Overview of JB HI-FI and Dick Smith
Analyzes the two companies and identifies the factors behind the diverse performance.
This report is aimed at comparing and contrasting two companies, JB HI-FI and Dick Smith, on the basis of strategic management to identify why some companies perform better than other companies in the same industry. It further recommends the desired improvements that the underperforming companies could undertake, that may increase their performances. Strategic management, according to OCVIRK, (2018), entails such parameters as general company development; long-term company success; creating the opportunity to succeed in the company; both internal and external aspects of the company; and a superior perspective upon which company decisions are based.
This company was founded in 1994. Based in Gladstone, Queensland, Australia, it is a retailer dealing in consumer electronics, video games and more. The company operates on a product portfolio consisting of computers, speakers, portable audio, car sounds, DVD music, televisions, recorded music, cameras, cooking products, kitchen accessories, Blu-ray disks and more (Crunchbase.com, 2018). The company also offers consultation and information technology services. It operates through three segments, that is, JB Hi-Fi Australia, JB Hi-Fi New Zealand and The Good Guys, (Bloomberg.com, 2018). The company owns over 50 JB Hi-Fi Home branded stores, with over four of the stores located in New Zealand. Approximately, the company runs 190 physical stores. The company also provides different solutions, including corporate, education and government sales of products and services and replacements of insurance. Also offered by the company are the JB Hi- Fi roll out and an approximate of 40 small appliances stores (Reuters.com, 2018).
Dick Smith Holdings Limited
Dick Smith Holdings Limited is also a retailer dealing in consumer electronic products. Its range of products is divided into four categories; entertainment, mobility, office and other products and services. It also has two branches, Dick Smith Australia and Dick Smith New Zealand. It operated four physical stores that cater for three distinct demographics of consumers. The company runs approximately 393 stores across Australia and New Zealand, inclusive of 351 Dick Smith branded stores, an approximate28 David Jones Electronics Powered by Dick Smith stores, approximate of four stores for MOVE by Dick Smith stores and an approximation of 10 MOVE stores. However, this company collapsed despite realizing high sales, owing to poor corporate governance.
Strategic Competitiveness
This is achieved when a firm successfully formulates and implements a value-creating strategy. JB Hi-Fi’s management was smart enough to formulate and implement value creating strategies that is one of the major contributors to its success in the consumer electronics retailing business. For instance, the strategy to acquire Good Guys as one of its segments led to the expansion of its market as well as its market share (Montgomey, 2013). On the other hand, Dick Smith’s management was only concerned about the increase in sales without considering the long-term survival of the firm.
Importance of Strategic Management
Competitive advantage
Firms operate in the highly competitive environment. Stiff competition can lead to a firm’s downfall, in case the firm cannot strategically deal with competition issues. One of the best ways to emerge the market leader in a highly competitive market is to create a competitive advantage (Porter, 2009).
Good corporate governance of a firm, an element of strategic management, in itself alone is a source of competitive advantage. When a firm can place itself in such a position as to be considered the best or the market leader in its industry, it leads to success. Considering JB Hi- Fi, its management, like in Dick Smith, does not rely on the mistakes of the former or past management as an excuse to blame the challenges it faces. While Dick Smith’s management team, when giving reasons for its collapse, placed blames on the company’s former management mistakes.
Business Environment
Business environment constitutes both internal and external factors that affect the business. Internal business environment factors include; business plan, its management, and employees, whereas the external environment constitutes such factors as suppliers, customers (Ahmed, & Absar, 2017). Dick Smith’s reliance on suppliers to create liquidity for the firm at some point indicated that the firm had not properly planned on how to ensure continuous liquidity of the firm. This led to customers lacking trust in the company’s long-term survival hence reduction in sales. JB HI -FI on the other hand didn’t rely on suppliers to create liquidity. It had a high liquidity ratio. JB HI -FI utilized the benefits of sweep accounts in its operations. This made it to perform better than the Dick Smith company.
Business long-term growth
Ensuring business short-term and long-term growth is one of the key elements of strategic management in the firm. This is seen through business expansion, for instance, through increasing the number of the stores. A firm should ensure that it can sustain the growth in its business in the long run (Barwise, & Meehan, 2011). Dick Smith, despite having twice as much as the number of stores possessed by JB Hi-Fi, could not survive in the highly competitive market. And despite making the huge sales, it still did not survive. Then what did JB Hi- Fi do that Dick Smith failed to do?
It could be that Dick Smith may have expanded its stores to a level beyond its sustainability. This is owing to poor business planning as a result of poor management. The company was only interested in the short-term growth of the business. Thus it lacked strategic management skills.
Creation of Competitive Advantage
Value creating
The company’s management had a responsibility to ensure that they create value in the firm, from the capital invested in the firm. This is realized through a continuous or persistent increase in sales measures through marginal sales figures and the return on investment figures (Mahajan, 2016). Dick Smith collapsed at the point when its marginal sales began to decrease and continued to decrease drastically. At this point, it required the management to intervene and maybe restructure their business plan and process. But they instead continued to operate the business despite the alarms created by decreasing marginal sales figures. On the other hand, B HI -FI invested its larger capital in supply chain process. This led to the increment in customer and consequently an increase in marginal sales.
Risk Management
A company faces a number of risks in the course of its business operations that poses threats to the company. Therefore, a risk assessment strategy should be developed by the firm managers to timely identification of risks or possible threats in any company undertaking. The risk assessment strategy should be developed in such a way that the company becomes risk aversive and aware. Proper risk assessment strategy will enable the company not only to identify short-term risks but also the long-term ones (Lam, 2014).
Moreover, proper risk assessment and management strategy also enable s the firm to be able to diversify its risks, maybe through a favorable portfolio and line of products.
Through proper management of the company’s risks, JB Hi-Fi Limited can analyze any of its business transactions and investment plans before actually implementing them. This allows it to choose the best investments to undertake. For instance, the firm engaging in a government sale of products and insurance replacements, besides its electronics line of business.
Unlike Dick Smith Holdings Limited that could not properly assess the risk of faster market penetration versus the company’s survival, thus leading to its collapse. If only the company’s managers had strategic management skills, they would have been able to identify and diversify the risks before they failed.
Resources Management
A firm has various resources that it uses to achieve its company goals. These resources include human resources, materials, technology, and financial resources. The success of a firm wholly depends on its ability to coordinate all these resources adequately, and through proper resource management, work towards meeting the company objectives (Machado & Melo, 2014).
Good Corporate Governance
Resource management is the role of the company’s management. As a company grows, its resources base also increases. For instance, an expansion in company product line causes a respective increase in its human resource recruitment, technology, material and financial resources. With this increase, there is a need for proper resources management, especially the financial resources, since it is the resource that is most vulnerable to misuse or mismanagement. In the company, every manager should be fully responsible for any mismanagement or resources under his or her department.
JB Hi-Fi Limited exhibits proper resource management thus leading to its growth. Unlike in the case of Dick Smith Holdings Limited, an increase in the company sales, causing an increase in cash available in the business, could not be sustained for long before the sales started to decrease, indicating poor management of financial resources. Moreover, the company failed to keep its liquidity, thus leading to its downfall.
Company goals and objectives
A company’s success also depends on and is measured by its goals and objectives. The firm’s management should be in a position to set realistic company goals and objectives that can be attained within a given time frame. Goals act as mirrors that guide the company to remain within its set bounds, that is, the ultra vires doctrine (Kambayashi, 2015).
For successful companies like JB Hi-Fi Limited, the management must have been able to set realistic goals and gear all its resources towards achieving the company goals. Unlike, in Dick Smith Holding Limited case, whereby the company’s collapse could be associated with the management not being focused to attain the company goals, or the company having set unrealistic goals.
Competent Managers
Management’s competency determines the ability of the managers to handle different situations that may face the company and to provide suitable solutions to all the problems facing the company. It takes a competent manager to provide a competent solution. Therefore, only incompetent managers will give excuses for the failures of past managers to justify their challenges, like in the case of Dick Smith Holdings Limited. The managers could not provide solutions or reasonable answers to the collapse of the business.
Thus, successful companies like JB Hi-Fi Limited, the company must have involved the services of competent managers.
Conclusion
It requires a firm to be smart, not only in its business operations but also in its management to survive in the long- run. The main reason why some firms succeed while others fail in the same industry is management skills. Strategic firm management ensures the long-term survival of the firm. It is the role of the management to continuously assess the firm to ensure that every aspect of the firm is working perfectly and is geared toward the long-term survival. Strategic management enables firms to ensure this by identifying areas that pose alarms and taking the necessary corrective measures before it is too late (Hitt, Ireland, & Hoskisson, 2017). Therefore, each firm should embrace strategic management for long-term growth and survival in the industry.
References
Ahmed, F. A., Absar, M., (2017) Business environment: Indian and global perspectives. [S.I.], Prentice- Hall of India.
Barwise, P., & Meehan, S. (2011) Beyond the familiar: long-term growth through customer focus and innovation. Hoboken, N.J., Jossey- Bass/ Willey.
Bloomberg.com, (2018) Market; stocks (online). Available at https://bloomberg.com/research/stocks/private/snapshot.asp?privcapld=1319687 [Accessed 8th May 2018]
Channticleer, (2016) Dick Smith collapse; A case study in electronics retailing (online). Available at https://www.afr.com/brand/chanticleer/dick-smith-collapse-a-case-study-in-electronics-retailing-20160713-gq54s0 [Accessed 8th May 2018]
Crunchbase.com, (2018) JB HI-FI (online). Available at https://www.crunchbase.com/organization/jb-hi-fi [Accessed 8th May 2018]
Hitt, M. A., Ireland, R.D., & Hoskisson, R.E. (2017) Strategic Management: Competitiveness &globalization. SAGE.
Kambayashi, N. (2015) Japanese management in change: the impact of globalization and market principles. Retrieved 8th May 2018 from https://public.eblib.com/choice/publicfullrecord.aspx?p=1966189
Lam, J. (2014). Enterprise Risk Management: From Incentives to Controls. John Willey & Sons.
Machado, C., & Melo, P. (2014) Effective human resources management in small and medium enterprises: global perspectives. Pearson
Mahajan, G. (2016) Value creation the definitive guide for business leaders. Los Angeles, SAGE.
Montgomey, B., (2013) Dick Smith vs. JB HI-FI (online). Available at https://www.rogermontgomery.com/dick-smith-vs-jb-hi-fi/ [Accessed 8th May 2018]
OCVIRK, G. (2018) Strategic Management of Market Niches: A Model Framework. Retrieved 8th May 2018 from https://dx.doi.org/10.1007/978-3-658-20364-1
Porter, M. E. (2009) Competitive Advantage: Creating and Sustaining Superior Performance. Simon and Schuster.
Reuters.com, (2018) Finance; Stocks; Company-profile (online). Available at https://www.reuters.com/finance/stocks/company-profile [Accessed 8th May 2018
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