Callaway Golf Company since its inception has been a force in the golf market as evidenced by the numerous successes which has made it a darling for almost all kinds of golfers. The success of the company seems to have taken root right from the company inception in 1982 when the company began to differentiate itself from other competitors by producing a unique and perfectly qualitative golf clubs on top of the usual golf bags, accessories and golf balls. It is important to note that because of the high and exemplary performance and skill forgiveness by the Callaway golf products, the company took advantage of this to charge premium prices which, for many customers was less valued compared to the comfort they got in using those products. The success of the Callaway to be a brand in the golf industry is mostly attributed to the Big Bertha line of products which took players by storm and by the year 1998, it was reported that approximately 69% of professional golfers in the entire world had used CGC driver in professional competition.
Callaway Golf Company Problems
Despite the success the company has enjoyed over the years since its inception, it faces serious challenges which if proper solutions are not found urgently, are threatening to bring the company into its knees. These problems are:
(i) Lose and dwindling of market share leading to reduced revenue for the company to run operations and secure profits.
(ii) Increased cut-throat competition from new and existing market players resulting to fierce challenge on Callaway’s premium pricing model.
By the year 1999 which is marked as the downfall year for Callaway, competition was intense and surely brought a complete overhaul to the existing market enjoyed by Callaway as consumers could get virtually the same products from different manufactures. As envisaged in the golf market during the periods late 1980s and early 1990s, Callaway enjoyed a greater cut edge advantage because the company competitors had no financial sound base to finance the production of new golf products. However, this situation was not to last as experienced in the late 1990s when the position enjoyed by Callaway and Ping, which were the dominant players in the golf industry was changed by increasingly energetic and enthusiastic new players such as Taylor Made, Titleist, and Cobra. The industry competitive disadvantage for Callaway was further worsened by the entry of Japanese golf companies into US markets which served to be single biggest market for Callaway as it accounted for 63%of the company sales revenue in the year 1998. Competition pressure on Callaway has got a direct correlation to the shrinking of market share for the company as consumers became increasingly advantaged to access golf products which earlier were charged premium prices by Callaway at lower prices from other manufacturers. This is the single most contributors to the woes faced by Callaway and the company has no choice but to see on how it can redeem itself and recapture its market back.
In order to come out of this current negative situation for the company, Callaway has to prioritize a two year period as the period to be back on its feet in order to continue enjoying the confidence of investors who have put their money into the shares of the company. This period should be looked in terms of the loss the company made in the 1998 which was reported by the company to be to a tune of $27 million. If the same loss progression is maintained for two year period, the company would not be far from receivership.
Possible Alternative Solutions
The following three solutions are the best alternatives to steer Callaway out of its present precarious situation to prosperity it enjoyed before:
(i) Change of market focus to foreign markets that had not been tapped in the company marketing strategy.
(ii) Increase advertising expenditure in print, television and internet marketing.
(iii) Continual investment in technological innovations by raising the revenue portioned for research and development.
The three solutions are by all means the key and fundamental ways to steer a company to prosperity. From the statistics of the company, the number market for Callaway for all the years the company has been in operation has been the USA which for instance in the year 1998 accounted for $437,628 representing 63% of the company’s total revenue. This dominance by the US of Callaway is massive to an extent of being detrimental in case economic shocks are experienced in the country. It is also to be realized that Callaway’s major competitors have their bases in the US and will therefore continue to pose a serous threat to Callaway. Callaway must for the first time have an oversee expansion strategy to tap developing markets such as those experienced in Africa and the Middle East. This oversees expansion could take the form of having physical presence in those countries and producing products there. This further has the advantage low cost of production as wage labor in the developing markets is comparatively than in the US.
In terms of advertising, it becomes evident that Callaway stayed away from engaging in prime-time air advertising because of the expensive costs involved. I want to categorically say that this is one area where the company really made an error. This is because Callaway over-enjoyed supremacy status to an extent that it opted to charge its products at prime prices and neglecting the important prime time advertising. It therefore becomes apparent that in the face of this fierce completion, allocating a paltry $33 million dollar as overall advertising expenditure might not work for the company.
Besides the two solutions, technological innovations are the next way that will ensure the company continues its business in the right path. The company has done well by bringing its latest innovation in the name of titanium big bertha, but as always said, technology changes very first hence, it is important that Callaway continue to differentiate itself by developing distinct products that will add value to its brand name. From the three alternative solutions, I find it prudent that change of market focus to oversee zones is the best and most effective way for Callaway to regain its lost glory and business fortunes. This is because, the golf products market in the US seemed to be overstretched when compared to the number of manufactures in the country. In this situation therefore, technological innovations and extensive advertisements might not yield much results.
Implementation of oversee expansion strategy got issues that must be addressed if the process is to go on smoothly. One of the issues is the increased capital to finance expansion. Financing oversees expansion is very expensive and the company management must look for ways of getting such finances. For instance, the company might have to resort to shares rights issue to finance the expansion or any other way such as borrowing from the financial institutions like banks.