Best Buy Strategic Plan: Add 10% to Operating Profit by 2016

1. Welcome to the Spring 2013MB107 Executive PresentationOrientationFind your team number and sit together with your team. We’ll get started soon!

2. Orientation Meeting Agenda • What is Company X? • Who’s who in the MB107 Program • What is the Executive Presentation? • Dry Run and EP Specifics • Analysis and Strategy Development • Financial Target: Economic Logic and Financial Estimates • Team Dynamics & Project Timeline • Student Perspective • The EP day

3. You are now junior executives working for this company…

4. http://www.youtube.com/watch?v=dTJCinYtrxE

5. Best Buy Companies, Inc.Not everything you think it is!

6. Your job? You must come up with a strategy to move Best Buy Co., Inc. forward in the next 3 years. The Bottom Line? YOUR TARGET IS TO ADD 10% TO THEIR OPERATING PROFIT BY YEAR-END 2016

7. MB107 Faculty Coordinator – Professor Caroline D’Abate MB107 Faculty – Professors Mark Youndt and Cathy Hamilton MB240/316 Coaching and Leadership Faculty – Professor Tancredi MB107 Staff – Nancy Walker, Tyler Orfao ’13, Rebecca McCourt ‘14 MB107 Coaches – Enrolled in MB240/316 and Volunteer coaches Management and Business Faculty – Experts are available Seek them out for specialized questions (marketing, financials, presentations,…) Reference Librarian – Barbara Norelli, Social Science Librarian http://libguides.skidmore.edu/MB107 Who’s Who in MB107 Program

8. Outcome: Strategic Plan for Best Buy • Strategic recommendation • Financial analysis & projections • Detailed plan for marketing, operations, • and implementation • Briefly describe what other options • you considered and why your chosen • strategic path is the right course of action • Formal and Professional Presentation • Your Role: Junior Executives of Best Buy • Your Audience: Senior Executives from Best Buy (actually executives from across the country and various industries) • Presentation Format: • -Formal Presentation 20-25 minutes – visual aids/hand-outs encouraged • -Question and Answer 10-15 minutes • -Senior Exec Evaluation/Consensus 10 minutes (students leave room) • -Feedback Session 5-7 minutes (you will receive a team grade) What is the Executive Presentation?

9. Dry Runs are Tues/Wed/Thurs nights (March 19, 20, 21) • Each team has been assigned a one-hour time slot on one of these evenings • Presentation in front of 3-4 student execs and MBD faculty • At the very least, you must have: • A solid situation analysis • A clear strategic recommendation • A good plan for implementation • Basic financials • Basic PowerPoint • Solid preparation will yield quality feedback • Use feedback to refine and enhance presentation for the EP day (April 26th) • Bring your iPhone, Flip, DVD recorder, or other device to film the dry run for your own review (if needed, contact Media Services to borrow a recording device) • Presentation Day – Friday, April 26th at the Courtyard Marriott • Assignment sheet outlines main tasks (Do not ignore it!) • You must update the case to April 26th (Look for 2013 annual report in early April) Dry Run and EP Specifics

10. Dry Run & EP Specifics: Executives’ Evaluation • Some key concerns • Do you have a good understanding of Best Buy’s situation? • Have you identified the key challenges? Will your strategy address those challenges? • Is it implementable? Have you convinced them that it can work? Have you convinced them that it’s the right course of action? • You will be evaluated on your presentation’s substance, • professionalism and effectiveness, and teamwork • Ultimate goal is reliable, consistent, valid, and accurate assessments • of your strategic plan and presentation. We give them clear evaluation • criteria (you’ll see the evaluation form beforehand). But remember… • This is real-world • Human perception is involved • Subjective judgments are being made • Imperfection is the rule rather than the exception

11. Best Buy may be a household name, but it’s got its share of problems.

12. Sources: Case; 2012 Annual Report; Foley, Int’l business times, 1/23/13)

13. Breakdown of BBY’s sales

14. “In the future, we expect to see a reduction in the number of large-format stores, a reduction in square footage for certain of our large-format stores and a continuation of the growth in small-format Best Buy Mobile stores.” (Annual report, 2012) ( Moving forward… Acquired cloud-like mindSHIFT for $175mill (focusing on small/mid-sized business IT services) Expanding Geek Squad to eBay and Target stores By end 2012, had closed all large-format Best Buy branded stores in China, Turkey, UK

15. Moving forward…domestic vs internat’l

16. Multi-year cost reductions (see Annual Report p. 34) Future Direction Overall US store formal improvements Growth initiatives Improved customer experience

17. Analysis and Strategy Development Q: Where should I start? A: Read the case, the annual report, any/all reports and articles linked on the MB107 website, and stay current on any “new” news or reports on Best Buy Analyze Best Buy’s current situation to identify the major issues. Two “Key Slides” to include in your presentation: 1. The key challenges/opportunities/issues facing Best Buy are… 2. Our strategy addresses these by… (explain how)

18. Analysis and Strategy Development • Start with Situational Analysis • This leads to Strategy Development • External Analysis • General/Macro-environment • Porter’s 5 forces • Industry life cycle • KSFs • Value chain • Competitor analysis • Strategic group mapping • Market segmentation • Rivals’ profiles • Select Optimal • Strategy (5 elements) • Arenas • Vehicles • Differentiators • Staging • Economic logic Strategic Options • Internal Analysis • Mission/vision • SWOT • Core/distinctive competencies • Competitive advantage • Internal value chain

19. Arenas • Which product categories? • Which market segments? • Which geographic areas? • Which core technologies? • Which value chain emphasis? Analysis and Strategy Development: Your strategic recommendation must be comprehensive • Economic Logic • Lowest costs via scale advantages? • Lowest costs via scope and • replication advantages? • Premium prices due to • unmatchable services? • Premium prices due to proprietary • product features? • Vehicles • Internal Development? • Joint Ventures? • Licensing/Franchising? • Acquisitions? • Staging • Speed of expansion: fast, slow, moderate? • Sequence of initiatives: methodical or ad hoc? • Action steps • Differentiators • Image? • Customization? • Price? • Styling? • Product Reliability?

20. Financial Target – Best Buy Refer to the MB107 Financial Template Guide (word doc) • Utilize case data, Best Buy’s 2012 Annual Report, Best Buy’s 2013 Q3 earnings release, upcoming 2013 annual report (early April??) • Recent company events/presentations • Analyst estimates (e.g., Yahoo Finance, Mergent Online, Passport GMID industry reports, Datamonitor Industry Profiles, First Research reports) • Project Best Buy’s operating income (without the effect of your strategic recommendation) out through 2016 (this is the projected baseline) • Your strategic recommendation must contribute an additional 10% to Best Buy’s operating income by year-end 2016 Refer to the Financial Template (excel) • Step 1 tab – Best Buy’s historical financials 2010-2012 (you’ll need to update to 2013 when available) • Step 2 tab - Calculate baseline financial projections for 2013 -2016 using cost/revenue assumptions (do research to determine assumptions) • Steps 3-5 tab - Demonstrate the impact of your strategy on the projected financials (show how they earn the extra 10%)

21. Financial Target – Best Buy

22. Strategy gets the plane started, the numbers keep you in the air! • SWOT – Key Success Factors of Best Buy vs. competition • Current and Future Standing on Key Financial Variables – Margins, • Ratios, inventory turnover, profitability, etc. Financial Analysis & Projections • Financial Projections: • Domestic/International revenues • Revenues by brand • Revenues by product category • Cost of sales and Operating costs • Don’t be afraid to lose a little money in YR1 • Project three years out

23. Some key concerns: • Capital • - What is your funding source? How will you pay for your proposed plan? - Operations? Investments? Financing? Cash? • Can you explain your quantitative analysis? • - Offer a coherent explanation of your finances • - Realism – Is it realistic? Feasible? You need to provide a good story • - Back it up – Use external sources to provide evidence • Explain and justify the assumptions that underlie your numbers • - Assumptions about costs (cost of goods sold, inventory, supplier relations, • distribution, facility costs, employee-related costs) • - Assumptions about growth (revenue projections, units sold, sales in • different product categories, in different regions, market share, revenue • projections) Financial Target/Economic LogicWhat will account for the returns of your strategy?

24. Create SYNERGY & ride MOMENTUM • Apply individual and team GOAL-SETTING • Be ACCOUNTABLE to your team • COMMUNICATE early, often, and effectively Team Dynamics: Your Junior Executive Team

25. Team Dynamics • MB107 Teams Fail When Team Members or Individuals: • Don’t develop competencies from the course • Use the analytical tools you’re learning in MB107 • Engage in social loafing • Instead, hold each other accountable • Share the workload • Fail to take the advice of others • Instead, recognize escalation of commitment is occurring • Realize when it’s time to move on • Seek intervention when you need to • Emphasize relationships, rather than the task • Instead, look for symptoms of groupthink • Mare sure you’re not putting “getting along” ahead of • making good decisions • Don’t forget the 360-degree evaluations!

26. Team Dynamics: Your Coaches • Coaches work with your team • They won’t do the work for you • They are facilitators, advisors, and leaders • They’re here to help you negotiate team relationships • They’ll help you stay on target • They work with you from today through to April 26th

27. Team Dynamics: Meetings Keep a schedule that works for everyone If your team needs a place to meet for one or two nights during the semester, you must reserve a room. You cannot assume that campus spaces are available. Room reservations should be made only when you absolutely need them and through Skidmore’s Scheduling Office: http://cmsauthor.skidmore.edu/odsp/scheduling-office.cfm

29. Back it up • Substantiate your assertions • Be able to explain: • how you know what you know • why you’re suggesting what you’re suggesting • EVIDENCE!

30. Tyler Orfao ’13 and Rebecca McCourt ‘14 MB107 Student Coordinators torfao@skidmore.edu rmccourt@skidmore.edu We’re here for you! Come to us with team problems, for team support, for help with preparing for the dry runs or the EP, etc… The Student Perspective

31. Resources SUCCESS

32. Your team is the most critical resource for success! Resources SUCCESS

33. TO BE PROFESSIONAL, YOU MUST BE PREPARED! • Address technology needsprior to April 26th (multi-media, connection issues, laptop issues, multiple flash drives, etc.) • Prepare for no Internet access at hotel – This means no email, no datastor, no Dropbox/Cloud • Use USB/flash drives • Equipment /power failures – The show must go on…can you present without PowerPoint? • Travel arrangements – getting to/from the Courtyard Marriott • Know the time of your presentation (it’s a tight schedule) • Perform Library Research Assignment • Check your Skidmore e-mailmultiple times each day! A FEW FINAL NOTES

34. Best Buy Companies, Inc.