Organizational Change Decision Processes

Leadership Challenges

Organizational Change

Transformational

Incremental

Internal or External
Planned

Unplanned

Take Action

Evaluate Results Of Action

Recognizing and Defining the Problem ID Course Of Action

Choosing Action

Decisions are Effected By:

Ethical Reasoning Specific Type of Situation (Reoccurring or Unique) Environment Thought Processes (systematic of intuitive) Inherent Biases

Leadership Challenges

Types of Challenges
External (Social, Economic or Political) Internal (Fear, Confidence, Insecurities, or Prejudices) Challenges from Leadership Itself (overall responsibility of the companies vision, mission, and identity)
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Best Buys OB during Crisis

Emergence of new competition Expansion into China Leadership scandals

Emergence of new competition due to change in market place

 Long tenured leaderships, natural progression to CEO roles resulted in lack of acceptance to shift in paradigm Richard Schulze 46 years (became Chairman from CEO) Brad Anderson partner of Schulze became CEO in 2002 Brian Dunn new CEO in 2009 with more sales background Lack of right internet strategy Away from big-box store culture Failure of Bestbuy.com lack of customer focus New emerging competitors such as Amazon.com

Facts and Figures

E-commerce accounts for more than 20 percent of U.S. consumer electronics sales vs. online purchasing is only 6 percent of Best Buys domestic revenue Best Buy's mobile business makes up nearly one-third of the retailer's profits, but accounts for less than 10 percent of its stores overall square footage.

Current Strategies Incremental changes

Reduction of square footage by 15% in about 43 stores Could it be more ???? Square feet Sales per Retail Real Estate: per Store square foot
GameStop Best Buy Costco 1,400 13,927 143,000 $1,015 $865 $1,031

Improved customer service

Best Buys Geek Squad turns the ordinary business of technology troubleshooting into a customer adventure (More than 17,000 Geek agents are at work in the U.S., and the program is expanding to Canada, the U.K., and Spain)

Price match Guarantee

Started with only during holiday season; Extended to all times From March 3rd 2013..Will it stop the practice of show rooming???

Improved internet strategy

Best Buys online portal allows customers to reserve items for pickup within the hour at a nearby store

Best Buys Entry Into Chinas Consumer Electronic Market

Chinese retail consumer electronics market:

Environment: Overcrowded Very competitive, price wars Consumers extremely price-sensitive Low margin business Dominated by two major competitors: 1. Gome Started in 1987, 1300 stores, #1 Consumer Electronics Retailer 2. Suning Started in 2004, 1012 stores #2 Consumer Electronics Retailer

Competitions Attributes
Small stores, leased space lower overhead less costs to pass to consumer = lower prices

Commission only sales people lower overhead less costs to pass to consumer = lower prices
Training provided by product manufacturers lower overhead less costs to pass to consumer = lower prices Locations outside of the cities more accessible to the consumer Ability to bargain regarding prices cultural difference

Competition Location and Logistics

Gome: Leased space, small stores

Suning: Low overhead warehouse style

We've become a service company in North America, and that's what we're doing in China, too Bob Willet CEO of Best Buy International

87,000 square feet 4 stories Located in the heart of Shanghai

Best Buys approach: Rely on intuitive thinking and heuristics

Big box stores, owned real estate higher overhead more costs to pass to consumer = higher prices Non-Commission sales people higher overhead more costs to pass to consumer = higher prices 18 month boot camp style training course higher overhead more costs to pass to consumer = higher prices Locations in major cities less accessible to the consumer Fixed pricing, inability to bargain regarding prices cultural difference
In 2011, five years after entering the Chinese marketplace, Best Buy closed all of its branded stores.

We were stupid and arrogant Dave Deno Best Buys former Asia Chief

Organizational Ethics

CEOs Ethics Judgment and Leadership

Selection of Brian Dunn Richard Schluze s vision of Dunn Plan for Best Buy Advisement of Ethical Concerns Responsibility of board members Possible affects on Best Buy and Board Members Corporate Policies Effectiveness Guidelines Failure to follow policies Need for Change

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Conclusion
Best Buys behaviors in dealing with change, decisions, and leadership resulted in its devaluation and poor public image

Conclusion Cont.
Best Buy needs to reevaluate itself (internally and externally.) If it does not alter its behavior as an organization it is doomed to extinction.