competition in the golf equipment industry in 2009
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Gerung - Gerung Syndicate by Inu, Inge, DhikaTRANSCRIPT
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
Macro Environment Analysis
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)
Macro Environment Analysis
List of Economies by Incremental Nominal GDP from 2006 to 2020
List of Economies by Incremental Nominal GDP from 2020 to 2035
List of Economies by Incremental Nominal GDP from 2035 to 2050
source: Goldman Sachs Macro Environment Analysis
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
Golf equipment Driver, woods, irons, putters, wedges, balls, footwear, gloves, golf bags
Endorsement12 PGA Tour Professionals, 5 LPGA Tour Professionals
Product Drivers : Big BerthaPutter : Odyssey and Black SeriesIron : Xseries, Top-Fllite
Market Penetrationstart to penetrate in to the new markets
Product SpecializationFocus on one or more type of golf equipment to make customers choose the product
US CitiesCompeting on United States
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
Arena Vehicles Differentiators
Staging Economic Logic
Golf equipment Driver, woods, irons, putters, wedges, balls, footwear, gloves, golf bags
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
Market Penetrationstart to penetrate in to the new markets
Product SpecializationFocus on one or more type of golf equipment to make customers choose the product
US CitiesCompeting on United States
Price R7 quad :low end
Innovation Adjustable shaft, moveable weights, interchangeable shaft, perimeter-weighted irons
Taylormade-Adidas Golf5 Major Elements of
Strategy
Arena Vehicles Differentiators
Staging Economic Logic
Golf equipment Driver, woods, irons, putters, wedges, balls, footwear, gloves, golf bags
EndorsementMore than 100 PGA Tour Professional (Pro V1)
Product Focus on apparel and ballFoot-Joy : golf gloves and shoesFortune brandsPutters :CameronWedges: Titleist
Market Penetrationstart to penetrate in to the new markets
Product SpecializationFocus on one or more type of golf equipment to make customers choose the product
US CitiesCompeting on United States
Price Pro V1 : high end (value brand)
Innovation perimeter-weighted irons, concern in USGA regulation
Cobra Golf5 Major Elements of
Strategy
Arena Vehicles Differentiators
Staging Economic Logic
Golf equipment Driver, woods, irons, putters, wedges, balls, footwear, gloves, golf bags
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
Product SpecializationFocus on one or more type of golf equipment to make customers choose the product
US CitiesCompeting on United States
Price G10 and Rapture : low end
Innovation perimeter-weighted irons, fixed weighted
Ping Golf5 Major Elements of
Strategy
Arena Vehicles Differentiators
Staging Economic Logic
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
Industry Strategy Suggestion
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
Industry Strategy Suggestion
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
Industry Strategy Suggestion
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
Industry Strategy Suggestion
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