Callaway Golf by FreddieJordanDesign

“THE NEXT SHOT” A FUTURE STRATEGY PROPOSAL

“The Next Shot”

A FUTURE STRATEGY PROPOSAL BY FREDDIE JORDAN

â&#x20AC;&#x153;Helping every golfer become a better golferâ&#x20AC;? Callaway.com 4

Abstract

his report provides an analytical insight into the Callaway Golf Company, with the intention of providing a proposal for future innovations. The report will make use of specific business tools and precise financial sources to present a step forward for the company. Areas of consideration that will be addressed to justify the proposal will include, Company Heritage, Company Values, Current Offerings, Social and Economical Implications. The report will suggest an innovative way of maintaining Callaway as one of the leading brands in the world of Golf.

Contents Section 1: The Background Content

Section

Page

An Introduction to Callaway Callaway Philosophy Callaway Heritage Callaway Brand Callaway Products Marketing Mix

1.1 1.2 1.3 1.4 1.5 1.6

8 8 8 11 12 13

Section 2: The Current Market Content

Section

Page

Boston Matrix Product Cycle Analysis Consumer Behaviour Seasonal Analysis Ansoff Matrix Stakeholder Map Opportunity Venn PESTLE Analysis SWOT Analysis Competitor Analysis Section 2 Conclusion

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11

14 15 17 19 20 20 20 22 22 23 26

Section 3: Identification and Justification

Content

Section

Page

International Target Markets Target Markets Persona Questionnaire Questionnaire Analysis Initial Concepts Concept Conclusion Affinity Diagram PEST for Concept Concept Market Concept SWOT

3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11

28 29 30 34 35 40 42 42 44 44 45

Section 4: Planning and Costs Page

Section

Content

47 48 48 52 53 55 56 57

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8

Strategic Planning Time plan Concept Considerations Concept Pricing Concept Marketing Mix Return of Investment predictions Product Adoption Stakeholder Map

Section 5: Conclusion Page

Section

Content

57 60

5.1 5.2

Final Concept Breakdown Conclusion

Section 6: References Page

Section

Content

62 63 64 65 66

6.1 6.2 6.3 6.4 6.5

References Meeting Minutes Appendix A - Balance Sheet Appendix B - Cost of Operations Appendix C - Selected Financial Statement Information

Section 1.0 The Background 1.1 An Introduction to Callaway

allaway Golf began in the early 80’s when Ely Callaway decided that he needed a new challenge following his retirement from the wine industry. Ely Callaway acquired half of a tiny golf club manufacturing company called Hickory Sticks. Not a stranger to the game or its products Ely quickly began to work his passion for business and innovation into the world of Golf. Callaway Golf today, has come along way since it began as tiny club manufacturer. It is at the forefront of high-end golf equipment and is constantly pushing the boundaries of the current golf market, as it always done through-out it’s 26-year history. In the past, the company has prided itself as being the most technically advanced golf manufacturing company in the business. It was first to pioneer the use of complete CNC and CAM methods of golf club production. The Callaway Golf Company’s products today cover the whole golf equipment spectrum, from Drivers, Fairway Woods, Irons, and Putters to specific Balls, Gloves and Bags. Callaway Golf Company also license the Callaway Brand for apparel, timepieces and accessories. They have also established themselves in the world of consumer electronics by acquiring Uplay, LLC to head their GPS product range. It is all part of making the game of golf more enjoyable for the golfer. For years Callaway hasn’t just been a number one in the pro-shops as a brand. It has also played a pivotal role on the course. Establishing respect amongst golf professionals, with Phil Mickelson and Ernie Els endorsing the clubs in the US as well as Eduardo Romero and Nick Dougherty in Europe and Morgan Pressel in the women’s category. Arnold Palmer, Justin Timberlake and Annika Sorenstam endorse Callaway as part of the “Icons” team. In terms of research and development, Callaway has been able to recruit experts in the field of aerodynamics and surface finishing from companies such as BA and Du Pont. With such an expert knowledge in specified scientific fields the company is able to constantly push the market and it’s

technological capabilities. With the release of Callaway’s Rule35 ball, it became the first golf company to register over 100 patents for a “perfect” ball design. Ron Drapeau became the companies CEO and President in 2001 following Ely’s third retirement and death. Ron has kept the spirit of Ely with in Callaway alive by acquiring two other companies to work under Callaway’s umbrella. By expanding and constantly innovating the Callaway Golf Company has managed to stay one step ahead of the game.

1.2 Callaway Philosophy

ly Callaway started the company with a simple mission “to make equipment that lets every golfer enjoy the game a little bit more”. Callaway Golf pride themselves in being at the forefront of scientific golf technology. They are constantly innovating and significantly improving not just on their competitors’ products but also on their own. Callaway Golf understand that economically there are faster and easier ways to make golf clubs, but they leave this to the followers. By maintaining a degree of science and understanding, and by constantly pushing the technical boundaries Callaway have been able to establish a definite edge above the competition. By introducing new technology to their products Callaway have not only improved the game of golf, but more importantly have made the game more enjoyable for the golfer. The Callaway brand is underpinned by ten core values; Heritage, Leadership, Innovation, Technology, Quality, Precision, Knowledgeable, Performance, Purit and Truth.

1.3 Callaway Heritage

he heritage of Callaway is re-enforced by the products and services the organisation produces. Founded in 1982 Callaway quickly became the worlds number one manufacturer of golf equipment because of its dedication to quality and the evolution of new technology.

â&#x20AC;&#x153;Demonstratably superior and pleasingly differentâ&#x20AC;? Callaway.com 9

â&#x20AC;&#x153;Blending artistry and technology with golf knowledgeâ&#x20AC;? Callaway.com 10

1993

The Callaway Golf Company Foundation is formed to help people in need within the community where the company operates Big Bertha Heaven Wood club introduced

1995

Big Bertha #11 club launched. Callaway Golf becomes the #1 manufacturer in sales of woods and irons.

1996

Callaway Golf Ball Company formed and becomes world’s largest manufacturer of golf clubs. Great Big Bertha Titanium Fairway Woods bring titanium to the fairway market.

1997

Callaway Golf acquires Odyssey. Sales reach $848.9 million, more than three times the nearest competitor.

2000

Odyssey unveils White Hot Putter line. Variable Face Thickness Technology (VFT) is introduced. Steelhead X-14 irons are introduced New ERC II Forged Titanium Driver becomes the highest COR Driver Callaway Golf ever produced.

2001

2 piece golf ball introduced. Hawk Eye VFT Series Drivers and Fairway Woods added to the line. Hawk Eye VFT Titanium Driver and Fairway Woods introduced. Hawk Eye VFT Irons with the tungsten weight matrix introduced. Introduction of the 2-ball Putter. Ely Callaway retires as President and CEO of Callaway Golf.

2002

1991

Big Bertha Driver (190cc), the first wide-body, stainless steel wood, is launched.

2003

1989

S2H2 Stainless Steel Woods introduced. Both S2H2 Irons and Woods offered with steel or graphite.

2005

1988

Callaway Hickory USA becomes Callaway Golf Company. Core S2H2 technology introduced, debuting in the S2H2 Irons

HX Tour 56 Golf Ball has softer feel for distance and control, thanks to new reaction injection moulding (RIM) technology. New Big Bertha Titanium 454 Drivers arrive. First forged iron X-Tours Irons are offered. X-18 and X-18 Pro Series Irons are the next gen of X-Series Technology.

2006

1986

Callaway Hickory Stick USA becomes the first company to use computer controlled milling machines to ensure uniform flatness on surface of its putters.

Big Bertha Red & Blue Golf Balls are launched. Launch of Callaway Golf Timepieces. New Big Bertha Titanium Driver and Stainless Steel Fairway Woods introduced. Callaway Golf acquires brands Ben Hogan and Top Flite Golf.

X460 Driver, X Fairway Woods, Big Bertha ‘06 Irons and the HX Pearl Golf Ball debut.

2007

1983

Ely Callaway renames the company Callaway Hickory Stick USA and becomes President and CEO

Launch of HX Golf Balls with efficient HEX. Introduction of C4 (Compression Cured Carbon Composite) club design using carbon fibre. Apparel is re-launched.

FT-i Driver debuts. Callaway golf lands 17 products on the 07 Golfers Digest Hot list.

2008

1982

Ely Callaway see’s steel-core, hickory shafted wedges and putters for the first time in an Indian Wells, California, Golf Shop. He buys a stake in Hickory Stick USA for $400,000 to become half owner.

Tour i Series Golf Balls debut, featuring dual core construction. New i-bird clubs for men and women. Big Bertha Irons, debut. I-MIX Technology debuts.

1.4 Callaway Brands

s well as their core range, Callaway produce other ranges of golf clubs, balls and accessories under a number of different “specialist” brands they have bought over the years. Top Flite: Is part of Callaway but focuses on Golf Balls as their primary product. It was acquired in 2003 and as since has continued to make innovative mid to high performance golf balls at affordable prices. Top Flite also have various beginner packages of golf clubs that are at the low end of technological and pricing market. Uplay: Callaway has acquired part of Uplay as a means of support for producing and branding their own range of GPS units. Uplay had built the technology of a GPS unit that enhances the game of Golf by allowing the golf to view fairways, distances and wind direction as well as record their score and distance. By acquiring a stake in Uplay, Callaway have been able to produce their

allaway’s product range breaks down into four core sections. Golf clubs, Golf Balls, Golf Apparel and Golf Accessories. Each of the sub Callaway brands will sell different elements of this product range and in some places are actually in competition with each other.

Solaire Tour Range HX Range Big Bertha Diablo Warbird Plus

Men and Women’s

Golf Apparel

Stand Bags Cart Bags Luggage C.G Collection Timepieces Umbrellas Range Finders Grips Head Covers Gift Packs Eyewear

Men and Women’s

Golf Accessories

Drivers Fairway Woods Hybrids Irons Wedges Putters Junior sets Left handed clubs Womens sets

Muen and Women’s

Golf Clubs

Headwear Shirts Bottoms Socks Footwear Gloves Belt

Figure 1. The Callaway Product Range [1]

Golf Balls

Odyssey: This is strictly a “Putter” orientated brand. It focuses on the selling, manufacturing and distribution golf putters. Odyssey products are high end and are tailored to the user requirements, they come in arrange of custom sizes, grips and weights. They are the number 1 putter brand in the PGA and the golfing world; they pride themselves in following Callaway’s passion for technology, precision and performance. Odyssey was acquired in 1997.

1.5 Callaway Products

Multi-Range

own branded models of these GPS devices. Ben Hogan: The Ben Hogan Brand was taken over by Callaway when it purchased Top Flite. The Hogan brand focuses on providing extremely playable clubs focusing on the casual player. The clubs are mid to high performance, many of which use exCallaway technology. The brand follows in the footsteps of Ben Hogan himself by providing the consumer with affordable quality. Today, it is used as a second base for Callaway to sell different club technologies/older technology under another brand.7.

They also have their own website in which you can view their entire product range. The website also directs you to their online store where you can purchase the items they sell, as well as a number of licensed retailers, which they allow to sell their products. Products are also sold through high street retailers and in stores they have their own section, to display their products. Callaway also have a custom build option on their clubs, so you can get a golf club suited to your needs and the way you play. Businesses can also buy Callaway apparel and accessories with their own personal logo on.

Growth Rate

High

Low

Place

allaway Golf advertise their products through a variety of mediums. These include golf magazines, press releases, sponsoring professional golfers, golf tours, their own magazine, printed advertising and word of mouth.

Callaway golf has moved far from where it started with Ely Callaway selling golf clubs from the trunk of his Cadillac. The company now are at the top end of the market. Being the biggest golf company around, they run their own tours and now own three golf companies, Ben Hogan, Odyssey and Topflite. The company originally started off in America and now business all over the world.

Price

Low

Promotion

1.6 Marketing Mix

The fact that Callaway’s core value requires their products to be of the highest standards, puts them into a high priced margin directed toward an exclusive market. This may one-day change if they decide to create their own low cost product range for the Callaway brand, though this would be highly unlikely as their brand Ben Hogan fits into the category for low cost golf clubs. Prices of Callaway Golf clubs start from around $70 a go right up to around $1000 a club. This is normally the price for the custom built clubs and the cutting edge technology used to produce them.

Market Share

High

Star

Problem Child

• Top selling putters like the Odyssey ‘Two-Ball’ • Popular clubs like the Big Bertha • In-fashion apparel • Gloves • Balls

• Brand new technology ‘Just released’ • New season branded apparel / accessories • Custom, specialist, high end clubs • Golf GPS units • New balls • New irons • New woods

Cash Cow

Dog

• Second hand clubs (which have been bought and resold in the ‘Callaway Used’ scheme) • Classic clubs • Some accessories • T-shirts • Umbrellas • Club towels

• Illegal clubs (Clubs that have been deemed ‘illegal’ due to the PGA rule changes e.g. driver heads and recently specific CNC milled wedges) • Out of fashion apparel • Out of season balls, clubs and accessories (old clubs that have not been incorporated into the second hand club scheme, out of season stock)

Figure 2. The Callaway Boston Matrix

Section 2.0 The Current Market 2.1 Boston Matrix (shown on previous page)

allaway pride them-selves in being an innovation driven company. It focuses on being the number one brand in the Golf equipment sector by providing consumers with the state of the art technologies and offerings. The company it self has been around a number of years and has had time to develop some very sophisticated products and marketing techniques to keep on top of their competition. The Matrix shows how Callaway maintains it’s current influx of new and existing products. Callaway introduces a new product annually; because of this the company has a very tight marketing system. Brand new products are aligned in the “Problem Child” section, partly because they have not had the opportunity to generate any high market interest yet. One product in this section is the new GPS system which is the first product of it’s kind to be produced by Callaway, the system also opens up a new market sector for Callaway and a new marketing opportunity in the realms of technological interface devices. The “Star” category is for products that are constantly updated but are seen in the golfing market as disposable/replaceable. Namely, accessories that wear with use or get lost during a round of golf, like balls and gloves. Other products in this area include top selling clubs that have had enough time to establish themselves amongst the golfing community, to name a few examples the Two Ball Odyssey Putter and the infamous Big Bertha range of golf clubs (and their annual updated reincarnations). Callaway prove themselves as being the leading innovator in Golf when you look into their “Cash Cow” section. Their current marketing strategy allows them to generate a cash flow from old and used products. Conventionally, old clubs and used clubs would form part of the “Dog” they would have a low market share and low growth rate due to consumer interests being next to none. However, Callaway have created a “Second Hand” buy back scheme and have

also marketed a “Classic Club” resource on their website. Other products in this section include functional branded accessories that won’t necessarily go out fashion each year, Items include towels and branded umbrellas. The Second Hand Club scheme gives Callaway’s consumers an opportunity sell their old model irons/drivers back to Callaway who in-turn can market them and re-sell them on their “Callaway Used” site to other consumers. This method allows Callaway to generate a second tier of profit from an already “exhausted” product. However, some clubs still become less desirable than others and some consumer’s will not use the Second Hand club scheme. So, although the scheme helps reduce the amount of low marketable products it does not completely eradicate it. Golfers are a strange bunch of consumers when it comes to clubs. With Apparel products and accessories they are more vain like the conventional fashion consumer, they will adjust to the new trends and fashions. However, when it comes to clubs they tend to buy and pick clubs that “suit” them. In this instance two types of Callaway club consumers are produced, one will buy into the brand and latest fashions and the other will have an interest in Callaway products that “suit” them. The “suit” consumer will therefore have a dependency on a certain type/model of club and would make good use of “Second Hand” scheme or would stick to buying into one franchise for example, The Big Bertha. The product analysis in the Boston illustrates how dedicated and proud Callaway of their products, and the company strives for the best opportunities for its consumers. They achieve this by making a large range of products available to the consumer as well as introducing new technological and desirable product ranges each year to enthuse consumer interest. However, despite Callaway’s efforts at prolonging their market share for as long as possible, they do also come under some strain. This comes in the form of the rules and regulations of Golf, put out by the PGA each year. Recently, the regulations have put design constraints and restrictions on Drivers and Wedges, namely in the manufacturing area. When the PGA release their annual rulings each year Callaway, like their competitors run the risk of having products fall into the “illegal”

club category. Predominantly this does not effect the casual/amateur golf market (the non-competitors), however it does effect the professional sector and the companies reputation as being a trusted and highly precise brand. It is evident from the matrix that Callaway currently offer nothing new to the market of golf. It can be deduced from this that Callaway has penetrated, and has a good market standing in the current golf sector. It now needs to find possible ways to branch out into others, whilst still maintaining its main company and brand directive.

2.2 Product Cycle Analysis

The growth and maturity section are dominated by the “Cash Cow” and “Star” market, the reason for both categories taking up the two sectors is down to the consumer behavior. Consumer’s are likely to buy the top products such as the Star products but they also may feel the need to upgrade their existing clubs with new ones. While upgrading to the “Star” range they might decide to sell their old clubs back to Callaway in the “Second Hand” Scheme. Other consumers may be new to the brand are a after a decent set of clubs at a fraction of the cost. They may decide to buy “Classic Clubs” or “used” clubs through Callaway’s scheme. Other products such as balls and gloves will tend to stay in this market as they will be constantly replaced by the consumer and will therefore have a constant demand/interest.

roduct Cycle Analysis (fig.3) is a graphical representation of the Boston Matrix with the added feature of a trend line that depicts the relationship of growth and market share. The PCA follows products from the Introduction to the market right through to it’s Matured Peak and its decline.

Gold Awards A

Silver Awards A

Drivers $350+

No.1

Drivers <$350

No.1

Fairway Woods

No.3

Hybrids

No.4

Game Improver Irons

No.1 & 3

Super Game Improver Irons

No.4 & 9

Player Irons

No. 4 & 5

W Wedges

No.4

Putters

No.1 X 2 No.2 No.3 X 2 No.5 No.6

Category

The PCA shows that the new products and the high end products have a slow steady growth. Products such as Callaway’s i-Mix system clubs and the GPS units are in this sector because they haven’t established a niche with the consumers yet. People are just gaining interest.

Ranking

Figure 4. Callaway’s 2009 product Rankings from Golfer’s Digest “2009 Hot List”

Growth

CALLAWA WAY - PCA Problem Child

Introduction

Star & Cash Cows

Growth

Star & Cash Cows

Maturity

Dog

Decline

Market Share

Figure 3. The Callaway Product Cycle Analysis

â&#x20AC;&#x153;Golf is deceptively simple and endlessly complicatedâ&#x20AC;? Arnold Palmer 16

Products that will strictly stay in the growth section would be the mid-range clubs that are at a reasonable price (compared to the flagship new products). Drivers such as the Big Bertha 460 CC would be here, because it is a Callaway club that is cheap enough to encourage consumers to try the brand out. Eventually this driver will be upgraded and replaced with a more “professional” range such as Callaway FTi driver, the act of replacement and desire for the higher end models places these types of products in the maturity phase. Products on the decline are those that are of out of date, out of fashion or out of season, such as accessories and apparel. Products with old logos on etc and wind proof jackets being sold in the summer. These products will need to be phased out due to their low interest and growth. Ways of phasing such products out would be to include them in promotional offers and end of season sales, reduce the price to the retailers and wholesalers. Products such as illegal clubs, that have been phased out by the PGA (Professional Golf Association) will need to be completely eradicated from Callaway’s product line. This is to preserve the company’s values, trust and integrity with the consumers. If a professional golfer was banned from a competition

because their Callaway Driver did not conform to the regulations, the companies reputation would be tarnished. The table on the previous page (fig.4) has been taken from a highly distinguished consumer review site. It shows how well perceived the current ’09 range of clubs are in the consumer world. The rankings are based on Consumer desire and rating and the Awards are based on “professional” trials and ratings of a range of different skilled players. The information has been taken from Golfer’s Digest, which is a consumer review company that specialise in Golf Equipment. The chart shows where Callaway have ranked and how well they have performed (Gold/Silver award) in each target product range. The areas in which Callaway have not performed as well as they should have indicate there could be room for innovation.

2.3 Consumer Behaviour

elow is a chart (fig.5) that shows the conventional ways a consumer would buy into the Callaway brand and what products will encourage the consumer investment.

GOLFER INTEREST New Consumer - -- The introduction to Callaway.

Existing Consumer / Prosumer - -- Upgrades and expansion of Callaway range.

Consumer Interest

Introduction

Growth

Maturity

Pro-sumer

Figure 5. The Callaway Consumer Behaviour Analysis

The graph is split into two consumer trends, path one shows how a new consumer would be introduced into the brand and encouraged into investing into its products. Path two indicates an existing Callaway consumer who will follow their interest in the brand with further investment into new products, logo products and club upgrades. There is a point on the graph where the two paths interlink. This is the point where a new consumer could get caught with the “buying bug” and cross into the realms of pro-sumer investment into the brand. The cross over point also indicates that both types of consumers could “flat line” on their interest in the brand they have simply invested enough as they need into the products. The x-axis is divided into 4 sections (similar to the PCA), these sections indicate points at which Callaway as a brand will see a form of trust and investment from the consumer. The introduction stage consists of the consumer’s first exposure to the brand, for example the golfer could have found a Callaway Ball on the course and used it, been given a logo Ball on a “society day” or simply

have fallen into the brand by buying the odd piece of attire (i.e a Polo Shirt, Hat, Glove). They would then perhaps continue to buy into other parts of the brand, for instance after they have a polo shirt they will buy some trousers and jumper to match. With every purchase they will be inheriting a trust in Callaway which will eventually draw them into the “Growth” sector. Entering the “Growth” sector, the consumer will have build up a trust and enthusiasm for the brand all the way to the point where they have decided to buy into Callaway’s specialty (clubs). Now essentially, the consumer may buy second hand clubs or dive straight into purchasing the affordable range or buy individual clubs such as a Putter, Wedge or Fairway Wood to try out, depending on their income and consumer habits. What is key at this point is that the ball is rolling for the consumer to become completely divulged into the Callaway brand. Their interest will keep increasing within the brand until it reaches a point where the consumer will fell satisfied with their investments (they have enough clubs which they like) and they will flat line on their interest.

2.0

The interesting aspect of this graph is that by mapping the consumer behaviour against the types of products they may be buying, we can analyse the importance of the whole Callaway range. Callaway is brand that prides itself on being a specialist in all areas of golf. This shows clearly how it has achieved this success in its diverse range of products. It also indicates how well selected and considered their product range is, for example the Branded accessories and apparel play a vital role in keeping the Brand endorsement alive in the consumer’s world. People may not be buying a £250 driver and opting instead for a £15 pack of balls, but it is definitely a start into getting the consumer involved. By having precision, accuracy and quality in all if their products they are able to persuade and encourage the next investment.

year round, mainly due to people losing the balls (under leaves and autumn and winter, and just through the constant playing during the summer). It is interesting to see what products may sell at what time of the year because it allows Callaway to plot when would be a suitable period to launch new product ranges. For example, the new model of Carry/Stand Bags would be best released during the beginning of Autumn where most golfer’s will prefer to carry their bags. As opposed to the trend in the summer of where they would prefer to use a Cart Bag to push/ pull along in a trolley. Other aspects such as the Custom Club product (i-Mix) are best launched at the height of the golf season because here people will have been playing numerous rounds and will feel more confident in trying out “new and improved” clubs which they will have the time to use.

2.4 Seasonal Analysis

This graph also shows the importance of Callaway “Luxury” products, items such as the Callaway watch and gift certificates. These products perform exceptionally well in the winter, mainly due to the Holiday period. The point of the graph is to indicate the importance each product has in Callaway’s arsenal and to re-iterate the enthusiasm Callaway has as a brand to be consumer orientated offering them the improvements and technology they need to make the game of golf a much more thrilling and enjoyable experience.

he importance of the Accessories and branded items over the clubs are also shown in the seasonal analysis. The Seasonal graph (fig.6) shows what types of products will be purchased during different periods in the year, it also indicates how much golf would be played during that period. Evidently, the back bone to Callaway seems to be its Ball segment, because they are purchased all

Rounds of Golf

SEASONAL ANALYSIS L

Winter

Spring

Summer

Autumn

Figure 6. Seasonal Product Analysis

2.5 Ansoff Matrix

Fresh products and innovative design, as well as brand loyalty of the customer is what keeps the brand in its position.

he Ansoff matrix (fig.7) is designed to look at any company’s existing products and the markets they penetrate. It gives an indication of the companies current market placement and where it could be in the future.

The customers satisfaction, is the most important external factor. If the consumer is unhappy and no longer purchases any products, Callaway will begin to decline. (fig.8)

2.6 Stakeholder Map 2.7 Opportunity Venn

allaway has both Internal and External factors that influence the company. The most influential Internal ones being the owners and designers, and external, the customer.

y looking at how the current Callaway brand is viewed, opportunity for further development of products or services arise in many different areas. Looking at the demographic already used by Callaway, enhancing existing customer experience is a possibility. It is also important to consider the people that do not use Callaway products when golfing. The golfers and nongolfers which are not exposed to the brand. should be thought of and products should be developed to further their enjoyment.(fig.9)

Within the company the CEO and fellows hold most influence, as they have final say on the future of Callaway, and where they move forward in the market. The designers of the new products are considered so important as they have to look at the market place, see what competitors are doing, and then keep the brand up to date with golfing trends.

Existing

Market

• Give away lesser selling products to make people more aware of Callaway. • Competitions to win Products.

• Advertising to appeal to younger golfers. • Increase Callaway PGA tour coverage. • Competitions that give away money & holidays if you buy Callaway Products.

Product

Existing

• Promotional incentives across range. Buy golf set, get a free golf bag.

New

• Increase of Accessories line.

New

• Increase in Golf product lines. • R&D making clubs that swing faster. • R&D making balls the fly further.

Figure 7. Ansoff Matrix

• Callaway Experience Days. • Callaway Cars. • Bringing Golf into Schools. • Making golf an Olympic Sport. • Sponsor Sporting Events. • Golf Clubs for Children.

Interest

Low

High Owners

Investors PGA tour High

Designers Research and Development

Influence

Managers

Professional golfers

Suppliers

Employees Offices Low

Media

Consumers Manufacturers

Distributors

Figure 8. Stakeholder Map

Brand Support

Brand Architecture

Position Research

Vision

Professional player endorsement Globally recognised golfing products

Business Goals

Consumer Interests

Leading golf brand in terms of R&D

Aesthetically pleasing products

Remain top golf manufactuerer

High quality performance

Maintain customer satisfaction

Segments

Objectives

Promise Customer satisfaction Reliable products

Mission

Personality

Figure 9. Opportunity Venn

People in the recession hit countries will be less likely to have expendable money to spend in the leisure industry. Callaway being a higher end brand will suffer from people not only not playing golf so much, but people also buying cheaper clubs as alternatives. ”The solution is to stay away from the well known but expensive top tier brands like Titleist, Ping, Nike, Callaway and the likes, and instead look at the cheaper second tier brands which offer the same quality but at a much reduced price” Frank J. Peter ezinearticles.com Alot more people now are starting to play golf in Far Eastern countries. With more countries developing people in that part of the world are having more time to play and more money to buy. (Golfing trends’09)

Social

The Company has significant international sales and purchases, and is exposed to currency exchange rate fluctuations. (Callaway Annual Report 2008) Currently in Korea, golf is the new “it” sport. After Pak Se-ri won the LPGA Championship and swept up other major awards in numerous golf tours, golf swiftly became Koreans’ favorite sport. [writes the Korea Herald]. Through the develpoment of callaway golf preowned.com, the company is able to reach users who are looking for bargain products. To keep popularity and interest amongst customers endorsement from proffessional golfers is essential.

Technological

Countries that have avoided the economic recession are predominantly in the far east and Australasia. “Australia takes the top spot followed by China with India and Singapore in equal third place.” [as being least struck by the economic downturn.] It is here where Callaway Golf will be least affected.

Callaway has licensing agreements with Sanei International Co Ltd for apparel lines in Japan, Korea, China and other Asian Pacific countries and with Playcorp Pty. Ltd in Australia and New Zealand.

Increase in networking sites such as facebook and twitter could lead to possible advertisement.

Maintaining IP for its products is essential to the success of the company. Environmental

Political

Goverment initiatives in schools to get kids out in the community and more active. Golf could possibly be a way of doing this.

Economic

ossible terrorist threats around the world could affect the company.

The Company’s operations are subject to federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the environment. (Callaway Annual Report 2008). With a big international market, Callaway could be affected by adverse weather conditions in places that are vulnerable to tsunamis and hurricanes. Golf being predominantly a summer sport means Callaway have income fluctuations across the seasons. 2.9 Callaway SWOT Analysis

Strengths

Technological advances in portable golfing technology.

Legislation

2.8 Callaway PESTLE Analysis

allaway prides itself on innovation of new golfing technologies. Endorsement from PGA players such as Ernie Els & Phil Mickelson. Mickelson won the PGA tour in 2009. Callaway owning Ben Hogan, Top-Flite & Oddysey means it has an excellent product portfolio. One of the leaders in high-end golf club market. Strong brand means instant recognition of products. Staff have strong understanding of engineering and technical product design.

2.0

Weaknesses

Callaway is well-positioned to break into the developing golf market. Being innovation led means marketing stategies and advertising of golf clubs is somewhat ignored. A reduction in the number of rounds of golf played or in the number of golf participants could adversely affect the Company’s sales. (Callaway Annual Report 2008) The Company depends on single source or a limited number of suppliers for some of its products, and the loss of any of these suppliers could harm its business. (Callaway Annual Report 2008)

Opportunities

With Callaway being focused on technical innovation aesthetics of their products must not be over-looked.

Current economic climate has resulted in a slump in the golfing sector. Callaway has reported losses in 2009. The Company’s golf ball business has a concentrated customer base. The loss of one or more of the Company’s top customers could have a significant negative impact on the business. (Callaway Annual Report 2008) A reduction in the number of rounds of golf played or in the number of golf participants could adversely affect the Company’s sales. Adverse weather conditions around the world could affect the golfing industry. The counterfeit golf club industry.

TaylorMade driver’s were the most used clubs on the PGA tour in ‘07 and ‘08.

2.10 Competitor Analysis

Callway golf is viewed as a company for senior and women players.

allaway operate within two market segments, Golf Balls and Golf Clubs. The Golf club segment divides further into club types.

Room to have more proffessional golfers using Callaway products and event sponsorship. Callaway sells 53% of its products to US golfers. Huge oppurtunity to penetrate markets abroad. Room to produce sustainable product range. Oppurtunity for Flagship stores in Major Cities. Offer Experience days, such as new product try out sessions and tours of Golf Courses. Promote Golf in Schools. Golf is a fast growing sport. Promotion at a young age could be the future. Making a range of clubs designed for children could be an interesting way to get kids involved. Golf is fast becoming the most popular sport in far east countries. In particular Korea (Korea Herald).

Threats

Under-cutting from cheaper online retailers is a threat to Callawaypreowned.com

Competition from other golf manufacturing companies such as Acushnet, Cobra & Nike.

The Club segment takes 80% of Sales and 95.1% operating income. This segment is divided into Drivers and Fairway Woods, Irons, Accessories and Putters. The Woods segment takes 24% of Sales, Irons take 27.5% , Accessories 17% of Revenue and the Putters generate 9.1% of Revenue. Callaway generates a very high amount of revenue from each segment, the Irons take the most at $309.6 million revenue (in 2007). The irons have generated an 8% increase from the previous year the accessories segment also increased at 17%, these are the only segments that Callaway have been able to capitalise on in the shift from 2007 to 2008. The Woods decreased 12% in previous sales of $268.3 million (a decrease of $37.6 million). Balls dropped by 8% in the Top Flite brand from the previous year but the sales of the Callaway branded balls increased creating an overall profit in this market sector. Balls increased to a revenue of $6.9million up from the previous revenue of $0.9million (2007). The reason for the increase and decreases in the market segments is due to the production of new innovative models and products in

the company and also due to the increase in selling prices of single units and overall unit production decreases. Another major factor in determining Callaway’s market decreases comes in the form of its competitors operating in the same sector. Callaway 2008 Annual Report – “Management Decisions” page 38 Callaway 2007 Annual Report http://www.examiner.com/x-1024-Golf-Equipment-Examiner~y2009m9d18Callaway-Golf-lowering-its-IQ - Article focusing on Callaway’s decision to decrease product range. http://www.Wikinvest.com - Callaway Golf (ELY) Article

The overall decrease in the Woods segment could be down the economic crisis, issues to do with falling rounds of golf being played but also due to public coverage and target markets. Currently Callaway is not the most popular Driver being used on the PGA tour, that segment is taken by Taylormade which has a much more younger aged target market. Also, Callaway does not have a sporting superstar with the marketing power as powerful as Tiger Woods and his endorsements with Nike. The tree diagram (fig.10) below depicts all of Callaway’s top competition and their special product field (what they challenge Callaway

at). The diagram also includes the brands that make up Callaway. It depicts the brands that are part of big conglomerates. The perceptual map (shown overleaf) compares Callaway with its main competition. It plots brands Quality (based on overall build quality, consumer satisfaction, skill level and technological innovation) against Cost (overall costs of products). The diagram has depicted the main proportion of the brands into 2 sectors: Sector 1 (top left of figure 11) consists of brands that deal with the lower end of the consumer market, these products operate in providing economically affordable clubs aimed at beginners and casual players. Sector 2 (bottom right of figure 11) consists of brands that produce products that fall into the high end “professional” consumer market, these clubs are seen as the top players in the golf equipment sector. Many of the brands in this sector have endorsements in professional golfers playing in the PGA competitions.

Competitor Breakdown Irons, Clubs, Balls

Footwear

Irons, Clubs Balls Balls Irons, Clubs Putters

Irons, Clubs, Balls, Accessories

Irons, Clubs, Putters, Accessories

Irons, Clubs, Putters, Accessories Irons, Clubs, Balls, Accessories

Apperal

Putters

Balls, Irons

Balls

Irons, CLubs, Balls Putters, Accessories Irons, CLubs, Balls Putters, Accessories

Figure10. The Callaway Competitor Breakdown

â&#x20AC;&#x153;The object of golf is not just to win. It is to play like a gentleman, and win.â&#x20AC;? Phil Mickelson 25

Callaway itself operates mainly in sector 2 against the brands there. However, it does have a hand in sector 1 selling clubs under the Ben Hogan and Top Flite brand names. Some of the companies such as Ashworth, Srixion and Footjoy have been excluded from each sector because they operate strictly in their own product niche such as Clothing, Balls and Shoes. Companies such as Bridgestone and Scotty Cameron have been excluded from sector 2 because they are not considered as big as the brands that have been included. Callaway is a brand that offers high quality and high priced goods, it also compensates for mid entry golfer and produces “reasonably affordable” clubs. Callaway’s top competition comes from the Fortune - Aschunet brand, Adidas brand, Nike and the SRI Sports brands. Against its top competitors Callaway produces the lowest Gross Margin at 44%, with Aschunet, Adidas and Nike producing between 44.7% - 46.7%. The reason for Callaway being the lowest may be due to the fact that most it’s competitors operate from large conglomerate of other brands.

(Wikinvest.com – Callaway – based on information from Fortune Brand, Adidas, Nike Annual reports). However, despite Callaway being low on the Gross Margin against their competitors, they still rank amongst number 1 and 2 (above their competitors) with their products. – See product Sector Chart. 2.11 Section 2 Conclusion

ow that the different market analysis tools have been undertaken, a decision as to how to futher the brand can be established. To understand the Callaway brand, the use of a SWOT analysis, allowed vision as to Callaway’s current strengths, weaknesses opportunities and threats. Deconstucting the brand futher, through the use of sales figure recall, a Boston Matrix and an Ansoff matrix, allowed the current products that are strongest, and time of most profit during the financial year to be seen.

Low Quality

High Quality

Low Quality

High Quality

Figure 11. The Callaway Competitor Breakdown

2.0

On a more personal note, completing stakeholder diagrams to sum up all the people who would have interest in the brand, is essential for further development. Understanding who would care for the progression, and want to take it seriously, is something that is needed for success. Looking at sseasonal sales has allowed insight into how the consumer is willing to spend their money, and what direction Callaway is best to advance in for a most profitable future. Now that all of these factors have been identified, the future of Callaway golf can be narrowed to down.

Key Identifiers

In conjunction, the worlds current trends were analysed. A PEST analysis was used to look at the current trends and issues in the world. This is key to understanding where the Callaway brand lies amongst others. Competitor analysis as well as consumer spending habits across seasons, allows a full view of where the Callaway brand stands and where its makes its money on a daily basis.

A strategy to help â&#x20AC;&#x153;problem child productsâ&#x20AC;? gain market share. A product that will interest both new and existing consumers of Callaway. A product that is available through out all seasons A product that is functional through out all seasons Promote brand advertising.

awareness

through

Stay number 1 above all competitors. Please all Stakeholders. Desirable and efficient to produce during current economic time. Include top of the range technology. Promote golf as a social activity. Maintain Callaways values. Keep within Callaways perceptual market.

Section 3.0 The Identification and Justification. 3.1 International Market Analysis

olf is a worldwide sport with large consumer markets in the US, Korea, Japan, India, China, Germany, UK and South Africa. Within the last 5 years, the golf industry has seen a significant growth of 5-15% annually at various regions of the world. (Golfer ‘09) According to a recent market study “Opportunities in the Global Golf Club Market 2004-2009” published by E-Composites, Inc; the golf club market in India and China will see a growth rate of over 25% annually for the next 5 years. The growing popularity of the game and the affluence of the golfers will insure this expansion. In 2007 The market size for the worldwide golf club manufacturing industry was estimated to be $3.9bn. Significant shifts in the global golf equipment market will see intense growth in the secondary Asian and European markets.

Japan will see itself overtaken as Asias target consumer network with Korea, India and China representing emerging consumer markets demonstarting dramatic expansion. The total value of the worlds emerging consumer market will quickly eclipse that of the primary european, asian and american netwroks. An increasing number of golfers in the world have come to rely on higher-level products and thus titanium and carbon fibre have become the mainstream materials in the industry. The trend now is toward lightweight golf clubs. According to the study, carbon composites now dominate over steel in the manufacturing of golf shafts. The market for manufacturers of golf clubs/shafts is crowded with small to large corporations such as Callaway, Taylormade, Acushnet, Ping Golf and Wilson. There are more than 100 manufacturers of golf clubs around the world and about 50 of these are based in the USA. Suppliers are mostly based in the US, China, Taiwan, Korea, Japan, UK, and Germany.

2008

$398

$486

2006

2004

$358

2005

$414

2007

$493

Figure 12. Year on Year Net Profit

Net Rev - Millions of $

RoA 11%

USA - $554.0

RoW 7%

Japan - $166.5 Europe - $191.1 Rest of Asia - $125.6

Europe 17%

Rest of World - $80.0

Japan 15%

USA 50%

Figure 13. Net Revenue by region

Net Sales - Millions of $ Irons - $308.5

Drivers & Woods 28%

Balls - $223.1

Irons 28%

Accessories - $215.6 Putters - $101.7 Drivers - $268.3

Putters 9% Acc. 19%

Figure 14. Net Sales by Product Catergory

Balls 20%

European Market

Market size: European golf equipment sales saw a 5.0% growth in 2007 represented by total sales of £256.1m in its largest consumer market the UK. (Golfer ‘09)

consumer market, the US, is expected to exceed $3.72bn in value representing an increased compound annual growth rate (CAGR) of 4.6% (PGA ‘09)

Market segmentation: Clubs, represent 63.4% of the markets total value and consituted the largest segment of the UK golf equipment market. Golf represents 35.0% of total sporting equipment sales in this market. (Top Golfer ‘09)

Main competitors for Callaway include Acushnet (Titleist and Pinnacle brands), Cobra, Sumitomo Rubber Industries (Dunlop and Srixon brands), Bridgestone (Bridgestone and Precept brands), Nike, Dick’s Sporting Goods (MaxFli brand) and others. (Callaway Annual Report 2008).

Market shares: The orgainisation with the largest market share (13.5%) was Acushnet Europe Ltd who own the brands Titleist, Cobra, Pinnacle and Footjoy. (PGA ‘09)

Asian Market

Market forecast: By 2011, Europes largest golf consumer market, the UK, is expected to exceed £318.8m in value representing a sustained compound annual growth rate (CAGR) of 4.6% (PGA ‘09) Market size: Asian golf equipment sales saw a 4.1% growth in 2007 represented by total sales of ¥247.9bn in its largest consumer market Japan. (Mintel ‘09) Market segmentation: Clubs, represent 43.2% of the markets total value and consituted the largest segment of the Japanese golf equipment market. Market shares: The orgainisation with the largest market share by value was Bridgestone with a 29.9% share of the market.

American Market

Market forecast: By 2011 Asias largest golf consumer market, Japan, is expected to exceed ¥263.0bn in value representing a reduced compound annual growth rate (CAGR) of 1.5% (PGA ‘09) Market size: American golf equipment sales saw a 0.5% growth in 2007 represented by total sales of $2.98bn in its largest consumer market the US. (Mintel ‘09) Market segmentation: Clubs, represent 53.9% of the markets total value and consituted the largest segment of the US golf equipment market. Market shares: The orgainisation with the largest market share (28.6%) was Acushnet Company who own the brands Titleist, Cobra, & Pinnacle. Market forecast: By 2011 Asias largest golf

Callaway golf for the fiscal year of 2008 made net sales of $1,117 million totalling $486.8 million in gross profit. This makes for a slight decrease from the $1124 million dollar net sales and $493.2 gross profit from 2007. Net sales fell 17 percent to $302.2 million, hurt by weak consumer spending and currency fluctuations. (wikinvest). Callaway’s net income totaled $66.1 million in 2008, a 28% increase from $54 million in 2007. (wikinvest).In the second quarter of 2009, the company reported net income fell 82% to $6.5 million, down from $37.1 million in the year ago period. (Callaway Annual Report 2008). Approximately 50%, 53% and 56% of the Company’s net sales were derived from sales within the United States in 2008, 2007 and 2006, respectively. (Callaway Annual Report 2008).

3.2 Target Market

allaway’s target markets are deconstructed by product segment with each element; clubs, balls, accessories and apparel appealing to different consumer markets.(fig.15) The primary target of Callaway clubs are experienced amateur golfers or prosumers positioned with a marketing strategy that includes; product family breakdown, global distribution channels, premium price points and target audience orientated product promotion. To satisfy the emerging beginner golfer market, Ben Hogan clubs (as subsidiary brand of Callaway) use the same principles at a reduced price point to target its less experienced consumers. Callaway offer a range of balls targeted at all golfers with a marketing strategy that includes;

Target Market Sectors Golf balls - every golfer Golf balls - premium Golf clubs - professional Golf clubs - experienced Golf clubs - Beginner Accessories - Avid Accessories - Traditional Accessories - Sports Accessories - Social

Figure 15. Target Market Sectors by product range and size

revolutionary technology and aerodynamics, global distribution channels, ranged price points and broad product promotion.

Occupation: Vice President of small national technology firm (6 months) Marital status: Married (17 years)

Callaway accessories and apparel products are segmented by target market and positions itself as fun, relaxed and traditional. They operate with-in four key golfer groups; avid golfers, traditional golfers, sports people and social golfers. Callaway accessories and apparel have reduced distribution channels and a premium price point.

he developed Persona has produced a view of the Callaway brand through the eyes of thier current users. This has helped establish opportunities for the brand that their customers might be interested in.

Details

Catergory: â&#x20AC;&#x2DC;the amateur prosumerâ&#x20AC;&#x2122; Name: Nathan Dudley Age: 41

Household income: $140,000 (30% dis) Home town: Windermere, Florida, USA

Narative

3.3 Customer Profile

Family status: Two daughters (aged 10 & 14)

Nathan works in a very demanding environment and spends much of the day at his office. Although he enjoys his job, Nathan most values time spent with his family and friends. His wife whom he met at college is a biochemist and also spends a large amount of her day at work. Nathan is a very sociable. He is introvert in character but remains strong and confident in his convictions. He enjoys treating himself and his family and leads a luxurious lifestyle within his means. Nathan appreciates quality and considers his product purchases very carefully. He enjoys the process of weighing up his options and exploring avenues for a better deal. He is

“Yell fore... shoot six... and write down five” Nathan Dudley 32

proud of his material things and is a ‘big brand buyer’.

Primary product use: Weekly round, Driving range, Putting greens Enablers

Nathan has been an amateur golfer since his teens but has been regularly playing for about 8 years. Nathan first started playing golf as a social outlet, but has become more and more obsessed with performance.

Callaway’s current product offering.

Nathan sees golf as the ideal opportunity for him to take a break from the intense focus daily life and enjoy the company of his closest friends.

Personal goals: Lower handicap, Drive furthe, Hit more fairways, Hit more greens in regulation, Improve putting Purchase Influencers: Learning curve, Friends, Magazines, Technology, Endorsement, Price, Brand loyalty

Nathan is a member of the Lake Windermere golf club and plays 18 holes at least once a week. He also regularly attends the club driving range but no longer has lessons.

Scenario

Primary market interaction: Club shop, Golf magazines, Golf websites, Televised golf adverts, Friends

Market and product fustrations: Product development speed, Try before you buy, Changing golf regulations.

Nathan is a prosumer and obtains a high level knowledge regarding golf clubs, technology advances and new product information. He is always looking for a new club or aid that will help develop his game and is well read on the subject. Nathan started playing with Callaway clubs six years ago and currently uses both Callaway irons and woods. He chose his current Callaway set because they are the same irons as used by his favourite player Phil Mickelson. He has a very good grasp of

Figure 16 is a Scale of Influence diagram, it lists and highlights the goals and influences of Nathan. The organe blocks indicate the range of influence, the white markers indicate the level of influence he is at now. The white circles predict Nathan’s aspirations (goals). 1 is the least and 5 is the most level of influence.

Knowledge

Influencers

Activities

Confidence / trust

Source

Friends rec

Product quality

Brand loyalty

Shopping

Televised golf

Driving range

18 holes

Websites

Magazines

Callaway

Professional game

Product information

Technique

Figure 16. Customer profile Scales of Influence

3.4 Primary research: Golfer Survey

lease attempt to answer the following questions by either checking the allocated boxes or writing in the area provided. This survey is part of an investigation into future market oppportunitites for Callaway golf and you participation is very much appreciated.

Your age? 0 - 15 (0.0%) 15 - 24 (6%) 25 - 35 (12%) 35 - 45 (38%) 45- 55 (26%) 55+ (18%) Your Gender? Male (88%) Female (12%) How often do you play golf? Once a year (4%) Twice a year (6%) Once a month (31%) Once a week (3%) Twice weekly or more (18%) Never (6%) Do you own your own golf equipment? Yes (76%) No (24%) If yes, which pieces of equipment? (82%) Individual Irons (18% of total sample) A set of Irons (64%) Individual Woods / Drivers (52%) A set of woods / Drivers (24%) Putters (60%) Other clubs (48%) Golf Bag (52%) Golf Trolley (16%) Golf Glove (76%) Other Accessories (76%) Attire (52%) Balls / tee (76%)

Are you familiar with Callaway golf products? Yes (84%) No (16%) If Yes, which of the following do you associate with Callaway golf products? (84%) High tech (64% of total sample) Low tech (0%) High price (84%) Low price (0%) High quality (72%) Low quality (16%) High performance (72%) Low performance (16%) Do you own a Callaway product? Yes (32%) No (68%) If you own a Callaway product why did you chose Callaway over its rival brands? Technology (20%) Recommendation (20%) Professional advice (4%) Player endorsement (4%) Price (16%) Brand loyalty (20%) Performance (28%) If you buy Callaway products, which products do you buy? Individual Irons (4%) A set of Irons (20%) Individual Woods / Drivers (12%) A set of woods / Drivers (4%) Putters (8%) Other clubs (4%) Golf Bag (0%) Golf Trolley (0%) Golf Glove (12%) Other Accessories (24%) Attire (4%) Balls / tee (20%)

2.0

If Callaway were to focus their efforts on one element of your game which element would you prefer that to be? Driving distance (24%) Driving accuracy (20%) Ease of use (0%) Reduced learning curve (0%) Fairway play (12%) Short game (8%) On the greens (4%) Hazard play (20%) Golfing accessories (12%) Do you own a smart Phone? Yes (60%) No (40%) Do you have any other thoughts relating to how Callawayâ&#x20AC;&#x2122;s future design focus could benefit you as a golfer? Find my ball! Keep me out of the sand! Offer try before you buy Make products for younger golfers Reduce price I wanna use my iPhone

3.5 Analysis of Survey

he purpose of conducting a questionnaire, was to find out first hand, what a sampled amount of Callaway users think about the brand. Overleaf the results of the questionnaire are shown in chart form. The results show that people will buy the cheaper products of the Callaway brand more readily, over the more expensive golf sets. It must be noted that further development of the brand must come in a form that is easily available to the golfing market, at a price which is affordable. Date of survey: 07.11.09 Sample: 25 People outside American golf in Slough

How often do you play golf? Once a year

Never Twice weekly +

Twice a year

4% 6%

18%

31% 3% Once a week Once a month Figure 17.

100 90 80

If Callaway were to focus thier efforts on one element of your game which element would you prefer that to be?

70 60 50 40 30 20

Golfing accessories

Hazard play

On the greens

Short game

Fairway play

Driving accuracy

Driving distance

10 Figure 18.

Are you familiar with Callaway golf products?

16% No

84% Yes

Figure 19.

Do you own a Callaway product?

32% Yes

68% No

Figure 20.

Low performance

High performance

Low quality

High quality

100

High price

High tech

0 Other Accessories Attire Balls / tee

Golf Glove

A set of woods / Drivers Putters Other clubs

Individual Irons A set of Irons Individual Woods / Drivers

100

If you buy Callaway products, which products do you buy?

Figure 21.

If Yes, which of the following do you associate with Callaway golf products?

Figure 22.

â&#x20AC;&#x153;We have always taken pride in being at the top of the market.â&#x20AC;? Callaway.com 39

3.6 Initial Concepts and Strategies

New source of income

T - Golfers may not want an electronic score

Increase the market share of Callaway golf by promoting the brand in other countries across the world. Creating tours in new countries to get new customers interested in golf and promote Callaway as the best, leading brand in that field by giving out free/cheep promotional items.

S - Increase Callawayâ&#x20AC;&#x2122;s market share Promote the sport

card

Not enough resources to create product RFID chips in golf balls & iPhone application

Global Marketing: Pushing the Brand

n the light of information presented regarding the Callaway brand, the current market situation and consumer trends, initial concepts were developed. Many concepts were generated however only five have been found most promising and have been presented here. A SWOT analysis has been carried out on each of the concepts to understand its potential.

S - Simple and easy to incorporate No other product currently on the market Can be incorporated quickly Broaden the target market/customer range/ bring new people to the brand

Increase peoples awareness of the brand

A new way to promote the brand

W - Not many countries will be interested in

New market

the brand

W - No products currently in this market sector.

O - The current economic situation may be

Is a big risk to take such a step.

the cheapest time to promote the brand T - The current economic situation may not be the best time These can be introduced quickly as part of a separate purchase or part of a package when buying Callaway golf clubs. The electronic score card is there to easily record the game play and to allow the data to be collected and analysed so that the golfer can see how he plays and where there is room for improvement.

S - Another product for the brand No other product currently on the market by another golf company Simple and easy to incorporate

W - No market for the product O - New market Broaden Callawayâ&#x20AC;&#x2122;s technology field

O - Increase income Update able/changeable New Market Broaden Callawayâ&#x20AC;&#x2122;s technology field

T - Not enough resources to create product Flagship Store

Electronic Store Cards

This is a chip that will be inserted into golf balls and allow the golfer to identify lost golf balls on the field. There will be a parallel application for use with and iphone or a key fob style tracking device or a watch with a built in tracking system. The ball will be able to be paired with the device so that it can easily be identified to the owner.

Flagship Store: To open flag ship stores across the worlds to promote the brand, where golfers can go directly to a store a purchase Callaway equipment and have an enjoyable experience. The store is the direct link between the business and the customer.

S - Direct contact with customers Opportunity customers

sell

products

directly

Promote Younger Players

In store promotions

Rely the brands image of a single entity

W - Could be costly to open

O - Bring in new customers

Appeal to the younger golfers

T - Could all fall through - No one will come to

Highlight the amateurs

the store Promote younger players Young talent: Find the new Tiger woods, by training young golfers, and getting them more interested in the brand, sponsoring, offering an opportunity in becoming a professional golfer.

S - Imprint brand on a younger audience Creates a new spokesperson for Callaway Callaway Role Model Increase media coverage products

brand

amongst

the

pro-

More Callaway products old due endorsements and â&#x20AC;&#x153;signatureâ&#x20AC;? ranges

T - A big risk putting a brand responsibility onto an individual

Try not to over exagerate the individualâ&#x20AC;&#x2122;s role in the company - reputation of the indvidual and Callaway could be jeopardised.

Callaway

W - Players with the ability and power as Tiger Woods rarely come along

3.7 Concept Conclusion

ollowing the initial innovation concepts in the previous section. It was decided that the development of an electronic score card concept would be the most valid option. The reason behind the concept is that the technology could be integrated with the iPhone and the score card could become an iPhone App. This would give the product an extremely quick development and implementation time, at a very little cost (compared to club/ball development). An iPhone application would be easy to produce because it is 100% software based. This would mean Callaway would only need to focus on designing the interface, promotion and development coding. All of the tasks required to make the App could be sourced from specific software developers and/or produced by the in-house art working/ graphics/web team. The low cost and easy turn around time also makes the product very low risk, compared the other concepts that are a lot more complex to implement. For example the “rebranding” concept for increasing international awareness may put Callaway at a risk of losing it’s Brand awareness in countries they would be devoting less time too. There are also international political issues to consider when selling “American” based goods abroad. The more technological concepts of producing special traceable balls provides the issue of a longer development time and runs the risk that R&D expenses may be spent on a product that could essential not be implemented until a long time into the future. The “Flagship Store” idea is a great concept, because Callaway and it’s Brands have a very versatile and diverse range of products and goods to offer. It would be great to have them all under one roof. The advantages of this would be that Callaway could increase their image from a not just a Club maker but a Callaway Fashion brand. Currently Nike has a similar setup with their “Nike Town” stores.

With Callaway having a presence on the high street, golfers could see the brand as more consumer orientated and humanistic, adding to it’s value. It could also offer beneficial services such as 1 on 1 shopping tips and custom club fitting services. The only issues with the Store idea is that financially it is a massive investment. Callaway would need to buy property in affluent areas of specific countries to get the most out of the Store. Callaway would also have to spend more on upkeep, staff, advertisements, maintenance and would also need to compete with standard golf stores and driving ranges who will offer a whole range of goods. They could offer product promotions and enticements to get them to use the flagship store. The flagship stores are a good idea because they cut out the retailer and costs involved there, however the set-up cost to create enough stores to compensate for the amount of products sold by conventional retailers through Callaway (as a supplier) would never get compromised. The iPhone is the better choice because it is low risk, cheap to implement and has a whole range of benefits that could increase the future sales of Callaway Products and increase the awareness of Golf. The concept also fits the brand and it’s values more than any other.

3.8 Affinity Diagram

his Affinity diagram looks at the consumer, and how the introduction of an iPhone application to improve their game will affect them. The primary, secondary and tertiary needs have been identified and the benefits of the iPhone application justified. At each stage the need of the consumer must be something that can be related back to the brand, and manageable in a golfing context. .

Primary Needs

Secondary Needs

Tertiary Needs

App

Improve golf game

Improve driving Improve course approach Improve short game Improve game knowledge

Functionality and Appearence

Appealing layout Appealing functions Unaffeacted by software glitches Customisable options Ease of use

Aftersales services

Quick to download Regular updates

App descripton

Effective Comunication

Informative discription Stand out logo Easy to understand Company Information Legal information

Pricing

Competitive pricing

Priced realistically to iphone and golfing consumers Competitively priced with other golfing applications and applications from other sporting manufacturers Trial versions

Profit Margin

Low production costs Low set up costs Low R&D costs Low mainatinance costs

Marketing

Communicate Brand

Effective promotion of callaway brand and products Graphically on brand

Figure 23. Affinity Diagram

he politics of the world have not changed since he 1st PEST. Therefore this category remains the same as the original.

Tech

Political

3.9 PEST for Concept With advances in technology, and the popularity of Apple, with the iPhone and iPod Touch, apps are becoming increasingly more in demand.

Economical

3.10 Concept Market Global financial crisis nearing an end. iPhone app, will not produce significant revenue when compared to main products. However, will increase brand awareness. Technology prices for iPhone, remain high. Tapping into a profitable market.

Social

VAT increasing back up to 17.5% in UK market as of Jan 1st 2010. iPhone app is something that can be used all year around. It will be able to keep you up to date with golf from around the world, when unable to play yourself due to it being the wrong season of the year. A marketing campaign would need to run alongside launch of App, to ensure maximum exposure.

he iPhone was announced by Apple’s CEO Steve Jobs during the keynote address at the Macworld Conference & Expo on 9 January 2007. It’s an Internet-enabled mobile phone that has revolutionized the mobile industry. The iPhone’s features include those of a camera, capturing video, an MP3 and video player, mobile phone, and Internet services like e-mail, text messaging, web browsing, Visual Voice mail and wireless connectivity. The iPhone user input is accomplished via touch screen with virtual keyboard and buttons. The iPhone 3G and iPhone 3GS App Store is a service for the iPhone and iPod Touch created by Apple Inc, which allows users to browse and download over 50,000 applications from the iTunes Store that were developed with the

iPhone Apps are downloaded directly to iPhone or iPod Touch. The Applications Store is also available within iTunes. After the success of Apple’s App Store, and the launch of similar services by its competitors, some have started using ‘app store’ as a generic term referring to any similar service for mobile devices. The App Store is accessible from the iPhone and iPod Touch via an application by the same name. Over 1 billion iPhone Apps have been downloaded so far. The iPhone Apps Store, lists the top 25 and top 50 downloads at any given time - both free and at a price.

already own iPhones. The App could be deemed too expensive. The patents and IP protection for the product would add to the products budget. There is not really a product comparison out there to judge the market impact of the product. It could flop and not take off.

Opportunities

iPhone SDK and published through Apple. iPhone Apps are available to purchase or free of charge, depending on the application.

These are the same opportunities as the Strategic Opportunities described in the previous section. However, these are the most prominent ones: Wider target market – young golfers, new golfers, iPhone Golfers. Increased brand awareness. The brand has the opportunity to target “nongolfers”.

http://www.iphonefacts.org

A Strengths

second SWOT Analysis was taken out on the iPhone concept to assess the concepts viability and possible outcomes.

The implementation costs are low compared to other innovation ideas. Turn over times of producing the product and getting it to market are short. New target area for Callaway to have a presence within.

Weaknesses

On brand with Callaway’s values of making Golf more enjoyable for everyone. As well as maintaining Callaway’s reputation as being number one in Golf innovations and technology. Callaway have not produced a piece of software like this before.

Be a leader in a new product sector above their competitors. Make golf more enjoyable for the consumers.

Threats

3.11 Concept Analysis

The product could be altered, reprogrammed and re-marketed as a Callaway rival. Callaway would have to make sure they could fully patent and protect the concept and product. The software will need to be continually updated with information and reviews of course and products. The costs for updating the software will need to paid, there will also need to be enough consumer interest to justify updating the packages. Having a consumer network built into the device will give consumers the opportunity to comment negatively on products. It is a new innovation, it could take a while for market interest to pick up, this could influence the return of investment time plan.

Many of the existing main target consumers of Callaway products are retired golf players who may not have the knowledge or enthusiasm to use such advanced technology. The product is only useful for people who

“Over 1 Billion Apps sold in 9 Months” Apple.com 46

Section 4.0 Planning and Costs 4.1 Strategic Planning

his plan is an overview of all the basic phases in the iPhone applications route to market. It details the application, from ideation, development and testing, right through to advertising, marketing and distribution. To begin with, concepts are developed based on feedback from consumers (via the questionnaire) and market trends. Since the iPhone app is to be out-sourced to an external company. Callaway must approach well selected businesses that are able to reflect their brand.

Once the company has been selected, stage 2 can begin, looking at how the app will function. Testing and development should take no longer than 6 months. Stage three then begins with user trials, beta versions of the software and once initial feedback has been gathered, moved onto a final version (stage 4), ready for launch to the mass market. Through-out the project sales and finances must be kept track off. This whole process should take no longer than 9 months to complete.

Sales and Marketing* Market Scoping, Customer Trends, Needs & Opportunities

Company Internal Capability

Finance*

Consumer Insights

Concepts

Software Design R&D Promotion and Marketing R&D Internal Testing

Developed Product

Qualatative Testing

Quantative Testing

Localised Store Testing

Commercialisation & National Distribution

Futher Product Development

* Applied throughout the project, in all phases

Figure 23. Affinity Diagram

4.2 Time Plan

4.3 Concept Consideration

he strategy for implementation of the iPhone application, will be different to the strategy Callaway usually go through. Rather than producing new products, that under-go lots of R&D, they must work alongside multimedia developers to create an application, in a field where they do not have much experience. Application development is a process that most multimedia consultancies are familiar with. Once terms are agreed, the process can begin and development should take no longer than 6 months. Through-out the whole development of the application, promotion must be made, to gain consumer interest in the up and coming release. Endorsement from some of the companies already sponsored professional players, such as Ernie Els, would further boost the consumer awareness of the application. It would be expected that after 6 months of release the application is in the early majority growth category and continuing to rise fast.

he short-term concept for Callaway is to produce an iPhone application that can enhance the social awareness of golf, promote the brand, engage a younger target market and overall increase the whole experience of Golf. This solution is a relative cheap solution with rapid delivery rate. Callaway would only have to invest in the development and distribution of the software and will not have to rely on producing any technological hardware. The risk of such a short term investment lies within its longevity, consumer reaction, target market, profit and benefactors from its implication. In-order to analyse and check the validity of the concept a brief run down of the concept’s implications and consequences are displayed below.

Objectives

The concept will aim to focus on the following key areas: To improve the golfing experience. To promote the game of golf and Callaway products. Promote Callaway’s association with the sport.

See figure 24

Make Callaway appealing to a younger audience/target market. Empathise that Callaway is the top innovative and technological golf company.

Jan - March’10 Liase with Multimedia Consultancy

Develop Application Trial Application Place Application on Market Promote Application Maintain Application Figure 24. Time Plan

Apr - June ‘10

July-Sept ‘10

Oct-Dec ‘10

To encourage brand loyalty.

Social device – send current Hole location or score to Twitter updates or Facebook status’.

Target Market

Distance from Pin – club selection tips (information set up in profiler, you set what distance you hit each club).

Current Callaway loyal customers. iPhone users.

Callaway updates/news, reminders.

Twitter / Facebook / Social network users. All types of golfers - men and women.

PGA news and updates.

Rival Brand loyal customers bases.

Video and Photo support for Youtube/Social networking sites.

Golf Professionals and their caddies / team.

Personalised “pocket caddy” experience.

Features/Functions

Course reviews from other players.

Integrated iPhone.

Personal networking site with consumer reviews of products, customer profiles and golf course database with reviews and tips.

Provide weather forecast, weather warnings.

wind

velocity,

Provide GPS support for the Golf and Golf course. Electronic Score card and Handicap Calculator and point scorer. Records and stores Golf scores.

App could incorporate games and make use of the iPhones motion sensors to provide a swing simulator. Swing the phone and it will “swoosh” like a real club and monitor your swing angle and simulate a ball strike. A virtual Driving range in your pocket and golf trainer. Callaway could also produce and market

a Golf iPhone Game, putting games and directional games already exist on the iPhone. If Callaway have their own golf game, that could promote themselves to a whole new audience of iPhone users who are non-golfers.

Distribution Callaway website – downloadable widget. iTunes App store. Golf retailer’s online stores – downloadable widget. Golfing Community – allow golfer’s to transfer details. Could be charged at a standard “App” price, but could also have be accessible as free downloadable content coinciding with Callaway product purchases. – Buy a £350 Driver and get a free code to download a free “App”.

Costs Considerations Cost of employing / out sourcing a software coding company to create the images, game designs. Graphics could be created by internal graphics department – may need to hire freelance specialists, such as Flash coders. Costs to patent, copyright, and legally protect the Software.

Costs to employ/subcontract a company to provide administrative support over the network. Providing updates, organising data and information. Cost of renting out server units to store and run a network from.

Costs Incurred A slight increase in cost spent in the R&D and Graphic Department to implement to create and implement the concept. As well as costs for Beta Testing. Advertising Costs to promote the product could come out of the PR and Graphic budgets. Still be a fraction of the Costs that would occur with the development of new clubs or balls. Certainly a lot cheaper than the R&D costs of developing a new Golf Ball or Club concept. Possibly about 1/5 of the expenditure. Although there may be overheads charged for the costs of a new PC or software. The costs will be significantly lower than the costs incurred in producing a new golf club which would require raw materials, testing machinery, industrial machinery and manufacture costs. Research costs and PR costing to arrange for numerous golf course venues to be part of the App.

Possible cost implications of distribution via iTunes or retail sites.

IT costs to subcontract companies to produce and maintain the network and databases that are required for the product.

There will be no fees for shipping, material, machining etc like most products would induce.

Apple will also take a small percentage of the profits for allowing Callaway to sell through the iTunes App store.

There is also costs of Overheads to consider, the company may need to purchase specialist software and perhaps a new PC workstation for free-lancers / coders. These will then increase the electricity consumption and other factors. Costs of setting up and maintaining network space for any internet features that may exceed the current quota for the Callaway website.

Savings The concept will save Callaway money in the long term. The concept will cost a lot less to implicate than a physical product or new product range. However, it will generate a large consumer awareness, wider exposure and stronger promotional output of the Brand. Possible savings on marketing and Adverts to feed news, brand updates and brand promotion throughout the Golfing demographic. People could just receive updated Ads on the “App”.

“Bringing Sexy back to the Game” Justin Timberlake 51

Strategic Opportunities

4.4 Concept Pricing

Wider exposure to different target areas and demographics.

Increase Brand and consumer relationship. Promote Brand loyalty. Provide a functional and useful service for golfers helping them enjoy the game more.

he current market of Golf related iPhone applications range from free to $35+ that can be downloaded from the Apple iTunes App store. The Callaway golf App/s could work on a tiered pricing system depending on the features and technologies (content) available for the consumer.

Tier 1 – Free

A new advertising medium. A chance to be the leader in this type of Innovation, above their competitors – opportunity to patent and copyright, legally own rights. Associate Callaway with non-golfers and younger golfers. Increased brand exposure. Opportunity to sell and provide more tools and services through this relative cheap medium. Increased public awareness of brand, Twitter and Facebook bigger than the “Tiger Woods Fan Base”. World is becoming more digitally orientated and Callaway can show they are beginning to tap into this.

The Apps available in this section tend to have a huge array of advertising incorporated with in the software, these Apps are very basic. in terms of the Callaway App concept, an App at this tier would consist of only a news update. Provide users with a stream of Callaway News, Golf News and perhaps pre-typed tips. Callaway would not benefit from this tier of Apps because the range of features wouldn’t be significant enough to coincide with Callaway’s brand values of being a top technological leading brand name in the industry. The free App would be a good marketing extra though because it will allow a new medium to advertise within and could also include count down timers for the consumer so they know when new products are on the market.

Tier 2 – $0.99 – $2.99

More rounds of golf being played = higher demand for Goods.

Apps in this tier tend to be cheaply developed games or games by big backed companies such as EA Sports. For the Callaway App to exist in this area it would need to offer a simple touch screen directional putting game or a very basic functional interactive score card. Where the user could use the score card App to type in course details and their score as they play along. This App would have advertisements but wouldn’t as heavily endorsed as the Free one.

No other competitor companies attempted to branch this market.

Tier 3 – $4.99 - $9.99

Increase the rounds of golf played via people using the product and advertising the fact they are playing golf to their friends (through uploads online).

have

These Apps seem to offer either slightly more features to the lower price Apps and also have next to no advertisements incorporated within them. The software of these Apps tend to make use of some of the technological features of the iPhone. In terms of the concept the App will provide features such as social networking via the internet connection, will also provide support for photo video uploads to various sites.

Tier 4 – $19.99 - $34.99

This is high price bracket for iPhone Apps the products in this range tend to include a whole

Tier 5 - $35 +

This category is exclusively for the iPhone Apps that offer extremely exclusive features and are of a high standard. Apps at this price include things such as TomTom Sat Nav for iPhone and some existing Golf related Apps that use maps. The concept at this price bracket will include of the previous material plus full support of the GPS coverage of each course to give accurate measurements from where the player is standing to the next hole. With this technology there is also an opportunity to incorporate a feature that will the phone to suggest what club to hit the ball with to cover that distance, stats and information that can be stored on the player’s personal profiler. This App would become a personal in your pocket Caddy and would offer features similar to that of the Uplay GPS unit but for the iPhone. The Callaway concept could be introduce incrementally at different tiers to judge the interest in the branded App. However, The App should be of the upmost quality and use technologically innovative design. The App must be on Brand with the Callaway colour schemes. The App would retail at around $40. The target market should have enough disposable income to warrant the feature as would most of the golfing community. To encourage new users to the Callaway Brand it could also market an economy version with stripped down features and more product advertising. The economy version would retail within either tier 2 or tier 3 depending on the features.

Price

range of features that are interactive and make use of the iPhones connective capability. An App in this bracket would consist of all the previous features but also have access to a special Callaway network of golfer’s, consumers would be able to communicate with each other and load their profiles. They would also be able to compare statistics with each other get access to a database of golfing tip videos and other features.

4.5 Concept Marketing Mix

he pricing strategy diagram (fig.25) illustrates the possible pricing options for implementing the iPhone App into the market. The diagram is based upon product quality and possible price brackets. As discussed in the previous section the App could be placed into several different pricing tiers dependent on the features included and the software development time put into the device. The App concept could run as new product range and not as a single entity. The product would operate in the “Product Line Pricing” strategy, the Callaway iPhone App line could include products that meet the specification of a number of the different pricing tiers. This pricing strategy would have the advantage of allowing Callaway to promote brand awareness into new markets, such as strictly iPhone users and not just iPhone Golfers. New markets could be established via the tier 1 and 2 price strategy because they are features and functions that primarily address iPhone users. These options could be seen as marketing ploys to support the brand and increase its public value. For example, a free Callaway PGA golf news and product updater could be useful for newcomers to the game of golf looking at buying their first set of clubs. Then a $3 putting game could interest iPhone users who are obsessed with gaming and finding Apps that can occupy dull bus journeys etc. Even though the consumer with the putting game may not like golf, the App instantly draws attention to the Callaway brand for that consumer. The Premium Pricing strategy is best suited for the main Callaway App. This is because the App will be a first of it’s kind to offer a whole range of new features and functions, it will also be an industry first for one of the big brands to back a project like this. The Premium pricing strategy also plays into the hands of Callaway’s main target market, people with disposable income. It also fits within Callaway’s consumer attitudes, they are likely to buy a Callaway branded product not just for the innovation and technology but as a status symbol as well.

golf knowledge, product information, PGA news and full GPS support. The GPS will allow the consumer to view courses and check the course reviews, as well as accurately determine how far away from the hole they are. The software will communicate with other social networking sites so that players can share with their friends their whole golf experience.

Low

Price

The product would require no packaging as it will be distributed digitally over the internet through the Callaway website and iTunes App stores.

Quality

High

Economy

Penetration

This is a cheap no thrills pricing option. The product will have little features but will be widely available to consumers. The fact that it is no thrills however could cause issues with consumer awareness.

Prices are set a lower introductory price to gather consumer interest. Once the product has established itself the price is raised.

Apps could exist here following the tier 1 and 2 price scheme to raise brand and product awareness.

The App could be priced this way to gather interest, however it could deter late adopters to the product.

Skimming

Premium

Charge a high price for the product while the company has a market advantage over it’s competitors. Then once the everyone catches up branch into other pricing options to open the market to new realms.

This price is used when the product as complete viable USP, and that the product has a substantial advantage over the competitors.

This is a safe option but allows for Competitors to follow. It would be advisable to protect the product legally to avoid this price structure.

Figure 25. Pricing Strategy Options for Concept

The App can get promotion through the standard forms of medium, mainly print and instore advertisements. It could also be advertised on the website with option to download and purchase. The App could also be used a great promotional tool for the selling of new clubs and Callaway products it could be used to boost sales against rival competitors by offering consumer’s the chance to download the App for free (with a promotional code) when they buy a new set of irons, driver or putter.

Packaging

The product would be a piece of software that can be used on the iPhone. It will allow Golfer’s the opportunity to track and record their golf scores over a range of different rounds and courses. It will provide a personal profiler which will keep track of handicap and club/shot information. Lastly it would have full access to a Callaway database full of golf tips videos,

High

Product

The App could also be used in conjunction with a Product Bundle pricing scheme in which a consumer could get a free download coupon for the $40 App once they have spent $300 + on Callaway equipment. This bundle pricing offers an incentive for consumers to buy the current Callaway range (clubs and irons) over their competitors. Consumers feel like they are getting something back from the company.

Promotion

Other pricing factors will need to be considered when marketing this type of product mainly the idea of Geographical Pricing. The App will be available worldwide from the iTunes App store and on the internet however both Callaway and iTunes operate on a region basis for their products. So Callaway will have to take into consideration the variants in pricing due to exchange rates and foreign taxes etc.

This is where Callaway iPhone App should be placed. Following the tier 5 pricing.

People Duration

The App will be available internationally for a whole range of customers. The App would only be accessible and usable to people with iPhones, which generally are young to medium aged professionals with disposable income and an appreciation for technology and gadgets. This would give Callaway the edge of breaking into the younger golfer market with out compromising their existing target demographic. The App would take approximately 6 months to develop and got on to the market through an external specialist software design and development company â&#x20AC;&#x201C; perhaps a department linked with the Uplay brand. 6 Months is reasonable because Callaway has enough specialist knowledge in software development in Uplay to fall back on a run the project with the external iPhone App Coders. The duration of the project will also need to consider initial Beta testing so there could be some slippage in the time scale due to design iterations if the Beta test receives some negative reviews or bugs.

% of buyers each year

Purchasers x app price

4.6 Return of Investment Predictions

efore proceeding any further with the iPhone application idea, a return on investment must be worked-out. The application must prove to be profitable otherwise their is little point in pursuing it. With more than 30 million iPhones sold worldwide (The economist, 2009), and a over a billion applications downloaded (apple website, 2009), there is a very justifiable market already at hand. Further calculations must now be considered. With 30 million iPhone users the percentage of who play golf must be assumed. Lets assume this to be 5%. This means that the market for a golfing application from Callaway is : 30,000,000 x 5% = 1.5 million The potential people who are going to by this is needed to be added to the equation. Over the time period of 3 years, around 20% of the 1.5 million, would be expected to invest in the application. This totals 300,000 people owning the application over its lifetime.

Gross Profit

Upkeep

Net Profit (Before Tax)

Year 1

16% purchase in year 1

48,000 x 40

$1,920,000

-10,000

$1,910,000

Year 2

34% purchase in year 2

102,000 x 40

$4,080,000

-5,000

$4,075,000

Year 3

34% purchase in year 3

102,000 x 40

$4,080,000

-5,000

$4,075,000

Figure 26. Stakeholder Map of iPhone concept

4.7 Product Adoption

From the adoption process diagram, it can be reasoned that of this 20%, innovators and early adopters will be the only buyers in year 1, accounting for 16% of the total 20% which equates to 48,000 buyers in the 1st year.

he adoption process describes the behaviour of consumers as they purchase new products or services. Each section refers to the stage in which consumers can potentially buy a product. (fig 27)

In the 2nd year, the early majority would be expected to purchase the app, accounting for 34% of the 20%, which equates to 102,000 buyers.

Innovators are the 1st people to adopt a new product or service. Usually before the product has been tried and tested to its full capabilities. An example being the purchase of Beta products.

In the 3rd year, the late majority would be expected to purchase the app, accounting for 34% of the 20%, which equates to 102,000. By the end of year 3 it would be expected that 252,000 people own the application.

Early Adopters are the 1st people who buy a product that has been fully launched. The early majority are consumers that look towards the innovators and early adopters, as to whether to buy a product. This is usually when a product surges in sales.

To calculate profit from this over the 3 years, 252,000 must be multiplied by the price of the application ($40). 252,000 x $40 = $10,080,000 - 20,000 for development and maintenance and the total net profit would equal $10,060,000.

Percentage if People adopting

The late majority, in terms of the Boston matrix are the consumers that make a product become a cash cow. They join the majority of people who own a product, but at a much later stage. Thus helping the product to continue to create revenue, even after initial

Innovators 2.5%

Early Early Adopters Majority 13.5% 34%

Late Majority 34%

3 months

12 months 18 months

18 months +

Time

Figure 27. Adoption Diagram

Laggards 16%

interest has died down. An example of this, would be the Xbox, which is currently being sold off much cheaper than before to the Christmas 2009 market. Anybody who picks one up now, would be considered to be a consumer in this stage. Laggards are consumers that are very late to take on board new technology, for example people who are last to upgrade to digital. There is little to be made from this type of consumer.

4.8 Stakeholder Map

Section 5.0 Conclusion 5.1 Concept Summary

elow is a quick summary of the proposed concept for Callaway Golf:

Aims: To increase brand awareness and encourage a younger demographic to have an avid interest into the Callaway Brand. To make golf more enjoyable for golferâ&#x20AC;&#x2122;s of all levels.

takeholder map (fig.27) showing all the new parties that would be interested in holding in the launch of a new iPhone application. It is a hierarchical analysis of who is most important, and has most influence in its route to market.

Remain the market leader in specific product sectors. Maintain all throughout.

Interest

Low

Callawayâ&#x20AC;&#x2122;s

core

values

High Callaway App Developers

High

Apple Inc Professional Golfers

iPhone Users PGA tour Influence

Cosumers

Investors

Media

Low

Competitors

Figure 28. Stakeholder Map of iPhone concept

â&#x20AC;&#x153;Technology is the driving force for us, we are always looking to improveâ&#x20AC;? Callaway.com 58

Concept:

Market:

A range of iPhone Applications, each varying in price structure to fulfil the needs of different demographic groups.

The technological features should appeal to the younger golfer, who is apt in the world of iPhone and App usage.

The premium App would be the flagship product, the App will consist of everything to help with Golf.

iPhone users and potential golfers would get an interest in the gimmick Apps such as putting games etc.

Features:

Golfers will enjoy the “social club” networking and peer to peer competitive challenge.

The premium App will consist of full GPS support with accurate distance measurements, Data Storage, Access to a “Tips” video database, Product Reviews, Course reviews, News updates and PGA Tour feed. The App will also have it’s own personalised profiling system allowing the golfer to store a whole range of useful information, such as club distances and current handicap. As well as an interactive scorecard. Other Apps in the market would consist of basic games and news feeds. These Apps will fall into the price range from free to $9.99. The other Apps will be considered as gimmicks to entice iPhone users into the world of Golf and to associate Callaway with that world. The premium is the App aimed at the “real” target market. Gimmicks could range from “Putting Games”, “Swing Trainers”, “Stress Balls/Release”, “Product Reviews” and “News feeds”. With the premium App Callaway will have their own network set up, creating an exclusive club for Callaway Members, where they can share scores, experiences, videos and photos. They could even use the GPS system to track and log ball landing positions to set up “Longest Drive” challenges to their friends, they could also post score cards so their friends can compare.

The social networking tool will help spread the word of Callaway across a whole range of nongolfers and golfers. The iPhone is an international product and so the App will be able to target the whole world. The App is not gender or skill specific so everyone can enjoy it.

Financial Summary: The Apps will operate on a pricing tier structure. Each product in the product line will be offered at a different price depending on the features and functions included. The flagship App should cost $40 and the lowest App will be either free or a little as $0.99. A maximum budget of $20,000. Broken down into $10,000 for the start up costs and the first year the $5,000 per year for the following 2 years. Costs could continue depending on the success of the product and the software’s usage. If completely successful “add-on” packs could be developed and sold, and the software could be updated.

The Apps should make use of the iPhone’s internet connection to allow users to post information onto social networking sites such as Twitter and Facebook, this will allow Callaway to promote themselves across a wider consumer market.

5.2 Concept Conclusion

his report shows that there is a huge potential for Callaway to produce a highly detailed iPhone application as their next Innovation. The reasoning behind producing such a product is down to strategic opportunities and new market sector that the brand can be associated with. The production of an iPhone App is a very quick process and has very small implementation costs than compared to Callaway producing a brand new golf club, ball etc. The development of an iPhone offers huge potential as product to be developed during the 2009-2010 period. It allows Callaway to produce a new product at an extremely high level of quality of detail and at a considerably reduced cost, than their conventional methods of producing new clubs and equipment. The reason the App will be so cheap to produce is because it cuts out specific manufacturing costs and overheads that are commonly subjective to Callaway’s product releases. Due to the App being a piece of software that is to run an already successful Hardware based product, Callaway only have to cover the costs of software development and testing. The implementation of the iPhone App will generally affect three main areas of the brand and budgets. These areas will include Research and Development, Administration and Promotion. By looking at Callaway’s 2008 expenses in the Appendices, R&D expenses were at $29,370 and Admin was at $85,473. If Callaway were to implement the iPhone concept, the R&D expenses for last would rise by an increment of 2.5% + $7.242 to expenses to cover the costs of contracting out a development company to design and produce the software. The Admin costs would rise to roughly .5% to cover the costs of extra Pc terminals and admin roles purely subjected to the project (including aspects such as legal and contracts). The project should take be budgeted around the $15,000 mark to be fully tested, legally safe and 100% viable to be marketed as a Callaway product. Although the iPhone App is a new innovation consideration, it is also essential to remember that the financial sheets in the appendices show that for the past 3 years Callaway has been able to afford account for all of their

assets each year and are able to comfortably keep themselves on safe grounds. Throughout these 3 years Callaway has been innovating upon golf clubs and equipment and it should be noted they should always continue to innovate and produce on this level. Golf Clubs and Balls are Callaway’s “bread and butter” and should continue to drive the company forward. However, the proposal of the iPhone App is a cheap way of producing a new product that generates a huge new avenue into new market sectors, with the potential of growing consumer interest into the brand. It also provides a new area to generate consumer “buzz” through new modes of advertising that are cheaper than Tv and other current media to advertise through, this could potentially help make the $56,020,000 advertising budget (2008) be spent more efficiently. The iPhone App will be a new concept and product area for Callaway and will inevitably have an increase on R&D costs. It should be a relative safe option seeing that Callaway generated a profit of $519,000 on overseas banking and exchange rates in 2008, giving the company a tidy disposable profit to invest in new developmental innovations such as the iPhone App. The final proposed solution for Callaway is to produce range of iPhones Apps, with the main flagship premium option being the $40 “Pocket Caddy” App which will be solely targeted at golfers with iPhone capabilities. However, the reason for the proposal of an App range is that Callaway could also produce heavily stripped down versions of the $40 App, with the purpose of generating a larger consumer awareness of the brand to iPhone users and not just Golfers. Overall, the product fulfils all of Callaway’s brand values. It also puts them as a leader in a new product sector above their competitors. It introduces Callaway to a whole new realm of potential customers, as well as reenforcing the faith and value of their existing target market. But more importantly it fulfils Callaway’s mission statement in that it makes golf more enjoyable for everyone.

â&#x20AC;&#x153;Making the game more enjoyable for everyoneâ&#x20AC;? Callaway.com 61

Section 6.0 References 6.1 References

valueguide.pga.com/detail-exec/ brand/2675/b/Callaway

All these websites were last accessed and checked on 27/11/09 – all the content at this time was the same as when each of the sites were first accessed at the start of the project.

Amp, Amp-London.com Branding Company – Callaway Work. http://ampcomms.com/ ourwork2.asp

Callaway, Annual Report 2008. h t t p : / / i r. c a l l a w a y g o l f . c o m / p h o e n i x . zhtml?c=68083&p=irol-reportsAnnual

Harkness Consulting 2008, Callaway Strategic Report. http://www.economics. pomona.edu/jlikens/SeniorSeminars/ harknessconsulting2008/pdfs/Callaway.pdf

Callaway, Annual Report 2007. h t t p : / / i r. c a l l a w a y g o l f . c o m / p h o e n i x . zhtml?c=68083&p=irol-reportsAnnual

Marketing Information. http://www. marketingteacher.com/Lessons/lesson_ pricing.htm

Callaway, Corporate Website. http://www.callawaygolf.com/Global/enGB/

Mintel, Snapshots 2007, UK Golf Equipment Sales. http://academic.mintel.com/sinatra/ oxygen_academic/search_results/show&/ display/id=346067

Apple, iTunes App Store. http://www.apple.com iPhone Facts. http://www.iphonefacts.org/ Google, Image Search. http://www.google. co.uk Wikinvest, (ELY) Callaway. http://www.wikinvest.com/stock/Callaway_ Golf_Company_(ELY) Article focusing on Callaway’s decision to decrease product range. http://www. examiner.com/x-1024-Golf-EquipmentExaminer~y2009m9d18-Callaway-Golflowering-its-IQ Brand Channel, Callaway Brand. http:// media.callawaygolf.com/webupdate/ CallawayGolf.uk/Products/corporateSales09/ CG%20Corp%20Sales%20Brochure.pdf

Mintel, Snapshots 2008, USA Golf Equipment Sales. http://academic.mintel.com/sinatra/ oxygen_academic/search_results/show&/ display/id=345839 Osiris, Callaway Company Info. http://osiris. bvdep.com/version-2009108/cgi/template.dl l?checkathens=1&kick=1&product=20&user= bru.18e4c6000c570900&pw=7ClLE3oGsVNuJe mPzJg67A%3d%3d Products, Americangolf. http://www.americangolf.co.uk/ Products, Discountgolfstore. http://www.discountgolfstore.co.uk/ Golf reviews, Today’s Golfer. http://www.todaysgolfer.co.uk/ Product reviews, 2009 Hot List Golfer’s Digest. http://www.golfdigest.com/

Callaway Sales Corporate Sales Brochure ’09. http://media.callawaygolf.com/webupdate/ CallawayGolf.uk/Products/corporateSales09/ CG%20Corp%20Sales%20Brochure.pdf

PGA,

Value

Guide

–

Callaway.

http://

6.2 Meeting Minutes

Meeting 12.10.09 - Joe’s & Kish’s Flat (All Present)

Meeting 02.11.09 - Joe’s & Kish’s Flat (All Present)

Discussed : Possible Companies Fred - Ben & Jerrys, Tropicana Joe - Callaway Golf & Golf Companies in General Outcome : After research, Callaway Golf selected as best candidate.

Discussed : Section 2 of Report. Section 2 divided up amongst group. Outcome: Come back in a week with sections complete. Any problems can be emailed or can meet up if need be.

Tutorial 16.10.09 (All Team members present) Discussed : Callaway golf. Aom liked the idea. Aom talked about initial stages of research, gathering Annual Reports etc. Outcome - Begin section 1 of report. Meeting 19.10.09 - Joe’s & Kish’s Flat (All Present) Discussed : Research findings on Callaway Golf. Possible future of Callaway golf, Possible Market Leader? Section 1 of report divided up amongst everyone. Fred - Market Research, Facts & Figures, SWOT Analysis Joe - Intro to Brand, Graphs & Diagrams Kish - Product Range, Company Timeline Mike - Layout and Questionnaire Outcome : Everyones sections should be complete by 25.10.09 Meeting 25.10.09 - Joe’s & Kish’s Flat (All Present)

Meeting 13.11.09 - Tower A computer room. (All Present) Discussed : Sections 1 & 2 collation. Everybody is up to date with work. Outcome : Need to dicuss section 3 in tutorial this afternoon. Tutorial 13.11.09 - Tutorial - (All Present) Discussed : Section 2. Talked with Aom about completed section 2. Aom suggested some changes to PCA. Discussed section 3. Outcome : Section 3 was outlined, and the suggestions Aom mentioned agreed with, and taken on board. Meeting 23.11.09 - Joe’s & Kish’s Flat (All Present) Discussed : Section 3 progress, spent a few hours collating work and seeing what was missing. Outcome : Onwards and upwards boys! Sections left to be completed are taken by each team member. Tutorial 27.11.09 - Tutorial - (All Present)

Discussed : Pooling of everyones work. Helping each other and and subtract information. Outcome : Report is up and running with section almost complete. Tutorial 30.10.09 - Tutorial - (All Present) Discussed : Current status of project. Section 1 looks good. Outcome : move on to Section 2.

Discussed : Was supposed to have a tutorial with Prof Choi, who unfortunately was of ill health. Talked quickly with Aom, and felt that we were on the right tracks for project completion. Outcome : Continue with project schedule as hand-in is fast approaching!. Meeting 3.12.09 Joe’s & Kish’s Flat (All Present) Discussed : Projects final details, Outcome : Finished, well presented report!

6.3 Appendix A 2008 Annual Report page 77 CALLAWAY GOLF COMPANY CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2008 2007

ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,337 $ 49,875 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,067 112,064 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257,191 253,001 Deferred taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,046 42,219 Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,549 9,232 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,813 30,190 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred taxes, net (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

490,003 142,145 146,945 29,744 6,299 40,202

496,581 128,036 140,985 32,060 — 40,416

$855,338

$838,078

253,411

223,548

— — 14,993 6,566 2,213

2,367 19,922 13,833 8,200 1,978

LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $126,167 $130,410 Accrued employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,630 44,245 Accrued warranty expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,614 12,386 Credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 36,507 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term liabilities: Deferred taxes, net (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy derivative valuation account (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred compensation and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest in consolidated subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and contingencies (Note 15) Shareholders’ equity: Preferred Stock, $.01 par value, 3,000,000 shares authorized, none issued and outstanding at December 31, 2008 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common Stock, $.01 par value, 240,000,000 shares authorized, 66,276,236 shares and 66,281,693 shares issued at December 31, 2008 and 2007, respectively . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unearned compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Grantor Stock Trust held at market value, 1,440,570 shares and 1,813,010 shares at December 31, 2008 and 2007, respectively . . . . . . . . . . . . . . . . . . . . . . . . Less: Common Stock held in treasury, at cost, 1,768,695 shares and 0 shares at December 31, 2008 and 2007, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— 663 102,329 (279) 518,851 (6,376)

663 111,953 (2,158) 470,469 18,904

(13,383)

(31,601)

(23,650)

578,155

$855,338

The accompanying notes are an integral part of these consolidated financial statements. F-3

—

568,230

$838,078

6.4 Appendix B 2008 Annual Report page 78 CALLAWAY GOLF COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) 2008

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative expenses . . . . . . . . . . Research and development expenses . . . . . . . . . .

$1,117,204 630,371

486,833 287,802 85,473 29,370

Total operating expenses . . . . . . . . . . . . . . . . Income from operations . . . . . . . . . . . . . . . . . . . . Interest and other income, net . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in energy derivative valuation account (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

402,645 84,188 1,863 (4,666) 19,922

Earnings per common share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Common equivalent shares: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

101,307 35,131

Year Ended December 31, 2007

100% $1,124,591 100% $1,017,907 100% 56% 631,368 56% 619,832 61% 44% 26% 8% 3%

493,223 281,960 89,060 32,020

36% 8%

403,040 90,183 3,455 (5,363) â&#x20AC;&#x201D;

66,176

6% $

1.05 1.04

$ $

63,055 63,798

2006

88,275 33,688

44% 25% 8% 3%

398,075 254,526 79,709 26,785

36% 8%

361,020 37,055 3,364 (5,421)

35% 4%

â&#x20AC;&#x201D;

54,587

5% $

0.82 0.81

$ $

66,371 67,484

39% 25% 8% 3%

34,998 11,708

23,290

0.34 0.34 67,732 68,503

The accompanying notes are an integral part of these consolidated financial statements. F-4

6.5 Appendix C 2008 Annual Report page 91 In September 2005, the Company began the implementation of several company-wide restructuring initiatives designed to improve the Company’s business processes and reduce the Company’s overall expenses (the “2005 Restructuring Initiatives”). The 2005 Restructuring Initiatives include, among other things, the consolidation of the Callaway Golf, Odyssey, Top-Flite and Ben Hogan selling functions, as well as the elimination or reduction of other operating expenses. In connection with the 2005 Restructuring Initiatives, the Company committed to staff reductions that involved the elimination of approximately 500 positions worldwide, including full-time and part-time employees, temporary staffing and open positions. In the aggregate, the Company recorded charges to pre-tax earnings of $11,994,000 in connection with the 2005 Restructuring Initiatives. Of this amount, approximately $896,000 and $3,023,000 were incurred in 2007 and 2006, respectively. There were no charges incurred during 2008. Note 6. Selected Financial Statement Information December 31, 2008 2007 (In thousands)

Accounts receivable, net: Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 128,686 $ 120,054 Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,619) (7,990) $ 120,067

$ 112,064

Inventories, net: Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79,132 $ 82,185 Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 1,932 Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,021 168,884 $ 257,191

$ 253,001

Property, plant and equipment, net: Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,407 $ 11,609 Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,223 85,245 Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,431 143,994 Furniture, computers and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,838 112,079 Production molds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,859 41,511 Construction-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,465 10,368 Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued expenses: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

415,223 (273,078)

404,806 (276,770)

$ 142,145

$ 128,036

$ 42,020 84,147

$ 33,019 97,391

$ 126,167

$ 130,410

Accrued employee compensation and benefits: Accrued payroll and taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,207 $ 31,882 Accrued vacation and sick pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,598 10,752 Accrued commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825 1,611 $ 25,630

F-17

$ 44,245

FREDDIE JORDAN