Callaway Golf Companys Case

Callaway Golf Company is driven to be a world class organization that design, makes the delivers demonstrably superior and pleasing different golf products that incorporate breakthrough technologies, backs those products with noticeably superior customer service, and generates a return on the shareholders in excess of the cost of capital. “CGC was led by Ely Callaway, a powerful motivator who defined the company’s culture.” It’s a world famous golf brand of club and product. CGC’s sales had increased from 1988 to 1998. However, CGC’s sales have decreased after 1999. What are the problems to stop that eagle? “In fall 1999, Callaway faced these questions; the answers would guide him in refocusing CGC’s retail channels, new-product development, and marketing strategies.” In my case study, I will focus on new-product development and described my plan. Logistic include products transport, warehouse, and information processing center.

External Environment

In the Figure 4, CGC is in the Cash cow. It means high relative market share and low market growth rate. That’s because CGC is well known in the world and their products in a lots of retailer stores and the clubs are famous. When Callaway bought into the company his first initiative was to develop original products. Innovation and superior performing products are important in golf because equipment is thought to have a significant impact on player performance. Moreover, innovation was important because CGC had to be the technological leader to sell its products at premium price and continue to exceed customer expectations. But his competitors more focus on specific target market. Technologically superior products reinforced CGC’s high quality brand and kept customers from switching brands. In the external environment influence, customers more likely have special clubs and low cast. Not high pay for every years. Customers are no more loyalty.

Analysis

For the external analysis, the company has a lot of opportunities. Owing subsidiaries in different parts of the world like Korean, Australia, Japan and Canada. Not many athletic good manufacturers are expanding in the golf market. The world population is aging and many old individuals are playing golf, they have the flexible income to purchase the golf equipment. Also, in New England state, Mid- Atlantic state and parts of south west, there are many golf players and the number is increasing. In Figure 3, CGC strengths are new-products development and well known in the world. The weaknesses are high prices and company relied more heavily on off-course shops. The opportunities are new-products on existing markets and marketing strategies. The threat is new-products sales decrease, low prices, cannot have good value. I will talk about products transport and warehouse in my first step, information processing center will be a follow page.

The catastrophic storm that not only affect the golf round during the storm but also for a significant period of time. The external analysis will be changed because of facing different economic and comparative situation in the global market.

There are several reasons that will treats the external analysis. High rate of unemployment and increase in consumer debt level. Decline the consumer confidence and spending year by year. One of the most important reason is that the increase of Euro to Dollar had a negative impact on the sales in Euro terms.

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For internal analysis, Callaway golf company products are designed and built on an eight building campus in Carlsbad, CA, where the majority of the company’s thousands of employees work. New technologies and production methods turned the small golf club manufacturer into the world’s largest maker of premium golf club and a dominant force in the industry.

Callaway consumers can have the trade in allowances. From their previously clubs toward to the new Callaway clubs. This option has become popular for consumers looking to upgrade their equipment.

However, the internal analysis is also has the weakness. Callaway marketing is limited and focused on promotion through professional players. It is very difficult for the company to track the imitations, which results in high administration cost and loss of revenues.

Global Manufactory and Warehouse

CGC need to set up manufactory in different countries for new-products’ transporting and saving. In figure 1, I can clearly find that CGC is in the Product development’ square, the top right side. It means new-products for the existing markets. “To achieve that, CGC had to consistently be on the leading edge of technology and to continually exceed customers’ expectations” (CGC’s case page 505). CGC need to make new-products to continually exceed customers’ expectations. But that “CGC’s biggest challenge, therefore, was to have products differentiated not only from competitors’ products but also from its own. If a product stayed in the pipeline too long, even if it was the best product, its sales would begin declining. This decline occurred because the people who really wanted the product would buy it within the first two years of its introduction” (CGC. 4). The key word is “pipeline”. What is that? It’s “a conduit of pipe, especially one used for the conveyance of water, gas, or petroleum products”( http://www.thefreedictionary.com/pipeline). Yes, products transport. CGC’s wasted time in new-products transportation. For instant, main manufactory transports new-products to global market need a month. If CGC has global manufactory, they just need a week or least in the transportation. That is the reason why manufactory set in foreign countries is very important stratagem. For instant, Apple Co. set his manufactory in China, cheap labor and costing, and than area manager saved those products in their warehouse in location and reported main logistic manager how many products they reserved. Marketing research, area manager build profitable relationships and create customer delight and reported main company about their area’s demand. And they made every month’s demand figure for data copy. Manufactories know how much product they need to make and warehouse will has enough room for new-product and old one. Aside from that, global warehouse good at fix that demand exceeds supply and supply exceeds demand problems. In CGC’s case, manufactory made new-product and transport to off-cause retailers have at least two problems. One is transport slowly, wasting time and declining value of “new”. Another problem is retailer hasn’t enough room for new-products. The second question CGC tried to use other way to fix. “Closeouts generally occurred when existing equipment was discontinued to make room for new products or when CGC had too much inventory itself and wanted to get rid of it. At the time of a new-product introduction, for example, if a retailer had eight of the previous clubs left in inventory, CGC would supply the store with one more new club for free, which brought down the average cost of the remaining inventory. Once a new product was introduced, the retailer had the discretion to mark down the remaining inventory to a price at which it would sell” (CGC’s case page 514). It’s helpful to make room for new-products and low price to sell closeout. “In 1999, CGC held its own closeout and sold $40 million of excess inventory of Great Big Bertha, Biggest Big Bertha, and Great Big Bertha irons to the market at a lower price” (CGC’s case page 514). If they have global warehouse, that would be saving resource and decreasing supply exceed demand risk rate.

Information Processing Center

Information processing center is the place that customers’ require report department. Their have information collect and transmit system to support manufactory, warehouse, and logistic manager or decision center. In case, CGC’s customers are from True friends shift to Butterflies. In Figure 2, Customers are no longer loyalty and they just need the products to play golf that’s it. New-products are the way to continually exceed customers’ expectations, that’s a reason why CGC need to know what customers needs and wants. “Golf was a difficult game whose participants’ emotions ranged from frustration to addiction, with passion and fun mixed in. Even when played in teams, golfers were very competitive with themselves. Golfers often blamed their equipment for their poor play and thus often wanted to update their clubs” (page 506). Those are all different level’s golfers’ wants and needs, high-level golfers doesn’t matter what type of club they used. Average golfers want to play golf and win the game in golf clubs, so they will keep the clubs. “Although one’s mental state and skill level had much to do with on-course achievement, in golf, unlike almost any other sport, the equipment also had a significant effect on a user’s performance. Even though highly skilled golfers would play well no matter what type of club they used, average golfers were able to see noticeable improvements in their game when they used premium equipment. Beginning golfers also benefited because the more forgiving clubs allowed them to make ball contact sooner, frustrating them less so they would not quit the sport prematurely”(case page 506). Beginning golfers would more advice of salespeople. “For a beginning golfer, buying new clubs was a daunting task. Retail shops offered a wealth of options that forced beginners to rely on the advice of salespeople”(page 507). CGC need to have those require from information processing center and make marketing strategies, refocusing on retailer. For example, focus on salespeople training for new-products promotion. For a beginner, salespeople can promote new-products or some old-model with 30%-50% discount. Old-model with discount would easier for people needs. It would not cast a lot of money and good for closeout from warehouse. And CGC gives those salespeople who are selling master 10% of $500 units sold encourage and 20% maximum. Those encourages also be used to information processing center to collect information from customers’ demand. And transmit this information to decision center.

Summarize

CGC had a premium pricing strategy. It was providing a high- quality product at premium price to the average golfer who was looking for a product to five them an edge in performance.

Callaway’s strategy was successful mainly because its innovative edge. Moreover, the average golfer perceived their products as providing a performance benefit.

The state of the industry also contributed to CGC’s success. During this time period public interest in golf was increasing a great deal. Also the market was not over saturated and the internet was not an important factor in selling products.

Setting up global manufactory and warehouse would increase sales and keep new-products profitable. And the Information Processing Center is more useful to research market and customers feedback and require. It would be helpful for the influence from external environment and decrease threats rate.

Figure 1 The Product/Market Expansion Grid

Existing Product New Product

Figure 2 Customer relationship groups

Long-term customers loyalty Short-term customers loyalty

Figure 3 S.W.O.T.

Positive Negative

Figure 4 The BCG Growth-Share Matrix

High  Low Relative market share