Circuit City Essay

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Circuit City-case study part 1 Name: NING YE Introduction Circuit City Stores, which was an American multinational consumer electronics corporation, selling consumer electronics, home office products, entertainment software, appliances, and related services. From 1980s to 1990s,Circuit City had incredibly success in the area, however, with Home Depot and Best Buy developed quickly and boomed, Circuit City busted from 2000. The reason for it could be caused by bad economy, the reduction of sales and earnings and also the old-traditional business strategy operating management. Problems According to the case, the main strategy of the company development was expansion all the way from 1960 to 2000. The managers want to expand the national market shares through this way to increase profits. Even when Best Buy began to use a new sales model in 1990, Circuit City still carried on the aggressive expansion program to open the market. Although resulted in too many stores in different places and the national market share has increased, however, its share in served markets had dropped in 1990. From this situation, it shows the expansion strategy did not work any more, because the market environment changed and competitors became stronger. Under the high competitive and fast-evolving electronic industry, no change means fall behind. The Financial Report from 1991 to 2000 indicated the sales increased, while the gross profit decreased. It means cost of good sold increased year by year. According to the case, Best Buy offering a self-serve mode rather than pay commissions to sales in order to reduce their SG&A, but Circuit City still kept the same one in its sales model, which resulting in increase the sales cost and declines in operating profit. Also, the worst part of this sales model is to ignore the customer’s needs. When customers started to read

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