Competition in the golf equipment industry in 2009

COMPETITION IN THE GOLF EQUIPMENT INDUSTRY IN 2009

Ingrid Gunawan Levana 29110401Irdra Firstyadhika 29110405Wisnumurti Rahardjo 29110412

BACKGROUND

Development

Recession (2008 – 2009)

Lifestyle

Counterfeiters

Development -- USGA

• USGA developed COR measurement would defend against any “spring-like”

1998

• Driving clubs not allowed to be larger than 5 inches by 5 inches and not have a volume of more than 460 cm3

2004

• MOI would be limited to 5,900 g-cm2 with tolerance of 100 g-cm2

• All golf ball manufacturers develop prototypes of golf balls that would fly 15-25 yards shorter than current models

2005

• Golf equipment manufacturers must discontinue producing wedges with sharply squared groove edges on irons and wedges

2008

Recession (2008 – 2009)

$ Coincided with tumult in the credit and housing industries$ Increase in US Gasoline price$ Loss of jobs was much worse than would be expected$ Government pushed to increase saving $ Falling consumer confidence and the massive spending pullback

Lifestyle

Lack of free timeJob responsibilitiesFamily responsibilitiesHealth concerns

“Ex-Golfer”• The difficulty of the game• The disappointment of many golfers that

low scores

Participation rates for selected sports and recreational activities(in millions)

Source: national sporting goods association

Lifestyle

Participation growth rates for selected sports and recreational activities(in millions)

Source: national sporting goods association

Lifestyle

Counterfeiters

Outsourcing China for some products, the employees stole mold to produce counterfeit goods or the firms run extra hours to produce goods for black market

Reduce the profitability of the company because some people who concern over price will go for the counterfeit

2003: Alliance to identify and pursue counterfeiters and seller of counterfeit clubs.

2009: Chinese officials confiscated nearly 10,000 counterfeit golf clubs, accessories, and components from a Beijing.

• Equipment industry revenues had begun to decline• Number of golfers stalled

Declined by 1.8% in 2008• Limit innovation in golf club, force

manufacturers to rely more on price to increase volume Declined by 5.7% in 2008 Projection: decline 15-20% in 2009

Problem Identification

ANALYSIS

Industry Analysis

Porter’s Five Forces Framework

Macro Environment Analysis

Scenario Planning

5 Major Elements of Strategy

Unit Sold (in millions) Industry Analysis

Industry Analysis

Driver Price Map

Industry Analysis

Woods Price Map

Industry Analysis

Iron Price Map

Industry Analysis

Hybrid Club Price Map

Industry Analysis

Putter Price Map

Industry Analysis

Wedges Price Map

Porter’s Five Forces Framework

Potential Entrants : Low• Big investment• Need product development to get the same technology with recent products

Bargaining Power of Buyer : High• Buyer could switch to another brand• Declining market

Threat of Substitute Products : High• Golf was in the declining stage while other sports like Tennis, Hunting, Bicycle Riding, and Running are rising in

popularity• Other recreational activities such as games, movie, malls are in popularity trends and very low cost

Bargaining Power of Supplier : High• Asian countries offer low prices• Supplier already know the technology and design of the equipment

Rivalry among competitors : High• Tight competition in matured industry• Counterfeiting• Could not develop products because of regulations


Political

• US-China cooperation in banning the counterfeit illegal trading• China’s Fiscal policy: fix RMB value to US$• US election year

Economic

• US & Europe 2008 recession• Gasoline Price increase• Loss of jobs was much worse than would be expected• Government pushed to increase saving

Socio-cultural• No time to leisure for people in US find alternative sports & leisure

Technological• eBay and other online shop sells counterfeiting product• Research and development of equipment and tools

Legal

• Online & Brick and Mortal has same tax• Patent on product design• Illegal trading• USGA design limitation

http://www.labnol.org/internet/countries-least-affected-by-economic-recession/8814/http://www.heraldsun.com.au/news/national/australia-best-placed-to-beat-recession-survey-finds/story-e6frf7l6-1225716592377?from=public_rss

Countries that are Least Affected by Recession(26 May 2009)


http://www.labnol.org/internet/countries-least-affected-by-economic-recession/8814/




List of Economies by Incremental Nominal GDP from 2006 to 2020



source: Goldman Sachs Macro Environment Analysis


Scenario Planning

If USGA hold the companies’ development for golf equipment

• Companies could sell new products with better significant technology

• Recent products already fulfill customers requirement that could be sold in term of USGA regulations

• Many golfers quit because they don’t have sufficient ability to play golf with recent products

Scenario Planning

If recession still happening in US

• Less sport activities• People rather to choose cheaper products• Golf companies must change their supplies into

cheaper suppliers that available outside US

Scenario Planning

If lifestyle of US people doesn’t change

• People like to do sports that are safer than golf• People choose sports that doesn’t take so much

time

Scenario Planning

If counterfeit products flooding the US market

• US golf manufacturers must decrease their price to compete with counterfeiters’ price

• New player rather to choose cheaper products because they have not already know the benefit of original product’s technology

Arena Vehicles Differentiators

Staging Economic Logic

Golf equipment Driver, woods, irons, putters, wedges, balls, footwear, gloves, golf bags

EndorsementEndorse local golf clubs and golf tournaments

PrestigeDevelop the prestige images

Reduce US & Canada Market DevelopmentIn next 2-3 years reduce the availability of the product

Product SpecializationFocus on one or more type of golf equipment to make customers choose the product

US CitiesCompeting on United States

Acquire middle-top class peopleTarget middle-top class customers

Market Penetrationstart to penetrate in to the new markets

Low PriceCheaper price to get more products sold

Industry Strategy5 Major Elements of

Strategy

Arena VehiclesDifferentiato

rs StagingEconomic

Logic


Endorsement12 PGA Tour Professionals, 5 LPGA Tour Professionals

Product Drivers : Big BerthaPutter : Odyssey and Black SeriesIron : Xseries, Top-Fllite




PriceWell define price ranges

InnovationSlow to react to changes in regulation and customer needed, interchangeable shaft, perimeter-weighted irons

Callaway Golf5 Major Elements of

Strategy




Endorsement110 PGA Professional tours (Taylormade driver)11 PGA (Club and

apparel)

Product Driver, metal woods, hybrid clubsIron : r5 series and r7 quad Putter : 14-model product lineWedges forged Z Apparel




Price R7 quad :low end

Innovation Adjustable shaft, moveable weights, interchangeable shaft, perimeter-weighted irons

Taylormade-Adidas Golf5 Major Elements of

Strategy




EndorsementMore than 100 PGA Tour Professional (Pro V1)

Product Focus on apparel and ballFoot-Joy : golf gloves and shoesFortune brandsPutters :CameronWedges: Titleist




Price Pro V1 : high end (value brand)

Innovation perimeter-weighted irons, concern in USGA regulation

Cobra Golf5 Major Elements of

Strategy




Endorsement20 PGA Tour and 12 LPGA Tour members

Product Irons : 4 linesPutters : large lineDriver, hybrid wood ; G10 and Rapture

Market PenetrationStart to penetrate in to the new markets



Price G10 and Rapture : low end

Innovation perimeter-weighted irons, fixed weighted

Ping Golf5 Major Elements of

Strategy



Go to Asia MarketSome countries like Indonesia, India, China, Vietnam, etc not affected by economic crisis

Endorsement17 PGA Tour, Tiger Woods

Product Hybrid club, balls, apparel

SponsorshipBecome sponsor on athletes and golf tournament to get market attention

Low PriceCheaper price to get more products sold

Grab Newly Rich PeopleSome countries like Indonesia, India, China, Vietnam, etc has new upper class people

PriceHigh end irons

Market PenetrationStart to penetrate in to the new markets

Innovation Driver pushes USGA regulation

Nike Golf5 Major Elements of

Strategy

SUGGESTION

ARENAGo to Other Markets• Countries like India, China, Australia, Canada are not affected by

economic crisisGrab Newly Rich People• Countries like Indonesia, India, China, Vietnam has new upper class

peopleGrab Women Market• More women want to be equal to men. Women tend to like fashion

more than menCreate different golf games with same equipment• Golf equipment could be sold even if the basic golf games demand is

declining

Industry Strategy Suggestion

VEHICLESEndorsement• Endorse local golf clubs or golf tournamentsSingle Authorized Distributor• The countries imported the productsCo-branding• Find pop brand in that country and try to

make collaboration in promotion


DIFFERENTIATORSPrestige• Develop the prestige imagesQuality-centric Product• Fight the counterfeiting product from China Premium Price• Positioning in premium class, so people see the

counterfeiting product is not the competitor of the productNew Product Development• Develop products that contain local materials


STAGINGReduce US & Canada Market Development• In next 2-3 years reduce the availability of the productTrial and Error Market Penetration• Start to penetrate in to the new markets as trial and errorPenetration to next countries• One by one to other country starts from the nearest from

the manufacturing country Bring golf as part of family recreational activity• Golf is not only for men but the whole family could do the

sport on their vacation or recreational activity


ECONOMIC LOGICSBetter Products • Fulfill the requirements of golfers and get bigger revenueDoesn’t need development cost• The company could reduce total costResearch Limitless• Not affected to USGA and R&A limitationLess Depending to US & Europe• In the future, there are possibilities to be a leader to the

emerging markets


COMPANIES SUGGESTION

Reduce products on the same price range

Make original sign to their products

Bundle products

Customized products

LESSON LEARNEDDeveloping products is required to create a differentiation with another products, so the products would not easily copied

Industry association must adapt with market situations, so the companies on the industry could get better growth

THANK YOUSO SO

Entertainment & Humor

Competition in the golf equipment industry in 2009