What is best buy core competence

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Two interesting and related pieces of news caught the eye. First, Toys R Us filed for bankruptcy earlier this week. This is one of the largest bankruptcy filings in US history. Of course the general feeling was that it was the emergence of Amazon and the changing buying patterns of consumers caused this, but that is only a part of the story. The reality is that this bankruptcy was also precipitated by a huge debt burden on the company, which was placed on it by a private equity buyout. A question to consider is, would Toys R Us be using different strategies if it would not have the burden placed on its finances by this leveraged buy out?

The second story is that of another "big box" store, Best Buy. Unlike Toys R Us, Best Buy is doing great. It has produced a formula for producing impressive financials, including high ROE and low debt-equity ratio of 0.31. Of course, Best Buy is a success story, but the question is, can we understand the principles that made it successful, and can we apply it to other companies facing disruptive pressures?

What is Best Buy's core competence, and how did it outperform Toys R Us so handsomely?

Reference no: EM131699011

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