Explaining JB Hi-Fi's decision to release its profit downgrade and reporting decisions using political economy and stakeholder theories

ACCT20074 Final Assignment
Term 1, 2018
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Question 1: Use Classical Political Economy Theory to explain JB Hi-Fi’s decision to release its profit downgrade
in the way it did. Make sure you explain what Institutional Theory is, and support your observations with evidence
from the case study.
Institutional Theory is related to the social structure of the society and gas various aspects of the social structure.
The theory relates with the various polices, norms, routines, rules are established by an authority in order to
establish such as authoritative guidelines for social behaviours. Institutional theory is also related to various
components which are diffused, created and adopted over time. Many of the philosophers are also of the view
that the institutional theory throws light on the concepts of rational myths, Legitimacy and isomorphism. The
trends which are associated with such a theory are institutionalism and new institutionalism. New Institutionalism
is concerned with the development of the theory of sociological view of the institutions. This theory is also known
as neo-institutionalism which is concerned with how the institutions interact and how the activities of such
institutions affect the society. Some of the ideologies which are present in the new institutionalism and the roles
of different organisation following such a theory is seen to reject the rationale characteristics of models which is
included in the classical economies (Mosco 2014).
As per the new institutionalism theory, organisations must follow the predominant belief system and rules in a
particular business environment and also the rules which are applicable on the same. Instances can be provided of
multinational companies facing immense pressures which generally relates to domestic pressure and in some case
international pressure as well (Greenwood et al 2017). The decision which was taken by the management of JB hi-fi
can be related to the classical political economic theory which is focused on the resources-based view and
considers that the main motto of the company behind any strategies should be based on profits. The resources of
the business comprise of intangibles, property, capital and know how. The company acted as per the current
market condition of the business and therefore the company was unapologetic.
The analysis of the management decisions to lower the profits of the business can be traced to the good guys

driving shares down by 10% since late November. The range of the electronic retailer which was earlier between $
235 to $ 240 dropped its profit to $ 230. According to the institutional theory, in several instances business
corporations tackle the decreasing earnings by avoiding additional payment of tax. Many businesses following the
institutional theory follow such an approach. In the case of JB hi-fi, the company has shown more amount of profit
after tax, however the same is shown to be written down by 5 to 10 million in the consolidated statement so that
the business can pay lesser amount of taxes to the authorities. Therefore, it is easier for JB hi-fi company to so
that the company does not have to pay additional taxes which will help the business to be competitive in an
intense market (Senge 2013). Therefore, the reason for the drop of sales is clear from the above discussions as the
company wants to stay competitive in the market and at the same time generate more revenues for the business.
Thus, the business has rightly downgraded its profits by lowering the sales of the business.
Mosco, V., 2014. Political Economy. In The Routledge Companion to Global Popular Culture (pp. 35-44). Routledge.
Greenwood, R., Oliver, C., Lawrence, T.B. and Meyer, R.E. eds., 2017. The Sage handbook of organizational
institutionalism. Sage.
Senge, K., 2013. The ‘new institutionalism’in organization theory: Bringing society and culture back in. The American
Sociologist, 44(1), pp.76-95.
Marker’s Comments: The marker will provide feedback here. Mark (10):
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Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very Demonstrates a balanced and high Demonstrates a good level of Demonstrates limited knowledge of Demonstrates little, if any,

Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
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Quality of writing is of a high
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Some problems with sentence
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Quality of writing is at a very poor
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The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
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ideas presented; drawing limited
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The assessment fails to provide
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