2Questions What are the external factors affecting the industry? What companies are in a strong position? Why?What part of the industry is the ideal place to be?Where have companies failed so far?What companies bought out other companies and was it a good decision?Where is the money made in the industry?Who are the industry’s target market?Who has the power in the industry? Suppliers? Retail channels? Manufacturer?
3What are the external factors affecting the industry? USGA regulations have caused a decrease in technological innovationsAs a result, golf equipment manufacturers became stifled in their abilities to pursue innovation-based strategies directed at making golf easier to play for those of modest talent.Decrease in the numbers of golfers playing the gameThe number of rounds of golf being played has been steadily declining
4What companies are in a strong position? Why? Callaway- Before USGA regulations, Callaway was the industry leader in terms of technological innovations. Big Bertha Driver is the number one selling driverFortune Brand- Their Titelist Pro V1 golf ball captures 40% of the ball market. While their FootJoy brand led the industy in accessoriesTaylorMade- Leading seller of hybrid clubs and second behind Callaway in drivers.Ping- Industry leader in the iron segment fighting for the position with Callaway.Nike- Signed Tiger Woods to an endorsement deal to help sell Nike apparel. Nike golf balls gained 10% of the market share.
5What part of the industry is the ideal place to be? DriversSee Slide 16
7Pest Political Economical Sociological Technological USGA Stifles innovation (drivers, balls, irons) -ThreatWeak anti-conterfeiting laws in China- ThreatEconomicalGolf is very exposure - ThreatWhite dominated sport- ThreatRelationship between income ($100,000) and participation- Threat or OpportunityChina counterfeitingExpensive sport to enter and remain competitiveSociologicalRestrictions are making sport less attractive to potential playersT.V. exposure and charismatic players increase interest- OpportunityAsian Americans, African Americans, Hispanics- OpportunityTechnologicalOnline sales (legal and illegal)- Threat or OpportunityCeiling on technological applications- Threat
8Porter’s 5 forces Core Golfer Non-Core Golfer Threat of substitutes LowHighIntensity of competition?Threat of new entrantsBargaining power of buyerBargaining power of supplierHigh/Low
9Two Major U.S. Market Segments Core Player1/3 (7.57 million) of total golfers fit into this category.Played at least 8 times per year,averaging 37 rounds per year.91% of rounds are played by this category.87% of industry equipment sold, membership fees, and green fees.Non-Core Player2/3 (15.13 million) account for this category
10Major Barriers of Entry to the Sport Issue:CostEquipment cost is highGreen feesAccessories (golf shoes, bags, balls)HealthRetired golfers had time, but failing health.Young golfers had health, but no time.TimeFamily and job responsibilitiesLength of time to play a roundDifficultyDisappointing that low scores do not come quickly.
11Declining Market Male 20 million 2000 to 16.2 million in 2007 19% decreaseFemale5.8 million in 2002 to 5.1 million in 200712% decreaseJunior2.4 million in 1998 to 1.4 million in 200742% decrease
12Market Demographics Men account for 71.4% Women account for 22.4% Juniors account for6.2%African Americans1.3 Million peopleAsian Americans1.1 Million peopleHispanic American1.0 Million people
13Driver regulations Regulation Effect 1998 USGA Coefficient of restitution (COR) testRule would defend against any spring like effect that a high-tech driver clubface might deliver.2006 USGA regulates driver performance Characteristic Time (CT) testThe CT test required that the golf ball remain in contact with the face of a driver for 239 microseconds, plus a tolerance of 18 microseconds was considered evidence of a spring like effect and would place a driver on the R&A’s nonconforming.2006 USGA Movement of Inertia (MOI)MOI would be limited.2004 USGA club head sizeRuled that driving clubs were not allowed to be larger than 5 inches by 5 inches and could not have a volume of more than 460 cubic centimeters.
14Ball and Iron/Wedge regulations Effect:2005 USGA ball regulationManufactures were asked to produce balls that would fly yards shorter than last year model balls.2008 USGA Wedge regulationManufacturers must discontinue producing wedges with sharply squared groove edges on irons and wedges.
15Effects of Counterfeiting The rise of counterfeiting in the golf equipment industry was attributable to the decisions by golf executives to source club heads and sometimes contract out assembly of golf clubs to manufacturers in China.Reverse engineering played a major part in the ability of other companies to produce counterfeits.In 2003 the six major manufacturers created an alliance to identify and pursue both of those who made and those who sold counterfeit clubs. In 2005 a Nike official said that it is increasingly hard to prosecute the counterfeit companies because they just pack up and move their operations somewhere else.In 2008, a set of clubs from a major manufacturer cost roughly $2,000. A counterfeit set of clubs could cost as little as $150-$400.
16Three phases of the sport Rich SportPhase 2:Television induced growthPhase 3: Decline
17Equipment change from 1997-2007 % change in Avg. Selling Price% change in Units sold% change of Retail ValueDrivers-24.68%71.67%29.68%Putters56.63%-14.12%33.71%Irons-5.33%15.45%4.89%Golf Bags-7.94%4.38%-3.49%Golf Balls14.54%5.11%20.41%Footwear-5.81%37.90%28.55%Wedges4.65%37.18%41.42%Gloves1.88%-8.59%11.61%
24CallawayStrength- Big Bertha driver was the best golf product of the centuryStrength- Good company image- President named the most influential golf personStrength- Industry leader in technological innovationStrength- Acquisition (Odyssey-good, Top Flite-bad)Weakness- Lack of leadership after the CEO’s passingWeakness- Late to market in regard to new productsWeakness- ApparelWeakness- Competition in low market share categories (putters)
25TaylorMade/ Adidas Strength- Leader in drivers Strength- Apparel is growing at an increasing rateStrength- Leader and first to market hybrid clubsStrength- Heavily endorsed by PGA TourStrength- Adidas’ acquisition of TaylorMadeWeakness- Competition in Low market share categoriesWeakness- Low market share and respect for their golf ball
26Titleist/ Cobra Strength- FootJoy has 60% market share Strength- Titleist Pro V1 golf balls 40% market shareStrength- Titleist Vokey forged Wedges 22.5% market shareStrength- Titleist Scotty Cameron Putter 10% market shareWeakness- Titleist’s iron line of clubsWeakness- Cobra line extension
27Ping Strength- Pioneer in custom club fitting Strength- Ping was the leader along with Callaway in irons 2008Strength- Putter market shareWeakness- Were very late to market with a hybrid club-2005Weakness- Did not produce a golf ball in 2008
28Nike Strength- Enormously successful in apparel and footwear Strength- Golf ball- 10% market shareStrength- Tiger Woods endorsementWeakness- Poor image quality when they entered the marketWeakness- Golfers didn’t like the sound of the club striking the ballWeakness- Products sell below retail price
29What are the strengths and weaknesses for the industry as a whole What are the strengths and weaknesses for the industry as a whole. (Critical Success Factors)Past, present, future CSF of the industry
30Strengths and Weaknesses for the industry Weakness- Technological innovations limited by USGA regulationsWeakness- Product differentiation became more difficult so manufacturers depended on endorsement dealsWeakness- Manufacturers had to be careful when selecting third-party suppliers for parts over seasWeakness- CounterfeitingStrength- The ability for companies to acquire other companiesStrength- Shaft performance, interchangeable shafts