Circuit City's Initial Core Competencies

Circuit City developed world-class capabilities in logistics that enabled it to track trends and have inventory in its geographically dispersed stores. Additionally, Circuit City developed a core of motivated and knowledgeable sales staff.

Circuit City employed a big-box strategy with stores that had a large footprint that stocked a variety of products (selection) and service that relied on economies of scale to achieve high sales volumes. High sales volume enabled competitive pricing, but it also resulted in lower profit margins. At the time, this concept was relatively new, and it related to a differentiation strategy.

Circuit City was able to achieve a competitive advantage, because its system of stores, trained salespeople, and logistics
The elimination of its highest-paid sales staff lowered costs, but it also eliminated the firm’s underlying strengths.

3. Circuit City’s management could have done several things differently. Fundamentally, they needed to define the business they were in and create a clear vision for the firm. The move from electronics to cars and video rentals suggests a lack of focus. Identifying the firm as a world-class retailer of electronics may have avoided distractions and kept management focused on maintaining its initial core competencies.

4. Best Buy largely inherited Circuit City’s position in electronics retailing and greatly benefited from Circuit City firing its highest-paid salespeople. The development of online retailing has largely undermined the value of big-box stores as the number of products available to customers online is essentially unrestricted. However, customers often still want to see and feel a product before purchasing an expensive piece of electronics. This has led to show rooming where customers try a product in Best Buy and then purchase it cheaper online from a company that does not have the costs of a store and experienced sales