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Executive Summary
The Taylor Guitar Company (www. ... com) produces high-end guitars for both professional and amateur musicians. ... Founded by Bob Taylor, the organization produces a set of different product lines, each featuring different wood and body contour designs. ... ” In part, this is due to a revolutionary approach to neck design, developed by Bob Taylor and his engineers. Taylor operates in what is best described as “stratified monopolistically competitive” with true competition coming from a small number of similar firms who also produce high-end guitars. ... Still, Taylor has created a differentiating characteristic in their highly innovated neck construction method. Taylor’s pricing structure is analogous with similar producers, with only limited ability to raise prices above what consumers generally consider acceptable for the product. ... High-end guitars are somewhat like luxury goods in that threats to consumer spending potential, such as projections for high levels of unemployment or inflation can have negative impacts on sales. Since its inception, the Taylor Guitar Company has achieved considerable success by producing a range of different products of extremely high quality.
The Pricing Component of Taylor Guitars
Recording artists and both professional and skilled amateur musicians often reach a point in their development where instruments of lower quality do not have the characteristics required to support the player’s requirements. It turns out that the price-to-quality curve for guitars follows a roughly logarithmic line:
The vertical axis represents dollars (in tens of dollars US), and the horizontal axis represents a quality scale. ... It is in this $1000 to $3000 range that most “high end” instruments (including most of Taylor’s models) are priced. ... One particular Taylor model (the 614ce) is so highly sought after that bidding wars on such consumer broker service pages (like ebay. ... A case in point is what is observed with the Taylor model 614ce, where market popularity has not been met thus far by a response from the organization to produce more units. ... This could work as Taylor capitalizes on its name recognition in the market, attracting a new segment to the company’s products. However, this approach is risky, because a tremendous number of competing firms currently produce such “entry-level” items, and the tactic might reduce the perceived value of the Taylor name for some consumers. ... While the guitars are “acoustic,” many are equipped with very discrete amplification systems. ... The production of high-end guitars also requires woodworking and machine shop tools, all of which have a cost that is amortized over their useful life. ...
In the case of the production of high-end instruments such as those offered by Taylor Guitars, it is often the case that the relative absence of technology is a factor that makes the final product more attractive to the marketplace. ...
Taylor’s Market Environment
Like all firms, Taylor operates within a particular kind of market structure characteristic of their industry. ...
The Taylor Guitar Company operates in what is best described as a “stratified monopolistically competitive” market structure. ... (Examples include Martin, Gibson, The Santa Cruz Guitar Company, and Taylor). ...
Various non-price strategies are available to a high-end guitar manufacturer such as Taylor to preserve or enhance sales and remain in an optimally competitive position. One particularly successful strategy is a marketing tactic actually used by Taylor is to create a “Taylor Community” amongst its customers. Taylor regularly publishes a company newsletter and makes this available free of charge to registered customers and for distribution through authorized retail outlets. This is an extremely effective way of generating a very favorable impression in the minds of Taylor consumers, and encourages them to speak favorably about the organization and the quality of the instruments to others. ... All these effects help Taylor maintain its highly competitive position.
Another non-price strategy used by Taylor is product differentiation. In this case, Taylor has created a highly unique neck-to-body interface approach which allows action and intonation adjustment to operate consistently across all octaves. ... The Taylor approach resolved this problem by allowing the entire fret board to pivot along a single plane of rotation. This significant innovation also helps Taylor to enjoy additional sales and a powerfully competitive market position. ... For a limited production run in 2003, a series of 814ce guitars were produced using Brazilian rosewood, which has a different sonic profile and appearance. ...
Economic Factors and the Taylor Guitar Company
As with many goods, the general economic situation has an influence on both the demand for Taylor’s products, and on the costs associated with producing these instruments. Economic factors that affect the demand for these products include the overall productivity of the economy, inflation, employment prospects, and interest rates. ... Each of these economic factors is discussed below. ... This suggests that total aggregate demand for all goods and services, including Taylor Guitars, should also increase. ... To the degree that higher rates make it more difficult for consumers to purchase Taylor’s products, the future appears favorable at least with respect to this economic factor. ... While the economic downturn during the past 18 to 24 months has seen a significant reduction in the workforce, the forecasts seem to suggest that there will not be any drastic increases in unemployment in the future. ... The degree to which the cost-benefit analysis could be swayed in favor of debt financing can be linked to the interest rates, with higher rates discouraging this approach to funding the purchase of a Taylor instrument, reducing demand. ... This is a favorable projection for individuals who might with to debt finance their purchase of a Taylor instrument and, concomitantly, should not reduce demand exerted by this category of buyer. ... To the extent that inflation is relatively ubiquitous, affecting nearly all goods and services, the price of the intermediate inputs to the production of Taylor’s instruments will increase, leading to an increase in cost.
Approximate Word count = 4795
Approximate Pages = 19.2
(250 words per page double spaced)
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