Best Buy vs Circuit City

Downsizing refers to the process of reducing the number of employees on the operating payroll by way of terminations, retirements, or spin-offs. It is seen from a management point of view as a cost reduction strategy. Some major techniques and strategies of downsizing include attrition, voluntary retirement, involuntary separation, and leave without pay. Although businesses use downsizing to cut costs hoping to profit, this isn’t always a viable solution. By getting rid of employees, you lose valuable talent and experience which can ultimately make your situation worse. Management plays a key role in downsizing effectively. In this report, we will be looking at downsizing in the electronic retail business scope; specifically, Best Buy and the once flourishing, Circuit City. Portions of this report will touch on the economical reasons that both had placed the blame for their decision to downsize. Another aspect that was reviewed as a reason for downsizing is the lack of innovation. Being that, both companies failed to adapt to the fast-evolving electronics industry and online retail competition. Our reasons will expose why Circuit City folded and why Best Buy will more than likely follow. We will also introduce a few ideas to avoid downsizing in general, or effectively downsize in businesses such as these.
Circuit City started in 1949 as a television and home appliance store in Richmond, Virginia, then known as Wards Company. In 1984 the name was changed to Circuit City and the stocks were listed on the New York Stock exchange (Associated Press, 2009). The company continued to expand until reaching its peak in the late 1990s of having upwards of 600 Circuit City superstores open. Then, having problems with larger retail competition and falling sales up to March 2007, Circuit City decided to combat its financial issues by downsizing and laid off 3, 400 employees, about 8% of their workforce. The decision was in part to hire lower-paid and also less-experienced