Callaway Golf: Company Overview and Strategy Breakdown

Callaway Golf has been leading the competition in this niche market for some time. Golf is a luxury sport so it is important to stay ahead of the competition and maintain top of the line equipment. To stay ahead of the market, it is also important to ensure strong sponsorship of top athletes who are sure to help create a strong impression of golfers looking to enhance their skills in the sport. When a company like Callaway invests in the technology (Technologies) they use to produce state of the art equipment it shows and creates a driving force that sends ripples through the market, inspiring others to spend more to help improve their handicap. The long list of legendary Callaway products introduced across the past three decades is long, punctuated by the iconic Big Bertha driver and the Great Big Bertha driver, which Golf Digest named the greatest club of all time for its combination of innovation, performance and lasting impact on the golf equipment landscape(Golf).

As of January 24th, 2019, Callaway Golf has a market cap of 1.568B (Nasdaq). The current trading value of Callaway Golf as of January 24, 2019 is 16.59 USD (Nasdaq). On January 4th they completed the acquisition of Jack Wolkskin (Schultz), a German based outdoor-wear company similar to North Face, this adds to their growing number of subsidiaries. According to Glassdoor.com Callaway Golf has a 92% approval rating of CEO Chip Brewer and 87% of employees would recommend working there (Glassdoor).

Product development is constantly evolving at Callaway Golf. Their focus is on creating a luxury experience for pro and non-pro golfers alike. This year they are releasing a new line, the Epic Flash Driver, which was made utilizing artificial intelligence to create more force to ensure more speed per distance(GolfPunkHQ) for a more satisfying swing. “We asked ourselves the question: if we could teach a computer to learn how to design a driver face, could it design a face that was better than the ones we were designing because it would be free of all the rules that we would apply to it?” (Matuszewski) Ultimately, they will change the way golf is played, creating more of a challenge for golf-course designers to up the challenge when tools like this become more readily available. When the company is trying to stay ahead of the competition with such a fierce force, they ultimately create a curve that will be hard to measure against. The utilization of artificial intelligence to create something once-deemed unfathomable shows just how far Callaway is willing to go. This will create an impact in the sporting world.

Callaway has certainly set the tone when it comes to golfing. Currently, Callaway sponsors dozens of pro-golfers including big names such as Phil Mickelson, Kevin Kisner and Madalene Sagstrom, as well as champions Tom Watson and Olin Browne and icons Annika Sorenstam and Pete Cowen, to name a few (Team). These renowned golfers have relied on Callaway to give them the best tools to ensure success in their sport and have become quite successful with the reliability Callaway has given them.

It appears as though Callaway is holding strong in their current market and are leading the way in product development. Employee satisfaction is high in both the corporate and retail aspects of the company and shareholders seem to be making profit as well. As previously stated, this is a niche market. Not every consumer is in the market for golf-wear, however through their diversified subsidiaries, Callaway is also profiting in the outdoor-wear market which opens up new possibilities for the company to grow.

Callaway has a number of competitors and with technology evolving as rapidly as it is and becoming more accessible than ever before it is quite easy for new companies to come out and introduce a new product which could very well shake up the golf market. This means that Callaway cannot stay stagnant. They must evolve to ensure a lasting future. Not that long-ago Amazon was barely a web-presence, Sears was a major retailor and K-Mart was more popular than Wal-Mart, but they evolved. Some thrived like Amazon, Sears is on the verge of a final bankruptcy, and K-Mart is almost fully eradicated while Wal-Mart expanded with consumer enthusiasm (Gertz). The future is never certain, especially in a niche market. Golf is luxury and when Callaway sells top of the line products, not every golfer will be able to afford their products.

While Callaway is evolving their products with the use of artificial intelligence, the market they share is declining and their subsidiaries are still mainly in the golf ventures, such as the popular drive range Topgolf, which creates a more game like challenging experience for in-experienced and novice golfers (News Nest). In a current government shutdown where the stability of the economy is not quite certain, having most of your eggs in a luxury basket is not quite ideal. Callaway survived the last market crash, but how well can they handle another?

Another segment to look at is their online presence. The lack of online presence is what helped end Sears as well as K-Mart and what helped elevate Wal-Mart and Amazon to be the major retailers that they are today (Gertz). They keep a very active Facebook page which showcases their products in fun and exciting ways. They also keep a YouTube page which they highlight their products, their courses and tips and tricks to become a better, more advanced golfer. Their online presence is pretty heavy and has a healthy dose of subscribers. Their Instagram and Twitter are also note-worthy. Twitter has helped escalate the online presence of Wendy’s which has caused them to go viral many times over the last year (Deputy). Their viral trends have helped bump Wendy’s to profit 64 million in a year (Deputy). While Callaway Golf will more than likely not see sales increase due to roasting their customers and boasting heavily sarcastic posts, having a heavy online presence can help push the name of the brand out to more consumers who may be in the market for luxury golf equipment.

The marketing data that can be collected through the use of social media is invaluable and can help Callaway hit new aspects of their target. They can find ways to tie their brands together as well. Ensuring they have a team of marketers who analyze the data is also important. When Callaway first came about in 1982 (About) it was easier to market to the country club scene. Now golfers come from a more diverse backgrounds and may choose not to participate in the country club environment beyond the use of the golf courses. So, gathering consumer data is pivotal in ensuring success long-term.

The recommendation currently would be to continue expanding subsidiaries into more diverse fields. If they are able to develop golf equipment and bring it to new heights, why not utilize their understanding of artificial technology to develop other sporting equipment, or work their way into government contracts developing tools for the armed forces. There are many angles in which they can expand out to new heights, which can ensure lasting survival for the company. For now, Callaway has secured a decent outcome of probability of lasting success but with a diminishing, volatile market it is quite possible that Callaway would be affected greatly in the case of another detrimental market crash.

Callaway Golf is a luxury brand for a luxury sport. Over the last few decades they have practiced a focused differentiation strategy in which they are selling to a luxury niche market but are ensuring their sales by offering top of the line products using the best technology available. Due to the fact that they are offering technologically high-end products they do not hold a low price point. Even when being resold the value maintains for these products for years. Callaway has strategically worked to ensure lasting quality with their brands and lines. Their lines such as Big Bertha have been popular since their launch in 1991(Brna) which are still being continued to this day. Callaway has set a lasting stage with their artificial intelligent inspired lines and have utilized top technology to ensure lasting products like Epic or Apex (GolfPunkHQ). Their drivers and balls and other equipment are meant to last. For those who may have purchased some of the lower level products but are looking to invest in the more higher quality lines, Callaway offers a “Trade in! Trade up!” (Trade Up) program in which customers cab do just that, trade in their old clubs for more valuable clubs.

Callaway offers a little of everything in their niche market. They offer lower quality lines all the way up to the top of the line items. This is so that golfers can experience Callaway quality for less. Callaway knows they offer a lot when it comes to their lines so it is to be expected that even the most basic would be better than the equivalent of their competition. This is enacting a bit of the low-cost strategy. They also have many subsidiaries in sporting goods/outdoor wear which helps with diversification so as not to have all of their eggs in one basket. With the shrinking of the middle class (Rapp) not all consumers are able to purchase a Callaway Epic Flash Driver for 529.99 (Shops). Middle- and lower-class members may still want to show off or present to a higher status so they may make a purchase of clothing or something with the brand on it.

It is not recommended that Callaway resort to a full change in their dynamic. They do not need to operate at low cost or a best cost. They could continue pushing out for more diversification but should not do so much more than they have already. They have operations in three states and 15 countries (SEC). Callaway should continue to consider who their clientele is, how technology is going to change their business strategies and also how they can continue to expand. With technology changing the way the game is played, it would be wise of them to look into designing golf courses to ensure the game doesn’t become to easy. If Callaway were to expand into the realm of building courses they could control more of the golf sector and ensure higher profit margins. This expansion could also come with building resorts around the world.

The overall recommendation for Callaway is to continue with their efforts. As a relatively young company there is a lot for them to do. Financially they are stable and are expanding in the right manner. The marketing team should continue to highlight products accordingly and to showcase them through catchy posts that will help drive sales. The utilization of pro-golfers being sponsored with Callaway will help as well as the continued videos of how to improve. It is important for Callaway to continue building its consumer base, as competition may lure consumers away. Offering consistent quality with value will help ensure a loyal consumer base. Operations seem to be running smoothly under Chip and his respect in the organization has certainly been earned as he has made the right decisions in guiding this company through some questionable moments. The company should look into new ways to expand profits as there is concern that technology will grossly impact the golf-game in the possible near future.

The market seems relatively stable at this moment but the future is unpredictable. Callaway should seriously look into ways to expand and to ensure lasting endurance over what can only be assumed to be a rocky future as the market will expand and decrease. The target market should continue to expand as they should target Topgolf users and other novice golfers. Expanding the market to create their own golf courses with resorts could help expand Calloway to new heights.