Case Study Analysis Callaway Golf

The key issues concerning Callaway Golf Company are:

* Relationship with its retail partners

* New product development

* Marketing strategy

Problem:

Callaway has experienced its first loss of $ 27 million after 10 years of growth. Competitors had finally caught up to Callaway's superior R & D capabilities and are flooding the market with new products and promotions, raising the bar for consumers on when to replace their equipment.

Callaway's strategic success in 1988 to 1997 is highly credited to its R & D facilities. Their approach toward innovation and technology provided a cutting edge against the other competitors in the market. The way Callaway was able to continue their differentiation features was through their highly skilled R & D. This was expensive which is why many companies choose not to compete in the area of differentiation. Over a five year period it spent $36.3 million on R & D alone.

Revolutionary "unanswered question" approach produced true market drivers in S2H2, Big Bertha, and titanium. Competitors could not catch up to the technology, enabling premium pricing and superior brand image.

They understood their customer well. They had the ability to identify and solve latent needs (e.g., a driver with accuracy) created a "pull" demand pattern. Pull demand made collaboration of retailers' easy and even enhanced promotion through voluntary celebrity usage. This took design expertise, in addition to understanding the addictive/obsessive/emotional relationship golfers have with their equipment. Selection of the average golfer as target customers tapped into the market most influenced by and likely to discuss golf technology. This is also one of the fastest growing segment, 27 %( 5.4m) of 20m US golfers in 1986, 32% (8.4m) of 26m US golfers in 1998.

Thus the factors that contributed to its success were as follows:

* Performance and quality of its club

* Product innovation

* Sales at of-course retailers

* Premium pricing

* Endorsements & global presence.

Competition Analysis

a. Rivalry among manufacturers of golf club equipment: Competing sellers are fairly active. The competitive weapons are product innovation and product quality. Other factors affecting the intensity of rivalry are globalization and the product differentiation. The overall rivalry is strong and likely to grow stronger, because there is little growth potential.

b. Suppliers of golf club parts and components: Suppliers have weak bargaining power and are not a source of much competitive pressure and seller-supplier collaboration is not really a factor here.

c. Bargaining power of golf equipment retailers and seller retailers is collaboration moderate, about 65% of business was done in off course retails shops while, thus it is very important to have a good relationship with their retail partners. But at the same time the retailers wanted to carry Callaway brand.

d. Threat from new entrants is high e.g. Nike Golf a branch of Nike Inc. Nike, a fairly new entrant, might be able to claim a large part of the market with the introduction of Nike Golf Clubs. Nike is using Tiger's endorsement as a switching cost by linking his worldwide popularity and golfing talent with Nike products, which dramatically increases sales.

e. The threat from Government regulation is medium, but they should make regulation adherence high priority and should not pursue design that will not be marketable.

Consequently, the rivalry of the existing golf club manufacturers is the strongest force, followed by the threat of potential entry into the golf club segment, the competitive threat posed by substitutes, the bargaining power of pro shops and other retailers of golf equipment and the bargaining power of suppliers. The overall strength/intensity of the competitive forces is moderate/normal. This is one of the contributions to the great success of Callaway.

The key issues as mentioned in the beginning are something what the Callaway Company should focus on for a successful strategy.

They should try and improve the deteriorating relationship with their retailers, as mentioned in the case there are no discounts, offered to the retailers and there is inventory management problem. They should provide discounts to retailers, which will provide better margins and more services in order to influence purchaser at the point of sale. One price for all retailers avoids channel conflict. Track retailer behavior to provide varying volumes of sales call. Adopt ways to improve relationship on one to one basis. Also, think of education on retail front. Sales people are the key figures for selling their products they should motivate them, by providing incentives, rebates commissions etc the sales people should make surprise visits, as a customer to see how their products are being displayed and to study the customer's behavior towards their products. They should provide the retailers with physical space for better inventory management, loss of sales were accounted, because there was no replenishment.

The R & D facilities allowed them to continuously come up with new products in the market. In my opinion they are flooding the markets