Best Buy PESTEL Analysis
Info: 1079 words (4 pages) PESTEL Example
Published: 2nd Nov 2020
Best Buy's main operating environment, the USA, is well regulated. Therefore, the organisation is held up to high operating standards by the political climate in which it operates. For example. Best Buy is liable for any product defects (Nguyen, 2017). In case a customer purchases a good from Best Buy, and it causes any injury, Best Buy is held liable and will compensate the consumer. Furthermore, as an electronic seller, whereby most electronic equipment manufacturers are located in Asia, import taxes play an important role in the organisation's operating costs. This situation is further compounded by the current US' president, Donald Trump's proposal to impose border tax for imports, to protect local organisations from cheap imports (David & David, 2017). The resulting increased costs will limit the profits of the company further.
Under the Best Buy brand, the company primarily operates in the USA. International operations under the Best Buy brand name are concentrated in Canada and Mexico (Yoder, Visich & Rustambekov, 2016), while in other global regions, the company operates under different brand names in the form of joint ventures or strategic alliances. Therefore, any changes in the Northern American economic environment greatly influences Best Buys profit margins. One such economic downtown is the depression in the US economy as a result of the 2008 financial crisis (Ball, 2014). During this time, the company experienced shocks in its sales and revenues. Furthermore, given that the US economy has experienced slowdowns, Best Buy should be prepared for tough operating environment ahead. This observation is further supported by the fact that Best Buy has positioned itself as a dealer in luxury products. During periods of economic growth, the company experienced increased sales and revenue. However, in cases of downturns, consumers first cut spending on luxury products.
As previously mentioned, Best Buy has positioned itself as a retail store for luxury brands, both in-house and third party. According to Al-Khatib, Dant & Vitell (2015), the spending habits on consumer luxury goods is dependent on the prevailing economic environment. Furthermore, according to Coale & Hoover (2015), population growth rate influence organisational profitability. This phenomenon is understandable given that people create markets. However, in most developed nations such as the USA and Canada, where most of Best Buy's operations are concentrated, have been experiencing a declining population growth. Therefore, Best Buy needs to explore international markets, especially in developing nations, which have positive population growths. Finally, efforts in CSR (Corporate-Social-Responsibility) are known to increase organisational profitability. In today's business environment, where corporates must create connections to their consumers to facilitate sales, CSR is important. Therefore, Best Buy is in partnership with other companies have formed foundations to encourage young generation to be strong in their studies so they can become professionals and experts in their fields (Prange, 2016)
The organisation operates in an industry characterised by high rates of dynamism, the electronics industry. With so many companies entering into the mobile devices industry, the rates of innovation in this sector are high. Therefore, Best Buy may find itself holding old stock, which is detrimental to profitability. Furthermore, within the retail industry, there is a shift towards 24-hour shopping, which is facilitated by technology. In this regard, Best Buy website allows consumers a 24-hour access of online products for more efficiency. Additionally, availability of information has shifted marketing operations towards being more data oriented. Consequently, the most competitive company is the one that had access to large amounts of security data. Therefore, Best Buy has invested in technology systems that allow the company to access customer information to enhance the shopping experience (David & David, 2017). Finally, technology has exposed organisations to malicious attacks, which cost firms a lot of finances and reputation. To protect themselves, organisations such as Best Buy institute measures such as encrypted websites for secure online transactions with consumers (Nguyen, 2017).
Concerns about increasing wastes by global and national corporations are increasingly putting pressure on business to adopt waste reduction processes such as recycling. This pressure increases Best Buy's operation costs, whereby the company has to institute compliance measures, which require additional resources such as employees and finances. Furthermore, Best Buy has come up with a program known as Greener Together specifically for conserving the environment (Gonzalez, Arrondo & Carcaba, 2017). The main aim the Greener Together program is to reduce energy costs, and disposable wastes. Best Buy collects electronic wastes from consumers, which is then recycled to reduce wastages and preserve the environment. To achieve this objective, Best Buy has an EMS (Environmental Management System) that tracks the recycling of electronic junks Prange, 2016).
According to (Gonzalez, Arrondo & Carcaba, 2017), Best Buy has to abide by the labour laws and environmental laws of ethical business. Best Buy has faced lawsuits several times for selling recalled products (David & David, 2007). In 2016, for example, the firm had to pay fine for selling defective products. Selling recalled products tarnish the brand image and the company might lose customers since the confidence level on Best Buy products decrease.
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