Best Buy Porter’s 5 Five Forces Model: Detailed Analysis (2021)



Best Buy Company Overview:

In the year of 2008, there were 5,822 Best Buys worldwide. In 2017, they have a total of 1,061 stores in the United States and 331 stores located all over the rest of North America. 87 percent of these stores are located within North America as well as 29 percent are from the United States. Best Buy is an American publicly traded company based in Richfield, Minnesota and they are also the largest retailer in the world when it comes to consumer electronics. This technology-based company was founded back in 1966 by Richard M. Schulze and James Wheeler who had previously worked at a retail store named Sound of Music before venturing off to create their own business. They first sold audio equipment and eventually became known as an electronics retailer all throughout the United States. The company continued to grow until it started earning 1 billion dollars every year. Time to go over Best Buy’s Porter’s Five Forces.



Best Buy Competitive Rivalry:



Best Buy has a high competitive rivalry because they are the leading electronics retailer, but there are many small competitors who provide the same product or service. One example is GameStop which also sells pre-owned video games and entertainment accessories. Even though these companies do offer pretty much the same things, they are different enough that it gives people the opportunity to choose which one they would like to go to.



Best Buy Bargaining Power of Suppliers:



The suppliers for Best Buy definitely have high bargaining power because of all the technology they sell. They need parts and accessories in order to operate their business so if they were to stop selling them, they would have a hard time selling any new products. One example of this is if there were some sort of shortage within Nintendo or Sony and they couldn’t get enough parts to sell their systems, it would be very difficult for Best Buy to continue doing so.



Best Buy Bargaining Power of Buyers:



Best Buy definitely has low bargaining power with their buyers because they are the ones who decide what happens to the company. If people started to boycott Best Buy and decided not to buy anything from there anymore, then it would become very difficult for them. It wouldn’t be hard for a consumer to go out and purchase something else instead of going to Best Buy if they were unhappy.




Best Buy Threat of New Entrants:



Best Buy doesn’t have any threats of new entrants because they are the leading electronics retailer and have been for a while now. The reason why I think this is because there aren’t many people who can afford to start a business like this, let alone would want to. Many people who would want to open up a new place like this, wouldn’t be able to find something that they could provide for their customers and not have it already provided by Best Buy.




Best Buy Threat of Substitutes:


Best Buy definitely has a few substitutes, but not to the point where it would be considered a threat. Some examples of these substitutes are other electronics retailers such as Amazon or Target. While there are other places that people can go to in order to purchase what they need, Best Buy is still one of the most popular choices. This is because they offer a variety of products that people can’t get anywhere else and they have a wide range of prices so that everyone can afford something.




Best Buy Porters Five Forces Conclusion:



Best Buy’s bargaining power of buyers is low, but their bargaining power of suppliers is high which makes it a little more difficult. The threat of new entrants is low because this isn’t something many people want to do and the substitutes aren’t really threats either because Best Buy does offer a larger selection than most other companies out there. Having both a high bargaining power of suppliers and buyers definitely makes it more difficult for Best Buy because these two things combined can be very hard to manage.


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