|
|
Overview
|
John E. Gamble
University of South Alabama
| As Ely Callaway walked
through the sea of drivers, irons, putters, golf apparel, golf bags, and
training devices displayed at the 2000 PGA Merchandise Show in Orlando,
Florida, and toward Callaway Golf Company’s booth, he noted that the eyes
cast toward him seemed to express a greater sense of anticipation and curiosity
than usual. As one of the most recognizable figures in the golf equipment
industry, he had grown accustomed to his celebrity status among the golfing
world and was aware that both rivals and retailers alike anxiously awaited
the new products his company typically launched at the industry’s premier
annual trade show. However, the drama and suspense surrounding Callaway’s
new products at the February 2000 show were very different from usual. Callaway
had gone ahead and introduced its innovative Big Bertha X-14 irons and Big
Bertha Steelhead Plus metal woods in January. The PGA Merchandise Show had
been saved for the introduction of the company’s highly touted and much-anticipated
Callaway golf ball.
Callaway Golf Company had become the leader in the golf equipment industry by developing technologically advanced golf clubs that compensated for the poor swing characteristics of most amateur golfers. During a golf swing, the clubhead travels in an arc around the golfer’s body, making contact with the ball for 300 to 500 milliseconds. During this very brief period of contact, inertia is transferred from the clubhead to the ball, and the ball is propelled forward at a speed of up to 150 miles per hour. There are an infinite number of variations in a golfer’s swing that can alter the swing path, causing the clubhead to strike the ball not squarely but somewhat off-center, at an angle. The more that a golfer’s swing path deviates from square contact with the ball, the greater the loss of accuracy and distance. A golfer loses approximately 12.5 yards of distance for every millimeter that the ball is struck off the clubhead’s center. |
 |
Ely Callaway, the founder of Callaway Golf Company, understood the importance of the physics of golf, so much so that he made the phrase, "You can’t argue with physics," an early company slogan. Callaway Golf revolutionized the golf industry in 1990 by introducing an oversized clubhead called the Big Bertha that was more forgiving of golfers’ swing imperfections. A Callaway executive stated in a 1995 Fortune interview that the company’s objective was to design a club that would allow golfers to "miss [the center of the clubhead] by an inch" and still achieve distance and accuracy.
The company’s high-tech golf clubs became so popular with golfers in the 1990s that Callaway Golf’s revenues and profits grew by 1,239 percent and 1,907 percent, respectively, between 1991 and year-end 1996. With the company’s competitive position securely rooted and a line of innovative new clubs ready for a 1997 launch, Ely Callaway retired as CEO in mid-1996 and turned to Callaway Golf Company president Donald Dye to become the new CEO. Soon after Ely Callaway’s retirement, Callaway Golf Company’s fortunes reversed due to a variety of factors, including the Asian financial crisis, poor global weather conditions, strategic miscues on the part of Callaway’s executives, and the introduction of innovative clubs by rivals. The reversal led to nearly an 18 percent sales decline in 1998. Callaway Golf also broke its string of 24 consecutive quarters of growth in net income in early 1998 and went on to record a net loss of $26.5 million for the entire 1998 fiscal year.
Ely Callaway returned as CEO in November 1998 to launch a vast turnaround effort that included the development of new models of golf clubs and a $54.2 million restructuring program, which brought a number of operational improvements and cost-reduction initiatives. Callaway Golf Company returned to profitability and recaptured a great deal of its lost market share in 1999, but on February 4, 2000, the entire golf industry watched intently as Ely Callaway launched the company’s new Rule 35 golf ball. Callaway’s entry into the golf ball market had been vigilantly anticipated since mid-1996 when Ely Callaway announced the formation of the Callaway Golf Ball Company, and was considered by many industry participants to be the biggest event in the golf equipment industry since the debut of the Big Bertha. Callaway’s managers and investors expected the entry to become a catalyst for the company’s future growth. Exhibit 1 presents a summary of Callaway Golf Company’s financial performance between 1989 and 1999.
|
Overview
|
Questions or comments about this site? Please send your e-mail
to
Ellen Cleary, Marketing Manager
For additional information on this text or any other, simply contact our Faculty
Service Department at 1-800-338-3987
Copyright ©1997 McGraw-Hill College Division
If you have a question or a problem about a specific book or product, please fill out our Product Feedback Form.
For further information about this site contact mhhe_webmaster@mcgraw-hill.com
or let us know what you think by filling out our Site Survey.
