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The Bass industry and the 4 markets: ECONOMICS

Discussion in 'Off Topic [BG]' started by sargebaker, Feb 13, 2005.

  1. sargebaker

    sargebaker Commercial User

    May 2, 2004
    Montreal QC CA
    owner/builder, ISLAND Instrument Mfg.
    I have an assignment to do where I must get adds of different things from the 4 markets:
    Perfect Competition

    And I would like to use the guitar industry for one of ym adds, I was thinking Fender, Gibson or Pedulla, however I'm confused as to whether it's an oligopoly or monopolistic. It is rather easy for any compny/ luthier to get into the business but its hard for success, and there are the big boys (Fender, Gibson, Ibanez) whoe are more succesful and probably "set" the prices for competition...Could anyone clear this up for me? I'm thinking it would be more of a monopolistic market.
  2. RAM


    May 10, 2000
    Chicago, IL
    Not a really good industry to study. In the guitar/bass market, it's a very free market with tons and tons of players ('scuse the pun), from gargantuan to boutique. And, there are several examples of both, and everything in between.

    For a good study in monopoly or oligopoly, write about utilities or the auto industry (in that order).

    Otherwise, good luck!
  3. sargebaker

    sargebaker Commercial User

    May 2, 2004
    Montreal QC CA
    owner/builder, ISLAND Instrument Mfg.
    so you're saying its technically a monopolistic industry... Fender could be compared to GAP...
  4. Commreman

    Commreman Faith, Family, Fitness, and Frets Supporting Member

    Feb 12, 2005
    New Jersey
    Its perfect competition. A monopoly would indicate that only one company is the supplier for a given product - think local cable companies, which in essence are regulated monopolies. A goodf analogy would be the auto industry - think that GM, Ford, and Chrysler are Gibson, Fender etc, and makes such as Ferarri and Lamborghini could be compared to high end makers such as Fodera, F bass, etc. Sadowsky could be eqwuated to BMW under this scenario. The point is that there are makers for the mass market and makers for the high end connesseur market, but certainly no monopoly exists. Any maker is free to join the fray. They have to analyze who their target market is, what drives that customer, and where thier price points need to be to serve that target market. Once that is established, what is the overall cost of doing business? Waht ais the cost of the individual components of the product? How can they be sourced? What is the cost of labor? What are the fixed costs such as rent, electricity, gas? What distribution routes and methods are to be used? Cost of getting the word out (i.e. advertising?) Companies such as Fender understand the mass market they are going after, and offer products for every l;evel of player. Their cost of production will be lower than a boutique operation because they have greater economies of scale, and better leverage with thier suppliers. Fender also is big in the endorsement game, which means younger, more impressionable players get to see thier heroes with the product. There is nothing wrong with that. A company such as Carvin can build a quality instrument for less cost because of thier unique distribution model - mail order only! Sadowsky, OTOH, built its reputation through word of mouth and providing impeccably assembled instruments to the professional market, bypassing the beginner market.

    In terms of getting into the bass building business, the overall barriers to entry are low. Think of Nino Brown on these boards. He is essentially starting from scratch in his basement building quality instruments from 100% outsourced parts, and selling them word of mouth (word of net?) Think Lakland - ten years ago or so, this company didn't even exist. They are finally turning a profit, all the while producing killer axes for the masses.

    Success is difficult in any business. Just understand your market and your margins, do your best to control your costs, keep your quality as high as you can, and most important, offer impeccable customer service. Nothing will kill your company faster than getting a reputation for producing and selling crap, and then not standing behind what you sell.

    I hope this helps.
  5. sargebaker

    sargebaker Commercial User

    May 2, 2004
    Montreal QC CA
    owner/builder, ISLAND Instrument Mfg.
    thats why it's monopolistic I guess, I know it's not a monopoly, Monopolistic is when just about anyone can join, its a large market but the prices aren't exactly set by supply and demand, a few of the BIG players can set the prices. For example in clothing it could be GAP, or something of the likes. I figured this could be compared to ie Fender.

    The car industry you mention would be oligopoly, as would shampoo and such (seeing as there are many various products but they are all owned by a few major companies, J&J and Proctor & Gamble, the chocolate bar industry is kind of like that too)

    The reason I was thinking it could be an Oligopoli is if you look at the mass produced basses there are essential Gibson (and everyone they own), Fender, Ibanez, I guess EB and MAYBE Spector could be considered, but Oligopoli's are hard to enter whereas monopolistic markets aren't so I'm pretty sure it's monopolistic.

    But I guess it could be Perfect Competition too...
  6. Nah, monopolistic has a stricter definition than that. The guitar and bass world is definitely far closer to perfect competition. The fact that there are so many niches to fill makes monopolizing it almost an impossibility.

    I'm hard-pressed to agree with your argument that the biggest players set the price levels. If people weren't buying, the prices would drop. It's absolutely a demand controlled market.