Harmony Strings (HS)
Harmony Strings (HS) is
a musical instrument manufacturer, specializing in both electric and acoustic
guitars. It is a partnership between George Carter and William Fletcher, who
launched HS in 2018 as a guitar repair service. Due to their exceptional
service quality and customer care, HS quickly gained a strong reputation in the
market.
By 2023, HS had
expanded beyond repairs, entering the manufacturing space with a range of
guitars catering to both amateur and professional musicians. The company offers
guitars priced between $100 and $1,500, and its manufacturing facility can
produce between 2,500 and 3,000 guitars annually. Thanks to growing demand and
solid financial performance, the partners are now considering further
expansion. However, George and William have two different ideas for the next
phase of growth:
Expansion Plan 1:
Manufacturing Violins
The idea is to get into
violin production, another string instrument. Several raw materials used in
guitar manufacturing can also be applied to violin production, and part of the
existing manufacturing facility could be utilized for this purpose. However,
the partners lack any prior experience in the violin industry, which presents a
potential challenge.
Expansion Plan 2:
Launching a Music Academy
The second option is to
establish a music academy offering professional courses for music enthusiasts.
Although this is a new venture for HS, they could hire experienced instructors
to manage the academy and deliver high-quality education for various instruments.
a)
Using the Ansoff matrix, explain HS’s
explain growth plans. No need to draw a diagram [4 marks]
Suggested answers
(a) Using the Ansoff
matrix, explain HS’s explain growth plans. No need to draw a diagram [4 marks]
1. Expansion Plan 1:
Manufacturing Violins
HS is looking to introduce a new product, the
violin, which is different from their current focus on guitars. Although
violins are in the same category as string instruments, they require different
expertise and serve a somewhat different market. This strategy is classified as
Product Development because HS is creating a new product offering for
their existing market. It allows HS to diversify within the musical instrument
industry, minimizing reliance solely on guitar sales. However, developing a competitive product in
an unfamiliar market could require substantial time and investment.
2. Expansion Plan 2: Launching a
Music Academy
The music academy is an entirely
new venture for HS, targeting a new market (students and aspiring musicians)
with a new product/service (music education). This is a Diversification strategy,
as HS would be branching out into a field (education) that is unrelated to its
current core business (manufacturing guitars). Diversification can open up new
revenue streams and reduce dependence on product sales alone. However, moving
into a completely new industry (music education) could be complex and costly,
requiring a different skill set and significant investment.
Note:
This can be argued as related
diversification (broadly within the music industry) or product development too
(b) Using information given
in Table 1, construct a fully labelled decision tree diagram, and recommend the
partners the best option based on your calculation. [7 marks]
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