25743 Corporate Financial Analysis – Assignment 1
JB Hi-FI (JBH.AX) – Consumer Discretionary
Name | Student ID | Lecturer Name | Lecture Time | Question |
Nathan (Fortunato) Foti | 11049614 | Lorenzo Casavecchia | 6PM | 1 |
Agnes Ho | 10427514 | Lorenzo Casavecchia | 6PM | 2 |
Carrie (Shuhan) Chen | 11624261 | Lorenzo Casavecchia | 6PM | 3 |
Nhan Doan Chi | 11814668 | Lorenzo Casavecchia | 12PM | 4 |
Han Han | 11862618 | Lorenzo Casavecchia | 6PM | 5 |
Table of Contents
1. Executive Summary 3
2. Industry Analysis 4
2.1. Competitive Forces 4
2.2. Industry Life Cycle 5
2.3. Potential Investment Risks 5
3. Ratio Analysis 6
3.1. ...view middle of the document...
The current participants tend to possess large economies of scales therefore are able to lower their prices to a level where they can force new entrants out of the market. As the threat of new entrants is low this will increase the profit margins of the existing companies as they are still able to reap the benefits of economies of scales, market share and as their prices become more competitive this will allow them to increase profits.
Rivalry amongst existing competitors – High
The products being offered are undifferentiated and perishable. To gain the largest market share, the companies will enter into a price war as customers “shop around” to find the best possible price or product. This can be in the form of competitive prices, customer loyalty, and customer service. As such, it is essential to gain a competitive advantage and JB Hi-Fi does this through reduced prices.
Threat of Substitute Products and Services – Low
As technology and globalisation continues to increase this allows customers to find alternate sources of entertainment access to new products from international companies. For example, increase in gaming applications for smartphones provides an alternate source of entertainment which could affect the market for PC and console games. These competitive changes could put a constraint on industry profits as companies would need to focus on the physical selling of these products. There has also been an increase in accessing products online where customers are finding alternate sources which may have lower prices and as such, won’t feel the need to physically go to the stores and purchase the products.
Bargaining power of supplies – High
The prices of which the above companies sell their products is greatly affected by the prices set by the companies supplying these products. For example Microsoft, Kodak, Samsung, Sony and Apple operate in various industries across the world and due to their size they are able to set prices at their will. If this is the case customers will once again be able to search around for the best possible prices. This can affect industry profits as they then pass on these costs increases in their own prices.
Bargaining power of buyers – Low
The consumer discretionary industry is characterised by undifferentiated products and due to the premium pricing of some product ranges customers will become quite price sensitive therefore forces industry participants to face off with one another as they try and retain their market share. This may cut into their profits although will enable them to become competitive through the success marketing and advertisements and the service they provide to customers. Customers are unable to produce the goods themselves which don’t give them high bargaining power therefore they will continue to seek out the best possible price.
JB HI FI’s business strategy is to provide an extensive product range, low prices, encourage new products and technology....