Explaining JB Hi-Fi's Profit Downgrade using Classical Political Economy and Managerial Stakeholder Theories

ACCT20074 Final Assignment
Term 1, 2018
Student ID:..................................... Student name..............................................................
Marker’s overall comments: The markers may include any
final comments here.
Overall Mark (Total) out of 50:
0

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.
Answer: The classical political economy theory initiates in the analysis of the manufacturing, distributing, and exchanging the
goods and the services in the societies of market. According to the classical thinkers the economic growth has determinants that
consists of is human skill, labour specialization, trade expansion of markets and various techniques for improvements of the
productivity (Onions, 2017). It can be assumed that more markets means more trade = which would lead to more growth which can
give rise to opportunities. The Classical political economy theory was initially primarily by Karl Marx in the first edition of Das Kapital,
that describes the British and Scottish economists that in order to explain the ‘internal framework’ of the “bourgeoise mode of
production”. There is confirmation this is true or not is not (Wagner, 2016). However in the case of JB hifi the chief executive has
anticipated a fall in the profit or the year by 2.9%.With the help of the classical economic theory it can be said that the main reason
for the anticipation is competition that has been taking place in the home appliance industry in Australian addition to tis the
Institutional Theory that Provides an explanation about why organisations tend to take on similar characteristics and form that might
be adopted in order to bring legitimacy to the organisation –‘Organisations conform because they are rewarded for doing so through
increased legitimacy, resources and survival capabilities’(Marx, 2015). The JB hifi company of who had anticipated that the profit
would $235 million and $240 million in 2017 and 2018 respectively has undergone a fall in the profit reduced the same to $230
million. The challenging conditions in the home appliance market of Jb hifi are expected to impact performance in the short term of
the company, therefore the shares dropped $2.29 that is 9%.The Institutional theory stresses more on deeper and more resilient
social structure aspect and considers the processes by which structures, including schemes, rules, norms, and routines, become
established as authoritative guidelines for social behaviour (Hull, 2017). 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. 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.
. Therefore, it can be identified in the given case study the company of Jb hifi in order to adapt with the social authoritative norms
has taken the decisions. The chief executive of the JB hifi along with the board is committed to conduct ethically according to the
high standards of the governance principle has considered in the institutional theory and has taken the decision of downgrading the
profits for the year in order to safeguard its stakeholders.
References:
Hull, G. (2017). A treatise on political economy. Routledge.
Marx, K. (2015). Capital: a critique of political economy, Volume 1. Arsalan Ahmed.
Onions, C. T. (2017). Themes in value and distribution: classical theory reappraised. Routledge.
Wagner, R. E. (2016). Politics as a peculiar business: Insights from a theory of entangled political economy. Edward Elgar Publishing.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
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
sources.
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
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
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
mistakes. Little or no evidence of
proof reading.
The assessment presents a The assessment presents a fairly The assessment presents a The assessment provides limited The assessment fails to provide

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%
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
any clear evidence of the ideas
presented; drawing no clear
conclusions.