Welcome to the Spring 2013

MB107 Executive PresentationOrientation

Find your team number and sit together with your team.

We’ll get started soon!

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Orientation Meeting Agenda• What is Company X?

• Who’s who in the MB107 Program

• What is the Executive Presentation?

• Dry Run and EP Specifics

• Analysis and Strategy Development

• Financial Target: Economic Logic and Financial Estimates

• Team Dynamics & Project Timeline

• Student Perspective

• The EP day

You are now junior executives working for this company…

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http://www.youtube.com/watch?v=dTJCinYtrxE

Best Buy Companies, Inc.Not everything you think it is!

Your job?You must come up with a strategy

to move Best Buy Co., Inc.forward in the next 3 years.

The Bottom Line?YOUR TARGET IS

TO ADD 10% TO THEIR OPERATING PROFIT

BY YEAR-END 2016

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Who’s Who in MB107 ProgramMB107 Faculty Coordinator – Professor Caroline D’Abate

MB107 Faculty – Professors Mark Youndt and Cathy Hamilton

MB240/316 Coaching and Leadership Faculty – Professor Tancredi

MB107 Staff – Nancy Walker, Tyler Orfao ’13, Rebecca McCourt ‘14

MB107 Coaches – Enrolled in MB240/316 and Volunteer coaches

Management and Business Faculty – Experts are available Seek them out for specialized questions (marketing, financials, presentations,…)

Reference Librarian – Barbara Norelli, Social Science Librarianhttp://libguides.skidmore.edu/MB107

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What is the Executive Presentation?Outcome: Strategic Plan for Best Buy Strategic recommendation Financial analysis & projections Detailed plan for marketing, operations,

and implementation Briefly describe what other options

you considered and why your chosenstrategic path is the right course of action

Formal and Professional Presentation Your Role: Junior Executives of Best Buy Your Audience: Senior Executives from Best Buy (actually executives

from across the country and various industries) Presentation Format:

-Formal Presentation 20-25 minutes – visual aids/hand-outs encouraged-Question and Answer 10-15 minutes -Senior Exec Evaluation/Consensus 10 minutes (students leave room)-Feedback Session 5-7 minutes (you will receive a team grade)

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Dry Run and EP SpecificsDry Runs are Tues/Wed/Thurs nights (March 19, 20, 21)• Each team has been assigned a one-hour time slot on one of these evenings• Presentation in front of 3-4 student execs and MBD faculty• At the very least, you must have:

• A solid situation analysis• A clear strategic recommendation• A good plan for implementation• Basic financials• Basic PowerPoint

• Solid preparation will yield quality feedback• Use feedback to refine and enhance presentation for the EP day (April 26th)• Bring your iPhone, Flip, DVD recorder, or other device to film the dry run for your

own review (if needed, contact Media Services to borrow a recording device)

Presentation Day – Friday, April 26th at the Courtyard Marriott• Assignment sheet outlines main tasks (Do not ignore it!)• You must update the case to April 26th (Look for 2013 annual report in early April)

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Dry Run & EP Specifics: Executives’ Evaluation

Some key concerns Do you have a good understanding of Best Buy’s situation? Have you identified the key challenges? Will your strategy address those

challenges? Is it implementable? Have you convinced them that it can work? Have you

convinced them that it’s the right course of action?

You will be evaluated on your presentation’s substance, professionalism and effectiveness, and teamwork

Ultimate goal is reliable, consistent, valid, and accurate assessments of your strategic plan and presentation. We give them clear evaluation

criteria (you’ll see the evaluation form beforehand). But remember…

This is real-worldHuman perception is involved

Subjective judgments are being madeImperfection is the rule rather than the exception

Best Buy may be a household name, but it’s got its share of problems.

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Worry List

No growth in revenues, economy-

driven, and holiday

seasonality

Different consumer trends & shopping

behavior in different regions

Turnover at the top

The shrinking

value of our brand name

Supplier relations - Five

suppliers represent 40%

of the merchandise

sold

International unit

stumbling

Consumers are

increasingly discerning

about price, service,

convenience

Cut costs: we have 3 times

the employees as Google, and

only 2% of its mkt cap

Rivals: Amazon,

Newegg.com, Amazon, Walmart,

Radioshack, Mobile phone

service providers

Showrooming trend (same store sales

dropped 4% in last 9 mos

of 2012)

Sources: Case; 2012 Annual Report; Foley, Int’l business times, 1/23/13)

Breakdown of BBY’s sales

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Moving forward…“In the future, we expect to see a reduction in the number of large-format stores, a reduction in square footage for certain of our large-format stores and a continuation of the growth in small-format Best Buy Mobile stores.” (Annual report, 2012)

(

Acquired cloud-like mindSHIFT for $175mill (focusing on small/mid-sized business IT services)

Expanding Geek Squad to eBay and Target stores

By end 2012, had closed all large-format Best Buy branded stores in China, Turkey, UK

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Moving forward…domestic vs internat’lDomestic InternationalIncrease our retail points of presence

Focus on best opportunities for profitable growth

Decrease our overall store square footage

Five Star in China

Increase our flexibility in a multi-channel environment

Small-format Carphone Warehouse and Phone House stores in Europe

Remodel existing key stores in test markets with new “Connected Store” format

Increase the number of small-format Best Buy Mobile stand-alone storesClose 50 or so large-format Best Buys

Explore options for downsizing other branded store

(2012 Annual Report)

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Future Direction Overall

Multi-year cost reductions

US store formal improvements

Growth initiatives

Improved customer experience

(see Annual Report p. 34)

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Analyze Best Buy’s current situation to identify the major issues.

Two “Key Slides” to include in your presentation:

1. The key challenges/opportunities/issues facing Best Buy are…

2. Our strategy addresses these by… (explain how)

Analysis and Strategy Development

Q: Where should I start?

A: Read the case, the annual report, any/all reports and articles linked on the MB107 website, and stay current on any

“new” news or reports on Best Buy

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Analysis and Strategy DevelopmentStart with Situational Analysis

This leads to Strategy Development

External Analysis• General/Macro-environment• Porter’s 5 forces• Industry life cycle• KSFs• Value chain• Competitor analysis

• Strategic group mapping• Market segmentation• Rivals’ profiles Strategic

OptionsInternal Analysis• Mission/vision• SWOT• Core/distinctive competencies• Competitive advantage• Internal value chain

Select Optimal Strategy (5 elements)• Arenas• Vehicles• Differentiators• Staging• Economic logic

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Analysis and Strategy Development: Your strategic recommendation must be comprehensive

Economic Logic• Lowest costs via scale advantages?• Lowest costs via scope and replication advantages?• Premium prices due to unmatchable services?• Premium prices due to proprietary product features?

Arenas • Which product categories?• Which market segments?• Which geographic areas?• Which core technologies?• Which value chain emphasis?

Staging• Speed of expansion:

fast, slow, moderate?• Sequence of initiatives:

methodical or ad hoc?• Action steps

Differentiators• Image?• Customization?• Price?• Styling?• Product Reliability?

Vehicles• Internal Development?• Joint Ventures?• Licensing/Franchising?• Acquisitions?

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Financial Target – Best BuyRefer to the MB107 Financial Template Guide (word doc)• Utilize case data, Best Buy’s 2012 Annual Report, Best Buy’s 2013 Q3

earnings release, upcoming 2013 annual report (early April??)• Recent company events/presentations • Analyst estimates (e.g., Yahoo Finance, Mergent Online, Passport GMID

industry reports, Datamonitor Industry Profiles, First Research reports)• Project Best Buy’s operating income (without the effect of your strategic

recommendation) out through 2016 (this is the projected baseline)• Your strategic recommendation must contribute an additional 10% to Best

Buy’s operating income by year-end 2016

Refer to the Financial Template (excel) – Step 1 tab – Best Buy’s historical financials 2010-2012 (you’ll need to

update to 2013 when available)– Step 2 tab - Calculate baseline financial projections for 2013 -2016

using cost/revenue assumptions (do research to determine assumptions)

– Steps 3-5 tab - Demonstrate the impact of your strategy on the projected financials (show how they earn the extra 10%)

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Financial Target – Best Buy

Fiscal Year Ended Recent Quarter

27-Feb 26-Feb 3-Mar 3-Nov2010 2011 2012 2012

Revenue $49,243 100.0% $49,747 100.0% $50,705 100.0% $10,753 100.0% Domestic - US - - $37,615 74.2% International - - $13,090 25.8%Cost of goods sold $37,201 75.5% $37,206 74.8% $38,132 75.2% $8,167 76.0%Gross profit $12,042 24.5% $12,541 25.2% $12,573 24.8% $2,586 24.0% SG&A expenses $9,622 19.5% $10,029 20.2% $10,242 20.2% $2,538 23.6% Restructuring charges $52 0.1% $138 0.3% $39 0.1% $36 0.3% Goodwill impairment - - $1,207 2.4%Total operating expenses $9,674 19.6% $10,167 20.4% $11,488 22.7% $2,574 23.9%Operating profit $2,368 4.8% $2,374 4.8% $1,085 2.1% $12 0.1%

Walmart: GM=24.86%; OM=5.49%Amazon: GM=24.75%; OM=.89%

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Financial Analysis & Projections

Strategy gets the plane started, the numbers keep you in the air!

SWOT – Key Success Factors of Best Buy vs. competition

Current and Future Standing on Key Financial Variables – Margins, Ratios, inventory turnover, profitability, etc.

Financial Projections:Domestic/International revenues

Revenues by brandRevenues by product category

Cost of sales and Operating costsDon’t be afraid to lose a little money in YR1

Project three years out

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Financial Target/Economic LogicWhat will account for the returns of your strategy?

Some key concerns:Capital

- What is your funding source? How will you pay for your proposed plan?- Operations? Investments? Financing? Cash?

Can you explain your quantitative analysis?- Offer a coherent explanation of your finances- Realism – Is it realistic? Feasible? You need to provide a good story - Back it up – Use external sources to provide evidence

Explain and justify the assumptions that underlie your numbers- Assumptions about costs (cost of goods sold, inventory, supplier relations, distribution, facility costs, employee-related costs)- Assumptions about growth (revenue projections, units sold, sales in different product categories, in different regions, market share, revenue projections)

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Team Dynamics: Your Junior Executive Team Create SYNERGY & ride MOMENTUMApply individual and team GOAL-SETTINGBe ACCOUNTABLE to your teamCOMMUNICATE early, often, and effectively

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Team Dynamics

MB107 Teams Fail When Team Members or Individuals:Don’t develop competencies from the course

Use the analytical tools you’re learning in MB107

Engage in social loafing Instead, hold each other accountable Share the workload

Fail to take the advice of others Instead, recognize escalation of commitment is occurring Realize when it’s time to move on Seek intervention when you need to

Emphasize relationships, rather than the task Instead, look for symptoms of groupthink Mare sure you’re not putting “getting along” ahead of

making good decisions

Don’t forget the 360-degree evaluations!

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Team Dynamics:Your Coaches

Coaches work with your team

• They won’t do the work for youThey are facilitators, advisors, and leadersThey’re here to help you negotiate team relationshipsThey’ll help you stay on targetThey work with you from today through to April 26th

  

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Team Dynamics:Meetings

Keep a schedule that works for everyone

If your team needs a place to meet for one or two nights during the semester, you must reserve a room.

You cannot assume that campus spaces are available.

Room reservations should be made only when you absolutely need them and through Skidmore’s Scheduling

Office:

http://cmsauthor.skidmore.edu/odsp/scheduling-office.cfm   

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Teambuilding & Situation analysis

• Thorough analysis• Identify the key issues…be able to back it up

Alternate strategies

• Come up with 2 alternates• Do they address the issues?

Pick a Strategy & Develop

implementation

• What to do (how, action plan, staging, vehicles)• Why it makes sense?

Dry Runs• Great chance for feedback• Be open to it…use it!

Back to the drawing board

• Major revisions to analysis, diagnosis, recommendation, and implementation plan

Financials • Numbers to support your plan• Revenues, expenses, profits, all the details• How do you reach the target?

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Teambuilding & Situation analysis

• Thorough analysis• Identify the key issues…be able to back it up

Alternate strategies

• Come up with 2 alternates• Do they address the issues?

Pick a Strategy & Develop

implementation

• What to do (how, action plan, staging, vehicles)• Why it makes sense?

Dry Runs• Great chance for feedback• Be open to it…use it!

Back to the drawing board

• Major revisions to analysis, diagnosis, recommendation, and implementation plan

Financials • Numbers to support your plan• Revenues, expenses, profits, all the details• How do you reach the target?

Back it up

Substantiate your assertions

Be able to explain:• how you know what you

know• why you’re suggesting

what you’re suggesting

EVIDENCE!

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The Student Perspective Tyler Orfao ’13 and Rebecca McCourt ‘14

MB107 Student Coordinatorstorfao@skidmore.edu

rmccourt@skidmore.edu

We’re here for you!Come to us with team problems, for team support,

for help with preparing for the dry runs or the EP, etc…

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ResourcesMB107 website

Financial Template (excel and word doc)

Your coaches

Student coordinators

Barbara Norelliand Library Resources

MB107, Coaching, and Leadership Faculty

All MB dept faculty

Tutors: SAS drop in hours and Accounting Lab

SUCCESS

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ResourcesMB107 website

Financial Template (excel and word doc)

Your coaches

Student coordinators

Barbara Norelliand Library Resources

MB107, Coaching, and Leadership Faculty

All MB dept faculty

SUCCESS

Your team is the most critical

resource for success!

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A FEW FINAL NOTESTO BE PROFESSIONAL, YOU MUST BE PREPARED!

– Address technology needs prior to April 26th (multi-media, connection issues, laptop issues, multiple flash drives, etc.)

Prepare for no Internet access at hotel – This means no email, no datastor, no Dropbox/Cloud

Use USB/flash drives Equipment /power failures – The show must go on…can

you present without PowerPoint?– Travel arrangements – getting to/from the Courtyard Marriott– Know the time of your presentation (it’s a tight schedule)– Perform Library Research Assignment – Check your Skidmore e-mail multiple times each day!

Best Buy Companies, Inc.