Competition in the Golf Equipment

What are the defining characteristics of the golf equipment industry? What is the industry like? The sport of golf has a long and regal history. Televised tournaments in the fifties and sixties in America meant that more people became interested in the game. The golf equipment industry in 2009 is in the middle of a crisis with the number of players stalling and the sales of equipment declining since 2006. The industry is defined by endorsements, branding, technological advances and regulation.

The industry is currently in a state of decline. The recent recession and the onset of regulations from the USGA and the Royal and Ancient society have had a negative impact on the golf equipment industry. i. Political/Regulatory The increase of counterfeit items available and their easy availability shapes the industry greatly. It also shapes the relationship between the rival companies. They were able to form an alliance to take a major stance against this issue and to receive the cooperation of the Chinese government whose usual stance is to disregard patents and copyrights.

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The level of regulation within the industry has risen also leading to situations where companies must take stock off the market each time a new rule is introduced. This has a negative effect on the industry itself. ii. Economic There is a global recession at the moment and the golf industry is another segment that is feeling the effects of it. The levels of incomes are falling as levels of unemployment rise. Spending on non-essential activities is decreasing and we are seeing a rise in the uptake of “free” hobbies such as walking.

People are tending to save now as opposed to spend. However once the economy begins to recover golf maybe one the sports that will see the participation number rising again. iii. Social Factors The number of people in the US playing golf at least once a week was 22. 7 million, this was a 5 million decrease compared to ten years previously. The reason for this is the lack of free time available to partake in a game of golf. Another reason for the decrease could be the difficulty involve in learning and improving at the game. It needs a lot of time and patience.

Unfortunately those that relied on using equipment to improve their handicap are left disappointed due to the regulations introduced. iv. Technological Factors Technological advances are to improve the user experience be it in virtual or real golf. The technological development of the 1990’s was doing just this. Companies were improving their products by using new technology thus boosting the user experience. Longer drive distances gave golfers confidence. It also allowed recreational golfers to aspire to a better more professional handicap. Greater accuracy also encouraged recreational golfers.

These advances not only enhanced recreational golfers but also the professionals. The average driving distance in the PGA tour “increased from 257 yards in 1980 to 290 yards in 2005” v. Rapid growth of technological innovation Golf equipment manufacturers had developed innovations at a rapid clip which makes the game easier to play. The advent of improvement equipment was also a benefit to the world’s elite professional golfers. For instance, the technological innovation proved to give golfers of modest skills an assist such that their bad shots were not quite so bad.

The primary benefit of technological advanced golf clubs and balls related to distance. vi. Innovation of golf equipment features controlled by golf’s governing organization (USGA) The most of golfers did not want to purchase equipment that violated the USGA’s Rules of golf. The USGA clarified its purpose of barring products like the ERC II in 2002 by stating “the purpose of the rules is to prevent an overreliance on technological advance rather than skill and to ensure that skill is dominant element in determining success throughout the game.? 2.

What is competition like in the golf equipment industry? What competitive forces seem to have the greatest effect on industry attractiveness? What are the competitive weapons that rivals are using to try to outmaneuver one another in the marketplace? Is the pace of rivalry quickening and becoming more intense? Why or why not? Competition in the industry is strong to fierce. The market is flooded with competitors and manufactures of equipment ranging from gloves to clubs. Michael Porters five forces model of competition can be used to evaluate a company’s competitive pressures.

The five competitive forces include competition from competitors, competition from potential new entrants, competition in the form of substitute products, supplier bargaining power and finally supplier bargaining power. i. Competitors The competition from competitors is very strong. There are at least five main companies that compete with each other in this industry in the U. S. Rivalry is based on the performance of the products, the image of the brand, the exposure of the brand at tour tournaments mainly by endorsements and also price.

The regulating bodies the USGA and R&A have issued guidelines as to the development of the clubs and how they should be designed. Since all the competitors in the market have adhered to the specifications they now compete on differentiating their products based on other features such as weight adjusting models and interchangeable shafts. Competitors also use endorsements to compete with each other. It was realised that consumers choose products based on those used by their favourite professional golfer.

The rate paid to professionals for endorsing has rocketed in recent years as manufacturers try to get a certain player to recommend their brand. ii. New Entrants The competition from new entrants is weak. The market already has many manufacturers that there doesn’t appear to be much incentive for any new rival especially since the market has declined. The only threat I could see is if a major sports brand acquires a company already in market, like what Adidas did with TaylorMade Company. If a major brand acquires one of these companies and injects funds into that company the competition may increase even further within the market.

The barriers to entry are high capital investment needed, the brand needs to have had a long term recognition to be acknowledged by current consumers and there is a high level of marketing expense involved especially with promotion and endorsement contracts. iii. Substitute Products The threat from substitute products is strong. On page 34 there is a table of other activities that can be participated in apart from golf. The participation rates have increased for other recreational activities such as bicycle riding and swimming. The rates for golf have increased slightly in 2008 but it still has not reached the level of 2002 again.

Another threat with regard substitute products is the level of counterfeit items available. It was a result of outsourcing that saw reproduction items being sold at a fraction of the selling price of the genuine products. An alliance among manufacturers led to the shutting down of many sites that sold these counterfeit items. The alliance also made an agreement with the Chinese government to confiscate counterfeit goods. However even though the alliance proved effective at that time there is no guarantee that it the market of counterfeit golf goods will desiccate. iv. Suppliers

The bargaining power of suppliers is weak to moderate. Manufacturers are selective in their choice of company to outsource to due to the level of risk that pertains to outsourcing. Most of the manufacturing occurs in casting houses in Asia. There seems to have been problems in the past with the quality of goods that were produced. The outsourcing for some companies is for just the club head, and the remainder of the work is done in the US and some outsourcing is for the complete product. We see in the case that some of the companies have formed an alliance of sorts for the co-development of shafts.

Suppliers appear to have little bargaining power due to the fact that they must prove to the companies that they are the best company to outsource to and that their products will not appear on the black market. v. Buyers The bargaining power of buyers is moderate. There are a variety of outlets that sell golf equipment and accessories. There are both on course and off course shops and an online service. Buyers have the choice to purchase custom fit options in the shops. Online buyers do not have the choice and the prices online must be the same as the shop prices.

There are low price retail outlets available to consumers but these seem to attract occasional golfers and beginners. Most sales of equipment are a one off purchase price of these items are quite high, rising steadily according to Exhibit 1. Sales of lower priced items and accessories have increased. The disposable income of families has reduced greatly since the recession and this has had a huge effect on the sales of equipment and decreased buyer power. The strongest force is the competition in the industry. Competitors are competing on the slightest detail.

There is not a huge difference in the products that are available by each company or the prices at which they are available. Regulation has caused them to compete on stricter innovations. The weakest force is the threat of new entrants. There are high barriers of entry including the level of investment that would be needed to compete with these already established brands. The only threat I would see is if one company acquired another company. Overall the competition in the market is quite strong. The strong force from competition will always have an effect on companies’ profits and their marketing and advertisement expenses.

Profit margins are thin already as they compete on innovation and developments. The competition is on slight product differentiation. However the market is still quite attractive because of the low threat of new entrants and the bargaining power over suppliers. Competition is very strong in this industry. Rivalry is strong where demand is stalling or declining. Sales of equipment had declined by 5. 7% during 2008 (page C-31). Even the amount of those playing the game had declined by 2008 compared with the figure 10 years previous to that.

A third of golfers were considered to be core golfers playing at least once a week and these were deemed to be responsible for 87% of equipment sales. (page C-34). Rivalry also increases when it is easier for buyers to switch brands. This can occur when similar products have similar prices. This is very evident for each of the companies in this case. For example the hybrid model of clubs ranges in price from $90 to $200 for each of the five companies mentioned. Competing on price basis could result in a price war at some stage with companies selling lower that cost just to gain market share and brand awareness.

Each of the rivals in the golf industry uses competitive weapons to compete with one another. The first of these that is evident is the endorsements that each company engages in with professional players. Calloway Golf had 12 PGA players and 5 LPGA players promoting their brand in 2009. TaylorMade Adidas was the most widely worn apparel brand on the pro tours in 2009. The deals made with the professionals are lucrative as each of the companies try to get the “right” golfer to promote their goods and to agree on what goods they will promote.

In 2007 the top ten professionals earned at least $4 million annually through endorsements along. Nike Golf made the mistake of using Tiger Woods to promote their clubs however when watched on TV the clubs he used were different to those on sale by Nike in the Pro-Shops. Endorsements with professionals lead to an increase in buyer demand for that product. It also enhances the perceived value of the brand and the product. Rivalry is also strong as the products become more alike. Due to the regulations in place the manufacturers have little scope to develop major changes with their products that could enhance performance dramatically.

They now compete on innovation, another competitive weapon that they use to stay one step ahead of each other. The technological limitations meant that the manufactures had to be more creative in the development of their products to ensure sales. Calloway was late in developing and selling their hybrid model. TaylorMade Adidas were the leading seller of the hybrid model and reaped the benefits in sales as a result. Customisation is another weapon used to compete and companies expanded their shaft flex options. New and improved features such as the ability to move weights on the shafts are with the guidelines of the USGA.

On page C-36 it states “With club head size and clubface CT off limits, golf club manufacturers began to pursue innovations that would increase the clubface area capable of producing the maximum CT. ” Products on the market prior to this had to be removed at a loss to the manufacturers. To be the first company to release to next new product within the regulations will take the lead in the market. The pace of rivalry is becoming more intense between rivals as a result of a slow growth within the market and the range of products that every company offers is similar.

Use of competitive weapons can only increase the market share for the company that best uses these weapons to their advantage. Innovation is likely to increase product costs but if one of the companies releases a product that is completely different to what is on the market and within the regulations of the USGA then that company would definitely be on the road to increased sales and profitability. ? 3. How is the golf equipment industry changing? What are the underlying drivers of change and how might those driving forces change the industry?

All businesses can be affected by developments and on-going trends that can cause the conditions within which they operate to change. Some of these changes require a strategic plan change to fit with the change. Management must be aware of these changes as they may have a profound effect on the strength of the five forces. If management notice these changes early, be they positive of negative changes they will then be prepared to adjust their strategy accordingly to the benefit of the company. The golf equipment industry is changing in many ways.

There have been technological changes and regulations introduced and the recent recession have impacted on sales of equipment. i. Technological Changes and Regulations The 1990’s saw the development of equipment making it easier for recreational golfers to play the game. Distance was improved by these changes and also accuracy. However, the USGA decided that they should limit the performance of golf clubs in order to preserve shorter golf courses. They developed a form of measurement called to coefficient of restitution. Any drivers that did not follow these guidelines were banned from use by recreational and professional golfers.

Although manufacturers did not agree with this form of measurement the consumers voted with their purchase power and did not buy any product that did not conform to the regulations. The Royal and Ancient then came to an agreement with USGA and the COR was abandoned for a CT test. Other rules were introduced including the size of drivers, and the performance of golf balls. More recently any irons and wedges that had grooves on them would have to be removed from the market in favour of those with a rounded edge. Products cannot be as differentiated now as before and this leads to a rise in buyer power and an increase in rivalry among companies.

These can have negative implications for the profitability of the company. The rules on club head sizes and the allowing of inter changeable shafts allow for the shaft manufactures to increase their profitability. The companies involved can now differentiate their club heads with their compatibility with the shafts. The regulations that enforce rules on club head size and performance also increase the profitability to shaft manufacturers. Any further regulation could result in a move from competing based on product innovation to competing based on endorsements and promotion. ii. Recession

The recession has had an impact on all industries in the world. The golf industry has not escaped this. The level of disposable income has decreased leading to a decrease in spending on luxury hobbies such as golf. In exhibit 1 there is a decrease in the units sold of most golfing equipment excluding accessories. On page C-37 it states that in a survey “30 per cent of respondents cited high golf fees as a barrier to playing more golf”. This is an example of the decline in those participating. Rising unemployment rates in the US lead also to an overall decrease in discretionary spending. The level of saving is also increasing in the US.

Although the recession has an effect on the decline of those playing other factors were considered also such as the difficulty of the game and the time involved in playing. All these factors have negative implications for the manufacturers of golfing equipment. A recession means a fall in the consumption of non-essential goods and services. iii. Counterfeiting This has being a huge problem for the manufactures of golf equipment. Counterfeit goods were sold at a fraction of the price on websites. Counterfeit items were a result of outsourcing. It only led to a loss of revenue for the companies.

The six leading manufacturers formed an alliance to combat the rise of counterfeiting within their industry. This was a successful move for all the manufacturers involved as websites were shut down and the Chinese government cooperated with the alliance. Rivalry was set to side in order to oppose a major threat to protect their operations for the future. iv. Rules and Regulations on Golf Equipment The most competitive golf equipment field is the driver market. Especially, because clubs have huge effect on its driving distance, manufacturers tried to develop technologies that can increase distance.

Yet, due to problems derived from golf field capacities and excessive reliance on equipment, USGA and R & A decided to restrict by limiting club sizes and weights. Because of these regulations on clubface design, firms that suffered in differentiating clubface started to find other ways of differentiation. Since USGA was not so restrictive on other things such as shafts and grips, companies started to develop shafts with various launch characteristics. Interchangeable shafts enabled the variation. Also, golfers-especially core golfers-are willing to pay more to extend their driving distance and to improve their own scores.

They prefer not only well-made clubface, but tungsten-made shaft with suitable sizes. Considering all market situations, most golf equipment manufacturers have been trying to co-develop various size lines of proprietary shafts with companies specializing in shaft design and manufacturing. v. Changes in Distribution Channels At past, there was only one channel to purchase golf equipment; off-course shops. After activating e-commerce, some golf shops started to move to online space for many incentives such as reduction in operating costs. Often, price-sensitive consumers used online stores.

After the appearance of online discounted stores, off-course shops improved their own existing merits providing custom fitting service as well as experiences to try and inspect demo models. Particularly, core golfers were attracted to the custom fitting stores. The golfers could choose a light-weighted clubface or a shaft that is inch longer; whatever that fits the customers’ characteristics such as swings and handicaps. While online shops focused on competitive pricing, offline shops provided a variety of brands and marketed more aggressively.

Moreover, most of the off-course stores chose only to stock equipment produced by leading manufacturers and did not carry those of low-end companies. In offline stores where they sold low-end firms’ products, they normally sold stocks in discounted prices. The discounting shops usually appeal to rookie golfers who want to inspect equipment by themselves, while not giving up the cheap price. The future for the industry will indeed be turbulent. The lack of growth in sales in recent years and the recession will have an impact on the market for a long time.

The regulations imposed, limits the level of product development that any of the companies can engage in. The subsequent lack of differences between the products available means that the industry will need to look at other ways of offering different products to their customers. The factors that are driving the change mean that the industry can only see a decrease in sales in the near future. These changes can only lead to a reduction of profit in the short term. ? 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?

? 5. What key factors determine the success of companies competing in the golf equipment industry? Which companies seem to perform these factors the best? What is the overall competitive strength of the major golf equipment manufacturers? An industry’s key success factors are those that affect the company’s ability to survive and grow within the market place. For the golf equipment industry one of the major key success factor is their ability to attract professionals to endorse their products. The appeal of the professionals to the recreational golfer adds value to the brand being worn and used by the professional on the tour.

It creates a superior product if the products being used appear to aid the professional to win or be placed in the tournament. The recreational golfer will wish to emulate the professional from skills to apparel to equipment. Another key success factor is the distribution channels used by the manufactures. Most goods are sold in bricks and mortar shops. These include on course and off course retailers. The brand awareness raised by the professionals on tour brings the consumer into the stores. Once the consumer enters the shop they can purchase custom fit clubs. This is another key factor for success.

The personal service that the buyer gets adds value to their purchases. The products are stocked nationwide and training is given to staff. In the case we see that those who buy on online stores do not get the same quality of service as those who purchase in a bricks and mortar store. However they must pay the same price for a lesser service. We also see that the retail stores that sell at discount rates do not offer the personalized service of the “pro” stores. Staff did not have the relevant training to give consumers what they may want other than price preference. Calloway golf appears to appear at these factors best.

They offer a wide array of equipment and accessories to golfer through online and bricks and mortar distributors. They offer a discount range at a specific website and new models at another website. They offer consumers the choice to collect their purchases made online at a retailer. Their products cover all price points and their range of products can suit every player regardless of handicap. In 2008 they were the second largest seller of golf balls. They were also market leader in that same year for the iron segment of the company. Calloway also uses endorsements to attract consumers.

In 2009 they choose to limit the professional they contracted for endorsement to 12 for the PGA tour and 5 for the LPGA tour. This added an elitist factor to the brand. Calloway has also being in the fore front for innovation. Apart from the mistake of not developing a hybrid model sooner they are very much in tune with the development of products. The acquisition of Odyssey aided the company in competing for top spot in the putter category, with a rival until they developed the putter further putting them in the lead in terms of sales. The competitive strength of all the manufacturers is quite strong.

Each company excels at least one element of golf equipment. Calloway Golf offers a broad product range and is the market leader for various types of clubs. They focus on product innovation. TaylorMade Adidas is quite similar to Calloway in terms of their product offering. Titleist main product is the golf ball. Their sales of apparel has increased in recent year but would not be seen as a major competitive threat to the above companies with regard the development of clubs. Ping golf does not have the wide product range of Calloway and TaylorMade Adidas. Ping was an industry leader in the iron segment in 2009.

They have no golf ball product. Nike golf does have a wide product line but as yet has not excelled in the sales of equipment. Their products almost never sold at the recommended retail price, unlike their rival companies who tightly controlled retail prices of their products. Collectively they could be regarded as a strategic group. A strategic group is a cluster of industry rivals that have similar competitive approaches and market positions. In the golf equipment industry all of the competitors can be placed into different groups based on the retail price of their products and their innovation of product.

The counterfeit goods would be the lowest end of the scale as it supplies low quality goods at low prices. Nike would be deemed the next on the scale as it offers mediocre products at reasonable prices. Their ranges of clubs are not seen as the best in terms of performance capabilities. At the high end of the scale would be Calloway, TaylorMade Adidas and Titleist. They offer high performance products at a premium price. Those at the high end of the scale are better positioned to prosper and the most likely to survive as the industry changes. ? 6. How do the financial results of the major golf equipment manufacturers compare?

Which rivals seem to be coping best with the competitive forces prevailing in the industry? How has the recession of 2008-2009 affecting the financial performance of the industry’s major sellers? i. Calloway Golf Calloway Golf is performing very well in the industry. Their net profit margins have increased from a negative 1. 08% in 2004 to 5. 94% in 2008. This is an incredible increase despite the recession. Only their sales of woods have decreased over the recession whereas their sales of other products have risen slightly according to Exhibit 5 page C-43.

However it does state in the case that in the first quarter of 2009 their revenues had declined by 17 per cent when compared to the same quarter the previous year. Also their diluted earnings per share fell from $0. 58 in the second quarter of 2008 to only $0. 10 in the same period in 2009. The uPlay acquisition has not had a positive impact on shareholder value. ii. TaylorMade Adidas TaylorMade Adidas has seen an increase in their net profit margin for 2008. The figure appears to fluctuate year on year but it is quite high compared with Calloway Golf. The 2008 figure was 9. 61% compared with 8.

08% the previous year. TaylorMade Adidas has had an increase in footwear sales, sales of apparel and other hardware. Although the sales of metal woods has decreased slightly they still have stability in their sales. The company decided to outsource production of their products to decrease costs and further improve its operating margins. iii. Fortune Brands This company is performing the worst out of the three in terms of net profit margins. It has decreased from an all-time high of 13. 59% in 2005 to a figure of 9. 13% in 2008. Their margin is higher than that of Calloway but if is downward sloping.

They have a high reliance on endorsements contracts for their golf ball. Their market share in the iron segment has decreased from 10 per cent in 2002 to 2. 5 per cent in 2007 due to an elitist perception surrounding their brand. TaylorMade Adidas appear to be performing the best in the industry at the moment. They have a high profit margin and plans to further reduce operating costs by outsourcing will see them increase those margins in the future. Their sales of apparel and footwear have grown from 13. 5 per cent in 2004 to 23. 3 per cent in 2008, as a result of endorsement contracts.

Their brand was the most widely worn brand on the professional tours. The recession has affected all of the brands in terms of a decrease in sales in some lines particularly the more expensive products. Sales of drivers, woods, irons and putters have decreased since 2006 in most cases (exhibit 1). Sales are increasing for products with a lower retail value such as footwear, gloves and golf bags. This could be a direct effect of the recession on the industry. Also due to the fact that participation rates have decreased most players would have invested in equipment prior to 2008 as the uptake had decreased for the game.

This would transpire in to a fall in sales of equipment but a rise in sales of apparel and accessories. The equipment is far more durable than the accessories. ? 7. What recommendations would you make to Callaway Golf to improve the company’s competitive position in the industry and its financial and market performance? To Fortune Brands? To TaylorMade-adidas Golf? Calloway, TaylorMade Adidas and Titleist all share the same target customer. Their products are very thinly differentiated. They also excel at what they do best, for Calloway it is club head innovation and development.

They should continue to focus on this aspect of the business to greater meet the needs of their customer and to achieve what they set out to do initially. That is to enhance players performance by use of the equipment they use. Regulations are limiting what exactly they can do but they can work within these limitations and develop irons and shafts and other revolutionary products that they were famous for. They have had may set backs due to futile acquisitions but the development of their own products such as golf balls has seen an increase in sales for them.

Their re-launch of the top flite acquisition is improving matters for the company. Outsourcing also proves beneficial to their production costs. One would recommend that they look at outsourcing other products also to reduce costs in the future. Their acquisition of Odyssey also proved to be beneficial to the company in terms of putter sales. Below are recommendations for the company Calloway golf. i. Online Sales Their online stores allow customers to purchase products online however I would recommend that they have a “home” site where the links for pre-owned items and new stock will be.

It certainly has a competitive advantage over TaylorMade Adidas who has no website at the moment. Their website could also be used to collect information on consumers and those interested in the game by requesting those who visit the website to sign up for a newsletter of sorts. This would mean that they could directly target current and future consumers specifically. This would boost sales for the company and add a personal aspect to sales. A database can be constructed for use in both the online and retail stores. Revenues would increase for the company if they adopt an approach that includes personalised recommendations for customers.

Customers could be notified of technological advances creating a surplus demand prior to launch dates. ii. Customisation Items can currently be purchased custom fit. Some stores already have a PGA professional to offer advice to the consumer when purchasing the products. By continuing with this practice they continue to provide a better service than low end manufacturers. Using virtual technology also aids the service the customer receives and also boosts the perception of the brand. This also would increase revenues in the future without adding extra costs. iii. Target Market

Those playing golf in the US in 2008 amounted to 22. 7 million. In Europe there were 2 million people playing golf and 17 million people in Asia. What Calloway could do is get more people to play golf. Then they would purchase more equipment. The market has major room for growth in Europe and Asia. Europe is also seeing an increase in the grey market. Calloway could seize this market and grow it increasing sales and brand awareness for the company. Another segment they could consider is the female segment of golfers. I would recommend making products specifically for women especially in apparel and accessories.

Opening up new markets will have costs involved but in the long term it would equate to a rise in revenues and market shares. iv. Strategic Partnership Calloway should consider forming a strategic partnership with another company. For example they could form an alliance with Nike. Calloway could focus their attentions on the development of equipment while Nike could assume sole production of apparel. Both companies can concentrate on those products that they do extremely well at. Endorsement contracts would appeal to players who wish to be the best by wearing the best apparel and using the best equipment.

It would also mean that both companies would be eliminating a rival. Both companies would save on the expense of production, which leads to an increase in profits in the long run. Here are the recommendations for the Fortune Brands. i. Innovation We would recommend that the management at Fortune looks at the level of investment in innovation. Their products were among the market leaders prior to the regulations being enforced. Their current threat at the moment is the USGA’s interest in lesser performance golf balls.

Fortune brand needs to move quickly to develop a ball that satisfies both performance and the regulators. ii. Reduce Expenses The company has being the largest seller of golf balls since 1949. By now they should be a well-established brand. We would recommend that they would not be so heavily involved in endorsement contracts and to also stop giving away so much free product. Also although they are improving their image with regard the iron products they offer they still haven’t shaken off their previous image. They really need to evaluate whether further investment in both Cobra and Titleist clubs are worth it.

They must do a cost benefit analysis to assess whether to continue to invest in two brands in the same company for the same products. Their operating profit has reduced in recent years even though their sales revenue has not reduced dramatically. The recommendations for TaylorMade-Adidas Golf i. Product differentiation Since the USGA limitation on dimension, volume, CT, and MOI, most golf club manufacturers were trying to achieve differentiation in drivers either lowering the center of gravity to increase launch angle or by offering clubs with adjustable features.

Nike Golf, Callaway Golf, Nickent Golf, and Nicklaus Golf had introduced drivers using square or other geometric shapes to position weight farther behind the clubface to boost MOI and produce a higher launch angle. Equipment manufacturers had looked to adjustability to differentiate their product lines from competing brands. Custom fitting had become very important as golf equipment companies expanded shaft flex options. TaylorMade, Callaway Golf, Ping Golf, and Nickent Golf all launched series of drivers that allowed golfers to install different shafts into the driver head to produce different launch characteristics. ii.

Endorsements Leading golf equipment companies had always struck endorsement deals with the game’s best-known players to enhance their image with consumers. Because, it’s common for recreational golfers to base purchase decisions on the equipment choices of successful golfers on the PGA Tour. iii. Pace of Rivalry The pace of rivalry is quickening. As the growth rate of golf industry is getting lower, golf equipment companies are struggling more to have larger market shares targeting original customers. Due to USGA’s technological limitations, it became possible for low-end firms to catch up with major firms in terms of technology.

Those limitations also made it hard for golf equipment companies to differentiate their brand through technology development, so that leaded to harsh price competition. As product differentiation through technology became more difficult to achieve, golf club manufacturers were relying more on endorsements from touring professionals to enhance their brand image. The value of endorsement contracts had escalated dramatically since 2000. These high annual endorsement fees are another factor of a strong price war.

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