JB Hi-Fi: Analysis of Profit Downgrade and Business Theories

Running head: JB Hi-Fi 1
JB Hi-Fi
Students Name
Institution

JB Hi-Fi 2
JB Hi-Fi
A classical political theory explains the need for a business entity to run without government
interventions. Classical political theory insists that resources in the society can be used
efficiently without the need of the government interrupting. This is just because, under normal
circumstances, people seeking to explore resources are always pushed by the sole reason of
making profits, the big concern on benefits entirely explains the reasons why funds in the society
can be used to the top beneficial level without the government issuing directives (White &
Donald, 2004). The classical theory further explains that under this type of economic model, a
self-regulating and stable market can be created that generally looks at meeting the entire
consumer needs and in the process of the transactions, there will be a consequent increase in a
countries wealth (Lionel, 2014).
The Classical political theory also referred to as laissez fire, puts more emphasis on
creating a type of market with free trade. Also, this type of model explains the need for creation
of a competitive market, and as enshrined in the model, there must be general growth and
development for the business and the society around the company (Gerald & Chandran, 2004).
All these enlisted business activities are supposed to be as free as possible from the
government’s regulation and direction. The government on its part is supposed to ensure
enforcement of security, create the necessary infrastructure for the running of business
enterprises and most importantly the government is needed to develop and enforce a system of
justice that is supposed to offer a solution when it business conflicts arise. In this type of
business theory, the primary responsibility of the government is to create a conducive business
environment (Deegan, 2014). Classical also believed that not only business enterprise would

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benefit from the exploration of a business venture, but the society as a whole will also derive
benefits from the investigation of a business venture by a business entity (William, 2015).
A profit downgrade occurs typically when analysts figure out that the level of revenue
or outcome out of the business activities will be fall lower than the level of result realized on the
previous attempt or the revenue realized the last fiscal year. This may sometimes happen because
the current business environment may seem not favorable to the business entity. On the hand, a
stand-alone statement represents typically the financial statements of solely the business
enterprise by the scrapping of the values indicated to represent income from their subsidiary
business entities. Independent financial statements come about when a holding company and its
subsidiary are treated as entirely separate business entities.
In this case scenario, the JB Hi-Fi consumer Electronics Company indicates a profit
downgrade in their subsequent financial year forecast, the idea by JB Hi-Fi to release a profit
downgrade in its projections rather than a stand-alone statement to the stock exchange can be
explained regarding classical political economy theory. The company’s evaluation partly
influenced the move by the company to indicate the downgrade rather than the standalone
statement. As much as the current business environment stated an unfavorable business ahead,
the company still does not view it in their opinion to have their financial statements stand alone
and not show the financial statements of their subsidiaries (Greenblat 2018).
Institutional theory generally refers to the argument that majorly looks into the aspect of
the interaction between the organization and the macro- environment surrounding the
organization (Marquis & Tilcsik, 2016). It also concerns how the macro-environment affects the
functioning of the organization. The institutional theory also indicates that sometimes, the
legitimacy of an organization can be comprised, some of the reasons that can cause the

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compromise include among them; self-institutional environment. (DiMaggio, Paul, & Walter,
1983). To maintain the organizational legitimacy, the managers of these organizations tend to
choose between these threatening forces in the institutional environment to survive. Apart from
helping the organization continue its legitimacy, this move also plays a significant role in helping
the organization adapt to the environment (Kraatz, Mathew & Edward, 2003). This theory insists
on overseeing how the organization reacts and adjust to these sinister forces and much
importantly how this helps to maintain organizational theory. The new institutional approach is
however criticized for not explaining the aspect of organizational adaptation (Staffan, 2014). In
this case scenario, the unfavorable type of market poses an institutional environment threat. It is
for this reason that the JB Hi-Fi consumer electronics report a change in the forecasts for the
subsequent year. A profit downgrade is therefore displayed in the organizations following years
forecast outlook.
The Stakeholder theory is a theory that is mainly concerned with the management of an
organization and the own business ethics. Furthermore, this type of argument tackles the aspect
of overseeing the morals and values needed in the control of an Organization (Maria & Dahl,
2016). According to the traditional perspective of a company, shareholders are often the most
critical part of the company. For this reason, the company has a binding obligation always to put
the shareholder's interests on the forefront. However, the stakeholder’s theory refutes the idea by
stating that, other essential parties form part of the company and are crucial to the ensuring the
forward progress of the company (Margret, 2015). Among the parties under mention include the
general staff, communities in the business environment, financiers advancing financial support to
the company, Government bodies overseeing the smooth running of business and fairness in the
market trade associations and unions. Due to the effect, they can have on the general operation of