JB Hi-Fi: History, Management, And Business Philosophy

Establishment and Growth

Question:

Discuss abouth the Evaluation of a Business Plan.

In the year of 1974, the company JB Hi-Fi was established BY Mr. Jhon Burbuto. At that time the company only operated a single store in East Keilor (Jbhifi 2016). During the years between 1983and 1999, the company had opened 9 more stores in Australia (Jbhifi 2016). The company has offred different types of products such as home appliances, consumer electronics and air- conditioning. The company also sells all the renowned brand of T.V., Cameras, Computers, Speakers, Home theater and Portable Audio system and many more (Jbhifi 2016). The company also offers different types DVD music, recorded music and games at cheap price compare to the market.    

Main business philosophy of the company is very simple. Mission of this company is to offer a specialist range of Hi-Fi and recorded music at lowest price to Australian customers (Jbhifi 2016). Maintaining this philosophy, the company has become one of the largest and fastest growing retailers of home appliances in Australia.  The vision of the company is to become the largest retailer company is the country within next two years. 

There major source of business plans are such as management, financial and marketing. They are discussed below:

Management

The company JB Hi-Fi has announced a major management restructure. Presently the company is trying to expand its focus on online marketing. CEO of the company named Richard Murray has announced that the day-by-day management team of the company will be strengthened. As the part of its expansion program, the company will increase its focus on digital and online marketing operations. For this purpose, James Saretta is appointed to take the role of Digital and strategy Director (Jbhifi 2016). He will be responsible for expansion and development of the organization’s online business operation. Due to enhance customer experience in JB Hi-Fi website online sales of the company was increased by 28% (Jbhifi 2016). For this reason JB Hi-Fi website is recognized as one of the biggest appliance and consumer electronic in Australia. 

There are various other changes have been found in the management team. For example, Cameron Trainor (presently assigned as Merchandise Director) will take the responsibility of the marketing department along with his present role (Jbhifi 2016). In addition, Gary Siewart has been appointed as general manager of marketing who will report to Cameron Trainor. However, the previous role of marketing director of the company has been eliminated. In addition, Belinda Minieri will be appointed as a part of the senior management, who will take on the role of general manager of online and solutions operation.           

Financial

Till 30^th June 2016, the company has more than 194 stores in Australia and New Zealand. In future, the company has the opportunity to increase its business in these two countries. The company JB Hi-Fi is achieve to sales of $3.90 billion in the year of 2016 (). The total sales growth of the company is 8.3%. The net profit of the company after tax is approximately 11.5%. Gross profit of the company is increased by 8.4% (Jbhifi 2016).

Product Range

It has been found that the total operating cost of the company remained well controlled throughout these years. In future, the company will try to remain focused on minimizing indirect expenditure and increase productivity. Due to low financial and operating leverage, the balance sheet of the company continues to grow. The company is considered as a discount retailer, which has the ability to offer low price products through the scale of its business operation.  The company offers the largest category of consumer electronics, home entertainment at discounted price. It helps the company to position itself in the mind of all customers.

Marketing

Gollenia (2016) stated that, good retailers always try to focus on low costs, right products and appropriate pricing. Company JB Hi-Fi is considered as one of the great retailers. Even if the company has grown to $2 billion organization, the management has not shifted its focus from that of the “value” player in the electronic retail market of Australia. The company is competing with big names such as Good Guys and Harvey Norman. The company is considered as a low price alternative, which has provided competitive advantage. According to the CEO of JB Hi-Fi, the company has deliberately positioned itself as low end branding and shop fittings. Human et al. (2015) stated that this strategy is highly effective during the downturn of market.

Branding of the company can be hardly considered as slick. The company mainly uses slightly tacky and loud print advertising. However, the television advertising is minimally used by the company. However, the store fitting of the company has a second-hand feeling. They use lots of hand-drawn price tags and signage. It provides customers the opportunity of bargaining. Ripsas et al. (2015) stated that branding of the company is consistent for store and it has a consistent product range. The company uses Uechtritz’s business model for this purpose.    

Market Segmentation:

JB Hi Fi has successfully divided the market in three distinct segment which are described below:

Family Homeowners: This particular segment owns middle-end to high-end homes along with other electronic equipments. Half of the families have two incomes and more than half families earn around $78000. More than half families have cable TV and broadband internet connection.

Single Homeowners: This particular segment owns their personal home only for them. They are mostly inclined towards using electronic technology. The median income has been assumed around $65000. Three quarter of the segment owns cable TV and broadband Internet Connection.

Commercial Sales: This segment mostly contains SMEs and mid-size businesses. This particular segment is focused on purchasing expensive electronics equipment for various purpose regardless of their industry.

Target Market Segment Strategy:

JB Hi Fi mostly focuses on these market segments as they are most attracted towards new models and technological entertainment electronic devices. While majority of the homeowners have cable TV, many other families would be inclined to purchase new models of TV. Moreover, the professional single homeowners would be attracted towards innovative electronic devices for entertainment (Corbett et al. 2014). In addition to that, the small and mid-size business organization would require a large amount of electronic products. In order to attract these customers JB Hi FI would focus on minimizing their cost so that they can offer limited price for their product. In addition, promotional activities with latest technology will also help to reach maximum numbers of customers.

Management Restructure

Products

JB Hi-Fi mostly operates its business in the sector of Home Entertainment Electronics Equipment. The product range contains various entertainment equipments such as large home appliances, hardware/electronics, video games, Blu-ray discs, DVDs as well as CDs. In addition to that, the organization also focuses on providing the business related products such as computing equipment, audio visual, BYOD Programs as well as corporate gift cards.

Industry Analysis:

The external market factors JB Hi-Fi is analyzed with the help of PESTLE model.

PESTLE analysis

P – Political	·         The legislative amendments due to the global requirements in Australia have immensely affected the business decision of company (Jones et al. 2013). ·         The trade faces greater challenges due to the international trade laws and political instability.
E – Economic	·         The high inflation rate immensely affects the online trading ·         The high rate of Dollar highly affects the monetary transactions ·         European economic crisis has also affected the internal market
S – Social	·         The customers are inclined towards entertainment related electronics equipment ·         They often focuses on the perceived quality and service availability
T – Technological	·         The emerging social media technology has enabled the organization to undertake new marketing strategy (Kunz and Dow 2013) ·         The online marketing and gaming market has been immensely improved by the advanced internet accessibility
L – Legal	·         International trade law is a major factor for the business operation ·         In addition to that taxation is a crucial element of business expansion
E – Environmental	The company has to focus on several major areas regarding environmental preservation and recovery. These areas are ·         Waste disposal ·         Disposal of worn-outs ·         Bulk packaging ·         Noise reduction

Competitive Edge

The competitive position of JB Hi-Fi is analyzed with the help of Porter’s 5 Forces model.

Porters 5 Forces Analysis

Figure 1: Porter’s Five Forces Analysis

(Source: Blank 2013)

Marketing Strategy

JB Hi-Fi would be focused on attracting the customers by offering a large range of products in a limited price. In order to bind the price in a certain level the company will emphasize on cost reducing techniques so that the products can be manufactured with limited expenses (Ghezzi et al. 2015). However, the company will also concentrate on the factors, where the quality of the products is not compromised. In this context, the organization will not reduce the cost of the quality control and materials. This way the organization would be able to ensure the quality of the products.

JB Hi-Fi will also be focused on investing in proactive and aggressive advertising approach. It will undertake numbers of promotional activities in order to attract a maximum number of customers. The most effective promotional activities are discussed below:

Inserts in Bills:  The organization will construct the bills in such a fashion that the promotional messages will be conveyed to the customers. It will effectively increase a significant number of repeat businesses. It is most inexpensive, albeit powerful way to reach the customers.

Website: In the contemporary technologically advanced era, any advertising campaign is not complete without online activities. The website campaign and advertisement is highly effective for reaching majority of the target audience in Australia, as most of the citizens actively use internet. In addition to that, the website also offers an effective platform for the customers to purchase the company’s products in an easy and convenient way. Moreover, the social media sites are also quite useful platform for reaching the customers in a limited effort.

Direct Mail: JB Hi-Fi will also use direct mail as a means of business communication. The customer database will be most effective for conveying necessary updates on the company’s activities and product renovation. The company will be able to inform the messages regarding the new information regarding the organization.

Sales Strategy

The organization would be focused on implementing push sales for increasing the sales figure in a significant manner. The supportive shopping experience provision would be also helpful to encourage the customers to purchase from JB Hi-Fi stores. The regular greetings would be most effective for enhancing brand recognition and repeat sales.

Projected profit and loss statement for the 1^st year

Pro Forma Profit and Loss Statement for JB Hi-Fi
				Amount (in $) (Debit)	Amount (in $) (Credit)
Revenue					27700
Closing stock				1700
Purchase of materials		7400
Carriage inward			900
Gross Profit			21100
Salaries to the staffs		11700
Maintenance expenses		910
Rent and rates			3000
Cost of building the internal structure	1400
Electricity charges			610
Other expenses			1000
Net Profit			2480

Projected Balance sheet statement for the 1^st year

Pro Forma Balance Sheet for JB Hi-Fi
				Amount (in $)	Amount (in $)
Assets:
Fixed assets:
Furniture				4700
Machineries			1400
Total fixed assets			6100
Current assets:
Debtors				6100
Cash in hand			1700
Closing stock			1700
Total current assets			9500
Total assets				15600
Liabilities:
Long term liabilities:
Long term bank loan		4000
Current liabilities:
Creditors				3700
Bank overdraft			1000
Total liabilities				8700
Owner’s capital:
Capital				6000
Reserve				900
Total Owner’s capital			6900

Sales and Profit

Projected Cash flow statement for the 1^st year

Pro Forma Cash Flow Statement for JB Hi-Fi
				Amount (in $)	Amount (in $)
Profit from the operations		2480
Cash flow from operating activities:
Add: Increase in current liabilities	570
Less: Increase in current assets	360
Total cash from operating activities		2690
Cash flow from investing activities:
Purchase of new furniture		-1000
Sale of old furniture		300
Total cash from investing activities		-700
Cash flow from financing activities:
Bank loan taken			4000
Capital provided by the owner		1000
Total cash from financing activities		5000
Net cash inflow				6990

Projected profit and loss statement for the 2^nd year

Pro Forma Profit and Loss Statement for JB Hi-Fi
				Amount (in $) (Debit)	Amount (in $) (Credit)
Revenue					31070
Closing stock				1870
Purchase of materials		8100
Carraige inward			1100
Gross Profit			23740
Salaries to the staffs		11700
Maintenance expenses		1010
Rent and rates			3000
Cost of building the internal structure	700
Electricity charges			900
Other expenses			1400
Net Profit			5030

Projected Balance sheet statement for the 2^nd year

Pro Forma Balance Sheet for JB Hi-Fi
				Amount (in $)	Amount (in $)
Assets:
Fixed assets:
Furniture				4900
Machineries			1400
Total fixed assets			6300
Current assets:
Debtors				7400
Cash in hand			1600
Closing stock			1870
Total current assets			10870
Total assets				17170
Liabilities:
Long term liabilities:
Long term bank loan		4000
Current liabilities:
Creditors				5070
Bank overdraft			1100
Total liabilities				10170
Owner’s capital:
Capital				6000
Reserve				1000
Total Owner’s capital			7000

Projected Cash flow statement for the 2^nd year

Pro Forma Cash Flow Statement for JB Hi-Fi
				Amount (in $)	Amount (in $)
Profit from the operations		5030
Cash flow from operating activities:
Add: Increase in current liabilities	1470
Less: Increase in current assets	-1370
Total cash from operating activities		7870
Cash flow from investing activities:
Purchase of new furniture		-1400
Sale of old furniture		360
Total cash from investing activities		-1040
Cash flow from financing activities:
Bank loan taken			4000
Capital provided by the owner		500
Total cash from financing activities		4500
Net cash inflow				11330

Conclusion and Recommendation

In Conclusion, it can be mentioned that JB Hi-Fi is already an established home appliance retailer of Australia. The main motto of the company is to offer consumer electronics and home appliances at cheaper price. In the year of 2003, the company had entered into the Australian Stock Exchange. Presently, the company is worth $2 million. However, the company still has limited presence in Australia and New Zealand. For this reason, the company will try more to expand its business in these two countries. The company also will try to improve its online business strategy.  In order to help the company to improve its business plan, there are some recommendations given to the organization. They are mentioned below:

Recommendations

1. The company has to improve its website and make it more user-friendly, so that customers can easily purchase their goods from the company websites.
2. The company has to improve its supply chain in order to distribute all the products equally at every corner of the country.
3. The company has use social media marketing such as Facebook, Twitter in order to make effective interaction with customer

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