ,057 -443

Net income (loss) 1,003 1,317 1,277 -1,231 - 441

Earnings per share (basic) excluding extraordinary ilems 2.43 3.16 3.14 -2.89 -1 .31

Earnings per share (diluted) excluding extraordinary items 2.39 3.10 3.08 -2.89 -1 .31

Sou rce: Compustat.

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46 Strategy & Policy

Dest OilY'S Turn-Around Strategy (2013)

EXHIBIT 2 Global Computer and Electroni cs Retail Industry, 2007-20 II

Global Computer & Electronic Retail Sector Value

Year $ Billions t: Billions % Growth

2007 449.8 323.3

2008 464.9 334.2 3.4%

2009 463.1 332.9 (0.4%)

2010 490.3 352.4 5.9%

2011 514.2 369.6 4.9%

CAGR: 2007-11 3.4%

Source: MarketLine Industry Profile: Global Computer & Electro",cs Retail. Reference Code: 0199-2025, May 2012 , www.mmkctlinc.colll.

600 . $ Billions

6

500 % Growth

5

400 4

V> c: ~ 300 C5

"" 200 2

100

0 o 2007 2008 2009 2010 2011

Year

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Best Buy's Turn-Around Strategy (2013) 47

Dest DIlY's Tllrn·ArOllnd Stnltegy (2013)

EXHIBIT 3 Market Share in the Global Computer and Electronics Retail Sector, % Share, 20 I I

• Apple Inc, • Walmart Stares , Inc, Metro AG

• Best Buy Co" Inc, Other

SOU I'ce: ivInrkclLinc Inouslry Proille: Global Com pUler & Eleclronies Relail. Reference Code: 0199·2025, May 2012. w\V\V,markelline.colll.

EXHlUIT4 Circuit City Financial Data, 2003-2007 (in $ millions, except EPS data)

Fiscal Year 2003 2004 2005 2006 2007

Cash and short-term investments 783 1,005 838 739 297

Receivables-total 580 173 226 425 489

Inventories-total 1,517 1,460 1,698 1,637 1,574

Property, plant, and equipment-total (net) 586 739 839 921 1,037

DepreCiation, depletion, and amortization (accumulated) 1,021 1,104 1,179 1,300 1,448

Assets-total 3,633 3,789 4,069 4,007 3,746

Accounts payable-trade 830 962 1,053 1,114 1,108

Long-term debt 23 12 52 50 57

Liabilities-total 1,409 1,702 2,114 2,216 2,243

Stockholders' eqUity- total 2,224 2,087 1,955 1,791 1,503

Sales (net) 9,778 10,478 11,598 12,430 11 ,744

Cost of goods sold 7,320 7,749 8,603 9,320 9,131

Selling, general, and administrative expense 2,266 2,487 2,620 2,806 2,775

Income taxes 0 36 88 31 -32

Income before extraordinary items -1 60 151 -10 -321

Net income (loss) -89 62 140 -8 -320

Earnings per share (basic) excluding extraordinary items -0.43 0.32 0.79 -0.05 -1 .94

Earnings per share (diluted) excluding extraordinary items 0 0,31 0.84 -0,06 -1 .95

Source: CornplIslru .

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48 Strategy & Policy

Uest Uuy's Turn-Around Strategy (2013)

EXHIGlT 5 WaJmart Financial Data, 2008-2012 (in $ millions, except EPS data)

Fiscal Year 2008 2009 2010 2011 2012

Cash and short-term investments 7,275 7,907 7,395 6,550 7,781

Receivables-total 3,905 4,144 5,089 5,937 6,768

Inventories-total 34,511 33,160 36,318 40,714 43,803

Property, plant, and equipment-total (net) 95,653 102,307 107,878 112,324 116,681

Depreciation, depletion, and amortization (accumulated) 35,508 41,210 46,611 48,614 55,043

Assets-total 163,429 170,706 180,663 193,406 203,105

Accounts payable-trade 28,849 30,451 33,557 36,608 38,080

Long-term debt 34,549 36,401 43,842 47,079 41,417

Liabilities-total 95,953 97,470 109,008 117,241 120,848

Stockholders' eqUity-total 65,285 70,749 68,542 71,315 76,343

Sales (net) 402,298 406,103 420,016 444,948 467,231

Cost 01 goods sold 299,419 297,500 307,646 326,997 343,987

Selling, general, and administrative expense 76,299 79,347 81,020 85,199 88,873

Income taxes 7,145 7,139 7,579 7,944 7,981

Income before extraordinary items 13,254 14,414 15,355 15,766 16,999

Net income (loss) 13,400 14,335 16,389 15,699 16,999

Earnings per share (basic) excluding extraordinary items 3.36 3.73 4.20 4.56 5.04

Earnings per share (diluted) excluding extraordinary items 3.35 3.72 4.18 4.54 5.02

Source: Compuslat.

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Best Buy's Turn-Around Strategy (2013) 49

Bes! Buy's Turn-Around Strategy (2013)

EXHIBIT 6 Amazon Financial Data. 2008- 20 12 (in $ million s. except EPS clata)

Fiscal Year 2008 2009 2010 2011 2012

Cash anel short-term inveslments 3.727 6.366 8,762 9.576 11,448

Receivables-total 711 836 1.324 2,134 2,600

Inventories-total 1,399 2,171 3,202 4,992 6,031

Property, plant, and equipment-total (net) 854 1,290 2,414 4,417 7.060

Depreciation, depletion, and amortization (accumulated) 555 625 842 1,369 2,522

Assets-total 8,314 13,813 18,797 25,278 32,555

Accounts payable-trade 3,594 5,605 8,051 11,145 13,318

Long-term debt 533 252 641 1,415 3,830

Liabilities-total 5,642 8,556 11 ,933 17,521 24,363

Stockholders' equity-total 2,672 5,257 6,864 7,757 8,192

Sales (net) 19,166 24,509 34 ,204 48,077 61,093

Cost of goods sold 14,585 18,594 26,009 36,288 44,271

Selling, general, and administrative expense 3,452 4,300 6,131 9,773 14,287

Income taxes 247 253 352 291 428

Income before extraordinary items 645 902 1,152 631 -39

Net income (loss) 645 902 1,152 631 -39

Earnings per share (basic) excluding extraordinary items 1.52 2.08 2.58 1.39 -0.09

Earnings per share (diluted) excluding extraordinary items 1.49 2.04 2.53 1.37 -0.09

Sotln.:c: ComrllS'~1.

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Ilestlluy 's Turn-Around Strategy (2013)

EXHIDIT7 Top 20 Most Valuable Retail Brands

The Top 20 Most Valuable Global Retail Brands, 2011 Brand Value

Parent Brand Value Change Brand Brand # Brand Company SUS Billions YOY Contribution Momentum 1. amazon.com US Amazon.com, $37,628 37% 3 10

Inc.

2. Walmart US Wal -Mart Stores, $37,277 -5% 2 5 Inc.

3. Tesco UK Tesco pic $21,834 -15% 4 7

4. Carrefour France Carrefour SA $13,754 -8% 3 7

5. Target US Target Corp. $12,471 3% 3 3

6. eBay US eBay, Inc. $10,731 15% 2 8

7. The Home Depot US Home Depot, Inc. $9,877 10% 2 3

8. Aldi Germany Aldi Einkauf $9,251 6% 2 4 GmbH

9. Auchan France Auchan SA $7,796 -1% 3 7

10. IKEA Sweden Ikea $7,293 28% 2 6 International

11. Lowe's US Lowe's Cos., Inc. $6,522 -7% 2 3

12. Marks & Spencer UK Marks & $5,252 -8% 3 4 Spencer pic

13. Best Buy US Best Buy Co., $5,104 -12% 3 3 Inc.

14. Costco US Costco $4,544 17% 4 Wholesale Corp.

15. Lidl Germany Lidl & Schwarz $4,240 3% 1 4

16. Kohl's US Kohl's Corp. $4,003 -8% 3 4

17. ASDA UK Wal-Mart Stores, $3,975 -19% 2 4 Inc.

18. Sam's Club US Wal-Mart Stores, $2,935 - 10% 2 2 Inc.

19. Sainbury's UK J Sainsbury Pic $2,685 -2% 3 5

20. Safeway US Safeway, Inc. $2,012 -37% 2 3

Notes: Brand contribution measures Ihe degree to which brand plays a role in generating earnings. It is displayed as an index from 1 to 5, 5 being the greatest brand contribution. Brand momentum measures the grow1h potential of brand-driven earnings. It is displayed as an index from 1 to 10-10 being the greatest potential.

Source: Adapled from Kanlar Relail, Milward Brown Oplimor.

20

Best Buy's Turn-Around Strategy (2013) 51

Best Buy's Tu rn-A roll lid Strategy (2013)

EXHIBIT 8 Custoiller Perceptions

When you think about buying electronics, who carnes to rnind first?

50 44%

40

30

20 15%

10

o Best Buy Arnazon Walmart Other

l- 2008 - 2009 ] Source: Adapted from www.relrevo.com/cOlllenlJbcslhuy-competilors-gaillcd-groulld (J<tllunry 5, 2010),

EXHIBIT 9 Apple Financial Data, 2008-2012 (in $ Illillions, except EPS data)

Fiscal Year 2008 2009 2010 2011 2012

Cash and short-term investments 24,490 23,464 25,620 25,952 29,129

Receivables-total 4,704 5,057 9,924 11,717 18,692

Inventories-total 509 455 1,051 776 791

Property, plant, and equiprnent-total (net) 2,455 2,954 4,768 7,777 15,452

Depreciation, depletion, and amortization (accurnulated) 1,292 1,713 2,466 3,991 6,435

Assets-total 39,572 47,501 75,183 116,371 176,064

Accounts payable-trade 5,520 5,601 12,015 14,632 21,175

Long-term debt 0 0 0 0 0

Liabilities-total 18,542 15,861 27,392 39,756 57,854

Stockholders' equity-total 21,030 31,640 47,791 76,615 118,210

Sales (net) 32,479 42,905 65,225 108,249 156,508

Cost of goods sold 20,898 24,999 38,609 62,609 84,641

Selling, general, and administrative expense 4,870 5,482 7,299 10,028 13,421

Income taxes 2,061 3,831 4,527 8,283 14,030

Income before extraordinary items 4,834 8,235 14,013 25,922 41,733

Net income (loss) 4,834 8,235 14,013 25,922 41,733

Earnings per share (baSiC) excluding extraordinary items 5.48 9.22 15.41 28.05 44.64

Earnings per share (diluted) excluding extraordinary items 5.36 9.08 15.15 27.68 44.15

Source: COlllpLlSlal.

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52 Strategy & Policy

Best Buy's Turn-Around Strategy (2013)

EXHIBIT 10 Target Financial Data, 2008-2012 (in $ millions, except EPS d<lta)

Fiscal Year 2008 2009 2010 2011 2012

Cash and short-term investments 893 2,200 1,712 794 784

Receivables-total 8,753 7,882 7,075 6,927 6,857

Inventories-total 6,705 7,179 7,596 7,918 7,903

Property, plant, and equipment-total (net) 25,756 25,280 25,493 29,149 30,653

Depreciation, depletion, and amortization (accumulated) 9,060 10,485 11,555 12,382 13,311

Assets-total 44,106 44,533 43,705 46,630 48,163

Accounts payable-trade 6,337 6,511 6,625 6,857 7,056

Long- term debt 17,490 15,118 15,607 13,697 14,654

Liabilities-total 30,394 29,186 28,218 30,809 31,605

Stockholders' equity-total 13,712 15,347 15,487 15,821 16,558

Sales (net) 64,948 65,357 67,390 69,865 73,301

Cost of goods sold 44 ,157 44,062 46,585 48,306 51,035

Selling, general, and administrative expense 14,563 14,599 13,469 14,106 14,914

Income taxes 1,322 1,384 1,575 1,527 1,610

Income before extraordinary items 2,214 2,488 2,920 2,929 2,999

Net income (loss) 2,214 2,488 2,920 2,929 2,999

Earnings per share (basic) excluding extraordinary items 2.87 331 4.03 4.31 4.57

Earnings per share (diluted) excluding extraordinary items 2.86 3.30 4.00 4.28 4.52

Source: Compusta\.

EXHIBIT 11 Share Performance of Major Competitors

- Apple - Best Buy - Target - Walmart - Amazon

80%

60%

40%

20%

0%

-20%

-40%

-60% Jan'12 Apr '12 Jul'12 Oct'12 Jan '13

Source: Google Finance, 11Itp:l/w\Vw.googie.com/finance .

22

Best Buy's Turn-Around Strategy (2013)

Best Buy's Turn-Around Strategy (21l1)

Endnotes

I. Copeland, M. V. (2012). "DeMh by a billion click, ," http://www.wired.com/busi ness/20 12/11/rnf-best-buy-colllebacklail/.

2. Besl Buy 2012 Annual Report.

3. hll p:llpr.bby.com/besl-buy-con fi nns-signi licanl-decli ne-i n-fiscal-Ihi rd-quarler-20 J 3-earn i ngs/.

4. 1111 P :II PI'. hby.com/l:x:st -bu y-a nnou nces-hol ida y -reven ue-resu Ils-2/.

5. hllp:llwww.slarlribune.com/business/ 179 17486 1.hllnl.

6. Copeland. M . V. (20 12). " Demh by a billion clicks."

7. hllp:! Ipr.bby.comljol y -Slalts- first -official-da y -as-president -chie F-execut i ve-officer-of-best -bu y I.

8. Copeland, M. V. (2012), "Death by a billion clicks."

9. Busli 110, M. , and M. Jarzemsky (20 I I). "Besl Buy gets squeezed," The Wall Sireel ./ollowl, September 14.

10. hllp:l/www.reuters.col11/arlicle/20 12/1 1/13/us-bes lbuy-meeting-id USBRE8ACOV 120 12 J I 13 .

I I. hllp:l/finance.yahoo.com/news/besl-buy-hires-joly-ceo-1117026S4--finance.html.

12. Besl Buy Timeline. www.bby.com/wp-con len l/uploads/20 10104/BBY _ TimeLine.pdf.

13. Best Buy Co .. Inc. (October I), Hoover 's Company Records, 10209.

14. Best Buy Timeline.

I S. Ibid .

16. Besl Buy Co .. Inc. (October I), Hoover 's Company Records, 10209.

17. "Besl Buy and Circuit City: The gloves come off," Bel'llSleill Research. April 1994, hllp:l/web.ebscohost.com/bsil pdPvid= I O&hid= I I I &sid=2600S6c3-72S2-467f-acdf-688 f3a98I bfa%40sessionmgr 13.

18. www.fundinguniverse.com/company-histories/Best-Buy-Co-lnc-Company-History.html.

19. www.bby.colll/wp-content/uploads/20 10104/BBY _ TimeLine.pdf.

20. Best Buy 's annual 10-K filing . Filed February 27,20 10, www.sec.gov/Archi ves/edgar/ data1764478/000 I 04 74691 0004349/a2197223z I O-k.htlll .

2 1. www.fundinguni verse.com/company-histories/Best-Buy-Co- lllC-Company-Hi stOl.y.html .

22. Best Buy T il11el ine. www.bby.col11/wp-content/uploads/2010104/BBY _ TimeLine.pdf.

23. www.fundinguniverse.com/company-histories/Besl-Buy-Co-lllc-Compally-History.html.

24. wWIV.crn .com/news/chan ne I-progrn ms/l 894004 24/<1n alom y-of-a-marri age-how -best-buy -acqu i red- i n regrator- mId i ov i sion s. h lIn :jsession id=X -s fi M fEI7Zesi ic n Li DSQ" ", .eca ppj03.

25. "Paci ri c Sa les will be acquired in deal valued at $4 10 million," The Wall Sireel./olll'lla/, December 23,2005.

26. www.speakeasy.net/press/pripr032707.php.

27. wWlV.reu ters.com/an icle/id USN I 5503088200809 15.

28. WIVW. fundi nguni verse.com/company-histories/Best- B u y-Co-IIIC-Company- H iSiory.ht mi.

29. Best Buy 20 12 Annual Repon.

30. "Best Buy will pay $ 180 million for majorily of China's Jiangsu," The Wall Sireel./ollma/. May 13. 2006.

23

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54 Strategy & Policy

Ilest Iluy's Turn-Around Strategy (2013)

31. www.icmrindia.org/cases tudies/calalogue/Business%20stra tegy/BSTR299. htl11 .

32. Best Buy 2012 Annual Report.

33. Ibid .

34. Copeland, M. V. (2012), "Dealh by a billion clicks."

35. Bustillo, M. , and M. Jarze msky (20 II), " Besl Buy ge ts squeezed."

36. Bustillo, M. (20) J) , "Bes t Buy 10 shrink 'big box ' strategy," The Wall Street Journal, April 14.

37. htl p:/lwww.marketwatch.com/story /besl-bu y-Iay i ng-off-600- from-geek -sq uad-2012-07 -06.

38. BUSlillo, M. (20 II). " Best Buy to shrink 'big box' strategy."

39. Best Buy Annual Rep0I1 2012.

40. BUSlillo, M., and M. Jarzemsky (2011), " Best Buy gets squeezed."

41. Ibid .

42. http://www.twinci ties.com/ci_203634 23/best -bu y -bria n-dun n-resigns-ceo-struggl i ng -elec tronics.

43. hltp://pr.bby.com/best-buy-releases-res ult s-of-iudependent-investi gation-new-chainnan-of-the-boanl-elected/.

44. Ibid.

45. http ://pr.bby.com/best-buy-announces- Ieadership-Iransition-interim-ceo-nHl11ed-to-lead-company/ .

46. http ://pr.bby.com/best-buy-releases-result s-of- indepcndent-investigation-new-chairman-of-the -boa rd-elec ted/.

47. http://pr.bb y .co m/j 01 y -s ta rt s -fi rSI- 0 ffi cia I-da y -as- pres i den t-c hie f-exec uti ve-o fti ce r- 0 f -besl- bu Y / .

48. http://online.wsj.com/artic\e/SBI0000872396390443855804577600184241 954866. html.

49. "Radio, telev ision, consumer electronics , and music stores," EI/cyclopedia 0/ American II/dllstries. Online Edition, Gale, 2009. Reprod uced in Business and Company Resource Center (Farmington Hill s, MI: Gale Group), htlp://galenet.ga legroup. com/servle t/BCRC.

50. Ibid .

51. lbid.

52. Ibid.

53. www.novelguide.com/a/discoverlcps_02/cps_02_00304.hlml.

54 . "Radio, television, consumer e lectronics, and music stores," Encyclopedia a/American Indll stries.

55. " Rewiring Best Buy: A longer look at capi ta l allocation and acquisition strategies," Bernstein Weekly Note. May 16,2008.

56. MarketLine indust.)' profile: Global computer & electronics re tai l. Reference Code: 0199-2025, May 20 12, www. marketline.com.

57 . Best Buy 's third -quarter IO-Q filing. Filed August 28, 20 10. www.sec.gov.

58. "Industry profile global-Com puter & electronics re tai l," Datamon;lOr PLC.

59. M arketLine industry pro fil e: Global computer & electronics reta il. Reference Code: 0199-2025, May 20 12, www. ma rke tline.com.

60. htlp:!lseek ingalpha.com/article/562821 -why-wal-mart-beats-its-competitors.

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Besl Buy's Tu I'll-A round Siralegy (2013)

6 1. Rourke, E., A. Woodward , and D. Sa lamie ( 1994 ), "Circui l Ci lY Sloo'es, Inc.," IllIemmiollal Direc/oly 0/ COIl1P(IIIY Hi.<lorie.l. Vol. 65. 1994.

62. Ibid.

63. Ibid .

64. Ibi d.

65. Ibid .

66. Ibid.

67. Ibid.

68. Ibid.

69. Ibid .

70. Lynch, D. J . (2007), "Flal-panel TV, di!;play effedS of g loba li za tion ," USA Todm', May 8, www. usa loday.com/edu ca le/ co li egeibusiness/a rLide!;/200705I 3.hlln.

7 1. www. l1led iapos l.com/publi c<l lio ns/index .cfm?fa=Arlicles.showArticie&arl_aid=5283 I.

72. "C ircu il C ilY revamps il s re tail stralegy," WashinglOlI PO.l' /, Februilry 9, 2007.

n. WWIV. hc i .orglca tegory/t racks/talent -com mun i t ieslta lent -slralegy/work force- pi an n i ng ?page= 18. 74. Herb Greenberg (2008), "'Worst CEOs of year-o f 2008, tha t is ," The Wolf Sireel Joul'llol. January 5, http ://on li ne .lVsj . com/news/arlic les/SB 11 99498364593693 17.

7:;. WWIV. marke tlVatch.colll/Siory/circ u i I-C i I Y -may- !;hut -sto res -Io-a void -ban klllplcy-re pori.

7 6. www.internetretailer.com/2009/05/29/a-talc-of-two-bankro.oplc ies -systemax-nabs-c ircuilci I Y -cOI1l -1 i nen.

77, Bes t Buy 2010 Shareholde r Meeling Presentation, June 24 , 20 10, http://ph x.corponlle-i r.net/Ex te rnaI.Filc·)ilem=UGFyZ WSOSUQ9Mzg3NDk3FENoaWxkSUQ9M zkw MDElVfFRScGU9MQ= = &1 =1 .

78. " Profil al Bes l Buy beats expec lal ions ," The Nell' York Tillle s, Morch 25 , 20 10,

79. "Besl Buy Co, Inc.," DUIOIIIOlliIOl; June 25. 20 10, IVlVw.dalamon ilo r.coll1.

80. http://lVww. wa lmaristo res .colll/sites/annua l-reportJ20 12/Wa liVl arl_AR.pdf.

81. http ://corporatc.lVa lmart .com/olir-sto ry/heril age/his lory- ti mel i ne.

82. Walmart.com USA, LLC ( December 15), Hoover 's Company Records, 125250. Relrieved December 20, 20 I O. f rom Hoover's Company Records. Document 10: 548531 73 1.

83. hllp ://www.wn lmart.lores.com/s ile!;/annuil l-repon/20 I 2/Will Mao1_A R .pd r.

84. hl l p:/ /hol hard ware.com/NelVs/Wa lrnart -Ex rands-Con su mer -E leci ron ics-Offeri ngs/.

8S. hllr://wlVw.bloomberg.com/news/20 I 1-04- 12/wa l-milrt-pl ans- to-redllce-space-for-e leclronics- in-slo rcs. hlml.

86. hllp ://seek ingal pha.com/art ic1e/S62821-why-wal-man -beals- il s-compelilon;.

87. hltp://www.forbes.com/s iles/)allrahe lle r/20 13/0 I /09/wa Imarl-defies-ce- recession/.

88. hllp:// ti nance. y a hoo.com/qli s ?s=A M ZN+I ncorne+Slalemenl&an nu a l.

89. Jannaro ne. J. (2011 ), "Forecasl fo r Be,t Buy: WorSI is yel lo come_"

90. htlp://ph x .corporale-i r.nel/phoen ix.zhlml k= I 76060&p=i rol-corporaleTimel ine.

91. http://phx.co rporale- ir. nel/phoenix .zhlm Pc=97664&p=irol-new,Articlc&1 0=906817.

25

55

56 Strategy & Policy

Dest Duy's Turn-Around Strategy (2013)

92. hllp://nws.amazon.com/prodllcts/.

93. http://www. marketi ntell i gencecenteLcomJart ic les/244S73.

94. Ibid.

95. Amazon 20 11 Annunl Report.

96. http://money.cnn.com/magazines/fonune/fortuneSOO/20 12/fulUist/.

97. http://seeJ<i nga I pha.com/artic len3S20 I-amazon-s-compet i t i ve-ad van tage -growt h-opportun i t ies- make-it -a-bu y.

9S. Ibid .

99. " Bes t Buy feel s the pressure of rivals on the web," The New York Times. December IS, 20 I O.

100. Ibid.

101. http://www.kantarretail.com/top20/B randZRetai ITop20. pd f.

I 02. www.retrevo.com/content/bestbu y-competitors-ga ined-ground.

103. Apple 2012 Annual Report, http://investoLapple.com/secfi ling.cfm?filingID=1 193 12S-1 I -282 I I 3&CIK=320 I 93.

104. www.tuaw.com/20 I 0/04/2S/a pple-retai I-store-sales-c I i mb-81.

105 . Apple 20 1 I Annual Repo rt. hllp://investor.apple.com/secfiling.cfm?filingID=119312S-1 1-2821 13&CIK=320193.

106. Apple 2012 Annual Report.

I 07. http://www.bloomberg.com/news/2013-01-23/apple-s-holiday-sales-mi ss-predictions. html.

lOS. Target 20 II Annual Report, https://corporate.target.com/annual-reorts/20 I Ilimages/company/a nnual_report_20111 doclimentslTarget_20 I I_Annual_Report.pdf.

109. http://blogs.consumerreport s.org/electronics/20 I O/OS/walmart-target-home-entertainlllcnt-electronics-upgrades-tvs- smart-phones-bluray- best-buy-competition.html.

110. Ibid .

I I I. http://pressroom.target.comJpr/news/target -launches-new-elec tronic s.aspx.

112 . Ibid.

113. http://pressroom.targe l.cOI11/news/targct-annollnces-brightSlar-and-markelsollrce-as-new-largel-mobile-sen1 ice-partners.

I 14. http://l11innesota .publi cradio.org/di splay/web/20 I 0/08/2S/target-e!ectronics.

liS. hnp://seekingalpha.comJarticle/S62821-why-wal-marl-beals- its-competilOrs.

I 16. http ://minnesota .publicraclio .orgldisplay/web/20 I 0/08/2S/larget-electronics.

I 17. http://seekingalpha.com/arl ic leIS62821-why-wal-mart-beats-its·competitors.

I IS. http://pLbby.com/besl-bu y- holds-analys t -and -i nvestor-day-to-prov ide-assessment-of-t he-company -and-to-ou t I i ne- p ri ori ti es -to-rei nv i g ora te- perform a nce-and-rej u ve nat e -i t s- busi ness/.

I 19. http://www.informationweek.com/global-cio/careers/besl-buy-hires-starbucks-cio-stephen-giV2326023 14.

120. http://pr.bby.comJbesl-buy-names-fo nner-sta rbucks-executive-stephen-g illett-evp-and- president-best-blly-digital-and- globa 1-busi ness-se rvices/.

I 21. http://pr.bby.col11lbest-buy-names-matlhew-furmnn -new-comrnllnications-chief/.

122. http://pr.bby.com/besl -buy-hires- top-g lobal-Iechnology-talenU.

26

Besl !luy's Turn-Around Sirategy (2013)

1 2~. hllp :l/pLbby.comlbe,l-bu y-ma kes -personnel-anlloullcemenl/.

124 . http://pr. bby.comlre I i red-wi II iam ,-sOllom a-exec ul ive-sharo n-mccolla m-re lurnS-IO-re I a i I-as-best -buys -ne w-c h ie f- ad min i sl rative-o lTice r-and-e h ie f-financia 1-0 Ffice r/.

125. http ://www.rc ute rs.com/article/201 2/ I 0124/idUS219043+24-0cl-20 12+1-1 UG20 121 024 .

126. Best Buy QI FY09 Earnings Call , June 16,2009.

127. IlItp://blogs.hbLorg/hbsfac ully/20 10104/ ins ide-best-buys-c uslome r-ccnt.hlml.

128. www.scdigest.com/asscls/N ews Views/04-11 - IS- I .cfm.

129. wWIV. dailyrec h.com/arlic le .aspx ?new,id= I I 133.

130. hllr ://money.c nn.com/magazines/forllln elforlune_"rchive/2006/041Ol/S~73W4/index .htm .

131. Ibid .

J ~2. hi I p://pr. bby.com/ \)esl -l1u y -ho lds-ana I ysr-a nd- i nves to r-d a y-to-provide-assessmenl -0 1'-1 he-company -a ncl-to-oll I I i ne- prio r iii es -I 0- re i nv i g ora Ie -perform a IlC e -a n d - re j u vellal e -i t, -bu s in es s/.

133 . IlIlp ://bcta.fooJ.com/pirloOo/20 121 I I I I 9/besl-buy-loves-showrooming/l 676 I/.

134. http://ceci nside r.exbdblogs.comI2010/ 1 1/23/besl-buy% E2%80%99s-e mployee- lis tening-sysre m/.

J 35. Pink , D. 1-1 . (2009), Drive: Th e S lI rprisil1g Trulh abolll Whm MOlivOIes Us (New York : Ri verhead Book,).

I ~6. http://money.c nn.com/magazi nes/bus iness2/business2_arc hive/2007/03l01/8401022Ii ndex. htm.

I 37. hi Ip:/ Iwww.bestbu y-jobs.coll1/beslbu y/pdfl? fil e= bes l-places- 10- work -hrc -2008.

138. www.diversilyalbeslbuy.com/Awards.hlm!.

139 . Copeland, M. Y. (2012) , "Dealh by a billion clic ks."

140. Ibid .

141. http ://m.startribune.co ll1/bu s inesst'id=195156871&c =y.

142. www.bby.com/aboui/.

143 . htlp://www.fcrrbes.com/s iles/barbara lhall /20 12/1 01 IS/rclai le rs- fight-bac k-againsl-all1azon-wilh-privalc-brands/.

144 . hllp ://www.bizjournals.com/lwinc ilie s/news/2012/ 11 / 14/bes t-buy-mi ght-buy-electronics -brand s. html.

145. http://ww w.bloomberg.com/news/20 12-1 1-14/besl-buy-ceo-joly-considers-buying-e lec lronics-brands-for-slores .hlml.

146. hltp ://www. tlt es lree l.com/slory/l 179758 I I I ISlephen-giliell-leaves-sinking-ship-best-buy-for-symanlec. hun!.

147. Cope land , M. Y. (20 12), "Dealh by a billion clicks."

148. hllp:llil -j obs. fin s.com/Arlicles/SBB000087239639044]79260457757346 1 I 10 IS91 181 B CSI- B II Y -Fou nder- Ma kes-Takeove r- B id.

149. hll p:1 Ipr. bby.com/besl-buy -board-and -Fou nder-ricllilrd-sc hu I ze- reac h-a grceme nl -pe I'm i II i ng -sc hu Ize-to- fo rm- i nveslment -group-a nd -condlici-due-d iii ge nce/.

I 50. ht I p: Ilpr. bb y. com/be s t- hu Y -board-a nd - FOIl n der- ri c hard -schulze -a gree -I 0 - a mend -3 u g II S t -2 61 h-coope ra t ion -3 gree me n II.

151. hllp ://online.wsj.com/arlicic/S B 1000 1424 12788732461660457830239020 I 622424 .hlrnl ? l1lod=googlenews_wsj .

152 . Cope land . M. Y. (2012), "Dealh by a billion clicks."

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57