to become one of the best companies in America? Please justify with Value Chain
ID: 395329 • Letter: T
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to become one of the best companies in America? Please justify with Value Chain supporting with Resource-Based View and VRIO and relevant facts from the case.
From Good to Great to Gone: The Rise and Fall of Circuit City IN THE 1990s, Circuit City was the largest and most successful consumer- electronics retailer in the United States. Indeed, Circuit City was so successful it was included as one of only 11 companies featured in Jim Collins' bestseller Good to Great. To qualify for this august group of high performers, a company had to attain "extraordinary results, averaging cumulative stock returns 6.9 times the general market in the 15 years following their transition points."1 Indeed, Circuit City was the best-performing company on Collins' good-to-great list, outperforming the stock market 18.5 times during the 1982-1997 period How did Circuit City become so successful? The company was able to build and refine a set of core competencies that enabled it to create a higher economic value than its competitors. In particular, Circuit City created world-class competencies in efficient and effective logistics expertise. It deployed sophisticated point-of-sale and inventory-tracking technology, supported by IT investments that enabled the firm to connect the flow of information among geographically dispersed stores. This expertise in turn allowed detailed tracking of customer preferences and enabled Circuit City to respond quickly to changing trends. The company also relied on highly motivated, well-trained sales personnel to provide superior service and thus build and maintain customer loyalty. These core competencies enabled Circuit City to implement a "4S business model"-service, selection, savings, and satisfaction--that it applied to big-ticket consumer electronics with an unmatched degree of consistency throughout the United States Perhaps even more important during the company's high-performance run, many capable competitors were unable to replicate Circuit City's core competencies. Further underscoring Circuit City's superior performance is the fact, as Jim Collins described it, that "if you had to choose between $1 invested in Circuit City or $1 invested in General Electric on the day that the legendary Jack Welch took over GE in 1981 and held [that investment] to January 1, 2000, you would have been better off with Circuit City-by [a factor of] six times."2 In the fall of 2008, however, Circuit City filed for bankruptcy. So what happened?Explanation / Answer
Circuit City:
Circuit city is one of the companies which have seen a sudden growth in their business by focusing on customer satisfaction. They utilized managerial talent and the IT to boost up their performance in such a way that they outperformed the stock market for a continuation of 15 years. This growth was in proportion to their 4S Business Model:
Some important facts are as follow:
Resources are always scarce and it is up to the management and to ensure that the limited resources are used to their most potential. Circuit city's management took all the correct decisions for 15 years and this helped them to outperform the stock market and their competition.
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