A Case Study on the Business Strategy of Gibson

Companies in this industry are mainly involved in the manufacturing of musical instruments. Major companies include Fender, Gibson, and Steinway, which are all based in the United States. These companies design, manufacture, market and distribute various musical instruments. The global market for audio equipment and musical instruments is worth around 17 billion. While Brazil has the fastest-growing market in the industry, countries like China, Taiwan, Japan, Indonesia, The United States and South Korea manufacture almost 90 percent of the world's music and audio gear. The United States musical instrument manufacturing industry includes about 570 companies with combined annual revenue of about two billion.

Main products manufactured in the industry are string instruments including violins and guitars, electronic keyboards, pianos, and woodwinds. Lower-cost instruments are usually made on assembly lines. However, higher-quality instruments are produced at groups of workstations. Typical tools include cutting tools, molds, sanders, lathes, presses, and drills. Production involves manufacture of components and final assembly. Revenues are slightly seasonal, with increased holiday sales for companies that sell to retailers. The United States industry's average working capital turnover ratio is about 15 percent and total inventories represent about 25 percent of revenue.

Gibson builds instruments that are held in an unrivaled integrity by many guitarists, including professional musicians. The company's most popular guitar is the legendary Les Paul. Gibson also makes guitars under brands Epiphone, Kramer, and Steinberger. Based in Tennessee, Gibson Guitar operates nationwide, as well as in Europe and Asia. Executives Henry Juszkiewicz and David Berryman bought the company for 5 million in 1986. In 2007, Gibson purchased Garrison Guitars. In 2009 Gibson reduced its work force due to a decline in guitar industry sales in the United States.

Order custom essay A Case Study on the Business Strategy of Gibson with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

The company sells its products through international distributors located in the Americas, Europe and Asia. Some distributors include Import Music Argentina S.A., Australian Musical Imports, and Samick Musicial Instruments Co., Ltd. Gibson also sells its products in the United States and internationally through online dealers the likes of American Musical Supply, Dave's, Guitar Center, Sam Ash Direct, and Woodbrass Musical Instruments.

In 2011, Gibson acquired the Stanton Group, including Cerwin Vega, KRK Systems and Stanton DJ. Then Gibson formed a new branch called Gibson Pro Audio, which delivers professional grade audio items, including headphones, loudspeakers and DJ equipment. In 2012, Gibson announced a partnership with the Japanese-based Onkyo Corporation. Onkyo is known for audio equipment and home theater systems. They became a part of the Gibson Pro Audio division.

Gibson is a private company with its Fiscal Year ending in March. In 2015 Gibson had a revenue of over 170 million and a gross profit of over 64 million. The operating income in 2015 was negative 12.6 million and a net income of negative 15.6 million. Gibson had a much better year in 2016 with a revenue of $189.3 million and a gross profit of $72.9 million. It had an operating income of 407 thousand in 2016 and it increased its net income to negative 1.8 million.

Gibson's growth has expanded the business globally from its Nashville roots. The guitar maker has gained a position in Europe and is looking to extend its reach in China and India. Gibson established a division in India in 2010, where the company is tapping the country's empathy for music and its prosperous customer base. Gibson operates a manufacturing plant in China to make Epiphone guitars and it has a majority stake in Baldwin Zhongshan China, a joint venture with Zhongshan Yue Hua Piano and Musical Instruments. To strengthen its position in China and significantly expand its manufacturing capacity, Gibson obtained a major player in China's piano market, Dongbei Piano Co., Ltd. Gibson renamed the firm Baldwin-Dongbei Piano & Musical Instruments Co., Ltd.

The deal followed several other previous purchases, such as Gibson Med, which is a key European distributor based in Milan, Italy, and Deutsche Wurlitzer. The company's long-range sights are set on top musical instruments maker Yamaha. Through its acquirement of famous brand names, from Baldwin to Wurlitzer, and its reestablishment of Epiphone, Gibson has expanded its product lines beyond the core guitar market and is continuing to develop new products.

The company sees potential in using technology to update designs that have not significantly changed since the 1950s. It developed a digital guitar that looks and feels like a conventional electric guitar, but converts string vibrations into a data stream using Gibson's copyrighted media-accelerated global information carrier technology. The company also hopes to license MaGIC to manufacturers for use in consumer electronics.

The company focuses on its namesake Gibson brand and on introducing the latest technologies into product development. The Gibson Dusk Tiger guitar boasts third-generation Robot Tuning technology with 18 programmable alternate tunings. The company is also extending its reach into the consumer market with its Wurlitzer Digital Lyra Jukebox.

Fender Musical Instruments Corporation is the world's number one maker of stringed instruments and the nation's number one manufacturer of solid-body electric guitars, including the Stratocaster and Telecaster lines. It also makes acoustic guitars, electric basses, mandolins, banjos, and violins, as well as amplifiers. The company's other notable brands include Guild, Tacoma, Gretsch, Jackson, Charvel, EVH, SWR, Groove Tubes, and Squier. Fender has a large portfolio of brands, including Squier, Gretsch, Jackson, Takamine, EVH, Ovation, Charvel, Passport, Groove Tubes, and namesake Fender, among others. From its headquarters in Scottsdale, Arizona, Fender maintains manufacturing facilities in Corona, California.

Kaman Music Corporation makes and distributors guitars under the Ovation, Takamine, and Hamer names. It's also responsible for producing Latin percussion, Gretsch drums, Gibraltar hardware, Toca percussion, Sabian cymbals, and Genz Benz amplifiers. In early 1965, Leo Fender sold his companies to the Columbia Broadcasting System for 13 million. CBS entered the musical instruments field by purchasing the Fender companies, Fender Sales, Inc., Fender Electric Instrument Company, Inc., Fender Acoustic Instrument Company, Inc., Fender-Rhodes, Inc., Terrafen, Inc., Clef-Tronix, Inc., Randall Publishing Co., Inc., and V.C. Squier Company, as well as Electro-Music Inc., Rogers drums, Steinway pianos, Gemeinhardt flutes, Lyon & Healy harps, Rodgers organs, and Gulbransen home organs.

Fender filed a $200 million IPO in March, planning to use about half of that to pay down debt. It then reduced the asking price to 150 million before calling the deal off entirely in August, citing unfavorable market conditions.

Fender has recently focused on business abroad. It opened a custom shop showroom in Mexico City in 2012 that's independently owned and operated by music store Holocausto Music. It also expanded in China by opening a new office in Beijing that's staffed by branding and marketing experts who aim to extend the reach of the brand there. Since most Fender guitars are relatively affordable, they are known as "the working man's guitar." Fender works to offer its customers products across all price points.

The company is expanding further into the value priced instrument market with its wholesale division, which sells to a broader network of dealers. The company has also been working to expand its customer base to include more women. Through a national effort, Fender is looking to attract the fairer sex to play, produce, compose, or listen to music. Fender developed a Girl Rock Nation website to act as a destination to learn about songwriting, music production, and how to play an instrument.

It's also getting into apparel. In 2013 Fender inked a deal with Dragonfly Clothing to make a line of music inspired dress shirts, work shirts, laser-printed microfiber shirts, denim and leather outerwear, and T- shirts. The line sells at specialty apparel and finer department stores throughout North America and Europe. Besides selling its products through specialty stores and through distributors, Fender offers a full catalog of more than 36,000 wholesale music products.

Fender and Gibson have similar communication strategies, as they are both guitar manufactures. Both companies would like to keep sales and also increase sales when possible. In order to do this, both companies must keep a solid communications plan.

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer