This case study is aimed at analysing the golf clubs industry in the United States. Michael Porter's Five Causes frameworks have been employed in the process of analyse. It mentioned the main element problems and vital trends in golf clubs industry. Then it analysed the issues that plaguing the entire industry in depth with Porter's Five Pushes model. Finally, the alternative solutions for the industry to solve those problems have been offered.
There are serious problems exists in golf clubs industry. It leads to rapid decrease in the amount of retail value and golfers. Government regulation and limitation on technological innovation lead to consistent declines in industry earnings. The new guidelines released by USGA and R&A have great negative effect on products differentiation. And it brought severe competition to golf market. Counterfeit products in china are respect as considerable hazards to the industry.
As per Porter's five makes model, there are five makes that can effect the competitive ability of any company.
1. Provider Power
Many club producers' processing activities has been outsourced to Asia. Components were stated in Asia countries and American membership makers just need to put together those components. Outsourcing techniques can be risky since it is difficult to regulate quality and security of products. Since there are lots of substitutes, it is not very easy for suppliers to operate a vehicle up prices. Grips have a minimal amount of differentiation of inputs. However, shafts have a higher amount of differentiation of inputs. Customers have strong inclination for a specific brand. Therefore, it limits the choice options of customers. In such a point of view, suppliers of shafts can't be easily substituted. There are fewer suppliers that can be chosen on the market and it definitely stifles competition. The bargaining powers of suppliers who provide shafts are more robust because of the uniqueness of products. Authorities regulation makes technology difficult to be performed. Thus, reliance on particular shaft maker is stronger than previously.
As it was defined in this case, there have been 22. 7million golfers in 2007 and it is a larger buyer size. Thereinto, male golfer accounts for 71%, feminine golfer accounts for 22% and junior golfer only makes up about about 7 %. Minority golfing participation rate is suprisingly low in the United States. Core golfers which were pivotal to industry sales take into account one-third of total golfers. They concern the grade of products instead of prices plus they seldom switch from one product or service to someone else. Therefore, those customers have lower bargaining electric power. On the contrary, the starters or non-core golf players are delicate to price change because they don't want spend too much upon this leisure activity. These people take a sizable part in golfing industry. Online golf stores such as Golfsmith. com and TGW. com can sell discounting products at a very low price. It really is attractive to rookies who want to avoid duty and lower expenditures.
3. Competitive Rivalry
There are five giants in golf clubs industry, namely Callaway Golf, TaylorMade, Ping, Titleist and Cobra Golfing. TaylorMade's is the largest competitor to Callaway on drivers offering. Callaway is the second-largest owner of drivers while TaylorMade in the 3rd place. Titleist's golf balls are best-selling brand and makes up about 40% market talk about in 2007. Callaway achieved economise of scale by Top-Flite acquisition and became the next largest vendor of golf balls. Titleist's putters are favored by bulk people. Ping golfing is in the leading position of custom fitting. Nike Company is famous for its golfing shoes. These businesses take a noticeably large market share and can securely control the retail prices. There is less competition on Technological innovation since government limitation. Therefore, competitive rivalry is is determined by price and quality. Callaway come with an internet sales program and many products can be purchased online. Online purchasing is of interest to price-sensitive customers.
Threat of Substitution
Substitution means different products for customers to switch to. The counterfeit products which consider as the substitution are excellent threats in the golf clubs industry. Since it states in the case, approximate 90 percent of world's counterfeit products manufactured in China. There are plenty of Chinese companies providing counterfeit products and it is unpractical to try to shut down all those companies. The Chinese government can not devote their effort to avoid counterfeiting for most reasons. Therefore, it makes the problem more terribly. The counterfeit products have competitive power in the forex market since it offers extraordinarily low prices. Moreover, many counterfeit products have high grade quality and can make accurate copies. It is problematic for customers to tell apart between them. There are a number of alternative products can be accessible in market which creates buyers' substitute propensity.
5. Risk of New Entry
Services and products that contain unique features can create customer loyalty. It really is called product differentiation. Central golfers account for one-third of total golf players. They are devoted customers for particular products and services. Customer devotion can cost new entrants a lot of time and money to promote their brands. However, situation is not optimistic. Restriction on manufacturing activity has limited technological innovation by competitive rivalry. Therefore, products differentiation has been blurred. Sales income rely more on discounting and endorsement. In this perspective, it is simple for new entrants to market their brands. However, it should be notice that the golf clubs industry is not profitable enough to get new challengers. It experienced sales declines in recent years.
Alliance and cooperation with suppliers
Shafts supplier has high bargaining electric power. Many producers co-developed shafts with companies which specialised in shaft design and production. There are plenty of famous brands of shafts such as Aldila, UST, Graphite Design and Fujikura. It can help companies arrive at a win-win situation to reduce costs and appeal to customers with strong personal preferences.
Outsourcing is a good method to offer with counterfeiting problems. The counterfeit products have a big market share by extraordinarily low prices. Outsourcing techniques non-core processing activities to low income countries such as china can keep your charges down and benefits companies in cost competition.
The golf equipment industry has experienced great changes in years. Price competition and counterfeiting will be the major problems for golf equipment industry. Assistance and outsourcing non-core activities are different solutions to solve this issue. However, outsourcing can be high-risk to the quality of products. Compared with outsourcing, alliance is safer and far better to boost sales.