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Competitive Strategy - A Study About Electric Guitar Pedals Market

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Market study + implementation of a solutition that would viable for an hedge fund investing in the electric guitar pedals market.

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Competitive Strategy - A Study About Electric Guitar Pedals Market

  1. 1. G U I TA R H E R O E S Elie BERNARD - Nicolas DEVERLY Thomas FERRAND - Louis LAMBLIN Charles LEFEBVRE - Shruti SHARMA Steven TRUFFLEY - Clémence VASSEUR Electric guitar pedals market
  2. 2. D e c i s i o n 1 We want to invest in KEYMUSIC to implement a digital strategy to propose a renting service in order to increase its growth by 5% in 4 years.
  3. 3. M a r k e t P r e s e n t a t i o n Size of the US market  40% of global market  1,1 million of guitar pedals sold in 2014  $79,92 millions 2 Size of Global Market Sources NAMM 2015 Global Report Redwitchanalogim market study  2,8 millions of guitar pedals sold in 2014  $199,8 millions
  4. 4. E X E C U T I V E S U M M A R Y Diagnosis1 Decision2 Implementation3  PESTEL  Benchmark  Mappings  Business canvas  Porter’s 5 Forces 3  Diagnosis results  Final decision  Actions taken Business models: Well-established companies for everyone Expensive high products for experts Lower price products for beginners Customization Renting service DIY Risk Analysis Planning Organizing Financial forecast Packages STP
  5. 5. OPPORTUNITIES THREATS Politic  No governmental impact on market Economic  Exchange rate variations  Increase of second hand market due to the crisis Social  Impact of musical trends D i a g n o s i s PESTEL – Part 1 4
  6. 6. OPPORTUNITIES THREATS Technologic  Greater worldwide presence thanks to Internet  Better quality products  Development of renting market through social networks  Internet leads to greater competiton  Increase of susbtitutes based on new technologies Legal  Exportation restrictions  Cultural practises like music are restricted in some countries D i a g n o s i s PESTEL – Part 2 5
  7. 7. D i a g n o s i s Benchmark 6 30% 10% 10% 10% 60% of the total market Price range 30 € - 500 € Average price 171 € Main sound effects 1. DISTORTION 2. DELAY 3. CHORUS Mainly B2B2C Market shares
  8. 8. D i a g n o s i s Mapping 7 0 50 100 150 200 250 300 350 400 1960 1970 1980 1990 2000 2010 2020 GUITAR PEDALS MARKET Boss Electro Harmonics MXR TC Electronics Line 6 Strymon Darkglass Electronics Mooer Harley Benton Digitech
  9. 9. D i a g n o s i s Business Canva Key Partners • OEMs • Distribution Partner (on-line and off-line) • Famous Artist/Musicians • Forum and communities • Specialized magazine • Influencers (blog…) Key activities • Pedals • Other effect for Guitar Value Proposition • Offer Wide range of product adapted to anyone ( beginners to professionnals ) • Performance Solid and compact Excellent P/Q ratio Good quality standards Innovation • Utilisation Intuitive features Usability Key Ressources • Human Ressources Marketing and Sales team Creative – Designers • Intellectual Ressources Knowledge Brand Copyright • Financials ressources Investors Customer Relationships • Assistance • Specialized communities ( Forum/Social networks) Channels Music intrument store ( on-line and off-line) Revenue Streams Product sales : B2B retailer / B2C and B2B for MXR Cost Structure • Fixed cost Employee cost, R&D cost, Manufacturers cost, Sales cost Marketing cost , Advertising cost … • Variable cost: Raw material, Energy ... Customer Segment From beginners to professionnals 8 Boss Electro Harmonix MXR TC Electronics
  10. 10. D i a g n o s i s Business Canva Key Partners • OEMs • Distribution Partner (on-line and off-line) • Famous Artist/Musicians • Forum and communities • Specialized magazine • Influencers (blog…) Key activities • Pedals • Other effect for Guitar Value Proposition • Offer Expensive high quality products • Performance Very high quality Solide products • Utilisation Technical Key Ressources • Human Ressources Marketing and Sales team Creative – Designers • Intellectual Ressources Knowledge Brand Copyright • Financials ressources Investors Customer Relationships • Assistance • Specialized communities ( Forum/Social networks) Channels Music intrument store ( on-line and off-line) Revenue Streams Product sales : B2B retailer / B2C and B2B for Strymon Cost Structure • Fixed cost Employee cost, R&D cost, Manufacturers cost, Sales cost Marketing cost , Advertising cost … • Variable cost: Raw material, Energy ... Customer Segment Only for experts 9 Line6 Strymon Darkglass Electronics
  11. 11. D i a g n o s i s Business Canva Key Partners • OEMs • Distribution Partner (on-line and off-line) • Famous Artist/Musicians • Forum and communities • Specialized magazine • Influencers (blog…) Key activities • Pedals • Other effect for Guitar Value Proposition• Offer Low price products for beginners • Performance Standard product • Utilisation Easy to use Key Ressources • Human Ressources Marketing and Sales team Creative – Designers • Intellectual Ressources Knowledge Brand Copyright • Financials ressources Investors Customer Relationships • Assistance • Specialized communities ( Forum/Social networks) Channels Music intrument store ( on-line and off-line) Revenue Streams Product sales : B2B retailer Cost Structure • Fixed cost Employee cost, R&D cost, Manufacturers cost, Sales cost Marketing cost , Advertising cost … • Variable cost: Raw material, Energy ... Customer Segment Mainly for beginners 10 MOOER Harley Benton Digitech
  12. 12. 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 2013 2014 2015 Gross margin 2013-2015 Boss Digitech D i a g n o s i s Financial data 11 Boss Digitech Line60 1 2 3 4 5 6 7 8 0 0.5 1 1.5 2 2.5 3 3.5 Average ROA 2013-2015 Mean = 4,36
  13. 13. D i a g n o s i s PORTER’S 5 FORCES BARGAINING POWER OF SUPPLIERS BARGAINING POWER OF BUYERS THREAT OF NEW ENTRANTS INDUSTRY COMPETITOR S Medium THREAT OF SUBSTITUTE 12 Medium Low Very Low Medium
  14. 14. D i a g n o s i s PORTER’S 5 FORCES BARGAINING POWER OF SUPPLIERS Low Boxe : low concentration Circuit board : high concentration Wire : low concentration Batterie : high concentration BARGAINING POWER OF BUYERS Medium Specialized websites General websites Physical retailers THREAT OF NEW ENTRANTS Low Simple technology Well known brands (mature market) Long lasting product Low risk of radical innovation INDUSTRY COMPETITORS Medium 3 main actors 10 actors own 90% of market shares IHH : 1450 THREAT OF SUBSTITUTES Medium 2nd hand market DIY - VST Amplifiers with integrated effects 13
  15. 15. D e c i s i o n 14 Do It Yourself Customization Renting service
  16. 16. D e c i s i o n 15 We want to invest in KEYMUSIC to implement a digital strategy to propose a renting service in order to increase its growth by 5% in 4 years. Economic crisis (impact on purchasing power) Dominant position of Retailers on the market Pedals purchasing habits (50% of guitar players own more than 11 pedals) Medium size company in following position
  17. 17. I m p l e m e n t a t i o n Presentation of the company 16  Stores for musicians, producers, DJs and singers  Physical stores in Belgium & Holland, delivery to many european countries
  18. 18. I m p l e m e n t a t i o n Risk analysis 17 RISKS SOLUTIONS 1. Awareness of the offer 2. Consumers are not used to rent pedals 3. Consumer can break or not return the pedals 4. Problem of supply chain implementation 1. Make a big promoting campaign 2. Make offers for first users to invite them to rent instead of buying 3. Implementation of a deposit system 4. Employees training
  19. 19. I m p l e m e n t a t i o n Supply Chain 18 O RDE R O RDE R R E CE P TIO N PACK AG IN G SE NDING D ELIVERY MUSIC P LAY I N G PE DAL RE TURN B ACK TO WARE HOUS E
  20. 20. I m p l e m e n t a t i o n Timeline 19 Apr May June July Aug Sept Octr Nov Dec Jan Feb March Storage Equipment Pedals purchase Process implement Apr May June July Aug Sept Octr Nov Dec Jan Feb March Website platform Digital campaign Social media Partnership Ads in magazines Supply Chain Marketing
  21. 21. I m p l e m e n t a t i o n Timeline 20 Apr May June July Aug Sept Octr Nov Dec Jan Feb March Hiring Training Human Ressources
  22. 22. I m p l e m e n t a t i o n Profitability of the investment 21 -1.5 -1 -0.5 0 0.5 1 1.5 2016 2017 2018 2019 Millions Profit Profit Investment: 1,2 millions € in 2016 Repartition of the investment: - Stock capacity - Shipping - Digital/website. ROI = 6% in 2019
  23. 23. I m p l e m e n t a t i o n Rental package offers 22 7,99€ - 19,99€ Weekly Monthly For 1 SILVER pedal at a time, keep as long as wanted Shipping fees not includeed (Pedals between 30€ and 99€) 14,99€ - 39,99€ Weekly Monthly For 1 GOLD pedal at a time, keep as long as wanted Shipping fees not includeed (Pedals between 100€ and 199€) 29,99€ - 69,99€ Weekly Monthly For 1 BLACK pedal at a time, keep as long as wanted Shipping fees not includeed (except for the monthly offer) (Pedals between 200€ and 399€) S I L V E R G O L D B L A C K
  24. 24. I m p l e m e n t a t i o n Segmentation, Targetting & Positionning 23 WHAT WHERE WHY HOW WHO A renting service for guitar pedals European market Guitar pedals market Eshop A growing demand Get a competitive advantage Win more market shares Investment in a strong following company 3 different offers Marketing plan All musicians level Economic solutions seekers Musicians wanting to test products
  25. 25. I m p l e m e n t a t i o n 4 P’s 24 PRODUC T PRICE PROMOTION PLACE Website platform Large choice of pedals from many brands; 3 types of offers: Silver pack / Gold pack /Black pack Silver pack: 7,99€ week/ 19,99€ month Gold pack: 14,99€ week / 39,99€ month Black pack: 29,99€ week / 69,99€ month Shipping fees depending of the pack 48 h delivery Digital campaign: Social media campaign (mainly Facebook) Partnership: Influencer (endorsement of artist, youtube guitar podcast) Blogs Communities and forum Online service B2C Reservation on the website, collection in store or delivery at home

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