Question

THE COMPANY HISTORY

Callaway Golf got its start in 1982 when the late Ely R. Callaway invested $400,000 for half interest in a golf club company called Hickory Stick. Callaway-Hickory, later renamed Callaway Golf, had sales of just $22 million in 1990 and was considered a small player as an OEM (original equipment manufacturer) for golf clubs. Callaway Golf made golf history and truly established itself in 1991 with the introduction of a very popular stainless-steel driver called “The Big Bertha.” The Big Bertha driver was soon followed by one of the biggest- selling drivers of all time, the titanium headed “Great Big Bertha.”

The success of the Big Bertha products—drivers,

irons, and fairway woods—made Callaway Golf a major player in the golf club business and the oversized tita- nium driver explosion was on. The Big Bertha name and product line continued with Steelhead, Hawkeye, ERC, C4, and ERC Fusion. Recent additions include the FT-3, FT-5, and FT-i irons and drivers, the Odyssey putter line—the most popular putter in the United States, Europe, and Japan—as well as the Callaway Golf X Ju- nior set for 8- to 12-year-olds with a manufacturer’s sug- gested retail price of $275.

By 2007 Callaway revenues exceeded $1.0 billion annually, making Callaway Golf one of the major OEMs in the business of golf. Callaway sells drivers and fairway woods, irons, and putters under the Callaway, Odyssey, Ben Hogan, and Top-Flite brands and also markets balls and accessories such as golf bags, gloves, headwear, foot- wear, and umbrellas. The Callaway trademarks and ser- vice marks are also licensed for products such as golf apparel, watches, travel gear, and eyewear. In November 2006, Callaway launched an online store where customers can order pre-owned golf products.

BUYER BEHAVIOR

Golfers, pros, and amateurs experiment with drivers, fairway woods, and putters more than other clubs in their golf bags. Many top professionals and amateurs choose to play with their favorite irons for years before chang- ing. Callaway Golf made a cunning decision to enter the club market the way it did in the late 1980s and early 1990s. By introducing drivers and uniquely designed fairway woods, clubs that players often change in the constant quest for distance and accuracy, Callaway Golf quickly became a name and force in the golf club equip- ment business.

THE GLOBAL GOLF MARKET

The golf industry has a broad and diverse global market. The game is popular around the world. The game and the rules are essentially the same everywhere. Golfers share similar characteristics and interests—a beginning golfer or an avid golfer in the United States is not much differ- ent from a beginning golfer or an avid golfer in Australia or Germany.

APPENDIX D Alternate Cases

The professional golf tours have done much to link golf as a global sport. Golf enthusiasts from around the world can follow their sport and stars through televised tourna- ments, daily newspaper coverage, weekly golf journals, monthly golf magazines, and the Internet. Golf-related websites are among the most popular sites on the Internet. The Golf Channel on cable television continues to be a strong venue for direct product marketing as well as inter- national event coverage. Golf is truly a global sport. Courses and competitions exist in many countries and on every continent except Antarctica. Professional and ama- teur players from around the world compete and interact with a high degree of etiquette and sportsmanship. Golfers at all levels share ideas and experiences from the game.

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There are notable differences among global golf mar- kets. Japanese golfers seek out technology and products to compensate for their smaller average stature. Savvy golf equipment manufacturers have developed clubs specifi- cally for the Japanese market with different head shapes, weight, lie angle, and shafts adjusted for the average Japanese golfer’s height. And the long or distance ball is very popu- lar. In the United States, distance balls are inexpensive and fairly low-tech. In Japan, distance balls can sell for up to 500 yen each or more than $49 per dozen. While many

U.S. golfers—regardless of ability—seek out the equip- ment used by professional golfers, Japanese golfers often think they are “not worthy” to use top-caliber equipment.

“In the U.S. we talk about the pyramid of influence and how the best players dictate what everyone else wants to buy,” says Maki Shinoda of Nike. “But in Japan, you basically need to flip the pyramid upside down.” This creates an interesting challenge for golf equipment manufacturers— technology sells, but manufacturers must also consider how best to position the product for the Japanese market so that it does not appear to be “too professional.”

COMPETITION

The golf equipment business is a highly congested and very competitive marketplace. Many merchants exist, and the field is constantly changing with new start-ups, mergers,

and acquisitions. Major equipment manufacturers include Titleist, TaylorMade, Callaway, and Ping. Adams, Cleve- land, Wilson, Mizuno, Nike, and others also compete for a slice of the multibillion-dollar worldwide golf equipment market. Almost all well-established club manufacturers have followed Callaway’s “Bigger Is Better” philosophy when it comes to the marketing and manufacturing of popu- lar drivers. In many respects, today’s design and engineer- ing for drivers has been a contest of who can make the most forgiving, longest-driving club that technology and the rules of golf allow. Premium clubs today not only offer technological innovation, forgiveness, power, distance, and accuracy, but they are also pushing the laws of physics and the rules of golf.

CALLAWAY’S INTERNATIONAL MARKETS

For Callaway Golf, the global market is a very big part of its total market, with about 44 percent of all sales coming from golfers in countries outside the United States in 2006. The global market has grown in importance since the U.S. market—estimated at 28.7 million golfers—is relatively stagnant in terms of participants and number of rounds played (around 500 million annually). In fact, for the first time since World War II, more golf courses closed in the United States in 2006 than opened.

The Japanese golf market has yet to recover from a se- vere economic downturn in the 1990s, and this has hurt Callaway and other golf equipment manufacturers. The typical Japanese golfer is male, spends approximately 480,000 yen ($4,500) per year on golf, and plays 6.8 times a year, practicing 9.5 times a year. Although the cost to golf in Japan has actually fallen as the economy struggled (which should have helped make golf more af- fordable, boosting rounds played), demographics are now a huge factor. Forecasts predicted that Japan would see negative population growth for the first time in its history in 2007. Younger golfers are working more hours to sup- port themselves and the aging Japanese population, leav- ing them fewer hours on the course to enjoy themselves.

One of the hottest Asian markets is South Korea. More than 30 percent of Korea’s 4 million golfers are women, compared to 10 percent of U.S. golfers. Korean women account for the lion’s share of the $600 million in golf and apparel/footwear sales tallied at retail compared to hard goods sales of $275 million. The female golf market is also growing faster than the male market in Korea. Pur- suing the style-conscious female golfer domestically and internationally would represent a change for most golf equipment manufacturers, including Callaway.

What appeals to style-conscious women golfers? The upscale Shisegae Department Store in Seoul provides

some insight. Shisegae devotes nearly an entire floor to golf equipment and apparel and nothing is cheap. Most of the customers are women. The TaylorMade r7 driver re- tails for 750,000 won ($810). Nearly every shirt costs at least $300! Form-fitting, stylish apparel is the norm. No khakis found here. The sale rack has a plethora of size large items, unlike U.S. stores where small sizes domi- nate among unsold merchandise.

Nike has a significant head start over many of its rivals in this market. Korean consumers aspire to look and dress like celebrities, and Nike has LPGA stars Michelle Wie and Grace Park endorsing and using Nike golf products.

ISSUES

In sports, it is often said that getting to the top is easier than staying there. Callaway Golf is faced with the bur- densome task of sustaining its phenomenal growth and market share against competitors in hot pursuit. Discount- ing and innovation by competitors are challenges that Callaway now faces. Fast followers like Adams Golf and others have developed and discounted products that cut into Callaway’s mainstay, the driver, fairway wood, and specialty club market. Callaway and others have been left swimming for higher ground, moving into discount stores such as Target, as discounting and dumping have changed the market share landscape. Callaway has often resisted discounting its premium product line.

Technology does drive the industry. In 2004, Adidas-

Soloman A.G. (TaylorMade) released a driver with tech- nological innovation unlike any other on the market. TaylorMade’s new driver, the r7 Quad, introduced a unique interchangeable weighting system that allows golfers to customize their driver for different course con- ditions and desired ball flight. More than three years later, the TaylorMade r7 was still arguably the most popu- lar driver on the market.

Other big players in the equipment business are also after Callaway’s market share and may pose a greater threat to Callaway’s long-term success. Titleist, Taylor- Made, and Ping are large enough and strong enough to survive any market slump and also have the resources to buy smaller successful companies and the technology to provide popular products.

Steps have been taken by golf’s ruling bodies—the United States Golf Association (USGA) in North America and the Royal and Ancient Golf Club of St. An- drews (R&A)—to limit driver head size (larger heads im- prove forgiveness on off-center hits) and coefficient of restitution (the springiness of the club face surface that creates a trampoline effect producing more distance). Many of the golf greats believe more should be done to protect the game and have bemoaned the fact that tech- nology and equipment advances have changed the game

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for the worse. Jack Nicklaus says, “It used to be 80 per- cent shot making and about 20 percent power.” Those percentages have been reversed today, according to Nicklaus. Many classic golf courses have been rendered obsolete for professional tournaments by balls and clubs that allow players to reach the greens on par four holes in one shot and par fives in two shots.

There are calls to restrict the type of equipment pros can use for tournaments. Equipment manufacturers are not eager to back away from pursuing technological ad- vances. The vast majority of customers are amateurs looking for any edge to improve their games, and one way is through more forgiving equipment. What will happen to the “pyramid of influence” if the pros or even amateur tournaments have to be played with a “handicap” on con- forming equipment rather than the latest, greatest, most forgiving equipment? Will it protect the game and put more of the emphasis back on skill?

The newest and potentially biggest golf market is now emerging in China, where golf is becoming a popular choice for a growing population of young professionals.

Although there are currently only about 1 million Chinese golfers, an annual growth rate of 25 percent is forecast over the next five years. The key to future global growth for the golf equipment industry may be in the budding Chinese market or the growing Indian market, also ex- pected to grow at the same healthy rate as the Chinese market.

Questions

1. What are the pros and cons of a global versus a multi- domestic approach to marketing golf clubs for Callaway? Which approach do you feel would have more merit and why?

2. What are 3 significant environmental factors that could have a major impact on the marketing of golf clubs internationally? Briefly explain each factor you list.

3. What marketing mix recommendations would you have for Callaway as it attempts to increase international market share, especially in Asian markets? (price, product, promotion, place)

plz read case study and give the following answer

Answer 1

This case study is about Callaway Golf sporting goods company which manufactuers, design and sells golf equipments. It's success is highly credited to their approach towards technology and innovation. Due to increasing market competition, target customers have another options to move to other brands. Callaway wants to increase their market shares in Asian countries. The company needs to make the strategies and understand the demands of the local market to capture market shares.

Ans 1 :

Pros and Cons :-

Multi Domestic Approach:

• Focus based on local market & needs of consumer
• Management structure is decentralized

Global Approach :

• Focus on global market
• Management structure is centralized.

According to analysis Multi-Domestic approach is more preferable as because of changing continually demand and needs of the customers playing golf in different part of world.

Ans 2 -

3 Environmental factors :-

1. Technological
2. Political
3. Economic

• Technological :- This enviromental factors provides the opportunities for Callaway to develop the advanced technologies and integrate with its proucts
• Political :- Better market penetration in other countries which adopt free trade policies. This factor is helpful to improve the Callaway's market presence in global expansion.
• Economic :- Rapid growth of the developing market has threat to the company's market shares. Callaway can also increase its operations in the developing countries.

Ans 3 -

Marketing Mix for Callaway :-

Product -

• This element of Marketing mix is concerned with developing the right “product” for the target market.
• Introducing New Product line.
• Research and development in quality, design, size, features of golf equipments and accessories.

Place -

• This element of marketing mix refers to where the company's product are sold.
• Callaway's Retail Stores, online store(website).
• Retail store should be in those area where distributors can easily access.

Price -

• Diffrerent prices for the different target markets.
• Pricing strategies must emphasize on maximizing the profits and generating higher sales and revenue by providing valuable product than competitors.

Promotion -

• Advertising- celebrity endorsment
• Discount coupon and offers to attract more customers
• Personal selling, Public reletion.