Golf Industry

Dominant Economic Characteristic

Market size

SRI estimates that the overall golf economy was approximately $62.2 billion in the year 2000. This estimate is comprised of $38.8 billion in core industries, and an additional $23.4 billion in enabled industries. It is interesting to note that in a study of similar scope analyzing the game in 1987,3 the golf industry was projected to grow to between $25.2 billion (no growth scenario) and $57.8 billion (most optimistic growth scenario) by the year 2000. The growth in the golf economy since 1987 can be attributed to a number of factors. These include growth in the number and diversity of players, the increasing importance of golf real estate, expansion of the golf tourism industry, and one of the longest economic expansions in our nation's history (1992-2000).

Golf course facilities - where golfers play the game, take lessons, play in tournaments, and relax with a sandwich and refreshment afterwards - represent the largest and most central component of the golf economy. Golf facilities in the United States produced $20.5 billion of goods and services for golfers and the general public in 2000 (see table below). Moreover, revenue at golf facilities grew by close to 10 percent per annum between 1997 and 2000.

Scope of rivalry

There are five main competitors in the premium segment: Callaway, Ping, Taylor Made and Titleist, Nike. If we look at the evolutions of both Callaway and Ping from 1994 to 2001, we see that both price and perceived quality have improved. Callaway is one of the main drivers of competition, accelerating from $16 million R&D spending in 1996 to $34.5 million on R&D in 2000. However, competition on performance/price has become so commonplace, rivalry has spread to other arenas: new technologies, strongholds, and is now entering the 'Deep Pockets' arena.

For instance, Callaway spent $175 million on marketing in 2001, 23% of net sales, Taylor Made was sold to Adidas to access deep pockets, and Titleist merged Cobra for economy of scale both on R&D and marketing activities. Nike is suited to a 'Deep Pockets' competition, with a $35 million advertising