Circuit City from Good to Great to Gone
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Transcript of Circuit City from Good to Great to Gone
FROM GOOD TO GREAT TO GONE
T h e R i s e a n d Fa l l o f C i r c u i t C i t y
J o s h u a N e i l V. B a n z o nB A 1 9 0 - S t r a t e g i c M a n a g e m e n t
U n i v e r s i t y o f t h e P h i l i p p i n e sP r o f . M i t a A n g e l a M . D i m a l a n t a
C• Electronics retail store in the U.S.• Founded by Samuel Wurtzel in 1949• Formerly known as Wards Company until 1984• First store was in Richmond, Virginia
IRCUIT CITY
GOOD GREAT GONE• Within 10 years,
Wards became a four-store chain• Total sales: $1M per
year• Lower prices than
smaller competitors• Stores offered service
incentives• By 1979, sales
reached $120M
• In 1987, annual sales reached $1B • In the 1990s, was largest consumer-
electronics retailer in the U.S.• Best performing company on Jim Collins’
Good to Great list• Highly motivated and well-trained personnel• Deployment of sophisticated point-of-sale
and inventory-tracking technology• Ability to connect the flow of information
among geographically dispersed stores• Detailed tracking of customer preferences• Quick response to changing trends• Implementation of 4S/5S business model• Competitors were unable to replicate their
core competencies
• Neglected to upgrade and protect core competencies• Top management team was
distracted by pursuing noncore activities• Laid off 3,400 of firm’s
highest-paid sales personnel• Best Buy recruited Circuit
City’s top personnel• Best Buy upgraded its core
competencies• Filed for bankruptcy
protection in November 2008
Questions• Why was Circuit City so successful as to be featured in Good to Great?
What was its strategic position during its successful period? How did it contribute to competitive advantage?• Why did Circuit City lose its competitive advantage? What was Circuit
City’s strategic position during the time of its competitive disadvantage?• What could Circuit City’s management have done differently?• What is the future of Best Buy as the leader in big-box electronics
retailing as it faces tough competition with Amazon and other online retailers? What core competencies in big-box retailing are critical not only to survive but also to gain and sustain a competitive advantage?
Answers:1. Because they exceeded Collins’ criterion, instead of outperforming the stock market 6.9 times, they did 18.5 times.
High value for their products and low cost – large gap between value and cost, resulting to competitive advantage2. Overconfidence: ignored their closest competitor (Best Buy)
Poor decision making process: ventured out to other product lines to regain lead
Laid off 3,400 of its most tenured employeesCore competencies lost their value they lost their
competitive advantage
Answers:3. They could have stayed in appliances while venturing out to gaming and imaging department. They shouldn’t have laid off their top employees.4. They must hold onto their innovative customer-centricity model. *This allows employees to identify and more effectively and serve specific customer segments
Use of 4S/5S model to improve their customer serviceCost-leadership
REFERENCESHart, A., Matulich, E., Rubinsak, K., Sheffer, K., Vann, N., & Vidalon, Myriam. (October 2012). The Rise and Fall of Circuit City. Journal of Business Cases and Applications. Volume 6. Retrieved from http://www.aabri.com/manuscripts/121101.pdf
Rothaermel, Frank T., Strategic Management, 2nd Edition, McGraw-Hill Education, New York, USA.
Wulf, T. (2011). Good to great to gone. Training, 48(3), 20-20,22. Retrieved from http://search.proquest.com/docview/878897800?accountid=47253