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Company Overview: Callaway Golf is proud to stand as one of the world’s prominent producers of golf equipment and accessories. Callaway focuses on evolving innovative products, for instance, Callaway was the first manufacturer of Big Bertha stainless steel drivers. Callaway also strives to maintain the best brand image in the golf industry. After all the acquisition and developments, Callaway’s existing brands include Odyssey, Top Flite, and Ben Hogan. The mission of the company is “To create healthy communities where our stakeholders live and work. Our focus is to support programs that improve lives and contribute to communities on a select basis. The Foundation also serves as a catalyst for our employees to become involved in and contribute to their communities.” (Callaway)
Market Overview: Callaway’s net sales were divided between product groups. A major factor that the golf industry should look at and take advantage of is the baby boomer generation that is beginning to seek retirement. Looking at target markets that have more leisure time and the discretionary income to spend on golf would be to Callaway’s benefit. They will in turn have more leisure time to spend playing golf as they seek retirement. The recession in 2008 took a toll on the golf industry. Between 2008 and 2009 the net income of Callaway decreased. A major factor in this is that people’s discretionary income has been limited. The economic struggles and the recession of 2008 are factors attributed to this decrease. Since the death of Ely Callaway in 2001 Callaway Golf has had many ups and downs financially. Callaway’s research and development team has looked for ways to make their products better at lower costs that will appeal to their target markets that they depend on for revenue. Callaway’s numbers for the year was the result of the combination of the golf industry’s slow recovery.
Competition: Callaway’s competition includes TaylorMade-adidas Golf, Titleist/Cobra Golf, Ping Golf, and Nike Golf. These companies are all fighting for the newest advances in technology, and brand recognition which will in turn yield customer loyalty. TaylorMade Golf gained competitive advantage by being the leader in production of the hybrid golf clubs which gained popularity in the industry during 2002. Once TaylorMade Golf became TaylorMade-adidas, the company pushed and relied heavily on endorsements that would bring about stronger brand awareness for consumers. Titleist Golf, having the number-one brand of golf balls and a 40% market share, is the largest seller and most played golf ball in the PGA Tour. Their golf ball recognition provided them with competitive advantage Titleist produced golf balls that are perceived to have technological advantages over competing brands and maintained sales and brand awareness through a heavy reliance on endorsements by touring professionals. In 2009, Ping Golf was an industry leader with neck and neck competition with Callaway Golf for the number one position. Ping Golf Company ranked as the fourth largest seller of drivers. The company lagged closely behind TaylorMade, Callaway Golf, and Titleist Golf. Nike Golf’s most recognizable competitive advantage was signing player Tiger Woods to endorse its merchandise. Nike’s entrance into the golf equipment industry was especially strong with the sales of apparel and footwear. They became the second leading seller of golf shoes, allowed the company to achieve greater success.
Technological Milestones: Callaway has substantially progressed in the field of technological improvements. Through their products such as the Big Bertha driver, the Odyssey Putter, iMix shafts, and the X-14 series the innovation improve the performance of golfers both professional and amateur. The collaboration of longer heel to toe length, larger club face, adjustable shaft, and different centers of gravity players are able to hit the golf ball farther, straighter, and at speeds that may have seemed unattainable.
Strategic Advantages: One of the main advantages that Callaway has against other golf companies is their innovative research and development team. They have constantly develop products that have a substantial competitive advantage over rivals. Their differentiated products and features are the result of their highly skilled and innovative research and development. “Callaway golf launched innovations every 12-18 months that further improved the performance of the metal drivers.” (Gamble290) Callaway also had the ability to recognize what their buyers were unconsciously seeking. For instance, after acquiring Top Flite which provided some struggles Callaway came up with the D2 line of golf balls that included some of the improvements of the Tour-I golf ball. This innovation gave them 900 additional retailers who had previously not considered Top-Flite or Callaway as a legitimate brand for golf balls and attain their first profitable year in 2007 since 2001. Also, they recognized the demand in the market for golf footwear. They designed and sold a Callaway foot wear line and as a result, they also received royalties from the sale of Callaway branded golf apparel, and accessories. Another strategic advantage was their sales at the off-course golf equipment retail stores.
Look to budgeting more money on marketing and advertising rather than research and development. Also, they should target their focus group according to demographics. This can be accomplished by offering discounts for university golf teams, golf courses and offices would also help increase their sales.
Find a complimentary product to collaborate with and design an effective ad campaign. An example of this would be collaborating with a product such as Gatorade.
Look into buying back or trading in a set of clubs as newer versions come out. The sets of clubs that are bought back by Callaway could be sold at a discount which would in turn open the opportunity for middle to lower income individuals to have the chance to own a set of Callaway clubs that they may not have been able to afford before.
TAYLOR MADE- ADDIDAS
GORSS PROFIT MARGIN
In 2008 the golf industry recorded a decrease of two million players of the sport since 1998, to which a number of respects can be attributed. The most indicative of reasons would be strictly enforced regulations put in effect by the United States Golf Association (USGA) to control technological modification and innovation of golf clubs and golf balls. These regulations affected the seller-buyer relationship in the sense that many companies, such as Callaway Golf Company, dared to challenge the USGA’s ruling with attempts of marketing products that did not meet the specific regulations, leaving both recreational consumers and professional tournament consumers hesitant to purchase certain models in fear of breaking any USGA rules. Callaway experienced this effect directly when the company attempted to sell its ERC II model, which ended up being a failure in the United States. Luckily, Callaway Golf pleased its consumers after the company its 1991 launch of its stainless steel driver, Big Bertha. Being the most successful driver of its time, revenues increased significantly from $10 million to $500 million because consumers were greatly satisfied with the size and performance of the driver compared to past drivers. Golf equipment manufactures sold their product line through off-course pro shops, on-course pro shops, and online golf retailers, making products widely accessible to both professional golfers and recreational golfers.
According to the text there were over $600 billion in counterfeit golf equipment products internationally. Counterfeit equipment were produced in large quantities in China and imported into the United States and other Western countries as a means for criminals to fund their activities. This posed a great threat to the industry because the markets were flooded with equipment that mocked manufactures products by near exact design but sold at a much lower price. Lower prices for golf equipment that were not easily recognized as counterfeit lured many consumers away from the manufacturers brand and toward a cheaper copy. Manufacturers’ brands fought to shut down many counterfeiting operations and formed an anti-counterfeiting alliance with the help of the Chinese government to reprimand any acts of the illegal activity. Other substitute products to Callaway Golf Company’s products include its competitors such as Nike Golf, TaylorMade Golf, Ping Golf, and Titleist Golf. These competitors produced drivers, balls and other paraphernalia that rivaled Callaway in their ability to attract consumers and attain brand loyalty.
Many oversee companies, such as Advanced International Multi-tech Company (AIMC), were contracted for the production of club heads that were to be designed to precise specifications to be assembled in the United States once they were shipped. There were also club heads and shafts assembled and shipped directly to U.S retailers from China, though this was done very seldom. Manufacturer’s discretion with established offshore contractors were key since the consumers’ perception of brands as whole depended largely on the quality and performance of the club heads.
Due to extremely high barriers to entry, any upcoming brands would face extremely difficult challenges in attempts to gain a position in the golf equipment industry. It would be difficult for new entrants to establish themselves in this market because existing companies have already gained deep rooted brand loyalty from both professional and recreational golfers and investors. Also, new entrants may not be interested or willing to conform to the legislation put in place by the USGA, and may easily find themselves in violation of any given rule that is in effect.
The golf industry has proven to be a very tedious and competitive industry to be in for even the most successful brands.
The top manufacturers in the golf equipment industry include Callaway, TaylorMade, Titleist, Ping and Nike. Golf equipment purchasers are usually more focused on the brand that they are about to wear on their back. Nike had a competitive advantage since they had the best golfer, Tiger Woods as their brand endorser for Nike Golf. Companies like Callaway on the other hand spent most of their money on research, development and new innovations. Tiger Woods earned $80 million alone from endorsing the Nike Golf brand alone in 2008. The competition in this industry is such that as soon as one company develops a new kind of club or ball, another is already planning to manufacture a better, more innovative and advanced one. For instance, Callaway lost out on great market potential in 2005 since it was too late to launch the hybrid clubs as one of its brands innovations. TaylorMade’s competitive advantage was the innovation of hybrid golf clubs. Titleist had the competitive advantage of being the number one seller of golf balls.
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