Реферат: Callaway Golf Case Essay Research Paper Contents1
The threat of substitutes will remain stable or slightly decrease. To play golf people always will need a club and therefore will always appear generic substitution. In case of slight decrease it will be caused by the disappearance of some manufacturers from the market. With more and more implication of advanced technology it will be as well more complicated to produce knockoff imitations and attract costumers with a similar product for a lower price.
Competitive rivalry will probably decrease when the first manufacturers withdraw themselves from the market because of a no profitable activity. In for the costumer worst case the development could lead to an oligopoly.
Callaway Golf s position in the industry is very strong and with it s expansion to the Golf ball market it enters the market of consumer goods. If it will gain a certain market share and recognition on that segment this may result in a stable supplementary income. However the segment is nearly dominated by one company Callaway s innovative strategy may have success.
Callaway acts on a market very much linked to people s lifestyle. Significant changes in the lifestyle, for example a decreasing attractiveness of golf as a sport could lead to significant cuts in sales.
With the Helmstetter test center and Callaway s capabilities in research and development the company matches perfectly one of the factors of critical importance to success in the industry. Another important factor is, that Callaway Golf with three wholly owned sales Companies in the key market distributes it s products under it s own label and will better be able to control service quality in distribution.
Besides there will not appear costs to contract a third company for distribution as it was the case earlier with sumitomi .
The continued participation of the company in the golf equipment market already created a very good image in customers perception, and would possibly help to entry in other industries, at least in sports equipment business.
4 Callaway Golf Company Resources and Competitive Capabilities
4.1. THE PRESENT STRATEGY
Since 1993 Callaway is stably the number one seller in all major golf markets in the world. The 1999 net sales with USD 714,471,000 reached an all time high. This represents roughly as much net sales as Callaway Golf s competitors in 1999 made together. Gross profits were about USD 338,066,000. In spite of a startup loss of USD 38,425,000 remained USD 55,322,000 net profit. Therefore the board s goal to return the company to reasonable growth was so far achieved. As well we have to mention that the company s net profit always was increasing, except in 1998 when the company firstly had to report a loss, which was because of the creation of a golf ball business from the scratch, coinciding with a decrease of net sales by 18 % caused by companies heavy attacking Callaway with knockoff imitations. The Figure 4 shows the development of Callaway s pretax and net incomes as percentage of sales.
We can see the 1998 loss and the recovery 1999. This is a positive trend and the company s restructuring goes on. However, some major markets in 1999 suffered a decrease in net sales. In Japan we noted a decrease by 5.5 % and in the United States by 5%. In Europe sales remained constant at USD 115,700,000 and in the rest of Asia and the rest of the world we noted a strong increase by 114% respectively 16%. The enormous growth rate in the rest of Asia is mainly due to economic recovery in Korea and is not supposed to hold on in the next period. In working capital Callaway nearly touched once again the 1997 level with USD 205,198,000. Total assets were reduced by nearly USD 40,000,000, to USD 616,783,000. Long term liabilities as well were reduced by USD 7,000,000 down to USD 11,575,000. This as well is a positive trend. The high amount of Cash and Cash equivalent Callaway possessed in 1999 led to an increase of interest income to USD 9,2 million. It is held to eventually buy back shares, because on of the weak points of the company is the stock price. However, since it seems to be a global phenomenon that excellent companies worldwide have lost a notable percentage of their stock price this is not caused by bad management or mistakes in the strategy. The problem solely is that there is no guaranty for an increase of the stock price in case of buying back stocks.
Callaway has an excellent reputation with it s costumers and is considered to manufacture products of very high quality. Besides Callaway during the nineties was always seen as technology leader in the market, since it came out with the oversized Big Bertha Clubs.
As a conclusion we can mention that Callaway s actual strategy is doing quite good and that there is no need for radical changes in its strategy. The restructuring Callaway started will contribute to further increased cost efficiency and better distribution systems of the company. The final important point is that Callaway already and with more than one year anticipation launched a plan for leadership succession which will contribute to the trust stakeholder have in the company.
4.2. THE COMPANY S STRENGTHS AND WEAKNESSES
As strength we can consider the following characteristics Callaway has:
technological know-how
R&D capacity and skilled human resources
good reputation it has for its products
presence at all big tournaments and endorsements of skilled players
a system of wholly owned distribution facilities
a couple of strong brand names
position as market and technology leader
clear defined leadership succession
relatively short development time
Weaknesses are the following:
relatively low stock prices, which facilitates takeovers
high warranty expenditures because the Big Bertha extra long graphite shafts experience shaft breakage at a rate higher than other metal woods
negative impact of the newly built up golf ball business on cash flows
As core competence and distinctive competence is the experience and the skill of Richard Helmstetter and his engineers in the Helmstetter Test Center which is as well equipped with the necessary funds to perform their work (Callaway is number 1 in R&D expenses).