Michael M. Pearson John W. Barnes Scott Fredrickson
Loyola University New Orleans
This paper focuses on the business of merchandising music products. The paper also focuses on the experience of presenting music business materials to music students, whose background tends to be very different from business or fashion merchandising students. We will:
Our goals in creating these exercises were to:
• Present only as much material in each exercise as can be absorbed by the student.
We feel that teaching with exercises is a relatively underdeveloped classroom tool that has great value for the area of music merchandising.
Teaching with exercises can be viewed as an experiential pedagogy. Experiential, or problem-based teaching has long been advocated, particularly in classes where individual deci-sion-making and the development of problem-solving skills is deemed important (Kolb, 1986; Salvador, Countryman, and Miller, 1995). This approach allows for the teaching of problem-solv-ing to achieve multiple goals by way of realistic scenarios presented to the students, coupled with both immediate and practice feedback (Salvador, et al., 1995). This type of teaching assumes that students will respond to and more favorably assimilate personal experiences than to exercises they know are controlled by the instructor, where they believe they cannot truly alter outcomes (Kolb, 1986).
Examples of the effective use of experiential scenarios in teaching business—and particularly marketing—concepts are becoming more common. Southwestern College Publishing Company sponsors a web site, Great Ideas for Teaching Marketing, that regularly calls for examples from instructors in the field (Southwestern College Publishing, 2001). Among these are a pricing exercise (Mark-Up and Its Relation to Gross Profit), and an experiential scenario created by Prof. Jenni Peters at Louisiana State University (“Location Analysis and Site Selection for a Retail Store”). This last exercise requires students to create a hypothetical store, for which they are responsible. They are divided into location consultant groups, responsible for evaluating retail sites within an assigned trading area, selecting the site and defending their rationale for the site selection.
Teaching with exercises can also be placed within the structure of Bloom’s (1956) Taxonomy of Cognitive Objectives (Clabaugh, Forbes and Clabaugh, 1995). In this classic educational work, Bloom and his committee defined six levels in which cognitively related objectives may be categorized: knowledge, comprehension, application, analysis, synthesis, and evaluation. Several key words have been identified for each level in deciding on what level an objective is located. (Erwin, 1991, pp. 39-40):
Classroom lecture would fall under category one, where students are expected to relate back in assignments and exams what has been professed by the instructor. Application, where the student must apply the principles learned in class to a real-world situation falls into a middle level category. The exercises presented here might be classified as experiential exercises, but this definition might be too restrictive. Experiential exercises are based upon the premise that students learn better from an experience than simply having the results of these experiences being related back to them through lecture. This type of pedagogy brings learning to a higher level than simply lecture or application.
There are three stages to teaching with exercises:
The emphasis in teaching with these music merchandising exercises is to have the students bring out merchandising principles rather than simply presenting these in lecture for the student to either relate back in an exam (category one objectives) or to apply in a real-world situation (category three objectives). The difference is that in these exercises the marketing principles needed to solve the exercises are not presented to the group before the exercise is administered. The fact that students are learning the key merchandising principles through direct experience with these exercises should result in a higher level of learning (probably at a category five, or synthesis, level).
The exercises presented are similar to ones that have been used many times with business and fashion merchandising students in retailing courses within a marketing unit in a college of business administration. These exercises have been modified for a music merchandising class that has only been taught once to date. Therefore, this paper will not be presenting quantitative findings. It will be presenting our adapted exercises, and relating our observations as to differing reactions between music and traditional merchandising students. Our goal is to share these exercises and observations with music business educators who might find our experience helpful in creating similar exercises for their own programs.
The question of what is traditional retailing and traditional merchandising, as well as who are traditional merchandising students certainly might trouble the minds of those who read this article. We understand that such a vague label groups together many heterogeneous retailers, merchandising practices, and students into homogeneous groups. However, differences have also been found between marketing and non-marketing business students in terms of their response to problem-solving learning. One study suggests that marketing students indicate their greatest strengths as leadership and interpersonal/relational abilities, viewing themselves as “leaders and handlers of people,” as opposed to non-marketing students who view their greatest strengths as problem-solving, organizational skills, and quantitative skills, seeing themselves more as “organized problem-solvers” (Newell, Titus, and West, 1996). (The non-marketing students in this study represented the disciplines of accounting, finance and banking, business administration, and management information systems).
Please keep in mind that our stated goals are simply to present the exercises and cite differences in reactions and practice between the music and non-music (traditional) groups. We are trying to keep our focus on our music merchandising experience. We cannot and are not trying to build a comprehensive list of reactions and practices of our comparison groups of traditional students and retailers.
This paper presents four music merchandising exercises. Exercises were developed for all fifteen modules of the music merchandising course, but these four were selected because they seemed to best illustrate the differences between music business and traditional retailing students, and music business and traditional retail practices:
Directions: Arrange the following items into an income statement for Ray’s Music Exchange. Calculate Ray’s gross margin and net profit. (You may work with others to get your
| answer.) | |
|---|---|
| Given: | |
| Cost of Goods Sold | $ 350,000 |
| Expenses | 200,000 |
| Sales | 600,000 |
Directions: Arrange the items below into a balance sheet.
Given: Borrowed from Parents $15,000 Bank Loan 10,000
Issued Stock 50,000
Directions: Place the following items into an income statement and calculate the 1999 net profit for A.J.’s Record Store.
Given:
| Beginning Inventory | $200,000 |
| Purchases | 500,000 |
| Discounts on Purchases | 50,000 |
| Ending Inventory | 250,000 |
| Reductions | 75,000 |
| Building Depreciation | 100,000 |
| Proprietor’s Income Tax | 10,000 |
| Net Sales | 775,000 |
| Salary Expense | 150,000 |
| Advertising Expense | 50,000 |
| Utilities Expense | 80,000 |
| Administrative Expense | 70,000 |
Exercise 1 Objectives:
Many people assume that the average music business student has less accounting training than the ordinary retailing student. This is the reason for the very basic nature of these exercises. This may or may not be true depending upon the requirements within individual music business programs. This also may or may not be true depending upon the typical retailing student. A retailing student may be a business major who has had many accounting and finance courses. In this case the assumption may be warranted. Another “typical” retailing student might be a fashion merchandising student who has had many design and textile construction courses, but fewer accounting and finance courses. Another “typical” retailing student might be a business education student who, again, has less of a base of business courses, but a strong base in education courses. However, while these exercises may seem basic, we have found that it is a mistake to omit these for any of our “typical” retailing students. Even students who have had several accounting courses often seem to freeze at the first sight of numbers. It is our experience that students have to be exposed to some review, and have to be brought slowly into financial statements. Getting down to the real essence of the income statement, the balance sheet, and the difference between these two is the art of teaching. These exercises have done a good job in helping us reach this essence.
We have tried to simplify the financial statements by focusing only on the retailer. This keeps us away from some of the more complex accounting problems, such as calculation of cost of goods sold, goods in process, and valuation of inventory. The basic message that the students should have derived from their group process of constructing an income statement for Exercise IA is that the income statement is a simple statement, consisting of only three inputs—sales, cost of goods sold, and expenses. Gross margin and net profit are simply calculations based upon these inputs.
Ray’s Music Exchange Income Statement (for a specific period of time)
Sales $600,000 Less: COGS 350,000 Gross Margin 250,000 Less: Expenses 200,000
Net Profit 50,000
Because this is a music merchandising class, the emphasis of these financial statement exercises is on the income statement and not the balance sheet. The income statement is the scoreboard of performance for the merchants and store managers of the retail firm. The balance sheet is less of a tool for the merchants and store managers than it is for the CEO and the financiers of the company. This is why we have presented a follow-up exercise with a more complex income statement (Exercise 1C), but not one for the balance sheet.
Because the merchandising side of a business is responsible for the buying and selling of the product, and the retail activities (e.g., pricing, promoting, display) associated with the buying and selling, it should be emphasized to the students that the merchant is more concerned with gross margin than net profit as a measure of his or her success. The store manager, on the other hand, is responsible for the operations side of the business (e.g., salaries, rent, utilities) and is therefore more concerned with net profit.
Lee’s Funk Music Store Balance Sheet (as of a specific date)
| Assets | Liabilities | ||
|---|---|---|---|
| Cash* | $75,000 | Borrowed from Parents | $15,000 |
| Bank Loan | 10,000 | ||
| Owners Equity | |||
| Issued Stock | $50,000 | ||
| Total Assets | $75,000 | Liabilities + OE | $75,000 |
*This could be allocated for store, fixtures, inventory, etc. in class discussion.
In discussing the balance sheet, the key point to reinforce to the students is that the balance sheet is simply a statement of the sources and uses of funds. Sources of funds belong on one side of the statement, and uses belong on the other side.
In Exercise IC, a more complex income statement is introduced. Again, the students should be reminded that the income statement consists of only three inputs, so their first duty is to divide the given items into sales, cost of goods sold or expense entries. Students appreciate reinforcement when they have put some of the entries in the right place on the income statement. This exercise can lead to some good discussions on the importance of inventory control, the allocation of expenses, the role of depreciation, the composition of reductions and the difference between gross sales and net sales.
| Gross Sales | $850,000 | Calculated | |
| Less: Reductions | (75,000) | Given | |
| Net Sales | 775,000 | Given | |
| Less COGS | |||
| Beginning Inventory | $200,000 | Given | |
| Plus: Purchases | |||
| Purchases | 500,000 | Given | |
| Less: Purchase Discounts | (50,000) | Given | |
| Net Purchases | 450,000 | Calculated | |
| Less Ending Inventory | (250,000) | Calculated | |
| COGS | (400,000) | Calculated | |
| Gross Margin | $375,000 | Calculated | |
| Less: Expenses | |||
| Salary Expense | $150,000 | Given | |
| Advertising Expense | 50,000 | Given | |
| Utilities Expense | 80,000 | Given | |
| Administrative Expense |