Week 1 Homework
Chapter 1: The Role of Labor Cost in Retail Electronics, page 27
1. Think back to our discussion in the chapter section, caveat emptor. Being informed consumer,
evaluate whether the replacement of high paid workers with lower-paid workers did or did not
cause Circuit city to perform so poorly. How confident are you in your valuation? Why?
Yes, I do believe that the replacement of the high paid workers with lower-paid works helped in causing
the poor performance of Circuit City but was not the main cause. The story displayed various reasons
one was due to Best Buy’s ability to outperform Circuit City who had as the book suggests in-store
customer experience as well as Best Buy’s reduction being different than Circuit City. Which was mostly
cutting its highly- paid employees who were middle managers and it affects only hitting regional offices
rather than stores or employees at the stores.
2. Do you believe that the compensation changes at Best Buy or a major reason for its current
difficulties?
Best Buy is observant and is learning. Although, Best Buy has cut s in its labor cost, and its effects have
not affected the customer. Now from this I believe, the compensation changes are not the reason that
Best Buy is suffering from its current difficulties. I do believe it competitors like Amazon-prime, E-bay,
Walmart and Target and other big box stores like Costco and Sam’s are the reason for such current
difficulties for Best Buy.
3. Why are Walmart, Sam‘s Club, and Costco doing better than Best Buy and circuit city? Do they
have high pay?
The reason that Walmart, Sam’s Club, and Costco are doing better than Best Buy and Circuit City is
simply that they offer their products with a lower-priced option. In addition to having employees that
have experience and very knowledgeable with the products as well as having a management team who’s
great with the organization. As it pertains to pay, let’s look at Best Buy, how its employee’s salary is not
much, and we can see they found no need in helping to improve the company’s market share. With that
being said, the employee’s compensation has changed and has caused numerous problems, such as lack
of performance, executives to leave, with no incentives for recalculating executives’ stock. One must
also understand that Walmart is a company that is a public corporation group in American that operates
as a big chain, just like Costco and Target nationwide
4. Are there larger problems in the competitive landscape for Best Buy that cannot be solved by
compensation strategy changes alone? When consumers looked to buy electronics, what
options do they have other than Best Buy and why would they choose these options over Best
Buy? Where do customers test drive the product and where do they buy it? Can compensation
changes address these challenges? Explain.
Best buy is a famous online retail store for electronic goods, where consumers order them through the
internet. once they receive the goods, within a specific time period, they can check the performance and
if they are not satisfied with it, they can revert them. While customers are looking for electronic goods
in Best Buy, they look for the total features and other additional services include in the product. once
the products receive, customers will check them and if they satisfy with its performance then only, they
can retain those products. Of course, the compensation changes also create some problems for them.
when the prices go up than the normal market, customers may not prefer to purchase products in Best
Buy.
5. Is best by focusing too much or too little on cost reduction? Explain.
I believe that best buy is focusing too much on cost reduction. In my view, they have already cut enough
costs as in wherever it had been possible for them, such as getting rid of costly mid-management. Now
the time is to focus on improve the sales and counter the competition. They should instead make
strategies to win over customers once they had and who switched to the competitors because of certain
reasons, apart from attracting new customers.
Chapter 2: Merrill Lynch, page 61
1. What is the likely result of bidding wars of this type for top brokers? Will most firms benefit?
Who will be the winners and losers? What about the brokers?
In these types of bidding wars, Results go on the favorable side of top broking firms with hiring the most
skilled employees. Hiring efficient employees and surviving the competition will help the top firms earn
