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Effects of Economic Factors on Jb Hi fi Company

Question :

There are many factors which affect the working of the companies. Some of which are external and some are internal. The former comprises of many elements like political, economic, social, technological, legal and environmental. The later comprises of internal strength and weakness of the company. The macro-environment is important to analyse as it influences the competitive environment. Economic factor plays a major role in the working of the businesses as it influences the economy and contributes to the economic growth of the country.

  • What is the overview of the company JB Hi-FI?
  • What are the economic factors which affect the working of the company?
  • What is the role of macro factors in influencing the functioning of the business?
Answer :
Organization Selected : JB Hi-Fi Ltd

Overview of JB Hi-FI

JB Hi-Fi is an electronic and entertainment chain store in Melbourne, Australia and has its headquarters located in Southbank. This industry started growing from the last few years since the introduction of many electronic gadgets that were catching the attention of the consumers. This growth was mainly due to the increase in the demand for smartphones, music players, tablets, etc. and all the other remaining items at the store are not giving growth to the company. It is very important for the company to know its competitions and the factors that may affect the competition in the market. Economic factors of a company help in determining the competition in the market of which the company is part.

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Macro environmental analysis

The macro-environment comprises of political, economic, social, technological, environmental and legal factors which affect the working of the business. These not only regulate the functioning of the business but also helps in decision making. From this factor, economic factor plays a major role as it directly contributes to the economic growth of the country and also contributes to economic decision making..

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Factors of macro environment like saving rate, interest rate, economic cycle, inflation rate determine aggregate demand as well as investment in an economy. On the other hand micro environment factor like norms of competition make impact competitive advantage of firm. The organisation JB HiFi limited can use economic factor of the country like growth rate, economic indicator of industry such as growth rate of retailing industry, consumer spending etc. to forecast growth trajectory not only for sector but for organisation also. The economic factor which JB Hi Fi limited must consider at the time of conducting PESTEL analysis are: Economic growth rate, unemployment rate, interest rate, Inflation rate etc.

Economic factors are not directly related to the company but it influence the value of investment in the future. Economic factors that affect the economy are: law, policies, tax rates, interest rates, etc. These also include the inflation rate, interest rate, fluctuation in foreign exchange rates, unemployment and many other. These are shape the investment relating decisions and also affect he profitability and revenue generation of the organisation.

Inflation Rate

If inflation rate is high than it make the things costly and it also reduce purchasing power of customers as large part of audience are unable to purchase costly gadgets. So it makes negative impact on sales of the company also that tends to decline revenues of the organisation “JB Hi fi” also. It also create difficulty in business survival and expansion. On the other hand if inflation rate is low than it increase the purchasing power of audience which indirectly help to increase sales of JB Hi Fi product and also increase revenue of the company that supports to business expansion also.

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Labour market condition

The supply and demand of the labour determine the rates of wages and the supply of the skilled workforce. The company JB Hi FI shall study and then predict labour market conditions so that it can attract the talented workforce and work on to improve the business performance. In case the labour market is flexible, the organisation JB Hi FI can take the advantage of the high labour productivity. It should also carefully analyse the availability of the skilled human capital so that shortage of the workforce does not place an impact on the efficiency of the business and retention can be made possible.

Financial market efficiency

The financial market efficiency influences the global expansion strategies of the company JB Hi FI as they operate in the high efficient financial market. It results in leading towards the improved position of liquidity and the also strengthen the ability to enter the new market.

Efficiency of financial market

The practices of the business of the JB Hi FI company are normally influenced by prevailing economic structure. This will help in perfect competition and will also result in the economic and the regulatory environment survival.

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These economic factors have the positive as well as the negative impact on the functioning of the company and define their contribution in the economic growth of the country where it operates. As JB Hi FI operates in two countries that is Australia and New Zeal land, it contribute in the economic growth of both the countries.

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