FROM GOOD TO GREAT TO GONE

T h e R i s e a n d Fa l l o f C i r c u i t C i t y

J o s h u a N e i l V. B a n z o nB A 1 9 0 - S t r a t e g i c M a n a g e m e n t

U n i v e r s i t y o f t h e P h i l i p p i n e sP r o f . M i t a A n g e l a M . D i m a l a n t a

C• Electronics retail store in the U.S.• Founded by Samuel Wurtzel in 1949• Formerly known as Wards Company until 1984• First store was in Richmond, Virginia

IRCUIT CITY

GOOD GREAT GONE• Within 10 years,

Wards became a four-store chain• Total sales: $1M per

year• Lower prices than

smaller competitors• Stores offered service

incentives• By 1979, sales

reached $120M

• In 1987, annual sales reached $1B • In the 1990s, was largest consumer-

electronics retailer in the U.S.• Best performing company on Jim Collins’

Good to Great list• Highly motivated and well-trained personnel• Deployment of sophisticated point-of-sale

and inventory-tracking technology• Ability to connect the flow of information

among geographically dispersed stores• Detailed tracking of customer preferences• Quick response to changing trends• Implementation of 4S/5S business model• Competitors were unable to replicate their

core competencies

• Neglected to upgrade and protect core competencies• Top management team was

distracted by pursuing noncore activities• Laid off 3,400 of firm’s

highest-paid sales personnel• Best Buy recruited Circuit

City’s top personnel• Best Buy upgraded its core

competencies• Filed for bankruptcy

protection in November 2008

Questions• Why was Circuit City so successful as to be featured in Good to Great?

What was its strategic position during its successful period? How did it contribute to competitive advantage?• Why did Circuit City lose its competitive advantage? What was Circuit

City’s strategic position during the time of its competitive disadvantage?• What could Circuit City’s management have done differently?• What is the future of Best Buy as the leader in big-box electronics

retailing as it faces tough competition with Amazon and other online retailers? What core competencies in big-box retailing are critical not only to survive but also to gain and sustain a competitive advantage?

Answers:1. Because they exceeded Collins’ criterion, instead of outperforming the stock market 6.9 times, they did 18.5 times.

High value for their products and low cost – large gap between value and cost, resulting to competitive advantage2. Overconfidence: ignored their closest competitor (Best Buy)

Poor decision making process: ventured out to other product lines to regain lead

Laid off 3,400 of its most tenured employeesCore competencies lost their value they lost their

competitive advantage

Answers:3. They could have stayed in appliances while venturing out to gaming and imaging department. They shouldn’t have laid off their top employees.4. They must hold onto their innovative customer-centricity model. *This allows employees to identify and more effectively and serve specific customer segments

Use of 4S/5S model to improve their customer serviceCost-leadership

REFERENCESHart, A., Matulich, E., Rubinsak, K., Sheffer, K., Vann, N., & Vidalon, Myriam. (October 2012). The Rise and Fall of Circuit City. Journal of Business Cases and Applications. Volume 6. Retrieved from http://www.aabri.com/manuscripts/121101.pdf

Rothaermel, Frank T., Strategic Management, 2nd Edition, McGraw-Hill Education, New York, USA.

Wulf, T. (2011). Good to great to gone. Training, 48(3), 20-20,22. Retrieved from http://search.proquest.com/docview/878897800?accountid=47253