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Review of Callaway Golf Company

In: Business and Management

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Define key elements in Callaway’s Strategy during 1988 to 1997.

- IMPLEMENTATION of NEW TECHNOLOGY In 1986 Callaway hired Richard Helmstetter as the chief club designer. He initiated major developments in the research of clubs designed and marketed by the company. This culminated into Callaway establish a strong product portfolio. In 1987, Callaway became the first golf company to use computer controlled milling machines to produce innovative club designs. These clubs helped eliminate/reduce the impact of variables such as directional control, distance, etc. during the game thus making it easy to play.
Callaway consistently produced innovative products at an impressive rate thus appealing to its present customers at the same time attracting new customers. Examples include:
1988 Introduced S2H2 technology
1991 Big Bertha club design is launched ruled the market in the 90s
1993 Big bertha Heavenwood club introduced
1994 Big Bertha stainless steel woods and Irons are introduced

ACQUISITIONS: In 1997, Callaway acquired Odyssey which was one of the leading manufacturer of golf clubs at that time. This move of Callaway had several advantages:
1 This acquisition added more variety of clubs to the product portfolio.
2 Increased market share which is directly proportional to the increase in customer base
3 Reduced competition
4 More manufacturing capacity with Callaway can use Odyssey’s establishments

GREAT CUSTOMER RELATIONS/ENDORSEMENTS: Callaway established great rapport with many leading golf players of the time by working closely with them and preparing custom clubs. Many players used Callaway’s clubs with some endorsing the brand and won major golf championships. Examples include:
1 1990 Don Bies becomes the first PGA tour player to win with a S2H2 driver, 2 1991 Mark Brookes wins PGA tour with Big Bertha driver.
This created trust among fellow professional golfers in Callaway products which lead to one of its products Big Bertha becoming 1 in senior PGA tour, Hogan tour and LPGA tour during the time. This also created great publicity for Callaway products among amateur golfers. Callaway also employed famous professional golfers and celebrities to endorse their products which further increased the publicity and hence sales Examples include: Annika Sorenstam, Phil Mickelson, Ernie Els and Arnold Palmer

Q Explain why the strategy was successful.

TECHNOLOGY - Upon its inception Callaway golf company laid emphasis on Technology. They wanted to provide the consumer Amateur and Professional Golfers with the best clubs available. They invested lot of money in research and development and hired professionals who could understand and use the available technology to the fullest. However, the products were relatively costlier than their competitors. In spite of the higher price, the strategy worked because in golf business 90% of the customers are either professional golfers (or) people who have enough dispensable money to invest on recreational sports in this case golf. These customers are ready to pay a relatively higher price because they can afford it. Callaway golf exploited this attitude of their customers and hence found market although the products were relatively expensive.

Q Is the Strategy still relevant? Why or Why Not? Or What changed, do they need a new strategy?

The strategy employed by Callaway during 1988 to 1997, might partly work now. Major changes need to be made so that Callaway will continue to make profits.
HIGH PRICE- BETTER PRODUCTS, WILL IT WORK ALWAYS? The golf market comprises of consumers with enough dispensable money (or) professional golfers. The strategy High Price Better Products employed by Callaway during the 90’s will work only when the economy permits. When the economy slows down, the amateur golfers will not spend the same amount of money they used to spend. Thus, this strategy will fail and will result in a reduction in net sales. This is obvious from the statement made by the President of Callaway while announcing the 2010 third quarter results Global economic conditions continue to be challenging and the golf industry has not recovered as we had anticipated coming into this year quoted.
INCREASED COMPETETION: Callaway started incorporating technology in their strategy products in 1990’s. Callaway can now boast of experience and established research and manufacturing facilities to support its research and development wing. However in 2010, I believe that the probability of rival companies to adopt matching or better technology to make better products is more than in the 1990’s. This can be attributed to the following reasons
1 Increased awareness among businesses as to what strategy to employ to fare well in a market
2 Businesses can obtain the required investment relatively easier More lending firms such as banks, venture capital firms, etc.

ACQUISITON FAILURES: Callaway’s recent acquisitions such as those of Ben Hogan and Top Flite did not fare well. In actuality, the two brands lost their previous reputation and market share.

A better strategy would be to produce products which are technologically superior and are cheap the main reason of slowing of callaway's growth was beacuse of economy slowed down - two prominent rivals Orlimar Golf Equipment Co. and Adams Golf Inc., took away about 20% of market share because they offered cheaper products.

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