CASE 3: COMPETITION IN THE GOLF EQUIPMENT INDUSTRY 2009
There is no exact date as to when the game of Golf came into existence. The first known reference of golf was made in 1452. Golf has come into its own during the early 1950’s and 1960’s. The game was televised in America, which ultimately meant that more and more people would become exposed to the game. During the late 1990’s.it was estimated that more than 27 million Americans were playing golf. However, between 1998 and 2008, the number of people playing golf had declined from 27.5 million to 25.6 million players. The industry is currently in a state of decline. The recent recession and the onset of regulations from ...view middle of the document...
This was in order to protect historic golf courses that could not be lengthened because of space limitations.
2. Competition in the industry is strong to fierce. The market is flooded with competitors and manufactures of equipment ranging from gloves to clubs. Michael Porters five forces model of competition can be used to evaluate a company’s competitive pressures. The five competitive forces include competition from competitors, competition from potential new entrants, competition in the form of substitute products, supplier bargaining power and finally supplier bargaining power.
- Competitors – The competition from competitors is very strong. There are at least five main companies that compete with each other in this industry in the U.S. Rivalry is based on the performance of the products, the image of the brand, the exposure of the brand at tour tournaments mainly by endorsements and also price. The regulating bodies the USGA and R&A have issued guidelines as to the development of the clubs and how they should be designed. Since all the competitors in the market have adhered to the specifications they now compete on differentiating their products based on other features such as weight adjusting models and interchangeable shafts. Competitors also use endorsements to compete with each other. It was realised that consumers choose products based on those used by their favourite professional golfer. The rate paid to professionals for endorsing has rocketed in recent years as manufacturers try to get a certain player to recommend their brand.
- New Entrants – The competition from new entrants is weak. The market already has many manufacturers that there doesn’t appear to be much incentive for any new rival especially since the market has declined. The only threat I could see is if a major sports brand acquires a company already in market, like what Adidas did with TaylorMade Company. If a major brand acquires one of these companies and injects funds into that company the competition may increase even further within the market. The barriers to entry are high capital investment needed, the brand needs to have had a long term recognition to be acknowledged by current consumers and there is a high level of marketing expense involved especially with promotion and endorsement contracts.
- Substitute Products – The threat from substitute products is strong. On page 34 there is a table of other activities that can be participated in apart from golf. The participation rates have increased for other recreational activities such as bicycle riding and swimming. The rates for golf have increased slightly in 2008 but it still has not reached the level of 2002 again. Another threat with regard substitute products is the level of counterfeit items available. It was a result of outsourcing that saw reproduction items being sold at a fraction of the selling price of the genuine products. An alliance among manufacturers led to the...