CASE STUDY 4: 3. How is the golf equipment industry changing?

What are the underlying drivers of change and how might those driving forces change the industry? The golf equipment industry has been changing drastically in the past decade due to technological advances and regulations placed upon the Professional Golfers Association (PGA) and other pro golf tournaments. The golf equipment industry was changing by 4 driving forces which are the regulation from USGA and R&A, the number of golf player and their frequency of playing, the counterfeit golf equipment and the last one is the touring professional endorsement contract fee.

a) The regulation from the united states Golf Association (USGA) and the royal & Ancient Golf Club (R&A) These two organizations have constantly established series of new rules to set the boundary in which the golf equipment with advance technology could give superior performance and advantage to some golf players over those with older technology. The USGA and R&A have announced the limitation on many aspects even though there is little evidences that technological advance of golf equipment will lower the score. The regulations that enforce rules on club head size and performance also increase the profitability to shaft manufacturers. The USGA allowed interchangeable shaft which mean that golfers can install different shafts into the driver head to have different launch characteristics. So the differentiation of golf club changes toward the compatibility with shafts. The skilled core golfers might have strong preference for a particular shaft and select golf club based on which club is compatible with their preferred shaft. The introduction of new regulation will also have an effect on the industry competition as the competition will shift from technological capabilities to price competition and endorsement contracts.

b) The number of Golf players and their frequency of playing The trends of golf playing are going down because of many factors or reason, the several reasons are, Difficulty of the game which disappointed the existing players and make them quit playing Lack of free time the play and practice from many reasons Health concern and injury from playing High playing fee These factors are accountable for the declining trends of golf industry and will reduce

the profitability while increase the intensity of competition of overall golf equipment industry. c) The counterfeit golf equipment

The counterfeit golf equipment were coming to be the threat to golf equipment industry since golf equipment manufacturer decided to outsource either the production or assembly or both to China. There are many ways to imitate the legitimate product such as reverse engineering, mild stealing and after hours production. So the counterfeit golf equipment can look nearly the same as the genuine branded product while price can be extraordinary low. This would reduce the profitability of the company who outsources to China because some people who concern over price will go for the counterfeit and the company will need to invest some capital to hunt down these counterfeit goods. d) The touring professional endorsement contract fee Most recreational golfers based their buying decision toward the brand of clubs and golf balls as their favourite touring professionals equipped. Therefore, the competition on endorsement contracts is getting more intense which make the endorsement contract value soar. The data shows that the endorsement fee of PGA tours top 10 golfers had been raised from between $250,000 to $400,000 in 1990s to $4 million in 2007. The soar in endorsement fee will directly lower the profitability of the company. But they cannot escape from this expense since the enhancement on brand image is needed.

4. What does your strategic group map of the golf equipment industry look like? Which strategic groups do you think are in the best positions? Which are in the worst positions?

Strategic group maps are revealing in several respects. The most important has to do with which rivals are similarly positioned and are thus close rivals and which are distant rivals. For this industry, all players can be group in different strategic group respect to the way they strategically position their product based on Product retail price and product/Technological Innovation. In this industry, they are 3 main strategy that we could classified which are High-end manufactures, Lo-end Manufacturers and the last one is Counterfeit Manufactures. Figure 1 shows the strategic group map application of the golf equipment industry.

HIGH

Best Position Made-Adidas Titlists/Cobra

Product/Technological Nike & Other Low-End Manufacturers

Worst Position Counterfeit Manufactures

LOW

LOW

Retail Price

HIGH

Figure 1: Strategic Group Map in Golf Equipment Industry The High-end manufacturer group includes Callaway Golf, Taylor made Adidas Golf and Titlists / Cobra golf which offer good quality and technological advance of golf equipment at premium price. They spend a large budget in R&D and marketing activities. Also, they mainly sell professional equipment to professional and core golfers. While the Low-end Manufacturer group includes Nike and other Low-end manufacturers which mainly offer golf equipment that are less technological advanced at cheaper price to recreational or amateur golfers. For Counterfeit Manufacture group, it represents manufactures which illegally sell imitated golf equipment products at much cheaper price than legitimate and original products. By taking these 3 strategic groups into consideration, the High-end manufacturer group is considered in the best position, while the Counterfeit Manufacture group is considered in the worst position.