Best Buy Boss: Bolster Business By Bettering Bungling Bureaucracy

Just as the title has way too many “B’s”, Best Buy believes it has too many upper-management positions in their organizational structure. With the company’s stock hitting a 10-year low recently, Best Buy believes leadership and organizational roles must be revamped to turn Best Buy back in the right direction.

Best Buy used to be known as the place to go (sometimes the only place) for any and all electronic needs. They had been leaders in the consumer electronics retail industry. Unfortunately, Best Buy has been relatively slow and complacent in terms of evolving and innovating their operations strategy. However, competitors have leap-frogged Best Buy from all angles. The last few years have seen internet retailers like Amazon and other large retail stores like Wal-Mart and Target capitalize on Best Buy falling asleep at the wheel.

Wal-Mart and Target have refined their operations efficiency enough to make them low-cost leaders. This is an essential part of why they can offer lower prices than many other outlets. They positioned themselves in consumer minds as the place to go to save money. Therefore, people figured if they save money at Wal-Mart for everyday items, the same must be for electronics. In addition, consumers also have the convenience factor of buying the electronics from Wal-Mart in that they could buy their groceries and other items there as well.

Amazon is also a big reason for Best Buy’s decline. While Best Buy and other retailers have an online store, Amazon’s specialization in online retailing has Best Buy “against the ropes”. Amazon beats Best Buy through lower prices, higher product variety, fast shipping, and in many states, tax-exempt purchases.

To stabilize the business, Best Buy’s new CEO, Hubert Joly, is condensing the management structure. They are cutting out high positions such as “President of U.S. Business” and “Chief Administrative Officer” organizing the company structure into three divisions. The heads of each division will answer to Joly directly. The reason behind the change is the hope that the company, can make a better connection to its functional-level employees (to be retrained as well) and customers. Best Buy has closed dozens of stores just this year and is reducing store sizes due to lack of in-store demand for certain products. With competitors doing the opposite, Best Buy’s relevancy  to consumers is fading.

It seems part of Best Buy’s sluggishness to be competitive had been a cumbersome organizational structure and the inevitable “bureaucratic red-tape” that hinders decision-making in an organization. In my opinion, this move by the newly appointed CEO is totally necessary for any long-term strategy to keep the company alive. However, I also feel it may be too little, too late for Best Buy to catch-up to its competitors. In the short-term however, I believe Best Buy will regain some traction due to the holiday shopping season and their new offer to customers of matching competitor prices on their items.

Will Best Buy eventually recover and be competitive in the market, or are their days numbered?

Patagonia & The Footprint Chronicles

Early this year, CEO of Patagonia, Casey Sheahan, raised a few eyebrows by introducing a “Don’t Buy This Jacket” campaign. Sheahan explained Patagonia must do the opposite of other businesses today for them to stay in business for a long time, as well as leaving an inhabitable planet for future generations. He goes on to say, “We ask you to buy less and to reflect before you spend a dime on this jacket or anything else.” Not only does this give a subtle hint that Patagonia strives for unparalleled quality, it shows the company highly values humanity and environmental consciousness.

More recently however, Patagonia has gone to new lengths to prove the ingenuity of their values and offer unprecedented transparency concerning their business operations to their customers. Patagonia has introduced The Footprint Chronicles, an interactive map of the world on their website that pinpoints all of the members of its operational supply chain, both textile mills and factories. Clicking on a pinpoint on the map brings up information on the location including what they are, their exact address, what they produce, work force, gender ratio, and how long they have worked with Patagonia.

For most companies, an informational map like this could just be a marketing ploy, but for Patagonia, it is an attempt to take business practices and operations to a new level of transparency for all to see. Patagonia is well known for the labor and working condition standards it surpasses every year, but nowadays it just isn’t enough for a company to have a piece of paper saying it passed regulations. This is due to the fact that sometimes these big manufacturers seemingly meet requirements for issues surrounding labor operations and working conditions, however, they are usually the ones who end up on a negative headline about underage labor practices, poor working conditions, etc.

Patagonia has always been know to champion quality over everything; not only a quality product, but quality operations that put people and the environment over profit. According to Patagonia, there are no private/closed-off managerial offices at their locations, creating a closer link between their corporate, business, and functional levels of the company. Though it may seem Patagonia’s humanity, sustainability, and environment driven business strategy leaves little room for profit, it is not true as the company has actually doubled revenue and tripled profits since 2008 ($540 million in 12 months ending with this past April) accoring to the Los Angeles Times.

Patagonia is definitely proving that not taking the easy short-cut to profits can undoubtedly pay off in the long-run. Could this be a sign that you do not have to be inhumane, greedy, or careless of the environment for your company to turn a profit and be successful?