Callaway Golf Company

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Callaway Golf Company

8-page SWOT

MBA 801 – Strategic Management

April 24, 2003

CALLAWAY GOLF COMPANY

Business Overview: Callaway Golf Company designs, manufacturers and sells premium, innovative golf clubs and golf balls.  They position the clubs to be demonstrably superior to, and pleasingly different from, their competitors’ products.^[1]  Callaway is an industry leader in golf equipment.  In 1999 they manufactured and sold 5.6 million premium golf clubs, for total revenue of over $714M and a net income of $55M.  Callaway became a leader in the golf equipment industry by developing technologically advanced golf clubs that compensated for the poor swing characteristics of most amateur golfers.^[2] Callaway transformed the golf industry in 1990 by introducing an oversized clubhead called the Big Bertha that was more forgiving of golfers’ swing imperfections.  Their products are sold in the United States and throughout 107 countries around the world.  Callaway’s products are designed for both amateur and professional golfers.  Golfers generally purchase the company’s products on the basis of performance and appearance.^[3]

Ely Callaway entered the golf club industry in 1982 by purchasing Hickory Stick USA, which was a manufacturer of old-fashioned hickory-shafted clubs.  The first major product from Callaway Golf was introduced in 1990, which was their Big Bertha driver.  By 1992 the Big Bertha drivers were number one on Senior PGA, LPGA and Hogan Tours.  In February 1992 Callaway Golf Company became a public company.  The funds from this stock offering were used to open the Richard C. Helmstetter Test Center, which expanded the company’s capability to research golf club performance and design.  Callaway continued to invent and produce new improved golf clubs through out the 90s. In 1998 due to the weakening foreign markets and the high investments into diversification activities, Callaway’s financial and market position suffered, but began to rebound again in 1999.  In 2000 Callaway launched their first innovative golf balls.^[4]  Callaway’s mission is “Callaway Golf Company is driven to be a world class organization that designs, develops, makes and delivers demonstrably superior and pleasingly different golf products that incorporate breakthrough technologies, and backs those products with noticeably superior customer service.  We share every golfer’s passion for the game, and commit our talents and our technology to increasing the satisfaction and enjoyment all golfers derive from pursuing that passion.”^[5]

Problem Statement: Though Callaway has been exceedingly successful with their innovative golf clubs; they face stronger competition and a mature market.  How does Callaway in the face of these challenges strengthen their position and find opportunities for growth? 

EXTERNAL ASSESSMENT

General Environment
Economic:  Opportunities in the economic environment include the size of the market which is estimated to be more than 25 million Americans golfers.  Golfers continually grow, though only at 1 to 2 percent annually. This rate is expected to continue till 2010.^[6]  Another opportunity is the baby boom generation that is now at the age where they have more free time, disposable income and the inclination to play golf.  Also, specifically for the golf ball segment, there is a higher growth rate then the general equipment due to the disposable nature of the product, which could be an opportunity.^[7] Golf ball sales were up 6% in 1998.^[8]  Threats to the economic environment include the global market maturity which was compounded by the Asian financial crisis that began in late 1997. This made the export of US products, especially expensive luxury goods, unaffordable for many Asians.  Also, the general weather conditions such as the heavy global rainfall caused by El Nino contributed to an overall decline in golf around the world in 1998.^[9] Overall spending on golf equipment was declining despite increase in golfers in 1998-1999, which was partly driven by market saturation and a lack of need to upgrade golf-clubs.^[10]