Guitar Center and the Guitar Industry

Guitar Center and the Guitar Industry

A market which is monopolistically competitive contains many firms that produce similar goods or services but maintain some independent control over their individual price. The guitar industry is monopolistically competitive with the leading business's concentration ratio being less than seventy percent of the overall market. Excluding the many small business competitors, the leading fifty businesses compose about forty-five percent of the market. In this type of market the combined market share of the top firms usually ranges from twenty to forty percent, and a few firms may definitely stand above the other competitors. The leading grossing companies in the overall music market include Guitar Center, Sam Ash Music, and also operate online with American Music Supply, and Sweetwater Sound. These leaders in the music industry adapt to the changing environment as pop-culture evolves the consumer's view of music into different venues ("50 Largest Companies," 2008). The guitar market takes up an entire twenty-five percent of the overall music market; and, with specialty stores, big band names, customization, and the overwhelming popularity of the guitar as an instrument, the guitar market creates a thrilling world of its own. One of the leading companies within the monopolistically competitive guitar market is Guitar Center, and it impressively overcame its lowly origins as The Organ Center to its work its way up to the top. The factors which make Guitar Center a company within a monopolistically competitive market rather than another market structure are five differentiations: the type of the firm, the production of the firm, the barriers to entry, the long-run profit, and the market power of the firm.

There are a large number of firms within the monopolistically competitive guitar market. Not including private makers and small time businesses, there are over 4,500 major music dealers in the United States which have a competitive advantage in the market ("50 Largest Companies," 2008). The firms together make combined annual revenue of close to five billion dollars. Gibson, Fender, Martin, Alvarez, Marshall, and many more companies are included in the overall guitar market. Vendors for these guitar makers include Guitar Center, Best Buy, Sam Ash Music, and Sweetwater Sound. However, small time vendors are able to survive and flourish as guitar makers because of the high quality work and the personal touch of their product.

What makes one firm products stand out above all other firms are brand image and product differentiation. One excellent example of product differentiation is found in the history of Guitar Center which originally sold only organs. Originally, The Organ Center made great market headway as it diversified its products and became the first store to sell Vox's electric guitars and guitar amplifiers.