Callaway Golf Company

1
Callaway Golf Company

• By Seth Fraser, Megan Foreman, and Corey Daigle

2
Overview

• Strategic Analysis
• SWOT Matrix
• SPACE
• Grand Strategy Matrix
• IE matrix
• Possible strategies
• QSPM
• Recommendations
• Strategic implementation and desired results
• Annual objectives (goal) and polices
• Evaluation Procedure

• Brief History of Callaway Golf
• Where we are now
• New Vision and Mission
• External Analysis
• CPM
• EFE
• Summary
• Internal Analysis
• IFE
• Financial ratio analysis
• Net Worth Analysis
• Summary

3
History of Callaway Golf

• 1981 Ely Callaway sells wine vineyard for 14
  million dollars
• 83 Ely renames the company Callaway Hickory
  Stick USA
• 85 Company moves to Carlsbad, CA
• 86 Callaway becomes first company to use
  computer controlled machines to insure flatness
  of the clubs, along with new and innovative
  designs
• 88 Company renames its self Callaway Golf
  Company
• 89 Introduce traditional sized steel clubs

4
History of Callaway Golf

• 90 Callaway drivers are number one on senior PGA
  tour
• 92 Callaway become publicly traded on NYSE under
  symbol ELY
• 95 Callaway becomes number one manufacturer of
  sales in woods and irons
• 96 Callaway becomes worlds largest manufacturer
  of clubs
• 97 Callaway acquires Odyssey Sports
• 99 Titanium drivers are introduced in Asia and
  Europe
• 02 Callaway lunches HX Golf Balls

5
Callaway Golf Today

• Callaway uses cutting edge technology to
  manufacture the worlds longest driver (the Big
  Bertha)
• Along with men's golf accessories and apparel
  they offer a large selection to women
• Callaway also offers a Fantasy Golf Challenge via
  the internet which offers Callaway products as
  prizes

6
Callaway Golf Today

• Callaway offers a golf magazine which has details
  on the number one players, courses and tips on
  golf
• Callaway also offers free donations to the under
  privileged and to better health benefits such the
  under insured along with employee volunteering
• As well Callaway offers great benefits and
  services to their employees
• http//www.callawaygolf.com/en/customerservice.asp
  x?pidsitemap

7
Vision Statement

• One good shot is not enough.

8
Mission Statement

• At Callaway Golf, we make golf equipment for
  players world wide who think that hitting just
  one great shot is not enough. We believe
  technology is a powerful tool for creating
  user-friendly equipment that can help golfers of
  all styles and skill levels enjoy the game- and
  maybe a few more great shots along the way.

9
External Analysis

• Opportunities1. Market in Europe expected to
  grow by 3-3.5
• 2. 35 -43 Cheaper Labor in Eastern Europe and
  Asia 3. Euro-Zone, no currency fluctuations 4.
  More open to western culture in the Middle
  East 5. Attitude towards leisure time 6.
  Internet as distribution channel 7. High school
  sport, 2.8 mill Juniors, 2-3
• increase

10
External Analysis

• Threats
• 1. Price decline in golf club equipment 1.3 2.
  Less rounds played by 2.9
• 3. Mergers make former competitors stronger
• 4. Patent/Trademark infringement, 2-4
  mill/year
• 5. Increase coverage of Golf on TV
• 6. Short production life-cycle
• 7. Weather conditions

11
EFE Matrix
12
CPM
13
External Analysis Summary

• At what point does market saturation occur in
  domestic and foreign markets
• Cheaper labor in Asia and Eastern Europe
• Short production life-cycle
• Mergers make former competitors stronger
• Internet as distribution channel
• Marketing channels
• Attitude towards leisure time
• Consumer interest is getting younger and younger
  (high school)

14
Internal Analysis

• Strengths
• 1. Financial ratios
• 2. Strong management team
• 3. Profit margin of 50, low cost production
• 4. High brand equity
• 5. Diverse product line (width)
• 6. Technology and innovative skills
• 7. Net working capital( 2.8 increase)

15
Internal Analysis

• Weaknesses
• 1. Customer service
• 2. Production process, golf ball company
• 3. Employment contracts
• 4. Distribution
• 5. Only view specified suppliers
• 6. Only production facility in USA
• 7. Marketing

16
IFE Matrix
17
Financial Ratio Analysis
18
Financial Ratio Analysis
19
Financial Ratio Analysis
20
Financial Ratio Analysis
21
Net Worth Analysis
22
Stock Performance
23
Internal Analysis Summary

• Strong Financials
• New Working Capital Increasing
• Profit Margin of 50
• Weak marketing campaign
• Weak Distribution Channels

24
SWOT Matrix

• W-O Strategies
• Start Callaway Online shop
• Callaway Golf Camps

• S-O Strategies
• Expand production into Eastern Europe
• 2. Open selected Callaway shops around the world

25

• W-T Strategies
• Move Marketing Channels
• Select personalities for endorsements
• Buy golf ball manufacturer
• Backward integration

• S-T Strategies
• Improve Production
• Callaway Golf Camps
• 3. Acquire competitors like Mizuno

26
Space Matrix
27
Y axis Financial strength 5
1 worst to 6 best Y axis 5 (-2)
3 Environmental stability -2
1 worst to 6 best X axis Industry strength
3 6 best to 1
worst X axis 3(-2)1 Competitive
advantage -2 -6 worst to 1
best
28
Grand Strategy Matrix
29
The Internal-External

• IE Matrix

30
IE Information
31
(No Transcript)
32
Possible Strategies

• Expand into East Europe
• Open Selected Callaway shops around the world
• Start Callaway online shopping
• Move marketing channels
• Select personalities for endorsements
• Improve Production
• Acquire competitors like Mizuno
• Callaway Golf camps
• Backward integration

33
QSPM
34
(No Transcript)
35
(No Transcript)
36
Recommendations

• Primary Strategies
• Improve production
• Acquire competitors

• Secondary Strategy
• Expand into Eastern Europe
• Open worldwide stores
• Online shop
• Special Credit cards
• Special low air fair flights
• Offer younger customers (high school students)
  discounts on goods
• Set up web site for local golf courses (offer
  arranged tee time)
• Get in on Frisbee golf
• Offer competitions for free weekend golf resort

37
Strategic Implementation and desired results

• Expand into European market and help increase the
  popular western culture on golf
• Domestic International sales
• 81.4 to 82.4 (3 increase)
• Decrease cost of manufacturing to keep up with
  cheaper countries
• 30.2 (37) to 29.3 (-3)
• Over the next 3-5 years
• (Numbers in Millions)

38
EPS/EBIT Analysis
Amount Needed 500 Million Interest
Rate 5 Tax Rate
33 Shares Outstanding 66
Million Stock Price 15.00
39
EPS/EBIT Analysis
40
Evaluations

• Qtr Annual financial reports
• Yearly examination by firms head analysts of the
  company

41
Callaway in the News

• http//biz.yahoo.com/fool/050425/111445675824.html
  ?.v1
• http//us.rd.yahoo.com/finance/freex/smart/SIG11i
  uhmkjh/http//yahoo.smartmoney.com/stockwatch/ind
  ex.cfm?story20050420aflyahoo
• http//us.rd.yahoo.com/finance/external/forbes/SIG
  1299rdilp/http//www.forbes.com/facesinthenews/2
  005/04/14/0414autofacescan01.html?partneryahoore
  ferrer
• http//biz.yahoo.com/bw/050322/225702_1.html
• http//biz.yahoo.com/bw/050321/215826_1.html