Callaway Case Study Questions:
Evaluate Callaway's strategy from 1988-1997. What factors contributed to its success? How strong is the Callaway brand at the end of 1997? Is Callaway well positioned?
The transformation from a niche producer to an innovation powerhouse!
a powerful motivator
defined the company's culture
Characteristics: charming, feisty, optimistic, energetic, and inspirational •
golf club champion at 20
three-handicap golfer at 40
Richard Helmstetter: a billiard cue stick expert, became CGC's vice president and chief of new products in 1986.
The development of the unique clubhead model S2H2 in 1988 transferred the weight from a place where it was not very efficient to where it is very efficient.
A new approach in research and development was used by Helmstetter. He tried to answer his unanswered questions of how golf works with teams formed out of members of different disciplines and there intuition.
This lead to the development of the Big Bertha in 1991, an oversized metal wood club. It made the golf game much easier and more pleasurable for those of who don't play golf for a living. Furthermore the Big Bertha created a competitive advantage which lasted up to 8 years.
In 1994 sales reached $449 million.
In 1995 a new Big Bertha was developed the Great Big Bertha titanium. This club was even more forgiving as golfers now could hit the balls at increasing moments of inertia.
Between 1996 and 1997 several more versions of the Big Bertha were launched, leading to sales of $843 million in 1997. In addition CGC bought Odyssey, which had the number-one-selling line of putters and was leading in golf technology.
In 1998 the Big Bertha X-12 Irons were introduced and became the best selling irons in history. Key Success Factors
Industry leaders in R&D
Well-developed distribution channels
Most wide product range in the industry
CGC had developed a great brand and consumers knew that CGC always delivered a high-quality product.
Loyalty in golf clubs depends on the club that works the best for the golfers and will help them play better. Therefore CGC must continue to develop innovative and better clubs to keep their customers. Otherwise they will switch as soon as a competitor has a better product.
The Brand is well positioned and differentiates itself from competitors through better performance. But this requires a constant development and replacement of products with newer ones.
What changed in 1998-1999? What market conditions changed to cause sales to drop for the first time in company history? Is the Callaway brand as strong as it seems? What do you see as the priority areas for Callaway to attack? In what order would you rank them and why?
Callaway has experienced its first loss of $ 27 million after 10 years of growth. Competitors had finally caught up to Callaway's superior R & D capabilities and are flooding the market with new products and promotions, raising the bar for consumers on when to replace their equipment.Therefore the worldwide premium equipment market was declining and the market was saturated. In 1998 18 types of "oversized head" clubs from 13 manufacturers shared the market. New clubs were introduced regularly, making it difficult for the golfer to decide which new product he really needed.
Ranking of priority areas:
Continuously focus on innovations. Keep investing money into R&D. It is clear that if CGC wants to keep following its differentiation strategy they should keep investing into R&D. The competition is very tough and in order to stay always in front and have a competitive advantage over them, CGC has to keep coming up with new innovations.
Enter emerging markets like Russia, Brazil, China
As US industry is on its declining stage so CGC should now concentrate more on emerging...
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