Callaway Golf Company Case Study
...orporate more internet based sporting goods stores. The final decision is should CGC change its marketing focus away from the common media channels and minimal player sponsorship to a higher rate of player sponsorship. Analysis of Alternatives: If CGC continues to produce clubs at a faster pace it will need to continue to increase its R&D budget as a percentage of sales. Since 1995 the R&D budget has grown from 2% of sales to 5% in 1998. If this pace continues and product life cycles continue to recede the R&D budget would have to be doubled within five years to keep up with current demand. This is due to the fact that current product life cycles are lasting two years, with the trend showing that they are moving closer to one year. A halving of the life cycle will cause the need for twice as many products to come out to keep the pipeline filled. Thereby causing the budget to double. The other option is to keep the pace of product development the same as in historical years, and refocus on the ever-demanding putter and accessories category. This category show signs of good growth from 1996 to 1998 the category rose from 4% of net sales to 11%. A focus on this category would allow CGC to gain market share in another category. The other alternative would be to continue to produce products assuming the current two year product life cycle and try to change to life cycles through marketing. The second decision examines whether to shift CGC focus from off-course retailers. Off-course retailers usually buy larger amounts and are better financed. They account for 33% of CGC accounts and account for 67% of the sales. With the large increase in number of on-course retailers predicted CGC could move to push sales in on-course shops and stabilize its off-course retailers. CGC could also structure its distribution through the Internet now that more and more shoppers are buying on-line. This poises the biggest risk because of the lack of products at the point-of-sale, which historically has been the biggest factor in purchases. The final strategic decision is whether CGC should change its marketing focus. The choices are to continue marking through the “regular” channels of TV, radio, magazine or print ads with some “B” player sponsorship on the tours. CGC has a large amount of players on the tour currently using its products with no contractual obligation, giving more professional coverage of the products without having to pay them. CGC could raise either the amount of players it sponsor or go after bigger professionals who would demand a larger contract. The decision comes down to whether CGC wants to compete with Titleist as a professional club or continue to market itself to the average golfer. Recommendation: The recommendation would be to increase CGC’s R&D budget slightly to allow more products to come to fruition but to push the one-year product life cycles back. Based on product research the product is not fully received by the market for a full year, so the extra year is needed to allow the club to ga...