strategic-management

3.5 percent for the first quarter of 2008. Also, it takes a lot of time to play golf. People today
have so many other ways to spend their time. A positive trend for CGC, however, is that the
world’s population is aging, and many older people both play golf and have discretionary
income to purchase golf equipment. Golf courses are overbuilt in the United States; the
number of rounds played was down 4 percent in the United States in 2008 from 2007. More
and more companies are chasing the same customers, which means that a gain in market
share for one is a loss for another.
For CGC to grow its sales of golf clubs or golf balls significantly, the company must
either increase its share of the market for golf clubs or balls, or the market for these items
itself must grow. Because CGC already possesses a substantial share of the market in sales
of clubs and balls, additional market share may be limited. In addition, the company does
not believe there will be any material increase in the number of golfers worldwide in the
next four years.
Competitors
The business of golf has grown to become a billion-dollar industry worldwide, but due
to the economic downturn, small companies may fall and big companies need to rightsize
and reset their business to survive. Industry leaders spend millions on endorsement
contracts for the game’s best players to entice recreational players. For example, Nike
pays Tiger Woods to use and endorse its products. A popular but expensive way to gain
market share is using PGA Tour players to promote your product. “The PGA Tour is
the one bright spot in the whole industry,” says Drapeau. “The TV ratings are up; the
attendance is up. A large part of that is due to Tiger Woods.” Woods is so popular that
Nike signed him to an endorsement contract and then over time built an entire golf division
around him. Woods once played Titleist equipment, but he shifted to Nike. Each
time he changed, he said he would not have changed unless Nike made the best product
for him to play.
Titleist is one of CGC’s biggest competitors. A subsidiary of Fortune Brands, Inc.,
Acushnet Company, owns the brand Titleist, among other brands. Titleist manufactures
various types of golf clubs, as well as balls, equipment, and accessories. Other golf-related
Acushnet brand names include FootJoy, Cobra, and Pinnacle. Acushnet primarily sells its
products to on-course golf pro shops and select off-course golf specialty and sporting
goods stores throughout the United States. International distributors and agents sell the
products throughout the global market, including the United Kingdom, Canada, Germany,
Austria, Denmark, Ireland, France, Sweden, the Netherlands, South Africa, Thailand,
Singapore, Malaysia, Australia, New Zealand, Korea, and Japan. Acushnet attributes about
42 percent of its sales to its international markets. The company is very strong in the golf
shoe and golf glove markets (FootJoy) and is the leading producer in golf balls (Titleist).
Between 2007 and 2008, net sales for golf-related operations at Fortune decreased from
$1,405.4 million to $1,368.9 million. This is attributed to the unfavorable global economic
conditions. Callaway competes with Acushnet in all three of its main markets: shoes and
gloves, clubs, and balls.
More and more well-known athletic goods manufacturers such as Nike, Wilson, and
Adidas, just to mention a few, are diversifying and expanding into the market. These companies
have very good reputations, which helps them enter the golf equipment and accessories
market. Several companies that produce high-quality tennis racquets, such as Prince,
Fila, Head, and Wilson, are becoming a big threat to Callaway Golf. Wilson already does a
substantial golf business.
CGC’s biggest domestic competition with respect to metal woods and irons are
TaylorMade, Titleist, Cobra, Cleveland (Srixon), Ping, Mizuno, Bridgestone, and Nike.
For putters, Callaway’s major competitors are Ping, Titleist, and TaylorMade. CGC competes
with Dunlop and Yamaha among others in Japan and throughout Asia. Mizuno is
Japan’s largest sporting goods maker and has made strides in the golf equipment industry.
In the golf ball business, CGC faces competition from Titleist, Nike, Spalding, Sumitomo
Rubber Industry, and Bridgestone (Precept). Titleist has an estimated market share in
excess of 50 percent and is therefore leading in the golf ball industry. In 2008, CGC was
CASE 28 • CALLAWAY GOLF COMPANY — 2009 279