Reference no: EM13784318
This paper will talk about the organizational renewal strategies that help helped failed companies such as Best Buy and Tyco to have a successful turnaround. This paper is a fraction of a series recounting the turnaround efforts at BBY (Best Buy); it focuses on the function of its Renew Blue initiative.
In 2004, Forbes lauded Best Buy as the company of the year whereas Fortune put it as the most admired company. However, BBY has struggled in the recent years and the outcome is an abrupt decline in stock prices and earnings. Its future is doubtful as a publically traded company. Therefore, the company had adopted the Renew Blue program as an organizational renewal strategy (Strategic Initiatives Case Study: Best Buy's, 2013).
Under the Renew Blue plan, the Best Buy has, summarize certain key initiatives in order to achieve its goals for the coming years. The first initiative focuses on hastening the growth in the online section. The company aims to augment online traffic and increase the rate of conversion among visitors by offering a shopping experience that is more interactive. That would imply keeping track of customer preferences rooted in their browsing history and producing recommendations for that reason. They will also revamp the platform to enhance the search experience. Creating product pages, which will offer smoothly, and consistent navigable experience across devices will make browsing easier (Shein, 2011).
The second initiative is meant to enhance customer experience across channels, be it online or in-store. The company has introduced the Net Promoter score, a new metric to track the level of satisfaction of the customers with the company's service on top of improvement of the functional experience online. All customers will be measured irrespective of whether they decide to buy from the corporation or not (Shein, 2011). The Best Buy company is of the opinion that the measurement is a very useful tool to shape and influence behavior. In fact, the Best Buy has established that the price and service perception has improved following the introduction of the NPS in November, as customer satisfaction with its sales acquaintances. NPS has quantitatively indicated a point growth of 200 bases.
The company will focus on stocking more items that produce higher margins in order to pick up gross profit for each square foot. Concurrently, it will seek to decrease costs through supply chain optimization and intelligent inventory management. Additionally cost reductions are intended by pruning of SG&A expenses and through real estate optimization. Besides forty-nine stores shut down last year, approximately 5-10 big box stores are expected to be shut down this year. The company anticipates reducing SG&A expenses by $400 million in the subsequent year by withdrawing non-core activities and eradicating redundant management layers. Savings of roughly $150 million were attained over the last numerous weeks by suspending about 400 individuals at the business headquarters (Shein, 2011).
Despite the fact that the strategy by Best Buy is executable, their stated challenges (declining operating margins and declining comps) indicative of something deeper since many industrial observers are cynical regarding the prospects of BBY.
This strategy may not be good at all since the Renew blue major idea in its investment thesis is that of being a market leader in growing and fragmented market. Amazon dominates the online space that is the growing section of the market. In the decreasing space of big-box electronic trade, BBY is the market leader. Additionally, BBY is ensnared by fixed costs.
Secondly, BBY levels itself against Starbucks, Sears, and Lowes for customer loyalty and satisfaction, but Starbucks and Lowes are not seeing their essential business model being shattered by Amazon. Lastly, BBY has to perform better than Amazon of which it seems impossible because they have no capacity to do so. The online weakness of BBY is the price since when compared to those of Amazon; their prices are a bit higher.