| The Squeaky Horn| Assignment A| Company Overview The Squeaky Horn is a musical instrument repair store which specialized in all major and minor repairs for band and orchestra instruments. Over the past ten year, The Squeaky Horn has established a great customer relationship with the music professionals from all over the country, and has been operated in a relatively less competitive environment as there were no many similar stores in the town.
However, as the new store Best Instrument Repair opened across the town recently, the Squeaky Horn faced a lot pressure on lowering the price for minor repairs in competing with the new price that the Best Instrument Repair offers for the similar services. Eugene Decker, one of the three owners of The Squeaky Horn, was trying to figure out the reason for losing $50745 in their planned profit from the actual operating results, with the information that the store has been going through significant changes within the year.
In order to explain the change in profit, it is necessary to have a good understanding of the musical instrument repair industry from both macroeconomic and microeconomic aspects first. Industry Background Macroeconomic Analysis Canadian GDP has been showing an increase trend from 2001 to 2010 as showed in Appendix 1, even though between 2008 and 2009, GDP had a negative growth rate of 2. 8%, the 3. 3% of increase in GDP at 2010 pull up the figure again to make an overall increase trend. Because of the significant increase in GDP over the past decade, consumers have more money spend on entertainment and education.
Thus, more people tend to go to watch art shows and learn to play musical instruments. If looking at Appendix 2, the first chart shows clearly that the average household spends more money in entertainment outside home in 2003 than 1998. For example, people spend $20 more on performing arts on average per year. It implies that an increasing number of people will go listen to a concert, which stimulates performers to keep a peak condition of their instruments for better performances. The musical nstrument repair industry therefore, attracts more repair jobs and technicians in order to satisfy the increasing demand on musical instrument repairs. The average Canadian music technician’s salary is $48,000, which is $9,000 higher than the other instrument repair technician’s as showed in the Appendix 3. Beside the facts that music technicians needs spend a lot of time work on the music repair certificate in order to perform their jobs, $9,000 difference in salary makes the musical technician jobs more attractive than others. As a result, the musical instrument repair industry is competitive.
At the last, the industry is also affected by researcher’s studies. According to a cross-sectional study of Canadian school children, E. Glenn Schellenberg (2006) as referred in Appendix 4, kids who play musical instrument perform better in both cognitive tasks and general intelligence tests. Therefore, more parents would like to have their kids learn one of the musical instruments in order to explore the kids’ IQ potential. As a result, the musical instruments repair business is much more prosperous than before. Microeconomic Analysis The musical instrument repair industry is competitive.
As a pure repair store, The Squeaky Horn faces competition not only in its own town, but also across the province. Because musical instruments are fragile, long distance travel increases the possibility of instrument breaking, music professionals prefer to have their instruments repaired in the local area. Therefore, there are not so many competitions outside the province. Since a lot of musical instruments retailers and individual music technicians also provide the similar services, the overall competition The Squeaky Horn is facing is heavy.
Appendix 5 offers 3 of the most popular musical instrument repairs store in Ontario. The first two stores specialized in difference instruments repairs (guitar and violin); the last one is basically covering repairs and restorations for all instruments. Appendix 5 also shows the instrument repair price that another store in the industry offers. The average major repair (overhaul and refinish) is priced over $300 for band instruments (trumpet, trombone and horn) compare to The Squeaky Horn, which shows that The Squeaky Horn is cost efficient.
The Squeaky Horn has various suppliers for musical instruments parts. Appendix 6 provides all the musical instruments manufacturers across Canada, and over half of the suppliers are from Ontario. Various supplier choices make The Squeaky Horn a price maker, which allow it to lower the repair price to attract more clients. The Squeaky Horn has customers all over the country. The customer line spreads from the music professionals to amateur players, from orchestra to individual household.
Since the store has been operated for more than 10 years, a lot of old customers prefer to have their instrument repaired there because of the already-established reputation. In addition, because of the musical instrument repairs need very specific skills, and technicians normally needs to obtain certain music degree and musical instrument repair certificate in order to perform their jobs, it is relatively hard to become a musical instrument repair technicians than others. As a result, the musical instrument repairs industry has a barrier to entry. There are not so many substitutes for musical instrument repairs.
Since musical instruments is considered to be expensive goods, and most individuals and families can only offered one piece of the musical instrument (ex. piano), periodic repair and examination become the most popular method to keep a peak condition of their instruments. Unless the price of music instruments become so cheap that an average music player can offer to pay a new one when they found problems with the instruments, or the second hand market become so popular that the selling price of the instrument are enough for getting a new one, people will stick on instrument repair.
If comparing The Squeaky Horn’s operating result with the maintenance and repair industry’s average (Appendix 7), we will find that The Squeaky Horn’s actual revenue of $664,170 is almost as twice as much of the industry average of $334,900. However, the total actual expense is $354,070 higher (calculation is provided at the end of Appendix 7), which results the overall profit fall below the industry average of $28,100 in 2008. Therefore, The Squeaky Horn is an absolute industry leader in revenue sector, but did not do well in maintaining high profitability through expenditure control. Appendix 1: GDP and Growth
Between 2001 and 2010, GDP for all industries in the Canadian economy increased from $1,041 billion to $1,234 billion. In each year of the period, GDP growth has been positive with the exception of 2009 in which we saw a decline for the Canadian economy. The compound annual growth rate of GDP between 2001 and 2010 measured 1. 7%. Gross Domestic Product (GDP) and GDP Growth: 2001-2010 Canadian Economy (NAICS 11-91) GDP growth in 2001 and 2002 was much slower, with annual growth rates below the 10 year compound annual rate. However, in 2003, annual GDP growth slipped to 2. 1, corresponding with a down-turn in the United States economy.
GDP growth rates went on to rebound and remained steady around 2% and 3% until 2008, when a global recession trimmed annual GDP growth to 0. 6% falling again in 2009 to an all time low of 2. 8%. In 2010, we begin to see another rebound with the GDP growth increasing to 3. 3%. Source: Statistics Canada, http://www. ic. gc. ca/eic/site/cis-sic. nsf/eng/h_00013. html Appendix 2: Consumer Demand for Entertainment Services Outside the Home In recent years, Canadians have spent more on entertainment. For their homes, demand has risen for such goods as home entertainment systems and computers.
Expenditures on these services comprised 0. 44% of the average household’s overall spending budget in 2003, up from 0. 41% in 1998. This shift in preferences and growth in incomes, population and prices caused the consumer market for entertainment services to expand from $2. 3 billion in 1998 to $3. 2 billion in 2003, an increase of 41%. The chart below shows the household spending on entertainment services outside the home in 1998 and 2003, respectively. Chart 2 at the right shows the average household spending on entertainment services outside the home in both 1998 and 2003.
Source: Yusu Guo and Don Little, Analytical Paper Series, Consumer Demand for Entertainment Services Outside the Home. http://publications. gc. ca/Collection/Statcan/63F0002XIE/63F0002XIE2006050. pdf Appendix 3: Comparison of Average Music Technician Salaries and Average Instrument Technicians Salaries The average salary for music technician jobs in Canada, KY is $48,000. Average music technician salaries can vary greatly due to company, location, industry, experience and benefits. Source: http://www. simplyhired. com/a/salary/search/q-Music+Technician/l-Canada
The average salary for instrument repair technician jobs in Canada, KY is $39,000. Average instrument repair technician salaries can vary greatly due to company, location, industry, experience and benefits. Source: http://www. simplyhired. com/a/salary/search/q-instrument+repair+Technician/l-canada Appendix 4: Study of Music and Intelligence Musicians perform better on cognitive tasks A study of 4 to 6-year olds found that musically-trained kids performed better on a test of working memory Other research indicates that musicians perform significantly better on tests of • Spatial-temporal skills Math ability • Reading skills • Vocabulary • Verbal memory • Phonemic awareness Musically-trained people perform better on general intelligence tests. In a cross-sectional study of Canadian school children, E. Glenn Schellenberg (2006) found that kids who took music lessons had slightly higher IQs. The effects were general, cutting across several different intellectual abilities (e. g. , verbal, mathematical, and temporal-spatial). Music lessons were associated with abilities associated with fluid intelligence, such as • Working memory • Perceptual organization Processing speed They were also associated with increased verbal comprehension and better high school grades. These differences remained significant after controlling for a child’s age, nonmusical activities, family income, and parent’s education. Source: http://www. parentingscience. com/music-and-intelligence. html Appendix 5: Competitors * Folkway Music Repairs ; Restorations · Fine Fretted Instruments Folkway Music is Canada’s premier acoustic guitar shop. We specialize in the sale, repair and restoration of fine vintage, new and used guitars, mandolins, and banjos.
There are always many vintage Gibson guitars, vintage Martin guitars, vintage Gibson mandolins, and other vintage guitars for sale in the store, as well as a large selection of new C. F Martin & Co. Guitars, Taylor Guitars, Santa Cruz Guitars, National Guitars, Larrivee Guitars, and others. C. F. Martin & Co. Authorized Warranty Repair Centre. World-wide shipping. 163 Suffolk Street West, Guelph, Ontario, Canada N1H 2J7 Source: http://www. folkwaymusic. com/ * Armenious Violins In our workshop we do any kind of instrument repairs/restorations such as crack repairs, bridge, sound post, fingerboard planning, peg fitting, etc.
After all we are violin, viola, and cello makers ourselves. The following are some highlights of instrument related works. Bridge Cutting, Sound Post , Fingerboard, Nut & Saddle, Install/Improve Pegs, Neck Repairs, Bass Bar, Internal Table Patches, Various Crack repairs and Anatomic Corrections, Clean and Polish the Varnish. Locations: 903 Willowdale Ave, Toronto, Ontario, Canada, M2M 3C2 Source: http://www. armenious-violins. com/instrument_services. html * Cosmo Music – A Music Instrument Superstore Cosmo Music operates one of the largest and most prestigious instrument repair shops in Canada.
Each year hundreds of schools, students and professional musicians trust Cosmo Music to restore their instruments to like-new playing condition. In addition to customer repairs the shop also maintains a fleet of well over 10,000 rental instruments which are used by students across Ontario each year. Led by its original technician, Kevin Rohm, the shop now employs 18 technicians and specializes in all types of wind instruments, guitar and electronic repairs. Cosmo Music has made a significant investment in equipment so that its technicians have access to all of the latest and best tools and techniques to service your instrument uickly and properly – the first time! Location: 10 Via Renzo Drive, Richmond Hill ON L4S 0B6 Source: http://cosmomusic. ca/contact-us. html Source: http://www. heidmusic. com/PDFs/repairs. pdf Appendix 6: Suppliers Source: http://www. profilecanada. com/category. cfm? cat=3931_Musical-Instruments Appendix 7: Industry Average Source: Statistics Canada, http://www. ic. gc. ca/cis-sic/cis-sic. nsf/IDE/cis-sic811bece. html#bec1 Total Expense for the average industry = $165,800 + $137,300 = $303,100 Total Expense for the Squeaky Horn = $664,170 – $7,000 = $657,170 $657,170 – $303,100 = $354,070