The industry overview
The retail sales of golf equipment industry, which includes golf clubs, bags, balls, gloves and footwear, declined from approximately $4 billion to about $3 billion in 2003 and then rebounded to around $3.8 billion in 2007 with many threats remaining. The changes in the retail value of golf equipment industry are closely related to the total number of golf players and total rounds of golf played in the country. The participation rate of golf has dropped approximately 21% from 27.5 million in 1998 to 22.7 million in 2007, being the largest decrease rate during the same period among selected sports and recreational activities including bicycle riding, fishing, hunting, running, swimming, tennis and workout at fitness club (Source: National Sporting Goods Association in Gamble 2008, C-80,). The total rounds of golf played in the United States had rarely changed in the last decades, it is especially flat from 2004 to 2007, with less than 1% changes recorded (Source: National Golf Foundation in Gamble 2008, C-80). 87% of golf equipment sales are from core golfers-those playing at least 8 times a year and averaging 37 rounds a year (Gamble 2008, C-80). Although, there are less players and less rounds played then before, manufacturers are compelled to go ahead with their innovation and development schedule and even boost their spending in marketing (Stogel 2009).
There are two types of manufacturers in the golf equipment industry. High-end leading brands, which include well known name such as TaylorMade-Adidas, Fortune Brand (parent of Titleist and Cobra), Callaway, Ping, Cleveland and Nike spent huge amount of resources on R&D for innovative designs and distributed their product through on and off-course pro shops and major online golf equipment retailers. The low-end manufacturers such as Adam Golf and Dunlop Golf with less developed technological capabilities sold their products at attractively lower prices. They mainly focus on beginner and occasional golfers through department store, large sporting goods stores and discounters.
The three defining characteristics of the golf equipment industry are the number of golfers, gear design innovations and brand recognition. The United States Golf Association (USGA) and the Royal & Ancient Golf Club (R&A) had started placing more and more performance regulations to limit the manufacturers’ ability to develop equipments, clubs and balls, with advanced technological innovations, because USGA officials believed that it’s an effective way of protecting historic golf courses that could not be lengthened due to space limitations, but also ensuring that the skill is the dominant element in determining game’s success. It is believed that such performance regulations had two impacts to the golf industry. Firstly, it discourages new golfers from taking up the game. Secondly, it equalises the technological differences between the high-end market leaders and the low-end producers.
In all, the golf equipment industry is a fix-sized marketing driven market with current manufacturers, each trying to capture a bigger market share by growing reliance on price competitions. The competition in this industry for market share is fierce.
The five-forces analysis
We take the five-forces model of competition to analyse the competitive forces in five areas that affects the industry attractiveness.
The competitive pressures created by the rivalry among competing manufacturers are very strong and have the greatest effect on the industry attractiveness, mainly due to: a.
All leading brand manufacturers are active in delivering advanced products with design innovations in order to improve their market standing, b.
All leading brand manufacturers are quite equal in size and capability. They can hardly be differentiated in overall product performances. c.
There are fewer buyers with less demand.
Equalization of technological capabilities due to regulatory...
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