Case #3: “COMPETITION IN THE GOLF EQUIPMENT INDUSTRY” From its earliest beginnings in the 1450’s, golf was a peculiar game that tested the individual skill of each person who played. It is a game that takes a player on a journey through a number of “greens. ” The player must try to get the small, hard golf ball into the “green” or “putting green” which contains a hole in the ground. The player can only hit the ball with a golf club. Golf equipment, such as golf clubs, golf balls, and the like are the subject of this report.
There are five competitive forces: “competitive pressures stemming from buyer bargaining power and seller-buyer collaboration; competitive pressures coming from companies in other industries to win buyers over to substitute products; competitive pressures stemming from supplier bargaining power and supplier-seller collaboration; competitive pressures associated with the threat of new entrants into the market; and competitive pressures associated with rivalry among competing sellers to attract customers.
This is usually the strongest force)” (Gamble & Thompson, 2011). There are a handful of rival competitors in the golf equipment industry. The leading manufacturers and marketers of Golf Equipment were Callaway Golf Company, TaylorMade-Adidas Golf, Titleist/cobra Golf, Ping Golf and Nike Golf. Innovation in regards to new technology “as allowed by the USGA and R&A, product performance, brand image, tour exposure, and price were the competitive forces that had the greatest effect on the industry.
In 2009, most golf club manufacturers had met dimension, volume, CT, and MOI limits and were attempting to achieve differentiation in drivers by either lowering the center of gravity to increase launch angle or by offering clubs with adjustable features” (Gamble & Thompson, 2011). The pace of rivalry is not becoming more intense since the industry services a limited amount of players and must work within the industry’s guidelines and regulations. Drivers of industry and competitive change include “changes in an industry’s ong-term growth rate; increasing globalization; emerging new internet capabilities and applications; changes in who buys the product and how they use it; product innovation technological change and manufacturing process innovation; marketing innovation; entry or exit of major firms; diffusion of technical know-how across more companies and more countries; changes in cost and efficiency; growing buyer preferences for differentiated products instead of a standardized commodity product; regulatory influences and government policy changes; and changing societal concerns, attitudes, and lifestyles” (Gamble & Thompson, 2011, p 61).
Differentiation of product, quality control, and touring professional golfers’ endorsements and their design preferences, along with other industry forces continue to shape the golf equipment industry. A charismatic professional touring golfer with perfected golf skills can bring a lot of positive changes to the golf industry. This might lead to increased awareness and viewership, an increased number of new golfers and returning golfers, and innovative design of products.
Key success factors (KSFs) may include “particular strategy elements, product attributes, resources, competitive capabilities, or intangible assets…and answers these questions: on what basis do buyers of the industry’s product choose between the competing brands of sellers? That is, what product attributes are crucial? ; given the nature of the competitive forces prevailing in the marketplace, what resources and competitive capabilities does a company need to have to be competitively successful? and What shortcomings are almost certain to put a company at a significant competitive disadvantage? ” (Gamble & Thompson, 2011, pg 67, 69). Common key success factors include “technology-related; manufacturing-related; distribution-related; marketing-related; skills- and capability-related; and other types of KSFs” (Gamble & Thompson, 2011, p 68). Technology, innovative design, and cost control are the key factors that determine success of companies competing in the golf equipment industry. Callaway Golf, Ping Golf, and Taylor-Made Golf utilized the innovations in club head design the best.
Important factors in evaluating industry and competitive environment include: the industry’s growth potential; whether powerful competitive forces are squeezing industry profitability and whether competition appears destines to grow stronger or weaker; whether industry profitability will be favorably or unfavorably affected by the prevailing driving forces; the company’s competitive position in the industry vis-a-vis rivals; and how competently the company performs industry key success factors (Gamble & Thompson, 2011, p 69).
Net sales for Callaway Golf is: $1,117,204,000 in 2008 up from $934,564,000 in 2004; TaylorMade-Adidas Golf is: €812,000,000 in 2008 (when the exchange rate was 2. 008 US dollars for every €1) up from €633,000,000 in 2004; Fortune Brands’ Golf is: $1,369,000,000 in 2008 up from $1,212,000,000 in 2004. Operating income for Callaway Golf is: $84,188,000 in 2008 up from ($24,702,000) in 2004; operating profit for TaylorMade-Adidas Golf is: €78,000,000 in 2008 (when the exchange rate was 2. 008 US dollars for every €1) up from €60,000,000 in 2004; Fortune Brands’ Golf is: $125,000,000 in 2008 up from $154,000,000 in 2004.
TaylorMade-Adidas Golf is doing extremely well. TaylorMade-Adidas Golf seem to have a strategy that copes strategically well with the competitive forces prevailing in the industry. The recession of 2008-2009 was very telling in the financial performance of the industry’s major sellers. Some increased financially while others decreased. Callaway Golf ‘s net sales decreased $7,387,000 in 2008 from 2007; TaylorMade-Adidas Golf’s sales increased by €8,000,000 in 2008 (when the exchange rate was 2. 08 US dollars for every €1) from 2007 numbers; Fortune Brands’ Golf decreased $31,000,000 in 2008 from 2007. I would recommend more research and development to Callaway Golf. I would also recommend that their employees play golf with their clubs, balls, and other equipment and suggest product design to an unbiased top management. Perhaps Callaway Golf could make a few high-end specialty items that cater to player preferences including players with disabilities. Buyer access to its product line could also be streamlined and revamped to include low or no-cost shipping and handling.
To Fortune Brands, I would recommend selling the golf division. It seems like Fortune is in the golf business to make money and although this is an essential trait, the golf business requires the company to be all in it to win it. I would recommend buyer seminars, classes, instruction offered to TaylorMade-Adidas Golf customers and business clientele. I would suggest that notification of these instructional seminars be marketed through high-end retailers and office pools in locations where golf is an accessible sport.
Maybe a golf celebrity or other celebrity could show up at the seminars to increase the enthusiasm of TaylorMade-Adidas Golf product line. I would suggest that TaylorMade-Adidas Golf research the options of wider distribution points such as the internet and other outlets. If the issue is the instructional experience of the buyer, perhaps TaylorMade-Adidas Golf could offer some quick internet video access instruction or live instructional seminars (as mentioned above) to the internet buyer as well.
Essentially, a company is to perform at its best capacity: “And whatsoever ye do, do it heartily, as to the Lord, and not unto men” (Colossians 3:23) and “Let every soul be subject unto the higher powers. For there is no power but of God: the powers that be are ordained of God” (Romans 13:1) REFERENCES Gamble, J. E. & Thompson, Jr. , A. A. (2011). Essentials of Strategic Management: The Quest for Competitive Advantage: 2nd Edition. New York: McGraw-Hill Irwin. Holy Bible (KJV). Public Domain.