Company Analysis Essay on Best Buy Inc.

Published: 2021-07-05 21:31:09
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Wesleyan University
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Case study
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1. Competitive forces, Competitive Profile Matrix (CPM), and competitors ratios Deliverables for this

a. Competitive forces analysis

Competitive forces model identifies and analyzes the five forces that shape every industry and helps in the determination of an organizations strengths and weaknesses. The forces are; power of suppliers, power of customers, competition in the industry, and threat of substitute products and potential of new entrants into the industry (McWilliams, 2004). With respect to Best Buy Inc., its competitive forces are as follows;

Bargaining power of suppliers: there is a low concentration of suppliers meaning that there are many suppliers with limited bargaining powers which positively affects Best Buy Inc. furthermore, volume is critical to suppliers that is when suppliers are dependent on high volumes and thus have less bargaining power since a producer can threaten to cut volumes thus hurting the suppliers profits (Grundy, 2006).

Bargaining power of customers: since customers at Best Buy Inc. do not make huge purchases they do not have bargaining power. It thrives to retain customers by offering low prices and quality products

Barriers to entry and exit: in the market where Best Buyer corporation operation, the market entry and exit are rigid due to the huge investments required thus not easy to liquidity such huge business.

Threat of substitutes: Best Buys threat of substitute is low; there are few vendors such as Wal-Mart.

Industry rivalry: its rivals include: Wal-Mart, radio shack and Circuit city, however, it still excels and exceeds its rivals since it offers quality service and variety.

b. CPM analysis

Competitive Profile Matrix with other corporations

Best Buy Wal-Mart Target Dell

Critical Success Factors Weight Rating Weighted Score Rating Weighted Score Rating Weighted Score Rating Weighted Score

Customer Service 0.1 3 0.3 1 0.1 3 0.3 3 0.3

Sales Knowledge 0.1 3 0.3 1 0.1 2 0.2 1 0.1

Advertising 0.2 4 0.8 4 0.8 3 0.6 2 0.4

Price 0.15 2 0.3 4 0.6 3 0.45 3 0.45

Product Quality 0.1 3 0.3 2 0.2 2 0.2 4 0.4

Market Share 0.1 4 0.4 3 0.3 2 0.2 3 0.3

Financial Position 0.15 3 0.45 4 0.6 3 0.45 3 0.45

Expansion Plans 0.1 2 0.2 4 0.4 2 0.2 1 0.1

Total 1 3.05 3.1 2.6 2.5

Source: Reuters.com

Current and historical Financial Statements

Income Statement (I/S)

Annual Income Statement (values in 000's) Get Quarterly DataPeriod Ending: Trend 1/28/2017 1/30/2016 1/31/2015 2/1/2014

Total Revenue $39,403,000 $39,528,000 $40,339,000 $40,611,000

Cost of Revenue $29,963,000 $30,337,000 $31,292,000 $31,212,000

Gross Profit $9,440,000 $9,191,000 $9,047,000 $9,399,000

Operating Expenses

Research and Development $0 $0 $0 $0

Sales, General and Admin. $7,547,000 $7,618,000 $7,592,000 $8,106,000

Non-Recurring Items $39,000 $198,000 $5,000 $149,000

Other Operating Items $0 $0 $0 $0

Operating Income $1,854,000 $1,375,000 $1,450,000 $1,144,000

Adel income/expense items $34,000 $15,000 $27,000 $39,000

Earnings Before Interest and Tax $1,888,000 $1,390,000 $1,477,000 $1,183,000

Interest Expense $72,000 $80,000 $90,000 $100,000

Earnings Before Tax $1,816,000 $1,310,000 $1,387,000 $1,083,000

Income Tax $609,000 $503,000 $141,000 $388,000

Minority Interest $0 $0 ($2,000) $9,000

Equity Earnings/Loss Unconsolidated Subsidiary $0 $0 $0 $0

Net Income-Cont. Operations $1,207,000 $807,000 $1,246,000 $695,000

Net Income $1,228,000 $897,000 $1,233,000 $532,000

Net Income Applicable to Common Shareholders $1,228,000 $897,000 $1,233,000 $532,000

Source (http://www.nasdaq.com/symbol/bby/financials?query=income-statement#ixzz4jNih513Z)

Balance Sheet (B/S)

Annual Income Statement (values in 000's) Get Quarterly DataPeriod Ending: Trend 1/28/2017 1/30/2016 1/31/2015 2/1/2014

Current Assets

Cash and Cash Equivalents $2,240,000 $1,976,000 $2,432,000 $2,678,000

Short-Term Investments $1,681,000 $1,305,000 $1,456,000 $223,000

Net Receivables $1,347,000 $1,162,000 $1,280,000 $1,308,000

Inventory $4,864,000 $5,051,000 $5,174,000 $5,376,000

Other Current Assets $384,000 $392,000 $1,130,000 $900,000

Total Current Assets $10,516,000 $9,886,000 $11,472,000 $10,485,000

Long-Term Assets

Long-Term Investments $0 $0 $0 $0

Fixed Assets $2,293,000 $2,377,000 $2,462,000 $2,598,000

Goodwill $425,000 $425,000 $425,000 $425,000

Intangible Assets $0 $0 $57,000 $101,000

Other Assets $622,000 $831,000 $829,000 $404,000

Deferred Asset Charges $0 $0 $0 $0

Total Assets $13,856,000 $13,519,000 $15,245,000 $14,013,000

Current Liabilities

Accounts Payable $6,233,000 $5,764,000 $6,414,000 $6,586,000

Short-Term Debt / Current Portion of Long-Term Debt $44,000 $395,000 $41,000 $45,000

Other Current Liabilities $845,000 $766,000 $1,322,000 $805,000

Total Current Liabilities $7,122,000 $6,925,000 $7,777,000 $7,436,000

Long-Term Debt $1,321,000 $1,339,000 $1,572,000 $1,612,000

Other Liabilities $704,000 $877,000 $896,000 $976,000

Deferred Liability Charges $0 $0 $0 $0

Misc. Stocks $0 $0 $0 $0

Minority Interest $0 $0 $5,000 $3,000

Total Liabilities $9,147,000 $9,141,000 $10,250,000 $10,027,000

Stock Holders Equity

Common Stocks $31,000 $32,000 $35,000 $35,000

Capital Surplus $0 $0 $437,000 $300,000

Retained Earnings $4,399,000 $4,130,000 $4,141,000 $3,159,000

Treasury Stock $0 $0 $0 $0

Other Equity $279,000 $216,000 $382,000 $492,000

Total Equity $4,709,000 $4,378,000 $4,995,000 $3,986,000

Total Liabilities & Equity $13,856,000 $13,519,000 $15,245,000 $14,013,000

Source (http://www.nasdaq.com/symbol/bby/financials?query=balance-sheet#ixzz4jNj0XTWp)

Statement of Cash Flows

Annual Income Statement (values in 000's) Get Quarterly DataPeriod Ending: Trend 1/28/2017 1/30/2016 1/31/2015 2/1/2014

Net Income $1,228,000 $897,000 $1,233,000 $532,000

Cash Flows-Operating Activities

Depreciation $654,000 $657,000 $656,000 $716,000

Net Income Adjustments $317,000 $293,000 ($180,000) $526,000

Changes in Operating Activities

Accounts Receivable ($185,000) $123,000 ($19,000) $7,000

Changes in Inventories $193,000 $86,000 ($141,000) $597,000

Other Operating Activities $10,000 $36,000 $29,000 ($70,000)

Liabilities $328,000 ($770,000) $355,000 ($1,205,000)

Net Cash Flow-Operating $2,545,000 $1,322,000 $1,935,000 $1,094,000

Cash Flows-Investing Activities

Capital Expenditures ($582,000) ($649,000) ($561,000) ($547,000)

Investments ($356,000) $146,000 ($1,224,000) ($180,000)

Other Investing Activities $51,000 $84,000 $73,000 $210,000

Net Cash Flows-Investing ($887,000) ($419,000) ($1,712,000) ($517,000)

Cash Flows-Financing Activities

Sale and Purchase of Stock ($527,000) ($1,008,000) $50,000 $171,000

Net Borrowings ($394,000) ($28,000) ($24,000) $381,000

Other Financing Activities $22,000 $20,000 $2,000 $0

Net Cash Flows-Financing ($1,404,000) ($1,515,000) ($223,000) $319,000

Effect of Exchange Rate $10,000 ($38,000) ($52,000) ($44,000)

Net Cash Flow $264,000 ($650,000) ($52,000) $852,000

Source (http://www.nasdaq.com/symbol/bby/financials?query=cash-flow#ixzz4jNjc5tt2)

3. Financial ratios from the most current and available 3 years with deltas and analysis

Profitability ratios

 

Source: Reuters.com

Leverage Ratios

 

Source: Reuters.com and Best Buy.com

 

Source: Reuters.com

4. Alternative strategies (giving advantages and alternatives for each)

The alternative strategies that I can recommend to the company are to have a more financial capital to expand B2B centers throughout every Best Buy stores. It can also have single point of contact for small ventures to embrace technology solutions which can foster the business.

References

Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic Change, 15(5), 213-229.

McWilliams, G. (2004). Analyzing customers, Best Buy decides not all are welcome. The Wall Street Journal Online.

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