Explaining JB Hi-Fi's Reporting Decisions and Profit Downgrade using Institutional and Managerial Branch of Stakeholder Theory

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.
As discussed by Fuenfschilling & Truffer (2014), the conceptualisation of Institutional theory deals with various
aspects of social structure. The main consideration under this theory incorporates processes by which routines,
structures, authoritative guidelines, and schemes are established as an authoritative guideline for social
behaviour. Several components in the institutional theory is conducive in stating how these components are
diffused, created and adopted over time. Some of the other theorists have stated that institutional theory can be
considered as a widely accepted theoretical posture which lays an augmented focus on “rational myths, legitimacy
and isomorphism”. There are two main trends which are associated to this theory namely institutionalism and
new institutionalism. Some of the emerging roles of organisations in the new institutionalism is seen as a rejecting
rationale for the characteristic models included in the classical economies (Cook & Hodges, 2015).
Based on the new institutionalism theory that organisations must conform to the prevailing belief system and
rules in a particular business environment. For instance, the multinational corporations in different countries face
various pressures. Some of these are based on home while other relate to international pressures. The particular
consideration of the decision taken by JB hi-fi for downgrading its profit can be related with classical political
economy theory which is based on a resource-based view and argues that creating value strategies need to be
based on profit potential. Instead, the resource and capabilities include tangible inputs like property, capital,
people and know how. The company was seen to be unapologetic for downgrading its profits as the company
acted in favour of the present market situation.
The main rational for lowering the annual profit forecast can be also depicted with the Good Guys driving shares
down by almost 10% low since late November. Moreover, the electronics retailer reduced its overall profit outlook
to $ 230 which was previously expected to be ranging between $ 235-$240 (Forecast, 2018). According to the
institutional theory, in several instances business corporations tackle the decreasing earnings by avoiding

additional payment of tax. In this particular situation, the statutory reports clearly showed that the company
earned more amount of profit after tax however in the consolidated report it reduced down by $ 5 to $ 10 million
so that it can survive in the challenging competitive environment by paying less amount of taxes in compared to
other companies. Some of the other evidence of challenges to the company can be depicted with performance of
Good Guys whose profit will be sent to be impacted by unfavourable price competition. Therefore, as the overall
market for the experiencing a drop-in sale it was more feasible for companies like JB hi-fi to release its profit to
downgrade so that it did not have to pay the additional amount of tax in a legitimate manner and still stay in the
competition (Cornelissen et al., 2015).
References:
Cook, S. C., & Hodges, N. (2015). Exploring non-ownership apparel consumption through online fashion product rental services: An application of institutional
theory.
Cornelissen, J. P., Durand, R., Fiss, P. C., Lammers, J. C., & Vaara, E. (2015). Putting communication front and center in institutional theory and analysis.
Forecast, J. (2018). JB Hi-Fi cuts profit forecast. [online] ARN. Available at: https://www.arnnet.com.au/article/640719/jb-hi-fi-cuts-profit-forecast/ [Accessed 30 May
2018].
Fuenfschilling, L., & Truffer, B. (2014). The structuration of socio-technical regimes—Conceptual foundations from institutional theory. Research Policy, 43(4), 772-
791.
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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
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible

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%
sources. sources.
Quality of writing at a very high
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other. Correct grammar, spelling
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Quality of writing is of a high
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well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
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proof reading.
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
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
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presented; drawing no clear
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