Group Case #2 Competition in Golf Equipment Industry in 2008

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The paper is partial fulfillment of Strategic Management course (2602-650), MBA English Program Batch 3

Content
General Environment ............................................................................................ 1
Economic Segment.................................................................................................................. 1 Demographic Segment ............................................................................................................ 2 Sociocultural Segment ............................................................................................................ 3 Political/Legal Segment ........................................................................................................... 3 Technological Segment ........................................................................................................... 4 Global Segment ....................................................................................................................... 4

Industry Environment ........................................................................................... 7
Industry Lift Cycle Analysis ...................................................................................................... 7 Industry͛s Driving Forces ......................................................................................................... 9 Strategic Groups ................................................................................................................... 12 Strategic Types ...................................................................................................................... 13 Key Success Factors and Industry Matrix ............................................................................... 16 Porter͛s Five Forces Model .................................................................................................... 20

Competitor Environment Analysis ...................................................................... 24 Market Environment Analysis ............................................................................. 27 Recommendation ................................................................................................ 29 Reference ............................................................................................................ 30

General Environment
General environmental factors are the external factors that have several impacts on golf equipment industry. An analysis and summary of those impacts including opportunities and threats of the industry are listed below.

Economic Segment
World economic today is still very weak and in the downturn. The world economic has declined since 2006 which was the result from the subprime mortgage crisis in the US. The percentage of the US disposable personal income and personal saving rate has continually declined in the recent years. Once they realized the difficult time in 2008, the US people tend to save their cash and reduce their leisure time as there is a rebound in the saving rate at 2Q and 4Q in year 2008. However, the US Government and also governments of the countries all over the world are not at ease in this crisis. They have to launch new initiative policies in order to restore and boost their economic system. Despite of capital injection, monetary and fiscal policies will play an important role and need to become more supportive of aggregate demand and sustain this stance over the foreseeable future. Also governments have to develop strategies to ensure the long-term fiscal sustainability.

Figure 1: US Personal Saving Rate (Percent of disposable personal income)

1

They are ages 44 to 62 in 2008.000. there would be an opportunity for golf industry to expand its market through women and junior golfers. we believe that the economic will be recovered soon. and junior was declined in 2007. Therefore. Those reasons are the threat for the industry. people will need some more relaxation and it would be the time they return to play golf. white non-Hispanics and Asians were nearly twice as likely to play golf as African Americans or Hispanic American while there is no difference among race in the household that their incomes exceed $100. women. Even though the number of golfers composed of men. which was around 5 million less than the number of Americans playing golf in 1998. However. The decrease was due to increased job and family responsibilities. which will become an opportunity for the golf equipment industry. In 2007. The retirees. health concern and/or injuries were a major reason that blocks the older golfers from the golf course. Demographic Segment Age structure Baby Boomers are the majority golfers in the US. there is a statistics from the National Golf Foundation (NGF) reported the fast growing segment of women golfers are those between the ages of 18 and 29.With strong effort from the government. the percentage of African American golfers has doubled after the success of Tiger Woods. both men and women.000. Moreover. In America. Minority participation was relatively low in the US. the golf still is the sport only for the rich. After the hard time.7 million. However. however. during the recession period. Young female golfers are golf ͞lite͟ and play golf average at about three rounds per year. 2 . For golfers with household incomes lower than $100. are a better golf customer because they are less likely to be working or raising children. the golf courses are accessible to Americans across a wide range of income level. Ethnic mix and Income distribution There is slightly effect from ethnic in playing golf. The availability of the access to golf course is another factor for playing golf. there͛s a study from National Golf Foundation stated that the income tended to reduce differences in participation rates among races. the number of Americans who played golf at least once a year was approximately 22. The Boomers are the 78 million American who born between 1946 and 1964. But in Europe and Asia.

this would be a great opportunity for golf equipment industry if they will concentrate more on female apparel and do R&D especially on golf club for female. Outsourcing their production to China would be the great opportunity for them to reduce and control their costs. The Chinese government tended to do nothing with the counterfeiters. In 2005. their suppliers in China have replicated their products with almost exactly the same as the genuine one since they were produced from the same factory in the afterhours. Sociocultural Segment Golf is classified as a sport for the affluent. woman and fashion are inseparable. Political/Legal Segment The rise of counterfeiting in the golf equipment industry is a considerable amount of threat. Ai Miyazato. This is due to its history that it was popular among the royal families.The high cost in playing golf is also the obstacle for people who want to play golf. Golf becomes more popular among business people once they have to negotiate their business. As the profit margin on golf equipments become less. about 60 percent of all golf equipment was manufactured in China. From the above reasons. Formerly. Therefore. They always want to look good. As we all know. then would be a great opportunity to expand the market. less income would be the threat but if any company in this industry can respond to this existing need. With small action from the Chinese government. there͛s an implication that there are interested people who would like to play golf but have the financial limitation. green fees. But since the women are more accepted in the world class today and after the established of the LPGA. The 18-hole round of golf can keep them together long enough and more relax than in the conference room. Unfortunately. Se Ri Pak are some of the example of the success female golfers which influence women to interest and start playing golf. golf is mostly played among men. and the equipment are the example. the numbers of female golfers are increasing. the golf equipment industry͛s six leading manufacturers have to help each other and become alliance in December 3 . These knockoffs are sold both in China and exported to all over the world via internet with a lot cheaper price than the original product. Lorena Ochoa. golf executives need to reduce their cost. Apart from the sports. we have to accept that golf is a kind of social activity. The membership fees. Therefore.

have harmed many industries around the world. not only golf equipment. the industry has to reconsider its outsourcing country. as golf continues to go worldwide and these countries are increasing in their purchasing power year after year. If they cannot solve this problem. and balls were designed to go further when tee off and better controlled on green. This is an opportunity for those less developed technological companies to catch up with those leading companies. for example. For example. Counterfeit products from China. etc. Not only clubs. Technological Segment Technology nowadays helps golfers enjoy more in their games. especially in China and India. there also were other counterfeit products. counterfeit products will ruin the price structure of the golf equipments. and China). the technology improvement in golf equipment industry has limited by the USGA and R&A. Even though there are controversies about the limitations. The technological innovation in golf clubs has many benefits. the companies have to comply with the rule. the increase in driver size helps reduce the adverse effect of off-center hits. 4 . India. however the emerging and developing economies countries have a lot more high GDP than the advanced economies. However. Even though GDP Growth of all countries over the world is going down in the same way. Therefore it is hard for the industry to differentiate themselves by their product. Otherwise. golf bag. Global Segment There͛s a rise in BRIC countries (Brazil. Some experts predict that there is an opportunity for golf club to have a growth rate over 25% annually in BRIC countries. In the other way around this is considered as threat to the advanced technology.2005 in order to identify and pursue both those who made and sold counterfeit clubs. Russia. wedges were given more defined grooves to help improve accuracy on approach shots. shoes. Many countries across the world condemned Chinese government and called for measures to resolve the issue. apparel.

Figure 2: GDP Growth (Percent Change) Moreover. which will increase its exposure to the world and introduce it to a new generation of people. there is an announcement that golf will make its return to the Olympic Games in 2016. General Environment Economic Segment y y Opportunity/ Threat (Ranking 1-5) Threat (3): Recession in the recent US economic Opportunity (3): Boost up from the governments͛ policies Threat (2): Health concern in baby boomers Threat (4): Increasing in job and family responsibility Threat (4): High cost in playing golf Opportunity (3): Increasing in female and junior golfers Opportunity (4): increasing in female golfers Threat (5): The rise of counterfeit products 5 Demographic Segment y y y y Sociocultural Segment y Political/ Legal Segment y .

Technological Segment y y Opportunity (3): Technology helps golfers add more entertainment in games Treat (4): Technology development limitation by USGA and R&A Opportunity (5): Expansion market to BRIC countries Opportunity (5): The return of golf in Olympic Games 2016. Global Segment y y Table 1: Summary of General Environment Effects on the Golf Equipment Industry 6 .

Divest: Discontinue production. Reduce the cost of manufacturing (e.g. at a decline stage. Profit: Sales and profits start to fall. y y 7 . Harvest: continue to offer the product. Channels that are no longer profitable are phased out. the industry will enter a decline stage. According to the life cycle model. By adding a strongly negative factor of industry evolution by announcing rules from USGA and R&A in 2008. Consider whether there are new markets in which the product might be sold. the industry will have the following effects. Thus. Promotion: Expenditure on promotion is reduced for products subject to the Harvest and Divest strategies. the industry is in the maturity stage because of stability in sales. and sell possibly to a loyal niche segment of the market. Distribution: distribution becomes more selective. the industry sales of 2008 should decrease from 2007. As sales decline. reduce marketing expenditure. and liquidate the remaining inventory or sell the product to another firm. at 2007. y y y y y y Product consolidation: the number of products may be reduced. move manufacturing to a low cost jurisdiction). The market for that product shrinks which reduces the amount of profit available to the firms in the industry. and surviving products rejuvenated. Price: A company might try to stimulate growth by changing their pricing strategy. Prices may be lowered to liquidate inventory. or maintained for continued products. a company has three strategy options: y Hold: maintain production and add new features and find new uses for the product.Industry Environment Industry Lift Cycle Analysis As shown in a graph and a table below. Exit: High-cost and low market share firms will be forced to exit the industry.

Year Drivers and Woods Irons Balls Summation 1997 1998 676 601 533 485 458 487 1667 1573 1999 2000 2001 2002 2003 2004 2005 2006 583 599 626 608 660 654 792 883 447 475 459 456 461 482 534 570 518 530 555 529 496 506 536 539 1548 1604 1640 1593 1617 1642 1862 1992 2007 877 579 552 2008 Table 2: Retail Value of Major Golf Equipment in the United States 1997-2007 2500 Introduction 2000 Growth Maturity 1500 Drivers and Woods Irons 1000 Balls Summation 500 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Figure 3: Graph Shown Retail Value of Major Golf Equipment in the United States 1997-2007 8 .

every time the new regulation comes out. USGA put the limitation on how well the driver clubface can bounce the golf ball by set the coefficient of restitution (COR) at 0. The USGA put the limit of CT test to be 239 microseconds with 18 microseconds of tolerance. within January 2010. y In 2004. USGA announced that the driving club must no larger than 5 by 5 inches and the volume could not be more than 460 cc y In 2005. So. That would benefit golf equipment whose technologies are limited by helping them catch up with the manufacturer with advanced technology such as Callaway Golf.Industry͛s Driving Forces In the past. These regulations from USGA and R&A could prevent the core golfers from purchasing the golf equipments that are not conforming to USGA͛s Rules of Golf. the differentiation between each manufacturer will be narrower. This would mean that every time the new regulation made an introduction.83 implies that the speed of the ball after hit the clubface cannot exceed 83 percent of the initial speed when it was launched from the cannon to eliminate a springlike effect. USGA. the golf equipment industry was changing by 4 driving forces as listed below 1. COR 0. 9 . there will be some models. y In 1998. developed regulation to have characteristic time (CT) test which indicate how long the ball remain in contact with the driver͛s face. have to be deeply discount or even removed from the market. every grooves of iron and wedges would be required to have rounded edges to minimize golf ball spin. The regulation from the United States Golf Association (USGA) and the Royal & Ancient Golf Club (R&A) These two organizations have constantly established series of new rules to set the boundary in which the golf equipment with advance technology could give superior performance and advantage to some golf players over those with older technology. TaylorMade and Titleist. y In 2006. USGA rules that. there will be the reduction on profitability of the companies who own those models.83. y In 2008.900 g-cm2 with a tolerance of 100 gcm2. The USGA and R&A have announced the limitation on many aspects even though there is little evidences that technological advance of golf equipment will lower the score. which are not conforming to the regulation. in an agreement with R&A. USGA informed all the golf equipment manufacturers that the driver Moment of Inertia (MOI) must not be over 5. As the technological advantages will be limited by the regulation.

2. There are many ways to imitate the legitimate product such as reverse engineering. The introduction of new regulation will also have an effect on the industry competition as the competition will shift from technological capabilities to price competition and endorsement contracts. mold stealing and after hours production.In other word. The USGA allowed interchangeable shaft which mean that golfers can install different shafts into the driver head to have different launch characteristics. The counterfeit golf equipment The counterfeit golf equipments were coming to be the threat to golf equipment industry since golf equipment manufacturer decided to outsource either the production or assembly or both to China. So the differentiation of golf club changes toward the compatibility with shafts. 10 . 3. the trends of golf playing are declining from many reasons y Difficulty of the game which disappointed the existing players and make them quit playing y Lack of free time the play and practice from many reasons y Health concern and injury from playing y High playing fee These factors are accountable for the declining trends of golf industry and will reduce the profitability while increase the intensity of competition of overall golf equipment industry. The number of Golf players and their frequency of playing From the research conducted by industry analysts. So the counterfeit golf equipments can look nearly the same as the genuine branded product while price can be extraordinary low. The regulations that enforce rules on clubhead size and performance also increase the profitability to shaft manufacturers. the regulation will increase the profitability of those low technology manufacturers. The skilled core golfers might have strong preference for a particular shaft and select golf club based on which club is compatible with their preferred shaft.

Therefore.000 to $400. The soar in endorsement fee will directly lower the profitability of the company. 11 . But for the small players and shaft manufacturer.000 in 1990s to $4 millions in 2007. In conclusion. the golf equipment industry is going a little worse since the above 4 driving forces are against the profitability of the industry especially the big players with advance technology such as Callaway Golf. The touring professional endorsement contract fee Most recreational golfers based their buying decision toward the brand of clubs and golf balls as their favorite touring professionals equipped. 4. But they cannot escape from this expense since the enhancement on brand image is needed.This would reduce the profitability of the company who outsources to China because some people who concern over price will go for the counterfeit and the company will need to invest some capital to hunt down these counterfeit goods. the competition on endorsement contracts is getting more intense which make the endorsement contract value soar. The data shows that the endorsement fee of PGA tour͛s top 10 golfers had been raised from between $250. TaylorMade and Titleist. there might be an opportunity to gain more profit and market share in the market since the downside factors are not much worse compared to the impact on big players.

For Counterfeit Manufacture group. While the Low-end Manufacturer group includes Nike and other Low-end manufacturers which mainly offer golf equipment that are less technological advanced at cheaper price to recreational or amateur golfers. They spend a large budget in R&D and marketing activities.Strategic Groups In the golf Equipment Industry. it represents manufactures which illegally sell imitated golf equipment products at much cheaper price than legitimate and original products. Product / Technological Innovation Worst position Counterfeit Manufacturers Retail Price Low Figure 4: Strategic Groups in Golf Equipment Industry 12 . all players can be grouped in different strategic groups with respect to the way they strategically position their products based on Product retail price and Product / Technological Innovation. they mainly sell professional equipment to professional and core golfers. There are 3 main strategic groups in this industry which are High-end manufacturers. Taylor made ʹ Adidas Golf and Titlists / Cobra golf which offer good quality and technological advance of golf equipment at premium price. Also. Hig h Best Taylor Callaway. Low-end Manufacturers and Counterfeit Manufactures. Made ʹ Adidas .Titlists / Cobra Ping Nike & Other Low-End Manufacturers The High-end manufacturer group includes Callaway Golf.

It hired a team of aerospace and metallurgical engineers to design and produce the most technologically advanced golf clubs. Furthermore. In addition. putters. This driver had far better performance than conventional wooden drivers. Hyper-X driver line. irons.By taking these 3 strategic groups into consideration. product innovation orientation. eyewear. footwear. although they sell products at cheap price. the company keep developing its products and introduced the squared-shape driver market where TaylorMade doesn't choose to play in. its driver models are square FT-I and traditional-shaped FT-5 driver. the High-end manufacturer group is considered in the best position. it introduced the first stainless-steel driver-Big Bertha to the industry. Callaway has developed various models of its golf clubs. especially when there͛s the decline in the number of Golfers and rounds played. clocks. The reason is that the High-end manufacturer group has larger financial resources and stronger industry and product knowledge and technology to develop new products. And in 1991. the quality of product may not match the original products. In addition. The introduction and sales of Callaway͛s Big Bertha led other rival companies taking technology into competition. Moreover. Big Bertha fairway wood. therefore. With the broad product lines. and get loyalties from Callaway-branded licensed products such as golf apparel. Strategic Types Callaway Golf Company Prospector Callaway has broad product lines of golf equipments: drivers. Callaway is characterized as prospector. However. X line of hybrid club. 13 . it had disadvantages since it͛s illegal entity and is risky to be shut down by the government or sue by the legitimate golf equipment manufactures. For the Counterfeit Manufacture group. Callaway has a continuous development on its innovation in perimeter weighted irons and putters to maintain its market-leading position. For example. under each product line. while the Counterfeit Manufacture group is considered in the worst position. golf ball. employ marketing activities and sell their products. and FT line of hybrid clubs. and golf range-finders. wedges. travel gear. watched. Callaway focus on developing product and create new innovation to golf clubs industry. in 2003 Callaway lost it 1st rank in driver industry to TayloyMade since TaylorMade͛s R580 was larger and matched consumers preference.

its Fortune brand of golf shoes hot the most market share in the golf shoes industry and Titleist became the world͛s largest seller of golf equipment. and irons even they are not well-regarded by most golfers. Moreover. TaylorMade is categorized as Prospector as it has fairly broad product lines and the innovation of product orientation. as Titleist golf ball was the leader in the golf ball industry. and Nike Golf. Titleist has been number one and the largest seller of golf ball since 1949. However. TaylorMade also develops its products in other category such as wedges. which can help maintaining its share of the market. Titleist is categorized as the Defender. In addition. and shoes. And to maintain its lead in driver category. it introduced hybrid club with movable weight technology that allows golfers to have a single driver that is able to produce many ball flight path. the company continued the development on its driver with updated model of r7 every 18 month. As the company did not tend to focus on creativity but more on improving its operation effiency. Titleist Defender Comparing to Callaway Golf. Like Callaway. Hence. and value-priced Pinnacle subbrand in order to have more cost efficiency in production of golf ball while gaining more customer in other segments. 14 . Each category contains long vertical product series such as putter category containing of 11 models in the product line. irons. Ping Golf.TaylorMade-adidas Golf Prospector TaylorMade emphasized on advanced technology in its products especially on its drivers and hybrid clubs. TaylorMade has fairly broad product lines: drivers. It was the most technological advanced during 1980s until the launch of Callaway͛s BigBertha in 1990s. However. Titleist was the first company to produce golf eqipment in 1932. And in the year 2007. the company golf ball line not only has premium-priced Titliest͛s Pro V1 but also lower-priced NXT. It more focus on cost efficiency. therfore. For example. This innovative product is well accepted by most golfers and expanded TaylorMade market share in the driver category. hybrid clubs. apparels. putters. TaylorMade. wedges. its introduction of R580 driver in 2003 brought it back to the market-leading position. the company rarely came up with innovation of golf equipment. putters. DT.

and Titliest. hybrid clubs. This strategy brought the company to success on the sales of golf apparels. 15 . footwears. TaylorMade. while other competitors like Callaway Golf. Nike Golf is categorized as Reactor in the golf equipment industry. Ping and Titleist could control retail prices. TaylorMade. lack of product innovation and systematic strategy. the limited product line Ping Golf focus only on the golf clubs industry. and shoes. Unlike Callaway. and golf balls but failure in the golf equipment industry since golfers perceived Nike as not a serious golf equipment manufacturer along with the poor performance of its hybrids. excluding golf ball. it only provides putters. Moreover. Nike Golf has the sell price different from the suggested price. With the limitation of product lines and unlikely to innovate in new areas. It neither emphasized on innovation of the golf equipment nor focus on the cost orientation but huge investment on heavily employment of the endorsers like Tiger Woods and other 17 PGA Tour members. especially on its well reputable perimeter-weighted putters and irons. wedges. Nike Golf Reactor We can say that Nike Golf did not have a systematic strategy.Ping Golf Defender As mentioned in the case. and putters. apparels. Ping Golf is categorized as Defender. drivers. wedges. irons. Since its low on cost effieciency. irons.

the company still continues to develop the driver segment by launching 400 CC R580 driver. 16 . Below are the key factors. Titleist is considered to have superior technology especially the Pro V1 which have the most advance technology that provide the maximum distance. Technological innovation is included the research and development that companies require to reserve a large amount of budget to gain the competitive advantage. It charges price upon its product performance. Then to compare the price between other leading brands. it made TaylorMade become the leader of driver segment again. With the largest available at the time. Callaway is also the leader in other segments like iron since 2002 and Odyssey 2-Ball putter because of the company continuous development. an oversized stainless steel driver were launched into the market with great success. 1. 2.Key Success Factors and Industry Matrix There are several important factors that determine the successfulness of golf equipments manufacturers. Fortune brand. the Big Bertha. It generated annual sales about 700 million USD and it is the no. One of Callaway marketing strategy is premium pricing. 1 brand of golf ball with the market share of 40% Ping was the brand pioneer for many aspects such as being the first brand who provided custom fitting service since͙ and being the first brand who launched the hybrid club in 1999 and became successful in 2002. Callaway products have highest price. They should also try to differentiate themselves in a market with similar products in the industry. By the way. Price Competitive The golf equipment price is varied upon the product category. For example. The company first invested on the research and development in 1985 by hiring the aerospace and metallurgical engineer team to design the new innovation of golf clubs. Titleist and Ping are using the same pricing strategy that provides the range of price depends on the product brand. TaylorMade. TaylorMade is the first brand that launches metal wood since 1979 and became popular since 1984 until the coming of Callaway Big Bertha in 1991. Product Performance and Technological Innovation Golf equipment manufacturers have to come up with new technology and continuous improvement to satisfy consumer's demand. Callaway provide the highest budget on research and development. Among the golf ball brands. In 1991. Among the golf equipment manufacturers.

Nike spends around 11-12% of annual revenues on advertising to build strong brands by using celebrity endorsements aim to grow the market share in the golf segment. all leading golf manufacturers sell their product through on-course pro shop. off-course pro shop and on-line retailer. For the 5 brands leader. golfers of all levels generally want to play with the same types of equipment. Nike golf product segment is not yet a remarkable brand compare to its competitors. Titleist and Ping have controlled the retail price accept Nike Golf that the price is always lower than MSRP (Manufacturer Suggested Retail Price). PGA Tour European Tour Champions Tour LPGA Tour Bruce Fleisher Legends Phil Mickelson Thomas Bjorn Ernie Els Nick Flanagan Olin Browne Annika Sorenstam Arnold Palmer Morgan Pressel Gary Player Johnny Miller David Leadbetter Michael Campbell Jim Colbert Nick Dougherty Niclas Fasth Eduardo Romero Julieta Granada Mark McNulty Leta Lindley Table 3: Endorsement players for Callaway Golf 17 . Brand Image Brand Loyalty and Endorsement Brand good reputation and good image can lead to brand loyalty. All the leading manufacturers like Callaway. In term of distribution channel. 3. Nike has a clear marketing advantage over its competitors. it may create a problem and the price inconsistency toward the brand. Callaway has the lowest level of endorsement with only 12 endorsement contracts with staff professionals and 7 contracts with professionals. That͛s why many brands use lots of advertising expenditure to promote their brands. As the leading sports brand in the world. The performances of the professional golfers sponsored by each brand strongly relates to sales. In case the company does not control the retail price.they provide variety of products which have different target market. The issue that have to be concern is the price that retailer will charge to consumers. TaylorMade. Nike is the only brand that uses different strategy with the lowest price charge that came from an uncontrolled retail price. By the way. Titleist VS Cobra and V1 golf ball VS Pinacle. Golf product brand equity depends on the performance of its endorsed players. When golfers use certain equipment to win any tournament. for example.

Brand Callaway TaylorMade Titleist/Cobra Nike Golf Ping Degree of Endorsement Low High High High Low Endorsement Detail 12 endorsement contracts with staff professionals. Titleist and Nike have equal in degree of endorsement. Callaway could increase the sales from less than 10 million to 500 million. 12 LPGA Tour members Table 4: Comparing of Brands͛ Endorsement Degree 4. With the progressive vision of Ely Reeves Callaway Jr. it is important for companies to be built on intelligent and dependable people in order to stay competitive in this business. shoes and apparel 17 PGA Tour members plus Tiger Woods for shoes. It seems to have lowest in no. 7 contracts with professionals 70 endorsement contracts for driver. Therefore. 50 tour staffs member for club. and Retief Goosen which can be broken down as 70 endorsement contracts for driver. skill and experience in the field can guarantee that a company uses its resources wisely and effectively. Moving a manufacturer's operations to areas other than the origin countries that have lower labor rates is a good idea. Natalie Gulbis. 11 endorsement contracts for clubs and apparel and other 40 limited contracts More than 100 PGA Tour professionals for V1 ball. Personnel Related Factors One of most important is related in the area of personnel. 11 endorsement contracts for clubs and apparel and other 40 limited contracts to use TaylorMade drivers during the tournament. TaylorMade used 121 golfers to be their endorsers like Sergio Garcia. to expand the club beside the antique clubs since 1985. of endorsers but the company has to put large financial commitment to Woods. While the main endorser for Nike Golf is Tiger Woods and other 17 PGA Tour members. apparel and clubs 20 PGA Tour golfers. Below are some examples of the management experience that give the strong effect to the company. Paula Creamer. 18 . Some brands outsource the entire production to third party country whereas some brands send the parts back to origin country to assembly.TayloyMade. Like any other industry. The Personnel can be divided into 2 levels which are. y Management Level Experience: The main duty for every manufacturing company is to keep the costs down by controlling expenditures and running low cost operations. Almost every brand in the golf industry outsources the production to the Asian countries.

It is very important to ensure that all sales personnel have an adequate knowledge in the product and performance features.3 0.72 0.33 0. 1 wood on the PGA Tour for long.24 3.44 0.64 0.36 0.4 0. By the way.12 0.24 0. From the research.2 0.10 0.16 0.08 1.72 Table 5: Industry Matrix 19 . it took more than ten year for the metal wood to become popular. S trategic Factor Product Performance/ Quality Technological Innovation Price Competitive Market Share Management Team Experience Brand I mage Endorsement Financial Position ¡ T tal Weight 0.54 0.36 0.48 0. Knowledgeable Sale Personnel: The sale personnel is one of the key factors that determine the company success because they are at the customer point of purchase so the good communication is required to maintain the loyalty and to persuade the customer who do not make decision yet.32 3.32 2. the founder of TailorMade has been claimed to be the father of modern metal wood because he began to market the metal wood since 1979.45 0.3 0.45 0.3 0.4 0.36 0.18 0.3 0.11 0.24 0.y Gary Adams.24 3.00 0.45 0.32 0.6 0.10 0. the TaylorMade metalwoods became no.4 0.48 0.51 0.72 0.3 0.33 0.24 2.33 0.2 0.48 0.48 0.33 0. it is stated that 53% of customer purchase decision came from an impulse from point of purchase.45 0.15 0.78 0. The communication can help stress on how the brand is different from competitors͛ brand.54 0. In 1984.00 Callaway Ratin 4 4 3 4 4 4 2 3   Sc ¡¢ £ TaylorMade Ratin 3 3 3 3 3 3 3 3   Sc ¡¢ £ Titleist/Cobra Ratin 4 3 4 3 3 3 4 4   Sc ¡¢ £ Pi ng Ratin 3 3 3 2 3 2 3 3   Sc ¡¢ £ Nike Gol f Ratin 2 2 3 2 3 3 4 4   Sc ¡¢ £ 0.57 0.

The new rule of golf͛s governing organizations (USGA and R&A) on the limitations of technology and innovation. 1. Also the manufacturers were establishing contracts with offshore iron casting house and they are very much selective by the quality and security aspects from preventing off counterfeit. The profits sharply dropped. by making the easier golf game. The declining in the number of golfers. more health concerns in older golfers. limited time to practice. y The company needs long term reputation and there is high level of customer loyalty. According to Porter͛s Five Forces Model. y The rapid declining in number of golfers from difficulty of the game. y Large amount of capital investment required in entering to the golf equipment industry. The Threat of New Potential Entrants ʹ Low level (3 out of 10) The Threats of New Potential Entrants or Barriers to entry are from the following reasons. and high golf fees.8 billion in 2007. the competition aspects were analyzed into 5 dimensions which are. 20 . Golf equipment manufacturers faced a hard time to pursue innovation-base strategies. y Specific knowhow and innovations are needed in making all the equipments.1. y y y y y The declining in retail sales from $4 billion in 2000 to $3 billion in 2003 and had bounced back to $3. 2.Porter͛s Five Forces Model The competition in the golf equipment industry has being tensed and faced with the serious troubles in 2008 from the following reasons. Bargaining Power of Suppliers and Other Stakeholders 2. It is considered Low Level from the threats of New Potential Entrants because the declining of the industry͛s growth. Bargaining Power of Suppliers ʹ Low Level (4 out of 10) Many golf manufacturers have manufacturer houses majorly in Asia. advertisement and endorsement contracts with the golf pros. y Rising in cost of marketing activities such as.

Bargaining Power of Buyers ʹ High Level (8 out of 10) As the number of recreational golf players were declining from many reasons such as. 3. Figure 5: Popularity of sports Other recreational activities such as games. travelling along with the health consciousness programs are in the rising of popularity trends and very low in switching cost. large numbers of recreational golfers had been sharply declining from more difficult game that would not allow the high technology advancement of golf equipment. it has tremendous effects to the whole industry from manufacturers to golfers. 21 . health concerning. Bicycle Riding. Threat of Substitute Products or Services ʹ Moderate Level (6 out of 10) From the graph below. new regulation from the USGA limitation which lead to the more difficult game. Bargaining Power of Other Stakeholders ʹ Highest Level (10 out of 10) As the announcement from USGA and R&A to limit the innovations. While the switching cost is low between rival products and other activities which giving greater power to the buyers. it can be seen that golf was in the declining stage while other sports like Tennis. Hunting. 4. economic downturn. Since golfers did not dare to buy any products those against the USGA͛s regulations. Also the manufacturer who tried to continued produce the equipments. movies. which against USGA͛s rules had face with the failure. malls.2. For example. and Running are rising in popularity.2.

The rising of counterfeit in the golf equipment industry were considerable threat.5. the counterfeit golf products aim for the customers who are the price concern than quality concern. 22 . y The rivals with less development technological were benefited from USGA and the R&A limitation to technology with an opportunity to catch up technology aspects. since 60% of all the golf equipment was produced in China with the good quality almost exactly the same as the copied. However. Which of the five competition forces seem weakest? While the innovation and technologies are required for large capital investment. the strongest force seems to be the bargaining power from USGA or golf͛s governing organization. company͛s reputation. Which of the five competition forces seem strongest? From the case. in order to compensate with the USGA. the new entrants are the weakest competition force.High Level (7 out of 10) y Counterfeit . counterfeit problems. along with the less technology required from USGA created less differentiation between products and brands. Threat of Rivalry Among Existing Firms . Thus. From the competing among golf manufacturers. research and development. and able to earn trust among golfers. This highest level of bargaining power can lead to the direction of the overall industry and each company needs to find its own strategic. Currently. there are many existing companies those offer premium products and their brand is very strong and most of them earn the customer loyalty. which has the widely effect over the technology advancement manufacturers to the declining in number of golfers. These factors considered as the High level of threat of rivalry among existing top firms.

The threat of rivalry among existing firms and the threat of the bargaining power of buyers are at the high level in the same rating scale of 10. However the tense areas.What is your assessment of overall industry attractiveness? Figure 6: Strength of competition forces From the competitive analysis of Five Force model from Porter. low threat of bargaining power over the suppliers. 23 . moderate substitute products. it can be seen that the golf industry still being attractive in many factors such as. those needs to be careful are the threat of bargaining power of other stakeholder (USGA) which is at the highest level of threat. low threat of new potential entrants.

high level of market share. This is an efficient strategy because new products will be able to charge with higher price. 24 .Competitor Environment Analysis Strengths and weaknesses of each company are summarized as follow: Strengths Callaway y y y y y Product performance/quality Technological innovation Market share Brand image Technological innovation Weaknesses y Endorsement TaylorMade y Outsourcing production Asia suppliers to Titleist/Cobra y Product performance/ quality y Endorsement y Product performance/ quality y Custom fitting y Low market share in other segments than golf balls y Market share y Brand image y Lack of variety of product line y Product performance/ quality y Technological innovation y Market share Ping Nike y Endorsement y Financial position Analysis of current strategy and capabilities of each company Callaway Callaway is the market leader in this industry. Although its endorsers are not popular like other competitors. it will not affect much if new products continuously come out with higher price again. and well-known brand image. Major Callaway strengths include product performance and quality. Current strategy is to develop products and to create new innovations continually. Callaway can continue being the leader in this market because of such continually product research and development. If its competitors follow and develop same products with lower price. continuous product research and development.

This enhanced Titleist have good brand image. TaylorMade were recognized as the most advanced in technology for the metalwood drivers. There is a potential to lose its confidential information or its competitive advantage. Current strategy of TaylorMade is to outsource its main production to Asia Suppliers to improve its operating margins. Next step for TaylorMade should be the same about continually product innovation. increasing market share in other segment is important to accomplish. its business has possibility to go down in case that losing golf balls market share to competitors. it maintained its lead in the driver category by continuously launching new models to the market. More than 90 percent outsourcing its production is very risky because of high level of suppliers͛ dependence or reliance. The company should not focus only golf ball segment. As such. This is a good strategy but we see this is a weakness.TaylorMade In the past. If the company is strong only in golf balls. it did not push much effort to expand its market share over other golf equipment. This can improve its market share over other golf equipment. Moreover. it can use its recognition and good image to guarantee the quality of other golf equipment. For outsourcing. Furthermore. It had endorse contracts with over than 100 PGA Tour professionals. it provided recognized golf equipments that professionals and better recreational golfers prefer. It can face with crucial problem if any suppliers͛ problems or conflicts. 25 . Titleist/Cobra Titleist golf balls are recognized as superior products comparing to its competitors. However. Moreover. We suggested that the next strategy should be the same that to continue providing high quality golf balls. Outsourcing means that TaylorMade has to share knowledge and innovation to external parties. it should reduce the ratio for production outsourcing.

It should invest more in research and development and produce more product lines. To hold the advantage of Tiger Woods endorser. However. it had the limitation of product lines and unlikely to innovate in new areas. This is a strong current strategy for Nike. while Nike Golf is strong in its brand image and endorser. Another strategy should be focused on gaining more market share gradually during the short-term period. However. Nike has to spend huge budget over the endorser contract. As a result. Ping was the leader in the iron segment by providing customers with custom fitting. a good and well-known endorser does not always guarantee the success.Ping In 2008. As shown in the case. This can make Ping have better brand image and more popularity. its strategy should focus on product development to eliminate the poor performance perception in the market. As mentioned. Well-known endorsers and acceptable product performance are key success factor that Nike Golf must take into its strategy. to become a leader of golf equipment manufacturer is quite too long. This budget is not a big concern for Nike because of its good financial position. 26 . Nike Golf received the perception that its products are not good golf equipment. the fifth golf equipment manufacturer. it was ranked as the fourth largest seller of drivers. it was the leader in the iron segment. Nike continuously signed contracts with Tiger Woods to endorse Nike products. its market share can be improved although it will be still ranked as the fourth. As Nike Golf is a new comer in golf market. Therefore. Therefore. comparing to other manufacturers. The weakness over its putter should be improved by Nike Since 1996.

As a result. the number of European and Asian golfers were also significantly high as the statistic shown that 2 million Europeans and 17 million Asians played golf in 2007. professional golfers and recreational golfers. Distribution channels There are three main distribution channels which are pro shops. Customers͛ current needs and future needs There are two type of golfers. the manufacturers should keep focusing on product innovation within the USGA and R&A rules. the leading brands are available in online retailers at cheaper price comparing to pro shops and no taxation and this channel also sells discontinued 27 y y y . For example. Therefore. mass merchandisers or sport stores. golf industry should mainly target on American. while low-end equipments are available mainly in discounters. discounters or sport stores and online retailers. Therefore.7 million people in 2007). however. The future needs are still focusing on the capability of the equipment which provides good performance within the limitation of USGA and R&A. All manufacturers try to maintain and increase their market shares. most of golf industry͛s revenue earned from core golfers which accounted for 91 percent of round played each year and 87 percent of golf equipment sales. the competition in the market is very intense. Degree of penetration According to the declining in number of golfers and increasing in counterfeit manufacturers.Market Environment Analysis The golf equipment manufacturers need to analyze external factors which impact on the market in order to develop or adjust their strategies. However. Pro shops and non pro shops provide different kinds of products which match with the brand positioning and target customers. which have professional for consulting. Professional golfers need good quality and performance of the equipment while recreational golfers need the equipments which help them play easier and perform well which its cost is not too high. six leading manufacturers created an alliance in order to diminish the counterfeit manufacturers. Asian and European especially frequent golfers. Nevertheless. the degree of penetration is low. There are various external factors as follows: y Target market The target market of golf industry was focusing on American (22. The leading brand equipments are available in pro shops. membership fee and green fee.

golf equipments͛ price is marked up in pro shops since there are other services offering such as custom fitting and advice. Since major revenue of golf industry are earned from core golfers and they are willing to pay more on pro shop in order to get some advice and custom-fitting instead of purchasing in internet at lower price. They want to get the equipments which match with them. According to the very high differences in price. Channel mark ups As we mentioned before. thus.y y y models of leading brand at very cheap price.  Health concern: Over 40 years-old golfers tend to concern more about injury from playing golf. Therefore. o The declining of golfers There are various factors that result in the declining of golfers as follows:  Game difficulty: Golf equipment manufacturers are forced to follow the new USGA and R&A rules. Golf equipment manufacturers are forced to launch the equipment within the limitation. new golfers and some of non-frequent golfers don͛t want to invest a lot. o The rising of counterfeit According to outsourcing China for some products. 28 . recreational golfers are suffered from the limitation of golf equipments. Current trends o Limitation of innovation According to new USGA and R&A rules. golfers have many channels to look for their golf equipments. Therefore. As a result. as a result. They cannot enjoy playing golf as much as before while new golfers face the difficulty of playing.  Time consuming for practice: According to the limited innovation of golf equipment.  High golf fee: Some golfers realize that golf fee is high. the product differentiation is not quite high while recreational golfers do not enjoy playing due to lack of innovational equipment. Therefore. golfers might purchase at pro shops if they want to get some services while some golfers might buy via online if they concern about price. some infrequent recreational golfers might not concern much about counterfeit goods. Price-sensitivity The level of price sensitivity is low. golfers need lots of time to practice while they also have take responsibility to their job and spend time with their families. the employees stole mold to produce counterfeit goods or the firms run extra hours to produce goods for black market. the proportion of this segment is declining. they cannot practice frequently. However.

for example gloves. to the driver to increase their performance and be able to remove it when using for competition. This would overcome the limitation of regulation and encourage recreational golfer to buy more innovation products. the counterfeit problem will need to take to a serious consideration in this case for both Callaway Golf and TaylorMade-Adidas Golf. y y y Moreover. The large number represents great opportunity for the overall industry. for example. Thus. customer can adjust some components. Expand to Asia region: As it states in the case that the number of golfers in United States is dropping. the companies should develop golf equipments for female. they should concentrate more on building brand to create customer positive perception for their product. and TaylorMade-Adidas are sharing the same target customer. golf bags to attract this new segment. Callaway expert in club head. Therefore the golfers in Europe and Asia remained with the large number of & 2 million and $17 million respectively. such as. these three companies should become strategic partner to increase overall revenue of innovation equipments market by develop new Handicap System special for recreational golfer. gender and income which the municipality and public golf course in US would like to create wide range of accessibility income level. either by race. Fortune Brand expert in golf ball. the recommendations of particular brand are as follow: y Customizable products: The product should provide customization function to attract both competition golfer and recreational golfer.Recommendation Callaway Golf. since this problem is severe over the Asian countries. weight plug or club head. Table 6: The ranking in each golf equipment category by year 2007 29 . Expand to new segment: As for the growth in female golfers. For example. Fortune Brands. Each of them has strength in particular product. footwear. However. They may launch more fashion apparel. Strengthen their expert product: Since each company has strategic product.

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