The Squeaky Horn
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
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 instrument 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...
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