Best Buy 2014 Annual Report Download - page 19

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Our International segment's operations face other risks as well, including the costs and difficulties of managing international
operations, greater difficulty in enforcing intellectual property rights in countries other than the U.S., and potential adverse tax
consequences. The various risks inherent in doing business in the U.S. generally also exist when doing business outside of the
U.S., and may be exaggerated by the complexity of operating in numerous sovereign jurisdictions due to differences in culture,
laws and regulations. There is a heightened risk that we misjudge the response of consumers in foreign markets to our product
and service assortments, marketing and promotional strategy and store and website designs, among other factors, and this could
adversely impact the results of these operations and the viability of these ventures.
We rely heavily on our management information systems for our key business processes. Any failure or interruption in
these systems could have a material adverse impact on our business.
The effective and efficient operation of our business is dependent on our management information systems. We rely heavily on
our management information systems to manage all key aspects of our business, including demand forecasting, purchasing,
supply chain management, point-of-sale processing, staff planning and deployment, website offerings, financial management
and forecasting and safeguarding critical and sensitive information. The failure of our management information systems to
perform as we anticipate, or to meet the continuously evolving needs of our business, could significantly disrupt our business
and cause, for example, higher costs and lost revenues and could threaten our ability to remain in operation.
We rely on third-party vendors for certain aspects of our business operations.
We engage key third-party business partners to manage various functions of our business, including but not limited to,
information technology, human resource operations, customer loyalty programs, promotional financing and customer loyalty
credit cards, customer warranty and insurance programs. Any material disruption in our relationship with key third-party
business partners or any disruption in the services or systems provided or managed by third parties could impact our revenues
and cost structure and hinder our ability to continue operations, particularly if a disruption occurs during peak revenue periods.
We are highly dependent on the cash flows and net earnings we generate during our fourth fiscal quarter, which
includes the majority of the holiday shopping season.
Approximately one-third of our revenue and more than one-half of our net earnings have historically been generated in our
fourth fiscal quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico. Unexpected
events or developments such as natural or man-made disasters, product sourcing issues, failure or interruption of management
information systems, disruptions in services or systems provided or managed by third-party vendors or adverse economic
conditions in our fourth fiscal quarter could have a material adverse effect on our annual results of operations.
Our revenues and margins are highly sensitive to developments in products and services.
The consumer electronics industry involves constant innovation and evolution of products and services offered to consumers.
The following examples demonstrate the impact this can have on our business:
• New product categories such as tablets and e-readers have grown rapidly and fundamentally changed the market for
mobile computing devices; however, as products reach maturity and/or markets become saturated, demands levels can
fall sharply;
• Product convergence has significantly impacted the demand for some products; for example, the growth of
increasingly sophisticated smartphones has reduced the demand for separate cameras, gaming systems, music players
and GPS devices;
• The timing of new product introductions and updates can have a dramatic impact on the timing of revenues; for
example, the introduction of new gaming systems can produce high demand levels for hardware and the
accompanying software, which may be followed by several years of decline in demand;
• Delivery models for some products are affected by technological advances and new product innovations; for example,
media such as music, video and gaming is increasingly transferring to digital delivery methods that may reduce the
need for physical CD, DVD, Blu-ray and gaming products; and
• Disruptions in the availability of content (such as sporting events or other broadcast programming) may influence the
demand for hardware that our customers purchase to access such content, as well as the commission we receive from
service providers.
Many of the factors described above are not controllable by us. The factors can have a material adverse impact on our relevance
to the consumer and the demand for products and services we have traditionally offered. It is possible that these and similar
changes could materially affect our revenues and profitability.