Porter’s five force analysis for Best buy co. Inc.

Efforts by:Prateek MishraSanchit kaparuwan Sumit KumarHitesh sharma Yash dev sharma

Direct competitorsRadio shack

Circuit City (presently out of US market)

Indirect competitorseBay.comAmazon.comWal-Marttarget

Barriers to entry and exit

In the market where Best buy operates , the entry and exit barriers are rigid because of huge investments required to enter (e.g. Real estate cost) and its not easy to liquidify such huge business and easily leave the market.

Rivalry is high

Bargaining Power of Customers is low

Threat of Substitutions is

moderate to low (i.e. few substitutes)

Bargaining Power of Suppliers is high

Threats of New Entrants is low

Threat of Substitutes

The threat of substitutes is low. You have options like target, Wal-Mart but their a customer does not get the desired quality and variety of product.

Threat of New Entrants

The threat of new entrants is moderate to low, the reason being that this business requires huge investment and the well established name that best buy built over the years in the market , which makes customer more loyal to best buy and restricts other players to capture the market.

Cont.…..Electronics Boutique and Egghead are two online stores that giving competition to Best buy.

Bargaining power of suppliers

Best Buy get its products at low prices directly from the manufacturers like Sony , Panasonic, Toshiba and thus they rely upon them so that they can pass on this price benefit to the customers. If in case best buy does not comply by any of its suppliers condition then it may have to face serious consequences in terms of customer base loss, the reason being that their USP(low price) would no longer be their strength as suppliers may increase the price.

Bargaining power of buyer’s

Since buyer’s at best buy does not buy in large quantity thus no single customer can have bargaining power. Since buyer’s get products at comparatively low prices so they prefer to buy from best buy. Best buy thrives hard to retain its customers by offering quality products at lesser price so as to fight competition.

Industry Rivalry

Though Best buy has rivals such as radio shack, circuit city, or Wal-Mart, but areas where best buy out do others are quality of service, price, variety and the staff, that has expertise in the electronic gadgets more than any other store.

Cont.Competition is high primarily because there is little to no switching costs if a buyer chooses to shop elsewhere. Even the products are not differentiated and so customer has the liberty to choose the products from any of the stores.

Thank you!