JB HI FI: An Analysis Using Porter’s Five Forces Model

Overview of JB HI FI and its target market

The JB HI FI Company has been chosen for this report. JB HI FI is an Australian company which is running its business and activities under the Australian retailing industry. The company mainly retails the video games, Blu-rays, DVDs, Ultra Blu rays, electronic products etc. the company has been founded 44 years back in 1974. Headquarter of the company is in Melbourne, Australia.

The target market of the company is Australian and New Zealand people who wish to have electronic products for their daily operations. There are numerous segments of the company which targets the different age group of customers towards the company. Further, the marketing strategies of the business are value propositions and the positioning statement. The company has positioned itself in the market through setting a great brand image in the market.

The JB HI FI is operating its business in the Australian retail industry. The Australian retail study has seen great growth in the overall position of the business.  The Australian retail industry’s main products are the consumable products which are offered to the Australian people. The industry is one of the highest growing Australian industries as the growth rate of the industry is higher (Home, 2018). The overall contribution of Australian retail industry is also highest in the retail industry. The improvements in the Australian retail industry are directly improving the overall performance and position of the company. The below graph brief better changes and improvements in the Australian retail industry which are as follows:

(Atasu, Sarvary & Van Wassenhove, 2008)

Porter’s five forces model is a tool of strategic management which analyzes the industry position and performance of a business in the industry. It identifies the competitive forces of a business which is used to shape each of the industry and assist in order to determine the weakness and strength of a business (Barney, 2011). The five forces model is important tool and technique to evaluate the completion position and other factors of a business in the industry. It assists the business to adjust the strategy which suits the competitive advantages of the business as well as improve the potential profits of the business. The study of porter’s five forces model on JB HI FI is as follows:

If the competition level is higher among the industry than it will impact on the price level of the company and also reduce the profitability position of the industry. JB HI FI operates in the Australian retail industry which is very competitive. The main competitors of the company are Harvey Norman, radio rentals and many others. Both of the companies are operating in the same industry and the market share and the market competition of all the existing players are quite higher in the industry as JBH is holding around 29% share in the market (Bell potter, 2016) (Chaffey, Ellis-Chadwick, Mayer & Johnston, 2009).

The Australian retail industry

Further, the industry concentration of the company is huge. JB HI FI’s market share is 29%  as well as great market goodwill has been maintained by the company in the market which cannot be influenced because of few companies in the market. However, few changes into the strategy would improve the performance of the business and make the business more strong.

The main rivalry among the competitors is because of the prices. The prices have been set by the companies according to their competitors and the technology which has been used in the specific product. The JB HI FI is offering different products with various varieties and segment along with the different prices (Dallas, 2011). The product quality and the servicing of all the companies in the industry are better because of the huge competition and the motto to grab more market.

Exit barriers of Australian retail industry are quite low. A firm can enter at any time in the industry and can exit at any time. The obstacle often cost high to the firm which could prohibit a firm to leave the market. The JB HI FI has invented huge amount in the firm and thus if the firm would exit from the industry than a huge amount has to be paid by the business. the exit barrier for the JBH is high.

If the thereat level from new entries are higher among the industry than it will impact on the strategies, products and life cycle of the company and it would also impact on the profitability position of the industry. JB HI FI operates in the Australian retail industry which is very competitive. The main threat of the company could be different innovative products and advanced technology of new entries in the industry. The company is required to plan and implement such strategies that the new entry could not impact much on the market share and the performance of the company could be managed.

In the Australian retail industry, the entry barriers are quite lower. A firm could enter into the retail industry at any time without little documentation. The associated cost is also lower. It directly makes huge threat in from of JB HI FI as any firm could enter at any time in the industry. The potential and existing companies could innovate new services and products to reduce the threat level (Cravens & Piercy, 2006). The new products would not only bring new customers to the business but they will also give reasons to the existing customers to become more loyal towards the company.

Porter’s Five Forces Model Analysis of JB HI FI

JB HI FI could also build economic of scale in order to lower the fixed cost per unit and reduce the total cost of the product. The JB HI FI is an established player so the impact level is quite lower in the industry and it would improve the performance of the company. It explains that the threat level could be reduced by JB HI FI from new entries through making few changes and the current threat is also lower.

If the bargaining level from suppliers are higher among the industry than it will impact on the cost of the company and it would also impact on the profitability position of the industry. JB HI FI operates in the Australian retail industry which is very competitive and the suppliers are also huge in numbers to provide the raw material to the companies. The main threat of the company could be quality raw material and fixation in the raw material prices (Leonidou, Leonidou, Fotiadis & Zeriti, 2013). The company is required to plan and maintain better relations with the suppliers to manage the overall performance in the industry.

There are numerous suppliers of JB HI FI which offers the different product to the company to manufacture the quality products. In case of JB HI FI, the bargaining power of suppliers is lower because an efficiency supply chain has been managed by the company with multiple suppliers (Pearson, 2008). The company also experiment different product designs by using different materials so that if the price of one raw material goes higher, the other product could be used by the company to produce the product.

It explains that the strategies of the business help JB HI FI to maintain the better position in the market along with less bargaining with the suppliers of the company. The current report describe that JB HI FI is bargaining with the suppliers and forcing them to reduce the raw material price.

If the bargaining level from buyers is higher among the industry then it will impact on the overall profitability position of the industry. In the Australian retail industry, the numbers of the buyers are quite higher as the company is offering its products to the end customers, Australian government and the corporate (Pride, 2008).  The main threat of the company could be numerous competitors along with the substitute products and the competitive prices. The company has maintained better policies in the market to manage the performance of the business.

Threat of New Entrants

There are numerous customers of JB HI FI which demands for the electronic products in the industry. In case of Australian retail industry and JB HI FI, the bargaining power of buyers is quite higher because the firms are few and the customers are huge. However, JB HI FI managed great policies and the products and services of the company are also impressive which manages the performance of the business in better way (O’Neill & Mattila, 2010).

It explains that the strategies of the business help JB HI FI to maintain the better position in the market along with less bargaining with the buyers of the company. The current report describe that JB HI FI’s bargaining with the buyers are lower and it helps the business to manage the performance in the market.

If the thereat level from substitute products are higher among the industry than it will impact on the financial and non financial factors of the business simultaneously. JB HI FI operates in the Australian retail industry where various companies are operating their business and offering almost similar product to the customers. The main threat of the company could be different innovative products and advanced technology to maintain the market share. The company is required to plan and implement such strategies that the substitute product could not impact much on the market share and the performance of the company could be managed.

JB HI FI has succeeded to manage various innovative ideas and products which do not force the customers to switch towards other brands of the company. It would help JB HI FI to manage and improve the performance in the market (Quester et al, 2007).

On the basis of the porter’s five forces model, it has been found that the overall industry level is quite competitive, JB HI FI has succeeded to manage various new policies and tactics which has helped the business to maintain better performance in the market and attract more customers towards the business in order to improve market share, profitability level and better strategically position in the industry. It has helped JB HI FI to manage and improve the performance in the market.

Life cycle of an industry depict different stages of a firm in which they are operating their business. Different firms in a particular industry could be at different stages of life cycle at a single time. The main stages of industry life cycle are introduction, growth, maturity and decline. All of this stage describes different time and different perspective regarding an industry. Such as at the time of introduction, an industry just entered into the market and start runs the business. At this stage, industry understands the market factors and start implementing the business and strategies. Further, at the growth stage, the performance of the market start growing, at this stage the profitability level, market share, GDP contribution, economics of scale etc of an industry improves. After it, at the maturity stage, the peak of all the factors comes, that is the maximum profit and contribution in GDP which could be offered by an industry to the economy (Walker, Mullins, Boyd & Larreche, 2005). Lastly, decline stage briefs the level where the performance and profits of an industry starts declining.

Bargaining Power of Suppliers

In case of Australian retail industry, it has been found that the industry’s performance is at maturity stage but various efforts are done by the industry such as different products, innovations and advanced technology in order to maintain the industry at maturity level only and to decline the performance. The life cycle and the management of the industry make it easier and simple for the companies, which are operating in the industry, to maintain the performance and improve the overall position of the business (Channel news, 2018).

It brief the better position of the industry and lead to the conclusion that there would be no decline stage for the retail industry in the Australian market because it offers the essential and consumable products to the people and the innovation and new strategies such as online retailing and other technologies also help it to manage the performance and other factors in the market.

The main threat of the Australian retail industry could be financial crisis as in the financial crisis, 2008, huge decline level has been seen in the industry and it has affected the overall performance of the business at great level (Dean & Yunus, 2011). Entry of the foreign companies and the changes into the industry could affect the performance of the business.

JB HI FI s acquired the “Good guys” as a strategically group of the business. After acquiring the “good guys” the performance of the business has been improved at great level. After the acquisition, the overall profitability level and market level of the business has been improved as well as the technology of the business has also been enhanced and attracted the customers and the investors to invest more in the business. The two iconic Australian retail brands have come together along with the acquisition and it lead to the business towards achieving the common goal and objectives of the business (Brigden, 2009). The CEO Michael ford of good guys has said into one of the conferences that the position and the track record of good guys would be matched with the home appliances of JB HI FI and it would lead to the Australian retail industry at different level.

Both of the brands has stand for the customer services, value and range and it has always been better for the business and the industry to grab their respective market and improve the overall performance in the market. after acquiring the good guys, the domestic appliances sales of the business has been improved by $ 2 billion to $ 4.41 billion which has lift to the performance of JB HI FI from one stage to other very efficiently (Tech Guide, 2018). The total store footprint at the Australian market has been improved from 179 stores to 280 stores across the Australian market.

Bargaining Power of Buyers

The collective bargaining power and the performance of both the business has been improved which lead to the performance of industry at different level as well. The CEO Michael ford has said that the deal with JB HI FI has been accepted just because the strength of the respective companies would be preserved and it would help both the businesses to meet their objectives and the goals in no time. The bargaining power of buyers has also been affected after the acquisition of good guys (Corporate customers, 2018).

To conclude, the overall performance and the acquisition strategy of JB HI FI has helped the business to improve the financial and non financial factors and meet the common goals of the business. It has lead to the business at improved and different stage which would lead better performance of the business.

JB HI FI is an Australian company which is running its business and activities under the retailing industry. The company mainly focuses on the video games, Blu-rays, DVDs, Ultra Blu rays, electronic products etc. the company has been founded 44 years back in 1974. Headquarter of the company is in Melbourne, Australia.

Currently, the company is running around 303 locations where 59 “JN HI FI Homes’ and 244 “JB HI FI” stores are running by the business. The company has expanded its business in New Zealand market as well. The main subsidiary of the JB HI FI is “The good guys”. In the year of 2017, company has generated the Australian dollar 4 billion. The evaluation expresses that the various economical, financial and political factors have affected the overall position of the company (Home, 2018).

In the last year, Australian regulations have affected the overall position of the business. It has also been measured that the demand of the customers has helped the business to enhance the turnover at great level continuously (Morningstar, 2018). The technological advancement of the business helps the JB HI FI to improve the overall position and the performance in the industry.

The main resources of a business are human resources, intangible assets and tangible assets of the business which are as follows:

The tangible assets are those assets which has a physical form. It includes all the fixed assets and current assets of the business such as machinery, buildings, inventory etc. The tangible assets of the business are as follows:

Cash and cash equivalents	51884	72800	72000
Total cash	51884	72800	72000
Receivables	98073	196600	204700
Inventories	546437	859900	891100
Prepaid expenses		29800	31800
Other current assets	6124	11600	10900
Total current assets	702518	1170700	1210500
Non-current assets
Property, plant and equipment
Fixtures and equipment	259013	310600	336400
Other properties	160365	173900	188100
Property and equipment, at cost	419378	484500	524500
Property, plant and equipment, net	183570	208200	198000

(Morningstar, 2018)

The intangible assets are those assets which does not have physical form. It includes all the non physical assets of the business such as patent, goodwill etc. The intangible assets of the business are as follows:

Goodwill	36566	736300	747000
Intangible assets	49024	290300	290300

Threat of Substitutes

Human assets are the employees which work for the company to achieve the goal of the business. The human assets are managed by the company at great level to manage the overall position of the company (Dotson & Hyatt, 2005). Various new tactics and policies are continuously made by a business to retain the right talent in the company.

JB HI FI has been made various strategies to maintain and manage all the factors and capabilities of the business.  The corporate management strategies of the business have helps the business to acquire good guys and enhance the overall share in the industry. As well, the marketing policies of the company are enough competitive to grab the market share and make more customers.

The supply chain and logistics management has helped the business to bargain with the suppliers and improve the performance and reduce the cost of the business. The other capabilities of the business are also higher which helps the business to maintain the performance.

The main core competencies of the business are the technology advancement and the innovative products which make a competitive advantage for the business and help the business to improve the overall performance level (Elmuti & Kathawala, 2011).

It leads to the conclusion that JB HI FI has managed various strategies and policies in an efficient manner to achieve the goals and objectives of the business.

Company’s strategy:

The business level strategy briefs the competitive advantage of the business. In case of JB HI FI, it has been found that the cost leadership (because the company is offering the product in lower price) is the main sources of competitive advantage of JB HI FI. The JB HI FI’s core competencies are to focus on the needs and preferences of the customers and satisfy them in order to achieve the great returns from the market. All of these have been managed by the business through business level strategies. It offers value to customers and gain competitive advantage from the market through exploring the core competencies in individual, specific and service markets of the business (Gaughan, 2010).

The main business level strategy of JB HI FI is cost leadership. It explains an organization to set a price which is based on the internal efficiency (the management and working capability of the internal stakeholder  of the business) in order to have enough margins to sustain the average return in the market and offer such cost which could attract customers to buy the product (Jain & Haley, 2009). The company has gained the cost advantages through determining and controlling over the cost and make the changes into the value chain of the business.

Rivalry among Competitors

The company is in retaining business. It is a single business company though it offer numerous products in the industry with different characteristics and uses but all the products are related to the retail industry only. Such as, JB HI FI is offering video games, Blu-rays, DVDs, Ultra Blu rays, electronic products etc. the company is involving into offering the quality and different product to the customers to set a better value propositions in the market (Fournier & Lee, 2009). It believes in offering the product with lower margin so that the long term profitability level of the business could be managed.

The business has diversified its market into vertical (where company offers the new product into market for the different market) market. The acquisition and the diversification of the product are done by the business vertically to grab more market share and manage the performance in the market.

Conclusion:

On the basis of the study, the Australian retail industry is at maturity stage and it would lead to the decline stage if the required changes would not be done by the business timely. The company is required to offer new products and services to the customers as well as the company is also required to focus on the business model to improve the overall level of the business to prevent the shift from maturity to decline level. Currently, the company is at leading level and thus the new entries are not offering any threat to the business and the performance of the business is competitive. The substitute products are offering huge competition to the business which is overcome by the business through launching new products timely. The industry’s performance is attractive which also lead to the performance of JB HI FI at next stage.

The current business strategies of the business are competitive enough and it is not required for the business to make the changes into the existing strategies until and unless some unwanted things take place in the business. The corporate strategies of the business is to set value propositions in the business which is enough competitive. The company is just required to diversify the market at new foreign markets which required new land and building to start the store of the business. The patent and copyright must also be focused by the business.

It leads to the conclusion that the strategic performance of JB HI FI is enough attractive and the company is enough capable to manage all the activities and performance at better level.

References:

Atasu, A., Sarvary, M. & Van Wassenhove, L.N., (2008). Remanufacturing as a marketing strategy. Management science, 54(10), pp.1731-1746.

Barney, J. (2011). ‘Firm Resources & Sustained Competitive Advantage’. Journal of Management, 17(1), p. 99.

Brigden, C. (2009). Journal of Industrial Relations. Unions & collective bargaining in 2008, 51(3), 365-378.

Bell potter. (2016). JB HI FI. [online]. Retrieved from :https://www.bellpotter.com.au/onlineresearch/fileGet.aspx?guid=DB2B39E8-82D2-4B84-9A87-8B482B510186 

Chaffey, D., Ellis-Chadwick, F., Mayer, R. & Johnston, K., (2009). Internet marketing: strategy, implementation & practice. Pearson Education.

Channel news. (2018). Why JB HI FI is the best retail group in Australia. [online]. Retrieved from :https://www.channelnews.com.au/comment-why-jb-hi-fi-is-the-best-retail-group-in-australia/

Corporate customers. (2018). JB HI FI. [online]. Retrieved from :https://www.jbhifi.com.au/General/Corporate/Consumer-Matters/Manufacturers/

Cravens, D.W. & Piercy, N., (2006). Strategic marketing (Vol. 7). New York: McGraw-Hill.

Dallas, H,. (2011). “Strategic Management; competitiveness & globalization”. Strategic management, Asia-Pacific 4(2), pp 434-440.

Dean, E. & Yunus, K. (2011). ”An overview of strategic alliances”. Management Decision, 39 (3) pp. 205 – 218.

Dotson, M.J. & Hyatt, E.M., (2005). Major influence factors in children’s consumer socialization. Journal of Consumer Marketing, 22(1), pp.35-42.

Elmuti, D. & Kathawala, Y. (2011). “An overview of strategic alliances”. Management Decision,  39(3), pp. 205-217.

Fournier, S. & Lee, L., (2009). Getting br& communities right. Harvard business review, 87(4), pp.105-111.

Gaughan, PA. (2010). Mergers, Acquisitions, & Corporate Restructurings. John Wiley & Sons.

Home. (2018). JB HI FI. [online]. Retrieved from : https://www.jbhifi.com.au/

Jain, S.C. & Haley, G.T., (2009). Marketing planning & strategy. Cincinnati South-Western Publishing Company 1985..

Leonidou, L.C., Leonidou, C.N., Fotiadis, T.A. & Zeriti, A., (2013). Resources & capabilities as drivers of hotel environmental marketing strategy: Implications for competitive advantage & performance. Tourism Management, 35(4), pp.94-110.

Morningstar. (2018). JB HI FI. [online]. Retrieved from: https://financials.morningstar.com/income-statement/is.html?t=0P00006WMC&culture=en-US&ops=clear

O’Neill, J.W. & Mattila, A.S., (2010). Hotel br& strategy. Cornell hospitality quarterly, 51(1), pp.27-34.

Pearson, D. (2008). Wall Street Journal-Eastern Edition. Airlines Face Shortage of Pilots, 251(95), p. B11A.

Pride, W., (2008). Marketing. Cengage Learning.

Quester, P., Neal, C., Pettigrew, S., Grimmer, M.R., Davis, T. & Hawkins, D., (2007). Consumer behaviour: Implications for marketing strategy. McGraw-Hill.

Tech guide. (2018). JB HI FI acquires the good guy. [online]. Retrieved from :https://www.techguide.com.au/news/jb-hi-fi-acquires-the-good-guys-so-what-does-this-mean-for-customers/

Walker, O.C., Mullins, J.W., Boyd, H.W. & Larreche, J.L., (2005). Marketing strategy. McGraw-Hill Education.