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Question:

Discuss abouth the Evaluation of a Business Plan.
 
 

Answer:

Introduction

Company Background

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.    

Mission and Vision

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. 

 

Three Sources of Business Plan

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 30th 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).

 


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 Analysis:

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.

 


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

Strategy and Implementation Summary

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.

Financial Plan

Projected profit and loss statement for the 1st 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 1st 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

 

Projected Cash flow statement for the 1st 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 2nd 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 2nd 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 2nd 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
 

References:

Blank, S., 2013. Why the lean start-up changes everything. Harvard business review, 91(5), pp.63-72.

Corbett, A.C., Siegel, D.S. and Katz, J.A. eds., 2014. Academic Entrepreneurship: Creating an Entrepreneurial Ecosystem (Vol. 16). Emerald Group Publishing.

Curley, A. and Slocum, J., 2016. Organizing a Startup Business According to Differentiation Strategy and Virtual Design.

Fernández-Guerrero, R., Revuelto-Taboada, L. and Simón-Moya, V., 2012. The business plan as a project: an evaluation of its predictive capability for business success. The Service Industries Journal, 32(15), pp.2399-2420.

Gately, C. and Cunningham, J., 2014. The Contributions and Disconnections Between Writing a Business Plan and The Start-up Process for Incubator Technology Entrepreneurs. Academic Entrepreneurship: Creating An Entrepreneurial Ecosystem (Advances in Entrepreneurship, Firm Emergence and Growth, Volume 16) Emerald Group Publishing Limited, 16, pp.197-241.

Ghezzi, A., Cavallaro, A., Rangone, A. and Balocco, R., 2015, April. A Comparative Study on the Impact of Business Model Design & Lean Startup Approach versus Traditional Business Plan on Mobile Startups Performance. In ICEIS (3) (pp. 196-203).

Gollenia, L.A., 2016. Business Transformation Management Methodology. Routledge.

Human, S.E., Clark, T., Baucus, M.S. and Eustis, A.C.S., 2015. Idea or Prime Opportunity? A Framework for Evaluating Business Ideas for New and Small Ventures. Journal of Small Business Strategy, 15(1), pp.59-80.

Jbhifi., 2016. JB Hi-Fi | Australia’s Largest Home Entertainment Retailer. [online] Jbhifi.com.au. Available at: <https://www.jbhifi.com.au/> [Accessed 16 Dec. 2016].

Jones, C., Penaluna, A., Matlay, H. and Penaluna, K., 2013. The student business plan: useful or not?. Industry and Higher Education, 27(6), pp.491-498.

Kiznyte, J., Welker, M. and Dechange, A., 2016. Applying Project Management Methods to the Creation of a Start-up Business Plan: The Case of Blendlee.

Kunz, D.A. and Dow, B.L., 2013, July. Organizing and Financing a New Business Venture. In Allied Academies International Conference. International Academy for Case Studies. Proceedings (Vol. 20, No. 2, p. 11). Jordan Whitney Enterprises, Inc.

McAdam, J., 2013. The One-hour Business Plan: The Simple and Practical Way to Start Anything New. John Wiley & Sons.

Miller, A., 2014. A Vision of Capitalism, as it was Meant to be: A Social Purpose Business plan for FoodShed Productions.

Mullins, J., 2012. The new business road test: What entrepreneurs and executives should do before writing a business plan. Pearson UK.

Olsson, E., 2013. A long lasting effort: A tentative business plan for a health care e-learningsystem in Tanzania.

Ripsas, S., Schaper, B. and Tröger, S., 2015. A Startup Cockpit for the Proof-?of-?Concept. Erscheint imHandbuch Entrepreneurship, Wiesbaden.

Thomas, D.F., Gudmundson, D., Turner, K. and Suhr, D., 2014. Business Plan Competitions and Their Impact on New Ventures' Business Models. Journal of Strategic Innovation and Sustainability, 10(1), p.34.

Turner, K. and Suhr, D., 2014. Business Plan Competitions and Their Impact on New Ventures’ Business Models David F. Thomas University of Northern Colorado Donald Gudmundson University of Northern Colorado. Journal of Strategic Innovation and Sustainability, 10, p.1.

Wentzensen, N. and Wacholder, S., 2013. From differences in means between cases and controls to risk stratification: a business plan for biomarker development. Cancer discovery, 3(2), pp.148-157.

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