Wednesday, April 13, 2011

Critique of "The 'Best Buy' is somewhere else?"

I thought that this was a very good original blog post, but some of the explanations, to me, could have a been somewhat more in depth in economical terms. One of the downsides to Best Buy, is that it's not a producer of goods, but rather a retailer of goods. This means if the supply from one of Best Buy's manufacturers, such as Apple, is low, then both companies get hurt. Best Buy doesn't turn a profit, and Apple doesn't make money either. The down fall for companies to sell through retailers and not a company store, is that the retailer charges a higher price because if they did not, then Best Buy and other retailers would not make a profit. For Apple, or other manufacturers' stores, the parent company supports the store because of fast availability of product and no need to pay a retailer for selling the good. This is the more expensive method, but the most cost effective. Best Buy prices are higher because they wouldn't make any profit if they weren't charging higher costs. According to game theory, then if one firm charges a higher price and the others are charging a lower cost, then the higher priced firm will suffer because of lesser profits. I think the point that made, "Do you really need 36,000 sq. feet to show that a tablet, smart phone and TV all work together? You don't." was very interesting in the fact that there is a lot of unused space in Best Buy stores and with other stores, there is less floor space, less employees and more products closer together, maximizing efficiency, reducing total cost and maximizing profit. I think that it would be interesting to put Circuit City and Best Buy next to each other and compare the trend of Best Buy to the former Circuit City. Potentially by seeing what had happened to Circuit City, Best Buy could right their wrongs before it is too late to become, yet again, an industry leader. I thought that this blog post was very insightful to see how prices that are higher than equilibrium can affect a firm. This makes me realize how useful game theories are as well. By charging lower prices than competitors, than you see the benefit when your competitors charge higher prices. I also thought that in the blog, more numbers could have been used to show how drastic the effects on the company actually are, instead of having to find them from the original website. Finally, overall, I thought it was a well structured blog and economically correct but I would have like to have seen more proof of how downhill the company is going in the post, maybe a comaprison of online to in-store retailers and potentially more terms in economics describing the situation.

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