Callaway Golf Co. Essay, Research Paper

Calloway Golf Co.

Situation Analysis

Situation Analysis

To measure ourselves we must first identify our major competitors and how we match up to them. Our major competitors include Titielst (Fortune Brands), Top Flite (Spalding), Taylor Made, and Ping (Karsten). A complete list of competitors is attached in Appendix A. I viewed our self against these competitors in terms of strategic performance indicators including total sales, profit margin, market share and growth.

CallowayTitielstTop FliteTaylor MadePing

Net Sales (mil)714.5855394308.4150

% Sales Growth26(37)8.211.1

Profit Margin42.2%47%40%38.7%46%

Market Share25.5%30.5%14%11%5.3%

*Estimating Total Market At $2.8 bill.

As the table indicates we are the second largest firm in the industry behind Titielst. This information is somewhat misleading in that Titielst has a much wider product line and we do not directly compete in some areas, such as golf balls (as of yet) and other accessories. The table also indicates that along with Titielst we control over 50% of the entire market. We are currently well positioned as a leader in the industry. Though our growth is somewhat low, the entire industry growth rate slowed down and most competitors? growth slumped.

Internal Strengths

We have numerous strengths dealing in this high velocity golf industry. Due to the rapid rate of golf club design we have a distinctive competitive advantage in our Research and Development department. In 1998 we invested $30.3 million into our R&D whereas Titielst invested only $25.5 million. We have also implemented computer-aided design, computer aided manufacturing, and in-house manufacturing capabilities to decrease the time from idea to prototype. These strengths have given us the ability to constantly be the first to market with innovative products. Though it is not possible to give concrete information on the increased demand due to advertising, we have spent $62.4 mil on an advertising campaign. This is nearly $20 mil more than the leading competitor. We also believe we have a competitive advantage in sales. We have designed a tandem approach to selling, where a regional, traveling sales man accompanies a telephone sales man. None of our competitors uses this aggressive approach to selling.

Internal Weaknesses and Threats

Our weaknesses are due to the fact that we compete in a high velocity industry. Our main weakness and threat is our lack of diversification. We compete in only one industry and it is high velocity. This could pose a major problem if the market slows, or a competitor?s product makes our product obsolete. Another weakness or threat exists in the fact that we rely on a limited number of suppliers for our high quality, highly technical materials. In the event of one of our suppliers to fail to meet our requirements, it would cause major problems in production time resulting in customer dissatisfaction. In terms of threats are the recent regulations being passed by the USGA to limit the ability of golf balls and clubs. This could take away some of the advantage we have in R&D. Also threatening our company is the ?knock-off? brands that illegally copy our product and sell it as their own. We have just completed a four- state sweep to catch illegal clubs and found more than 650 golf clubs infringing on our rights, legal procedures are pending.

Distinctive Competencies

The competencies we have which give us a competitive advantage include R&D, prototype production, and sales force. We invest in our R&D nearly one and a half times the money as our nearest competitor. Also, since we have CAD/CAM and in-house production capabilities this allows us to consistently go to market first with innovative products. We believe our tandem approach to selling gives us a competitive advantage over our competitors due to the increased coverage and service capabilities.

Opportunities in the Industry

There are multiple opportunities in the golfing industry. The most lucrative opportunity that is presenting itself to us is the emergence of the Internet industry. We feel that we have an advantage in the Internet industry due our technical know how, and our dedication to be first to market. Another, opportunity is internationally, we currently have deals in place to sell our product to 40 countries, and that is just the tip of the iceberg. Our specialized sales technique gives us a competitive advantage in our domestic market, and we feel that will transfer into international markets as well. And always an opportunity in such a high velocity industry is the innovation of a new technology. With our in-house manufacturing and CAD/CAM abilities we feel we can bring new technology to market quicker than any of our competitors. An opportunity has arisen through demand of our products, to broaden our product line. We have moved into the phase of manufacturing golf balls. We believe our brand name and technical knowledge will give us an advantage in this segment.

Strategy Suggestions

Before we can decide where we should move, we most first review where we were going. One of our current strategies has been to invest highly in the ability to be first to market. This strategy has worked and has paid big dividends in the past. We have also out-sourced the distribution of our product outside the U.S., and International sales increased over the last two years from 32% of total revenues to 37%. But, we feel this strategy is hampering sales even with the increases. By using our tandem approach to selling we can increase international revenues 150%, and so we have began buying the distribution facilities in foreign markets to control how the distribution of our products are handled In the Internet industry we have only taken the first step, we have a page, and it?s only a page. We should develop Internet sales capability; have an interactive site so the customer will have a reason to return. We have the technical know how to have the good site we must use it. We have begun the strategy of expanding our product line into golf balls and we have not got any sound information on the successfulness of that endeveur. So, we should wait and see how that goes before moving on it any more.

Implementation Steps

 Our first move should be to begin development of a new web site. Included in the web site should be electronic sales capabilities and interaction with the site viewer.

 Next, we should continue and expand on our acquisitions of foreign distributors.

 Continue our massive investments into R&D.

 Assuming the golf ball venture is successful; investigate broadening our product line even more.

 Investigate diversification into other highly technical, molded metal products.

Value line, Recreation Industry, Calloway Golf Co. pgs 1771-1776

www.hoovers.com, Karsten Manufacturing Corporation, Fortune Brands, Inc., Spalding Inc, Taylor Made,

Calloway Golf Co. Company Profiles and Financials

www.sec.gov, 1998-10K reports for Calloway Golf Co. and Fortune Brands Inc.

www.callawaygolf.com, press releases, ?Callaway Golf carries out four state sweep against illegal knockoff businesses?, and, ?Callaway Golf Ball company introduces the new Callaway ?rule 35? golf balls-the easiest choice golfers will ever make?

www.callawaygolf.com, 1998 & 97 annual reports