Griffiths Guitar Works

"Two of the biggest barriers to starting my sole proprietorship are gathering the appropriate market information
and convincing the money lenders that I am not just another long haired, 19 year old guy who wants to be a rock
star. I have to convince people that I am absolutely set on pursuing my dream of building customized acoustic
and electric guitars and offering a full range of stringed musical instrument repair services." These are the
thoughts of Chris Giffiths of St. John's, Newfoundland as he begins his business planning during the spring of
1992.

Background Information

Music has been a lifelong interest of Chris Griffiths's, he started guitar lessons at the age of 12 and has played
with various groups in his native city of St. John's, Newfoundland. After graduating high school in June 1991,
Chris was undecided as to what career path to follow, so he decided to seek employment in the music field.

Finding employment with a small local music store, Chris quickly learned about the ordering, inventorying and
selling of musical equipment. He also became very familiar with the many music manufacturing sales agents
from which the store purchased supplies and inventory. In addition, Chris began to complete minor repairs on
damaged guitars and to modify guitars to suit specific customer preferences. Even though he had always been
aware of the inability of local craftspeople to carry out major guitar repair work, Chris was surprised by the
steady stream of customers who were requesting these major guitar repairs. In addition, he shared his customers'
frustrations concerning the inconvenience, and high costs of exporting this major repair work to the mainland.
Chris began to wonder if a business opportunity was emerging.

This case was prepared by Kathy A. Hickman for the Atlantic Entrepreneurial Institute as a basis for classroom discussion, and is not meant to
illustrate either effective or ineffective management. Material in this case has been disguised.

Copyright © 1993, the Atlantic Entrepreneurial Institute. Reproduction of this case is allowed without permission for educational purposes, but all
such reproduction must acknowledge the copyright. This permission does not include publication.

By the fall of 1991, Chris was beginning to realize that his opportunities for growth were very limited in his
music store position. Therefore, he approached Mr Chord, the owner of the store, to discuss the possibility of
attending an intensive, two-month guitar building and repair course in Michigan, US. Mr Chord was interested
in the addition of guitar manufacturing and repair services to his existing music store operations and agreed to
Chris's request for a leave of absence. This demanding, one-on-one course provided Chris with the knowledge
and skills required to build acoustic and electric guitars and to repair and refinish stringed musical instruments.
In addition, Chris totally built two prototype guitars while completing the course and he proudly carried them
home to Newfoundland after graduation.

Chris returned to his position in the music store in December 1991, and looked forward to opportunities to
demonstrate the craft he had acquired. Unfortunately, by the spring of 1992, these opportunities had not
developed. Sales in the store were fading and Chris was desperately unhappy with his work situation. Fearing
his job was in jeopardy, and frustrated that he was unable to pursue his craft, Chris began to think about opening
his own small business. He enrolled in a small business night course at Cabot College which provided valuable
information regarding the start-up of a small business. At the same time, Chris began purchasing quality tools
and collecting information on the guitar industry.

The Problem

Chris's fears had been well-founded because in May 1992 Chris received his lay-off notice. That lay-off notice,
in a very depressed economy, was the turning point in his career. His decision to pursue his business idea was
with the realization that this was to be an all-out effort with no going back or half-hearted attempts. All of his
energy was to be focused on making this business venture come true. With no personal capital and limited
business experience, Chris knew that a great challenge lay ahead of him. His first step towards meeting this
challenge was to research the potential market for his product.

Questions

1. What are the barriers which Chris must overcome in order to launch his business idea?

The barriers which Chris can face in order to launch his business idea:

 Lack of market information:

While the tools and technology for doing market research today are plenty, in the 1990’s the
same were limited and ordinarily inaccessible. A small business would only be successful if
Chris outshines his competitors and establishes his presence. Doing so without proper knowledge
of the market would have been difficult

 Market sentiment due to the Canadian government imposed moratorium: On 2 July 1992,
the Canadian government imposed a moratorium on the Northern cod fishery in St. John's,
Newfoundland. This resulted in a deep economic plunge for the town, massive layoffs and
worker migration to other towns. An economic disaster like that would have taken away people’s
attention from leisure and luxury related spending towards limited spending in essential
commodities.

 Close knit community in the small town: As has been mentioned in the case information, in his
previous employment, suggestibly established and well known among town folk, people returned
due to consumer and community loyalty. “Even though he had always been aware of the inability
of local craftspeople to carry out major guitar repair work, Chris was surprised by the steady
stream of customers who were requesting these major guitar repairs.” There seems to be a lack of
trust in new businesses and as such it would be a barrier for him to be noticed and approached as
a business.
  Lack of business knowledge and mentorship: The only business knowledge Chris has was
from ‘a small business night course at Cabot College’. He has no mentorship or guidance as he
embarks to open his business.

 Finding initial capital or investors: Chris has been laid off from his last employment. Also, due
to the moratorium in the town the economic condition is uncertain and finding investors or
funding would have been difficult.

 Infrastructure: Setting a small business would still require basic infrastructure, space and
resources which with current lack of employment and investors can be a challenge.

 Reputation: A commodity like guitar sells due to good reputation/brand name. Brands like
Fender or Gibson sell largely due to their established reputation. Competing with these will be a
challenge for Chris who proposes to also build his own guitars. Unless there is something novel
or custom to customer demands he will have little advantage over his competitors

 Finding skilled artisans/ apprentices: From the information we gather from the case problem
local craftspeople in town are not skilled to carry out major guitar repair work. Finding people to
help him with his business in the town will be difficult

 Distance from mainland: As a lesson learnt from his previous employment, it costs a lot to
export major repair work to the mainland. As such exporting and importing equipment and
resources, not available in the town can be a problem and has to be planned.

2. One of the major barriers which Chris faces is a lack of market information. What kinds of market
information do you think Chris must have before he can proceed any further?

Some market information that Chris must have before he can proceed any further:

 Understanding of target audience: This includes the customer Spending power, demographic of
the town, willingness of the customers to commute, frequency of visits to the guitar shop in a
year, purpose and usage of guitars.

 Competitors in his niche and their unique selling points: apart from the community trust, Chris
needs to find out what selling points do the town competitors use to drive customers.

 Music genre and musician popularity: If not the brand, people are motivated to buy a commodity
like guitar if their favourite artist uses and endorses it. Since he is in the beginning of his
business, he can customise his guitars to suit the preference of music lovers. Perhaps, eventually
he can even get some artists to sign a few.

 Nearest inventories, wholesale networks in and around the town: As he will eventually need then
for equipment and resources

 Transportation network in the town

  Music enthusiast groups, clubs and communities in the town: In a town dealing with economic
crisis, groups like these will among the few still focusing their time and energy to find and buy
good quality guitars. This also includes music schools and tutors.

 Ideal location to set up business: This will include factors like competitors’ locations; proximity
to music schools, clubs; price range suiting him etc.

 Economy recovery trend and growth possibility of start-up

 Exploring business needs of existing similar business in town: Average revenue generated, cost
incurred, challenges faced etc.

 The potential demand in both major and minor repairs. This will give an idea which type of skill
he will need to use more and in what amount. The demand for new guitars per month. This will
give him an idea as to how much raw material is needed approximately beforehand and how
much time he has to keep free for building new guitars.

 Fairs, cultural festivals, events, competitions organised in town: The demand of guitars may be
influenced by such musically inclined events

3. Suggest ways that Chris could acquire the information that he requires.

Some ways that Chris could acquire the market information that he requires:

 Networking with the primary customers-mostly youngsters-in places of their interest

 Market research by going to every bar where a music band is being played and asking people if
they play guitar and if yes asking the above questions or going to any concert and doing the
same.
 Contacting the executive members/owners of music schools, clubs.
 Collecting information about the most popular and bought music from records/cd stores
 Exploring novelty points for his guitars from the interest of people in the town by networking
with them. In the current scenario he can base his customisations on the moratorium protests/
solidarity with cod industry.