Strategic Management Analysis of JB Hi-Fi Limited's Financial Position

This report presents a strategic management analysis of JB Hi-Fi Limited, an Australian public company specializing in consumer electronics and home entertainment products. The analysis begins with an examination of JB Hi-Fi's financial position based on its 2016 annual report, highlighting sales growth, profit margins, and controlled operating expenses. The report then applies Porter's Five Forces to assess the company's competitive environment, considering the threats of new entrants, rivalry, supplier and buyer power, and the threat of substitutes. Finally, it utilizes a balanced scorecard to evaluate the company's performance across financial, customer, internal business process, and learning and growth perspectives, emphasizing customer satisfaction and employee expertise. The analysis concludes that despite a competitive market, JB Hi-Fi has achieved significant market share and financial health, implementing effective strategies to expand its market reach and navigate industry challenges, thus providing a strong foundation for potential investors.

Strategic Management Analysis 1
STRATEGIC MANAGEMENT ANALYSIS
Student’s Name
Course
Lecturer
Institution
Date

Strategic Management Analysis 2
Executive Summary
Financial position of an organization depends on the company’s competitive environment and
nature of its transaction and operations in the industry. With these considerations, this report
presents analysis of JB Hi-fi Limited financial positions based on its 2016 annual report. This
would include annual report analysis, porter’s 5 forces as well as balance scorecard analysis
of the company. Such analysis would assist in evaluating the company competitive
environment, its financial position, strategy as well as its position in the overall industry
which would in turn assist in giving recommendations and suggestions to potential investors.
In the analysis, it is evident that despite competing in a wider market, the company has been
able to outdo most of its rivals; hence, gaining wider market share. In addition, the company
tries to accomplish its main goals of expanding the market share by mostly adopting three
key strategies which taps on present retailing trend. Even though its strategy matches with
variations or adjustment in the external environment, there are numerous issues that could
affect its financial position.

Strategic Management Analysis 3
Introduction
JB Hi-fi is usually an Australian public limited company that deals with retailing consumer
electronics and home entertainment products (Market Watch 2017). Basically, JB Hi-fi
Limited is usually a specialty discount retail of some home entertainment products. Its
products fall into different categories; that is, car sound systems, white-goods, consumer
electronics, Digital Versatile Discs as well as music. In essence, the company provide
different entertainment and audio products at competitive prices with its stores located across
New Zealand and Australia. It was established in Melbourne suburb of the Keilor East in
1975. With these considerations, this report aims to present an analysis of JB Hi-fi Ltd. This
will be based on its annual report analysis, porter’s five forces analysis as well as a balanced
scorecard analysis to be able to assess its financial position, strategy and its competitiveness
in the industry.
Annual Report Analysis
Annual report analysis usually presents crucial information through which different investors
could make sensible investment decisions. Information in the company’s annual report
usually provides relevant data for vertical analysis and horizontal analysis as well as ratio
analysis which delineates the relations amongst numerous items presented in the financial
statements. According to 4-Traders (2017) the company sales increased over the last three
years. This was also observed in its gross profit and its net profit margin over the same
period. In other words, its sales growth was solid with a growth of around 8% while its net
profit with a growth of around 11%. Its operating expenses were well controlled and were
also in line with its expectations. This is based on the fact that the company maintained it low
CODB via continued focus on it productivity and minimizing its indirect expenses (JB Hi-Fi

Strategic Management Analysis 4
2016). Its store wages also remained controlled during the 2016 financial year as it continued
delivering high standard of client service which the company is well known for.
According to JB Hi-Fi 2016 annual report, the company can be exemplified in that it has
established some new HOME stores whereby its home appliances can be bought and the store
is said to be operating at highest profit categories for the company particularly in the
increasing demand for the houses environment. Furthermore, JB Hi-Fi also innovates in the
online platform in developing digital offering linked with relations with clients. In addition, it
has been acquiring some stores on high traffic and convenient areas therefore clients would
stop by and check products resulting in maximized impulse destination sales and buying.
Porter’s 5 Forces
Porter’s 5 is a holistic strategy approach that took the strategic decision away from analysing
present competition. It usually focuses on how the company can build up sustainable
competitive advantage in the retail industry (Hunger & Wheelen 1999). To be more specific,
it is the micro environment and capacity of an organization to serve its clients and make
profit. It evaluates five aspects that are used in determining industry competition (Porter
2008). Understanding the nature of each one of the five forces provides necessary insight to
an organization enabling its formulate suitable strategies to be a bit successful in the market
(Grundy 2006).

Strategic Management Analysis 5
Source: Porter (2008)
The threat of the new entry
This threat brings about innovations, new means of carrying out their work and put some
pressure on its through reducing costs, lower pricing strategy as well as offering new value
propositions to customers. Therefore, JB Hi-Fi Ltd needs to manage all the challenges and be
able to build effective or efficient barriers in safeguarding its competitive edge. In essence,
the industry enjoys high profits, thus many new entrants would try to get in the market.
Nonetheless, since the entrants would cause a decrease in entire profits, there have been some
blocks to new entrance in the market. For instance, the government has out in place high
capital requirement as well as government restricted policies which barred new parties from
entering the industry.
Rivalry
In case competition amongst existing players is stiff then it would drive to decrease in overall
profitability as well as decrease in price. With these JB Hi-Fi Limited operates in a high

Strategic Management Analysis 6
competitive sector. The level of rivalry does take toll on while long-run profitability of the
firm.
Bargaining power of the suppliers
In the retailing sector, all companies purchase raw material from various suppliers. Here,
suppliers in dominant states could lessen the margin the company could earn in the overall
market. Those powerful suppliers utilize their negotiating power in extracting higher prices
from organizations in the retailing field. The whole effect of a greater supplier bargaining
power is usually that it lessens or decreases overall profitability of the retailing activities.
The lesson the company should learn is how different suppliers whose operations depend
solely on them therefore creating a scenario where these suppliers have significantly lesser
bargaining power as compared to its competitors.
Bargaining power of the buyers
Buyers are usually on high demand. In essence, buyers wish to purchase the best offering by
paying the least price. This places a lot of pressure to JB Hi-Fi profitability. The more and
smaller powerful the client base is of the company the higher the bargaining power and the
higher their capacity to look for increasing offers and discounts. Basically, the bargaining
power of the buyers is less in JB Hi-Fi since the company rapidly innovate new products,
hence limiting the chance of bargaining power of the buyers.
Threat of substitute
Whenever a given product meets same client needs in numerous means, the sector
profitability suffers. For instance, services such as Google Drives are viewed as substitute to
the storage hardware. Thus, threat of the substitute is relatively high in it provides value
proposition which is exclusively different from the current offering of the sector.

Strategic Management Analysis 7
Balanced scorecard Analysis
It is an analysis structure that mostly emphasis on customers, internal, learning and
shareholders desires of an entity in creating a system of the related objectives, targets,
initiatives and measures which could jointly describe tactic and how the strategy could be
accomplished (Cherunilam 2003). It is usually an analysis tool that is used in aligning an
organization’s activities to its vision (Kaplan & Norton 1998). It usually comprises of four
main perspectives; that is, customer perspective, financial, learning and growth as well as
internal business processes.
Financial perspective
Shareholder’s value is a key financial perspective. JB Hi-Fi introduces some measures that
shift emphasis toward clients on the sales growth and gross margin, some of the measures
that ignore investment required to generate growth in future. In essence, the company is
usually a low-cost provider which operates in highly competitive sector. Hence, its financial
perspective is usually dominant (JB Hi-Fi 2016).
Customer perspective
Previously, JB Hi-Fi did not focus on its customers, but instead they used to focus on its
products and technology. Nonetheless, since then, it has shifted its focus on customer
satisfaction, which is its core tent in its operations. In essence, JB Hi-Fi has shown an
cumulative realization of the significance of customer satisfaction and customer focus in its
operations. This is based on the fact that in case customers are unsatisfied they would actually
look for other suppliers which would meet their needs. In addition, the company has put in
place apps which permit customers purchasing products while watching TVs. Furthermore,
the company has highest level of trust and loyalty from its customers for the past three years
(JB Hi-Fi 2016).

Strategic Management Analysis 8
Business process perspective
Business process entails internal processes in the organization. Basically, the company
ensures appropriate processes are put in place such that all its salespersons fully understands
cost of every product and have authority in discounting to appropriate level (JB Hi-Fi 2016).
It has the capacity to bring new brands to life and it also has reputation for taking deals, being
first in marketing with latest technology as well as price leadership.
Learning process perspective
In JB Hi-Fi there is relatively high level of expertise since each employee is highly skilled
and equipped to carry out their work. In addition, employees working in the company are
highly satisfied, which is evidenced by low employee turnover (JB Hi-Fi 2016). Hence, its
staff turnover and training is treated with a lot of carefulness.
Conclusion
Financial position of an organization in the industry depends on the company’s competitive
environment and nature of its transaction and operations in the industry. In the analysis, it is
evident that despite competing in a wider market, the company has been able to outdo most
of its rivals; hence, gaining wider market share. In addition, the company tries to accomplish
its main goals of expanding the market share by mostly adopting three key strategies which
taps on present retailing trend. It can also be concluded that JB Hi-Fi is financially healthy in
terms of profitability and efficiency and that it has put in place better measures in dealing
with the stiff competition in the market.

Strategic Management Analysis 9
REFERENCES
4-Traders 2017, JB Hi-Fi Ltd (JBH); Viewed at 10th October 2017 from; http://www.4-
traders.com/JB-HI-FI-LIMITED-6496641/financials/
Cherunilam, F 2003, Strategic Management, Himalaya Publishing House, Delhi, Fourth
Edition, pp.1-5.
Grundy, T 2006, ‘Rethinking and reinventing Michael Porter's five forces model,’ Strategic
Change, 15(5), 213-229.
Hunger, JD & Wheelen, TL 1999, Strategic Management and Business Policy, Pearson
Education Asia, Prentice Hall, Eighth Edition, pp. 250-251.
JB Hi-Fi 2016, Annual report 2016 for JB Hi-Fi Limited; Viewed at 10th October 2017 from;
https://www.jbhifi.com.au/.../2016%20JB%20Hi-Fi%20Annual%20Report_ASX.pdf
Kaplan, RS & Norton, DP 1998 “The Balanced Scorecard – Measures That Drive
Performance”, Harvard Business Review on Measuring Corporate Performance, pp. 123-
141.
Market Watch 2017, JB Hi-Fi Ltd; Viewed at 10th October 2017 from;
http://www.marketwatch.com/investing/stock/jbh/profile
Porter, ME 2008, ‘The five competitive forces that shape strategy,’ Harvard business review,
86(1), 25-40.