------------- if may gin add pa kamo, ichat lang ko kay na transfer ko na ni sa ms word -----------

https://docs.google.com/document/d/1PsFZfiEBFkR-UuPj8WRiIh6iRdg0DkLihBLQHvc0A
X0/edit?usp=sharing​ ←- link sg mga nkasulat sa babaw before

EXECUTIVE SUMMARY
In such a competitive business world, each decision could either make or break the company.
Even an established one such as Gibson Brands, Inc., which has been in the music industry
for over a century, is not safe from the consequences of poor decision making and poor
management. The company suffered not only from financial problems, but also from
managerial, marketing, and ethical problems. All these eventually led Gibson to file for
bankruptcy.

For a long time, the company has been battling problems in its sales. They remained
traditional while the market transitioned to keep up with the time. In hopes of saving their
company, they have made drastic decisions that did not produce good results nor did it relieve
them of any of their ​pre-existing​ problems.

Gibson Company’s obsession for innovation ​prompted the management to invest a lot of their
resources in the acquisition of companies. The spending spree caused the accumulation of
more debts until their assets could no longer cover these debts. Moreover, not only did they
fail to capture the interest of the market, the cause of the decline in sales, but the management
also failed to satisfy their employees. This resulted to an inefficient work output by
employees and bad employer-employee relationship. Furthermore, Gibson got involved in a
legal proceeding against illegal importation of wood and was alleged to be producing low
quality guitars.

Gibson Brands, Inc., in trying to revive the company, is currently undergoing reorganization.
START OF CASE STUDY ON WHY THE COMPANY WENT BANKRUPT
Famous artists like Jimmy Page of Led Zeppelin, Slash of Guns N’ Roses, and Eric Clapton
have two things in common: rock and Gibson. Together with their rise in the music industry
comes the name of Gibson, acclaimed as one of the most iconic brands of guitar worldwide.

Founded in 1894, the Nashville-based company sells over 170,000 guitars annually in 80
countries and claims to have 40% of the market for electric guitarsa. For over 116 years that
they have operated in the music industry, the company have undergone multiple periods of
financial difficulty and operated by different owners, including Chicago Musical Instruments
and Norlin Corporation. But the most relevant period of ownership in this study is when
Henry Juszkiewicz, together with his Harvard classmates Gary Zebrowski and David
Berryman, purchased the company in 1986 for $5 million from the Ecuadoran conglomerate
Norlin Music after almost two decades of ailing due to absentee corporate management.
(“Henry Bio,” n.d.)

He believed in the power of the brand name, and the company was seen to grow at 30 percent
annual increase in sales since 1986. He explained that the turnaround was because of
“improved quality, an emphasis on popular, classic guitars rather than constant innovation,
and restored ties to musicians and retailers.” (Miller, 1994)

The company then again found itself in dire straits as the Baby Boomers and Generation Xers
passed their prime, making way for Millennial era.

Through the years, Gibson went through periods of economic decline until they eventually
filed for bankruptcy on May of 2018 under the same management. (Horowitz, 2018)

Their filing for relief under Chapter 11 was not sudden, as successive management decisions
that were supposed to save the company further contributed to its atrophy. (Sinclair, 2018)
Gibson’s downfall can be encapsulated in three parts in chronology, namely: electric guitar
sales decline, Juszkiewicz’s obsession with innovation and defaulted maturing debt
obligations.

First, the decline of electric guitar sales is both a product of external and internal factors.
According to data shared by Music Trades, which tracks annual instrument sales in North
America, electric guitar sales slipped 22.7% over the past decade. The report counted sales of
1.452 million guitar sales in 2008, a figure that had slipped to 1.123 million units in 2017
(Gupta, 2018). This can be easily correlated with the decreased demand of younger people for
electric guitars. ​Young songwriters are increasingly opting out of creating and performing
music through traditional means. For decades, the electric guitar has been a staple within
virtually every genre of music, but electronic-driven instrumentation has taken over that role,
causing the rapid decline in the former’s popularity.

Graphically, the law of demand and supply predicts that the drop in demand with a little
decrease in price and no change in supply, the quantity should drastically fall. For a high-end
company like Gibson, decrease in price is limited by the high cost of brand image
maintenance and labor.

The data available is localized in North America only, and it does not reflect the world trend
in the sales. A major factor that affected the growth and profitability of Gibson and as well as
other American guitar brands like Fender is the prospering of cheap, high quality Asian
instrument manufacturers such as Yamaha, the latter taking a dominant share in the market.
Such companies have lower costs of brand image maintenance and labor.

With an aging customer base and lack of iconic guitarists at present, electric guitars had
become a highly discretionary item. It was a “must-have” for a large percentage of young
Americans before, and it is now just another “toy” for the younger people today as guitars can
be easily replaced by electronic musical instruments. The era of guitar heroes has come to an
end with no successors in line. The guitar fanatic boomers are now downsizing, retiring and
adjusting to fixed income.

Although there is oversaturation of a stagnant market, the overall guitar industry is not dying.
The bankruptcy of Gibson is not representative of the said industry as the company has its
share of market decline due to internal factors, mainly attributed to low quality production and
mismanagement. Gibson consumers in online forums argue that the quality of production is
not consistent through the years. One recent example is when Gibson unveiled the ​2017 Les
Paul Standard with a photo that showed an ​obvious ding in the $4,799 guitar's finish in their
official online marketplace.

As a result, many celebrity endorsers terminated their advertising contract with the company.
During October of 2017, a high-profile former Gibson endorser, ​Mastodon guitarist Bill
Kelliher, revealed that he stopped working with Gibson and instead jumped ship to ESP (a
Japanese electric guitar manufacturer), just like ​Metallica frontman James Hetfield before
him. According to Kelliher, Gibson failed to comply what he asked his guitar to be, such as
when Kelliher specifically do not want his guitar to be chambered but Gibson instead made it
otherwise. High profile celebrity endorsers contribute largely to the demand of their brand
name.

Caveat: The alleged quality control issues have been addressed by Juszkiewicz as “fake
news”. There can be found no objective statistics other than testimonies in online forums.

With the intent to diversify their design and upgrade the electronics, every Gibson guitar sold
in 2015 came with an electric tuner, which inflated the price of the already several thousand
dollars guitar they sold. Although innovative, it drove sales down since most people do not
need more than one tuner. Gibson figured out that their prices were too high, so they started
focusing on their lower end models and came out with random collection of guitar lines
ranging from throwback models to pastiche of unconventional designs that their customers
did not want.

In 2009 and 2011, Gibson factories were raided by agents of the ​United States Fish and
Wildlife Service (FWS). The authorities found ​illegally imported ebony wood from
Madagascar in 2009 and in 2011 the FWS seized wood imports from India that had been
mislabeled on the US Customs declaration and was denied by the court.

To address the threat of guitar sales decline, Juszkiewicz does not want to rely only on guitar
sales. ​With a vision to make Gibson the “Nike of music lifestyle”, ​Gibson acquired many
companies under the leadership of Juszkiewicz, almost all by debts. They partnered with
Onkyo in 2012, as well as spending $52 million to buy a majority share of the Japanese stereo
company TEAC the next year. Gibson owns 54 percent of the home audio company, with an
estimated value of $63.5 million, according to the bankruptcy filing. In 2014, they bought
Phillips Entertainment for $135 million, in a bid to become “the largest music and sound
technology company in the world,” ​per its CEO​. Not content, they decided to diversify their
guitar designs, as well as upgrade the electronics. The transition has drained more cash than
expected, with a particular downhill turn after the Philips deal. These acquisitions, especially
the latter, put the company in a lot of debt. ​In 2015, Gibson was doing $2.1 billion in annual
revenue, but its profit margin had dropped to 4 percent. Gibson had also developed a broken
relationship with some retailers, a number of whom have stopped selling the brand, citing
unmanageable demands that range from annual credit checks to upfront orders for a year’s
merchandise.

These events led to the ultimate declaration of bankruptcy on May 1, 2018. The legendary
company sought protection under Chapter 11 in US Bankruptcy Court in Delaware. Currently,
the distressed music lifestyle brand is undergoing reorganization, giving ownership to
noteholders and has installed new leadership.

One of the major causes of their downfall the accumulation of too much debt until the
company’s assets are no longer enough to cover these debts. Gibson underwent a spending
spree when they acquired a number of companies which include Onkyo, TEAC, and Royal
Philipp in a bid to become what Henry Juszkiewicz, Gibson Brands chairman and CEA, call
“the largest music and sound technology company in the world.”
What were the Remedial Actions taken before the company declared bankruptcy?

After Juszkiewicz and Berryman purchased Gibson in 1986, the sales went extremely high
that increased approximately 25% from less than 10 million in 1985. The sales of Gibson
continued to soar under Juszkiewicz and Berryman’s leadership. Unfortunately for the past
decade, Gibsons went through a lot of problems that made Juszkiewicz feel threatened for the
future of Guitar Manufacturing Industry.

Aside from the overall Guitar market decline due to change of interests of the new generation
and other issues mentioned above, one of the main problem of Gibson is its supply for wood.
Juszkiewicz feared that there will be no more good quality wood available for guitar
manufacturing (Vinnicombe, 2011). Since 1992 the Convention on International Trade in
Endangered Species of Wild Flora and Fauna (CITES) has been very strict when it comes to
importing all species of rosewood and three other species of bubinga.

In 2012 Gibson even faced lawsuit which required the company to pay $300,000 in fines and
make a $50,000 donation to the National Fish and Wildlife Foundation. Since the quality of
the tune of a guitar depends on the kind of wood used, the efforts to take a sustainable
approach to wood sourcing put them at a competitive disadvantage. (Taylor, 2017)

Due to the fear of bankruptcy and getting out of the business, Gibson shifted its core value
and changed its name to ​Gibson ​Brands, Inc. in 2013. According to Gibson’s official website,
this change of company name is “to represent Gibson’s growing selection of products and
evolving lifestyle orientation”​. The company also has its latest business motto, “Play. Record.
Listen.,” that reflects Juszkiewicz’ aim to plant its flag in all corners of what he often refers to
as “the music lifestyle.”

Gibson’s biggest acquisition was the 2014 purchase of the ​WOOX Innovations, the audio,
video, multimedia and accessories business ​of 126-year old Netherlands-based Royal Philips
(​Eastern Daylight Time, 2014). ​This action tripled the size of the company overnight and cost
the company around $135 million.

Other than buying different small companies in the hopes to give more profits to the
company, Juszkiewicz also became obsessed of innovating their guitar models. In 2015 the
main guitar models was redesigned. There are notable changes that Gibson applied to all their
products and to name a few, they made ​a wider, flatter “shredder’s” neck profile, a brass zero
fret adjustable nut, and the most controversial is the G-Force automatic tuning system.
(Cianci, 2015).

Why remedial actions were not effective ?

Juszkiewicz, not relying on guitar sales to pay finance their acquisitions, issued bonds. This
did not resolve the main issue at hand - the decline of guitar sales. Instead of resolving the
originating issue, the supposed to be remedial actions turned out to be another set of dilemma
they need to address, adding insult to injury instead of relieving it - a vicious cycle that
eventually lead to Gibson’s bankruptcy.
A lot of critiques, including ​Gruhn, an expert on guitars of all kinds, said the company's
bankruptcy was predictable after it expanded into the home electronics business. (The
Associated Press, 2018) ​The decision can be traced back to ​poor management and poor
decision-making by the authorities in the topmost management which was lead by their CEO
Juszkiewicz.

Unfortunately, ​due to ​Juszkiewicz’ goal, Gibson created a huge debt in acquiring different
brands (Sullivan, 2018). It also caused the company to revolve in credit causing Moody’s and
Standard & Poor’s ratings firms to downgrade the company’s financial ranking. ​In an
interview with New York Times, ​CEO ​Juszkiewicz admi​tted that his decision to expand the
most famous guitar company into music lifestyle company was a very bad one. According to
him, “No, it wasn't a great decision. It didn't work out very well. I think it was a rational
decision, but ​it turned out to be a very poor decision, and it's a decision I made. It is what it
is."

Stakeholders’ Perspective
A. Suppliers and Creditors-

According to the federal bankruptcy filings, Gibson has been stiffing key suppliers and
partners for months with amounts involving billions. At this stage, it is unclear if these
companies will ever be paid back, though at least a formal bankruptcy proceeding introduces
some order into the chaos. Gibson’s outstanding debt has been estimated at more than $1
billion, with the bankruptcy proceeding specifically covering a $500 million tranche (give or
take a million). The proceeding was forced by agitated bondholders as the chances of default
skyrocketed. With this, Gibson Brands executives have reached a wide-ranging settlement
with various creditors — including big names such as Blackstone and Philips Electronics
which sets the stage for the instrument maker’s aim to emerge from bankruptcy in late 2018.
(​Lombaerde, 2018)

Gibson’s legal team detailed an amended reorganization plan that adjusts some payout plans
and calls for Blackstone entity GSO Capital Partners and Philips to be paid $30.0 million and
$57.2 million, respectively, to settle their claims and the company’s objections to these
claims. This plan of Gibson’s reorganization also calls for the company’s leaders to stop
marketing the company’s assets, a move that if approved, will leave private equity giant KKR
in control of the historic brand. (Resnikoff, 2018)

Also, the latest plan to leave bankruptcy court is a change in how the company will distribute
proceeds from the planned sale of its majority stake in Japanese consumer electronics maker
TEAC. This change is one of the many that directly impacts two of the big names in the
company: David Berryman and the CEO, Henry Juszkiewicz.

This plan also accelerates Juszkiewicz’s detachment from Gibson’s day-to-day operations.
Juszkiewicz is to delegate all responsibility and functions as CEO to Chief Restructuring
Officer Brian Fox once Judge Christopher Sontchi gives approval to the proposed changes.
With these changes, he will be taking an extended vacation and he shall not take part in any
activities unless specifically asked by the company’s board but will continue to be paid his
current salary and benefits.
The bankruptcy is also having a huge impact on the company’s bondholders. A group of
bondholders is pushing for a ​restructuring that would hand them ownership of the guitar
maker and let them install new leadership. These bondholders don’t expect Gibson’s earnings
will be strong enough to attract new money for a refinancing to emerge out of the bankruptcy,
and creditors are reluctant to invest more funds while Juszkiewicz is still in the executive
position.

“Some bondholders are not looking to get paid back and get interest, but have other intentions
that are not necessarily my intentions,” Juszkiewicz said on a Feb. 15, 2018 interview with
Bloomberg News. “They’re trying to do everything possible to put the company in a worse
position, and get us in a situation where they’re exclusively talking to us. But factually, we’ve
made our interest payments, fulfilled our obligations, and our intent is to pay back all
bondholders​,” he also added. (Orr, 2018)

The company is faced a $375 million bond maturity in August, and a springing lien caused
$185 million of debt. Gibson’s August 2018 bonds fell as much as 2.5 cents on the dollar to
79 cents.

B. Customers –
Gibson also faced the decreasing customer satisfaction with its products. One of the reasons
the company’s brand has been tarnished in the recent years has been the alleged dip in quality
control.
The high-profile former Gibson endorser, ​Mastodon guitarist Bill Kelliher, revealed why he
stopped working with Gibson and instead jumped ship to ESP—just like ​Metallica frontman
James Hetfield before him.
He has said that the company always did not follow their agreements even with the simple
details he wanted for his guitar which made it impossible for him to maintain his relationship
with the brand.
He also stated his signature guitars were being shipped without being properly set up. He said
he would also regularly get messages from fans asking why their guitars didn't sound right.
But customer and artist relations isn't all of it. In 2016, Moody's Investors Service
downgraded Gibson’s credit rating outlook to a negative mark, because of the company’s
outstanding debts at that time of over $80 million to a supplier and $45 million in accounts
payable. They detailed that these outstanding debts could be a reason for a dip in quality,
meaning Gibson is trying to increase production and sales at the expense of the details.
Also, YouTube gear reviewer ​Sean Pierce Johnson — an avowed Gibson fan — said in a
video summer of 2018, that Juszkiewicz "doesn't come across as the kind of guy that g​ ets
guitars."
Gibson has built up decades of goodwill with its customers and as a result, its guitars are
inextricably tied to music history—and to artists like Metallica, ​Led Zeppelin​, ​Aerosmith​,
B.B. King​, ​AC/DC​, ​Guns N' Roses​, ​Bob Marley​, ​Black Sabbath​, ​Eagles​, ​Green Day​, ​Tool and
many others. (Magnotta, 2017)
C. Employees –
As the battle against its deteriorating financial position continues, Gibson has laid off
employees at its Nashville plant according to Nashville Post for them to lower overhead and
meet critical loan obligations. In comments issued by Henry Juszkiewicz, the layoffs were
acknowledged as part of broad initiative throughout the company to prepare for their
refinancing and a spring cleaning of sorts to lighten the operational load. (Snyder, 2018)

The company's CEO and majority shareholder at that time, Henry Juszkiewicz, recently
placed the ​blame on stores where the guitars are exclusively sold. "They're all afraid of
e-commerce, with Amazon just becoming the second largest employer in the U.S., and the
brick and mortar guys are just panicking," he told ​Billboard​. "They see the trend, and that
trend isn't taking them to a good place, and they're all wondering if there will be a world for
brick and mortar stores for much longer. It’s a turbulent world to be a retailer, and many of
our retail partners are facing that same issue.” (Resnikoff, 2018)

D. Board Members-
Gibson Brands will begin its post-bankruptcy life with a new CFO who is a veteran of
high-end retail. In the court filing, Nashville-based Gibson identified Kimberly Mattoon as
the successor-to-be to Benson Woo, who rejoined the company early in 2018 for a second
stint. Mattoon will join Gibson after eight years with luxury goods holding company
Richemont, first as CFO of its Peter Millar and IWC Schaffhausen units and since last year as
COO of Richemont North America, one of the Switzerland-based group’s four regional hubs.
Before that, she was Vice President of Finance, Real Estate and IT at The Body Shop for
about three years.

James Curleigh, who goes by JC, is now the new CEO of the company starting November
2018. Before coming to Gibson, he served as the president of Levi Strauss & Co. from 2012
to 2016. In addition, he was also the president and CEO of Keen , a footwear brand for four
years.

Curleigh filled the seat long held by Henry Juszkiewicz, who has led Gibson since leading a
buyer group in 1986. Juszkiewicz has during the company's bankruptcy process ceded his
duties to restructuring expert Brian Fox who will stay on for a while to help Curleigh get
settled and was sidelined ​last month​ as part of a wide-ranging deal among creditors.

Curleigh has spoken to Nashville Post and said that he is excited about the health of Gibson’s
core business of manufacturing instruments and related equipment and sees some similarities
between his time at Levi’s and what he is preparing for with Gibson. Both brands, he said,
took their leadership for granted and lost touch with their customers. The opportunity is there,
he said, to refocus on both the core connections Gibson has with its customers and to truly
grow its markets over time. He also stated that the brand needs some modern-day attention
and since the core business is still intact, he plans to leverage the brand’s authenticity and
make it more accessible. (Kennedy, 2018)

http://ultimateclassicrock.com/gibson-lay-off-workers/
RECENT DEVELOPMENTS/CURRENT SITUATION OF THE COMPANY

A private equity firm, Kravis Robers & Co. (KKR), decided to invest on the company under
the condition that the former CEO, Henry Juszkiewicz, be removed from the board. The
co-owner, Dave Berryman was also ousted. The ousted former owners will have reduced roles
in the restructured company. It was agreed that the aggregate amount of new common stock to
be received by Messrs. Juszkiewicz and Berryman shall be reduced from 4.5% to 3.45% and
Juszkiewicz shall receive $650 000 (previously $1 500 000) of profits interests as of the latest
revision.(Resnikoff, 2018)

KKR now assumes majority control of the company as it will relaunch with an approximate
of 800 employees and the board will be made of mostly guitarists, according to KKR
Director Matthew Ross. It was announced that the new appointees will join on November 1,
2018.(5)

James “JC” Curleigh, previous President of Levi Strauss & Co., was named the new president
and CEO. He was also president and CEO of KEEN Footwear and Salomon Sports, a ski
company, before being taking up a position in Levi’s. Cesar Gueikian, appointed as chief
marketing officer (CMO), was tasked to oversee product and its evolution, commercial
solutions and marketing strategies. Kim Mattoon, new Chief Financial Officer, was
previously the COO of Richemont North America. Christian Schmitz, new chief production
officer, was from KKR Capstone. Also, Nat Zilkha, KKR executive, is the incoming
Chairman of Gibson’s board of directors. The company is now run by KKR and Melody
Capital, their new bondholders. (​Schneider, 2018)

On October 2018, the U.S. bankruptcy Court approved of Gibson’s restructuring plan,
condoning $500 million of debt and approving the use of up to $70 million to start its new
business plan. (Schneider, 2018) Gibson’s post-bankruptcy plans includes: 1) continued
execution of Gibson’s Musical Instrument and Professional Audio units to design, build, sell
and manufacture Gibson and Epiphone guitars as well as studio monitors and loud speakers of
KKR and Cerwin Vega; 2) continued funding for the musical instruments and professional
audio businesses while offering continued support for vendors and suppliers; 3) entire balance
sheet will be reconstructed which also includes dropping non-core businesses. (Resnikoff,
2018)

Gibson also announced that it will kill its innovation division bankruptcy. The new key
management officers plan on refocusing Gibson on their iconic brands and core musical
instruments. A statement from Zilkha from one of their interviews states that, “For us,
establishing the credibility that we intent to deliver is important… We are musicians. We care
deeply about the brand and we are going to protect it.” (Astley-Brown, 2018)

On September of 2018, Gibson launched the 2019 model line that showcases a simpler, back
to basics approach.
GROUP INSIGHTS (Please remove subheadings)

Notwithstanding the declining market for guitars, Gibson’s sales has particularly dropped
relative to other music brands of the same range. This can be attributed to broken
relationships along the supply chain. This section will present the group’s analysis, evaluation
and synthesis on Gibson Brands bankruptcy.

Production

The company’s predicament stems even from the first stages of making a guitar. The overall
quality of an instrument highly depends on manufacturing precision, material quality, and quality
control and whenever a high quality product is made, it is expected that high cost of
production follows. When it comes to direct and indirect materials, its cost does not
significantly differ if it is from US or overseas as long as it is of high quality. The bulk of a
guitar’s cost, and the source of much of the cost variability is in the labor, which is largely a
function of geography.

Even though globalization - ​the process by which businesses develop ​international influence
or start operating on an international scale - is becoming a trend nowadays, Gibson did not
take the opportunity to manufacture offshore its guitars. Unlike other American companies
such as Fender, Taylor Guitars, and PRS guitars. The company wants to retain its title of
being “the only legitimate US brand”, as termed by Gibson’s previous CEO Juszkiewicz. He
also added that it is one of their tradition and brand image. Recently, Gibson has two
different location facilities. They have one in ​Nashville that manufactures solid-body electric
guitars while acoustic guitars are produced in Bozeman, Montana. (​Drozdowski, 2009)

Gibson failed to take the opportunity to ​gain a ​competitive advantage from lower operating
costs, and access to new raw materials and additional markets. Had Gibson considered to
manufacture offshore, it could reduce its manufacturing costs in the long run, although it will
be expensive at first as they need to buy or rent a big facility that will cater all the equipments
needed and area for storage. Once manufacturing costs are lowered without sacrificing its
quality, the company can lower its prices or to gain more customers or keep its prices and
earn more ​profits.

EMPLOYEES
Moreover, the unpropitious workplace environment results to inferior production, perpetrated
by noxious treatment of the manager to the employees. Specifically, Juszkiewicz's ill-temper
caused the morale of the employees to dwindle, leading to poor quality control. The
management is said to be only concerned with the number of outputs. Employees are forced
to work overtime to reach the quota, compromising the quality in the process. According to
contemporary motivation theories, employees are more effective when there is a deeper level
of commitment than just finding the job interesting. Job engagement is the investment of an
employee’s physical, cognitive, and emotional energies into job performance.

In the case of Gibson, the employees view their leader as a stingy, bad-tempered tyrant and
for that, they dislike their job. When employees hate their jobs, they are not as motivated to
produce world-class products.
CEO
Gibson’s CEO for almost 3 decades is notorious for micromanagement and bad temper. It has
been reported that he has to sign off on everything: new hires, transfers within the company,
promotions, raises, budgets, any funding for new parts or machines. He does not accept the
idea of others. An employee, venting out his sentiments through Glassdoor.com, posted “If
anyone in the company dares to have a different idea than his, you can pretty much guarantee
that they will be fired - on the spot”.

Juszkiewicz, as the owner, failed to consider the impacts of his own actions that jeopardize
the company . Indifferent of the Stewardship Theory of Corporate Governance, his actions
were rather expedient and egocentric. Stewardship theory holds that ownership doesn’t really
mean owning a company; it’s merely holding it in trust. In this regard, notice that in this paper
the company “Gibson” and CEO “Henry Juszkiewicz” are used interchangeably, reinforcing
the contention that the CEO is acting for himself, and not as a steward of the brand.
Furthermore, Juszkiewicz personally knew nothing of music, much more of the vast music
industry. To lead a legendary music company requires not only expertise in the financial
aspect, but also an intricate understanding of the said niche. ​An industry-incompetent leader
such as Henry cannot properly employ the stewardship theory inasmuch as the passion for
music does not even manifest in himself. A worshipped brand like Gibson could have done
better if their leader was sensitive to the market and as well as its internal operations.

Before Gibson, he was an investment banker specializing in mergers and acquisitions.

Admittedly, he may be profound in numbers, but his apathy in the music industry was a
significant factor of the M&A failure.

ACQUISITIONS

At some point, Gibson has decided to pivot and become a ‘Lifestyle Brand’ even deciding to
drop the ‘Guitar’ from the brand name. The company then went on a buying spree of
headphones and audio companies, including Philips consumer electronic business as
mentioned above. This has hemorrhaged money for the company and is the main reason for
its current state. It lost focus. As the saying goes, it did not stick to its knitting. They have
built a significant brand and it continued to be in demand but it could have focused on what it
did well and have banked on that. Distractions are appealing and exciting but are also rife
with pitfalls.

Although headphones and audio may seem like connected to its core business, the market is
extremely competitive and dominated by in-demand players like ‘Beats’, and their purchase
by Apple was a much more logical brand extension. Gibson should have looked at the next
generation of customers and have seen what opportunities there were for app development
around music creation.

Another mistake of the brand was its failure to anticipate, not having a sound Plan B. It was
not able to determine the difference between a shiny object and a real market opportunity.
Gibson has been around for over 100 years so they should have known that their past
customers will not ​(ang nkabutamg d gna present customers will not be the future ones..nd
sya nga ang past customers nila amo na na forever?) ang namean di is that ga change man
generations ang ila customers. Of course, indi forever na baby boomers or gen x lang ila
customers. Kag bsi sa dalom na sya nabelong upod sa customers nga paragraph

This now talks about innovation. Just because the company thinks an idea is good does not
mean their customers will too. It should have taken measures to survey, poll and ask them
what they are looking for and then figure out how to deliver. The core of the brand is the
reason why its valued customers continue to keep coming.

Gibson was always viewed as a premium option. Yet some of the other guitar manufacturers
heard a need from customers for lower cost options and delivered on them. Gibson chose to
ignore this and handed over a much larger mainstream market to their competition when
perhaps they could have owned it.

As mentioned above, it did not listen to the demands of its customers. While it is not always a
good idea to lower prices, it is not going to be bad for it to have a more mainstream option for
those that cannot or do not want to invest in the premium option which could make a lot of
good business sense.

Although all acquisitions are related to music and sound systems, they were aiming for a
broader market. This could be good as when they are expanding their business. However, it
was too broad and it happened in such a short period of time ​that they lost their focus on what
they do best and that was producing good quality guitars for musicians​. Eventually, their main
product was compromised and management thought the best way to address this is to acquire
even more companies.

It could have been a smarter move if Gibson remained intact as “Gibson Guitars” and not as
“Gibson Brands”. Loyal customers will feel more intimacy with the same company they fell
in love with, and the legacy of the guitar brand will continue to be passed in the next
generations. Contrary to most business, expansion in business of this kind can cause their
downfall as the goodwill of the business dissolves with heterogeneity. Legendary companies,
like Gibson, survive the test of time through consistency.

(something here)
RETAILERS
Many of their retailers also cut ties with Gibson because “working with them is a nightmare”.
Juszkiewicz continuously increased the number of ever-more-expensive guitars they have to
sell to keep their certified dealership status. As they do, the number of outlets for Gibson
guitars shrinks, and its sales diminish as a consequence. Although Gibson sell directly online,
it is important for a high end musical company to maintain brick and mortar outlets that sell
their product because products of this nature are tested first upon purchase. Notwithstanding
the quality of the products, retail outlets directly affects the sales

Customers
Gibson is known as a legendary guitar company but over this several years, their reputation
has been tarnished by bad quality control. Some famous guitarists who were working with
Gibson stopped working with them because of this reasons, even more, they started to work
with a rival brand. This includes Mastodon guitarist Bill Kelliher, and Metallica frontman
James Hetfield. They not only endorsers but are also loyal customers of the brand.
One of the main reasons why guitarists stopped buying at Gibson is because they do not
deliver the products that the customer wants. One customer wanted his guitar not chambered
but still received a chambered guitar. Another guitar collector bought a 2005 Gibson Les Paul
for $4000 and cannot set the tune for the guitar, he had to disassemble the parts and redo it in
order to get the tune correct.

Some customers thanked Gibson’s lack of quality control because it opened a new market for
small scale companies. With this issue, people were influenced to buy a second hand Gibson
than a brand new one. Since their quality is declining, customers compares the older guitars
Gibson produced and the recently made ones and they believed that the new guitars are not on
par with guitars made in the 1900’s. The new guitar has shown problems from the cutting of
the wood, alignment of the frets and strings, neck angles, tailpiece to the finishing and paint.
Gibson’s main problem is they do not tune the guitar to the customers’ specifications and that
angers them since Gibson sells guitar at a very high price; now they think that it is not worth
their money. These customers even said that a guitar bought at a small store was worth more
of their money than the “gold-standard” guitar Gibson produces.

In the marketing aspect, the group’s assessment of the company’s Strengths, Weaknesses,
Opportunities and Threats (SWOT) is as follows:

Strength: Gibson is an iconic guitar company and has many loyal customers. Gibson should
have used this information to have customer retention and loyalty programs designed for
these people. Due to innovations made by the company, which these customers did not like,
they lost them.

Weaknesses: The management of the company is not organized and communication between
employers and employees is not strong. This could have addressed earlier and given solution.
They could have talked with the CEO and tell him not to micromanage everything and instead
divide the workload so it would be efficient. Or they could just have elected a new CEO since
it seems that he is everyone’s problem. Another weakness that they may have is their high
pricing. Due to economy being unstable, people are debating whether to save or to spend, so
higher prices would make its demand lower.

Opportunities: The company has a lot of subsidiaries which they could control. This is an
opportunity because these subsidiaries could have been used to their benefit if they managed
them well. They could have sold items of Gibson and the subsidiaries as part of one package.
With this, they could attain higher sales in both companies and also do away with the
advertising. On the other hand, this is also a threat because they wouldn’t be able to focus on
their main business of making legendary guitars. The problems relating to their subsidiaries
could affect their brand positioning and brand image.

Threats: Another threat that the company is facing is the tightened laws on imports of wood.
Since most of the guitar’s body is made of wood this would inflict problem regarding their
supply. The recent developments of their competitors is also a threat, Fender recently
conducted a study and widened their target market to female customers which increased their
sales.
Overall, with regard to marketing, the brand failed to identify a sustainable target market. This
is very crucial, especially in creating and marketing their products, in order for them to
determine how they should shape their brand and its products so that it will continue to be
profitable. They should have conducted a market study to find a new niche. A study shows
that 50% of the guitar players in the US and UK are women.
https://www.lamag.com/culturefiles/electric-guitar-women/ Gibson could have taken
advantage of this market by initiating campaigns that appealed to women and reversing the
traditional showcase of women as guitar accessories to make the latter cooler and more
desirable.

Also, a study found that 90% of the first time buyers which comprises about 45% to 50% of
the total guitar sales, would give up during the first year. This secures a one-time-only sale for
this group. The gap could have been addressed by promoting guitar tutorial programs for
beginners or designing beginner-friendly, lower-end models to cater the market needs.

By releasing models of unconventional designs, it is evident that they are still targeting the
same market since the 20th century who have become collectors at present. These designs are
inconvenient for a guitar player’s consumption, but are more suitable for the collectors who
seek novelty in their stash.

In summary, our group has concluded that there was no single main cause of Gibson
Brands, Inc.’s bankruptcy. Rather, it was the accumulation of all the problems that the
company had overlooked or although they were aware of, had failed to address, OR HAD
THEY ADDRESSED, THEY ADDRESSED INAPPROPRIATELY.

One of the major causes of the company’s problem was its poor management.
Although Henry ​Juszkiewicz exercised similar aggressive measures in measuring his prior
acquisition Phi Technologies which he was able to turn from a struggling technology firm to a
highly profitable one, and Gibson Brands, he failed to realize that companies with different
cultures tend to react differently. On a long run basis, the methods used by Henry ​Juszkiewicz
were not sustainable. It was a threat because …. (failed to recognize employee needs, state
employee problems, and suggestions guro how to address this)

https://www.linkedin.com/pulse/what-lessons-can-you-learn-from-gibson-guitars-failure-paul
-copcutt

https://www.latimes.com/entertainment/music/la-et-ms-gibson-brands-guitar-henry-juszkiewi
cz-20170618-htmlstory.html
https://www.prnewswire.com/news-releases/gibson-brands-reaches-restructuring-support-agre
ement-to-reorganize-around-core-businesses-300639935.html

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