THE GOLF BUSINESS ENVIRONMENT
STRATEGIC PLANNING
MARKETING
FINANCE
OPERATIONS
PEOPLE
The Golf Business
Environment
The Micro-Environment
(Competitors & Suppliers)
Script
Golf Retailing: The Golf Business Environment
Year One 2014/15
PLEASE NOTE, THIS DOCUMENT IS INTENDED TO COMPLIMENT THE
E-LECTURE AND SHOULD NOT BE SEEN AS AN ALTERNATIVE
Slide 2: E-Lecture Outcomes
After completing this E-Lecture you should be able to:
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Outline the value of carrying out competitor analysis.
Identify why it is important to know about competitors and where that
information might be gained.
Define the term ‘direct competitors’.
Define and give examples of the indirect competitors faced by Pro Shops.
Distinguish between different types of golfing facility.
Outline some of the key trends in golf retailing.
Slide 3: Introduction
Voiceover:
The micro-environment consists of all the elements that influence the business on a
day-by-day basis e.g. customers, competitors and suppliers. Unlike the macroenvironmental forces, however, the business can have some influence over elements
within the micro-environment but not direct control. This means that it is important
to understand and respond to the key influences in the micro-environment.
Therefore in this e-lecture particular focus will be given to:
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The different categories of competitors you need to be aware of.
The need to analyse these competitors.
The need to analyse suppliers.
A copy of the script used to produce this e-lecture is available in the attachments
folder at the top of this page.
Slide 4: Interact: The Micro-Environment
Introduction
You should now have a good understanding of the Macro-environment from the
previous e-lecture.
The Micro-environment consists of all the elements that influence the business on a
day-by-day basis e.g. customers, competitors and suppliers.
Unlike the macro-environmental forces, however, the business can have some
influence over elements within the micro-environment but not direct control.
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Click on the tabs to understand the 3 elements which make up the Microenvironment which a business needs to be aware of.
The following pages of the e-lecture will then explore the first 2 of these: Competitors
and Suppliers.
The Business
A business does not operate in a vacuum. It has to act and react to what happens in
the business environment in which it is situated.
Competitors
As the golfing environment has become more competitive, it has become
increasingly important to analyse and understand the competition.
Big companies have the resources to perform sophisticated competitor research
but, for small businesses, it is a question of focusing on the key competitors.
Suppliers
The second key element of the micro-environment concerns the forces exerted on
golfing businesses by suppliers.
Undoubtedly, the strength of the market leaders in supplies of golf equipment gives
them a great deal of power in dictating trading terms with golf retailers.
This power not only enables leading suppliers to dictate minimum order values, but
also to influence the terms of the sale such as pricing and other merchandising
decisions, including space allocation within golf shops.
Customers
The third main group in the micro-environment that a business needs to understand,
and probably the most important, is customers.
Market research involves the collection, recording and analysis of information about
products or markets. It is a way of finding out what people believe, think, want, need
or do.
Customers will be covered in greater detail in the following e-lecture.
The Macro-Environment
You should have a good understanding of the Macro-environment from the previous
e-lecture.
Remember, there are 4 main forces affecting a business in the Marco-environment:
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Economic forces
Political / Legal forces
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Golf Retailing: The Golf Business Environment
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Year One 2014/15
Social forces
Technological forces
Slide 5: Analysing Competitors
Voiceover:
As the golfing environment has become more competitive, it has become
increasingly important to analyse and understand the competition. Big companies
have the resources to perform sophisticated competitor research but, for small
businesses, it is a question of focusing on the key competitors. ‘If you can see the
enemy then at least you know what he is doing; when you cannot see him, then is the
time to worry!’ (Butler, 2001:37).
Slide 6: Reasons for Analysing Competitors
Voiceover:
There are two reasons for analysing competitors:
1. To look closely at both existing and potential competitors to evaluate the
precise nature and scale of threats posed in the foreseeable future.
2. To identify opportunities created by gaps or weaknesses in competitor
business offers e.g. opportunities arising from: gaps in their product range
(breadth, quality etc); customer service (range of services offered, quality,
expertise, after sales service etc).
Slide 7: Competitor Research
Voiceover:
Much competitor research can be done simply by keeping an eye on adverts,
newspaper and trade press articles, promotional offers and events. This, combined
with information gleaned from conversations with suppliers, can reveal a lot about a
competitor’s business, their strengths and weaknesses in particular product/service
areas, and sometimes advance warning of their plans for the future.
Information gathered from Customer Attitude Surveys can also prove valuable especially where a rating scale of factors has been used to compare one business
with another.
Lastly, but by no means least, the importance of information gathered from informal
conversations with Pro Shop assistants, Club Officials, other Golf Club employees,
members and casual players, should not be overlooked.
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Year One 2014/15
Slide 8: Interact: Types of Competitors
Introduction
As the golfing environment has become more competitive, it has become
increasingly important to analyse and understand the competition. Big companies
have the resources to perform sophisticated competitor research but, for small
businesses, it is a question of focusing on the key competitors.
The first stage in competitor analysis is to identify who the main competitors are,
bearing in mind that this is not always as straightforward as it appears.
Click on the tabs to the left to identify the 2 categories of competitor.
Direct Competitors
Direct competitors are relatively easy to assess as they deal in similar goods and
services and are likely to operate in comparable ways. Therefore, the main direct
competition comes from other providers of playing and teaching facilities.
As well as direct competition from other golf establishments, as a retailer you will
also be in direct competition with a number of independent golf retailers, both online
and in-store. This is becoming increasingly fierce with a growing concentration in the
hands of a small number of dominant companies.
Indirect Competitors
Golf is an industry that competes for consumers’ discretionary income. Therefore,
effectively any other business that does this is a competitor. The most obvious
substitutes include other sporting activities. According to Sport England (2014), once
a month participation numbers for each funded sport from April 2013-14 was:
Sport
Swimming
Cycling
Athletics
Football
Golf
Angling
Participation
4,990,800
3,524,400
2,829,700
2,736,400
1,159,500
962,900
According to a report by Syngenta (2014) the top activities lapsed golfs take up are:
Men:
1. Walking (13%)
2. Cycling (13%)
3. Fishing (10%)
Women:
1. Walking (21%)
2. Swimming (18%)
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Golf Retailing: The Golf Business Environment
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3. Cycling (7%)
So, if there is a leisure centre close to your golf facility, they should be regarded as a
competitor. Other leisure activities such as restaurants, cinemas and pubs also
compete for discretionary income.
Slide 9: Interaction: Direct Competitors: Playing & Teaching
Introduction:
Direct competitors are relatively easy to assess as they deal in similar goods and
services and are likely to operate in comparable ways. Therefore, the main direct
competition comes from other providers of playing and teaching facilities. Golf
facilities in the U.K. are supplied by three main types of organisation:
Private Members’ Registered Clubs
Private Members’ Clubs are owned and regulated by the members through the rules
laid down in their constitution. The main objective of this type of organisation is to
provide golf facilities for its members, not to make a profit (although obviously they
have to make enough money to continue to exist). In the U.K., there are over 1300
Private Golf Clubs.
Municipal Courses
These are owned by local councils, although since the 1980s, in some areas, they are
run by private clubs acting as contractors. Essentially, municipal courses are nonprofit making organisations, with the aim being to provide reasonably priced golf
facilities to the general public. In the U.K. there are around 250 municipal courses
although their usage has declined in recent years.
Proprietary Clubs
Proprietary Clubs are commercial organisations whose main aim is to make a profit.
In legal terms, a Proprietary Club could be a Sole Trader, a Partnership or a Limited
Company. According to the Golf Research Group there are nearly 900 Proprietary
Clubs in the U.K., of which around two-thirds have opened since 1990. Thus, there has
been a dramatic growth in competition from Proprietary Clubs in the last decade. In
some cases, golf courses are owned by ‘multiple clubs’ who own more than one
course. The largest of these is Crown Golf with 25 golf properties, totalling 36 courses
throughout the U.K.
Other major operators include:
• The Club Company.
• Marriott.
• De Vere.
• Burhill Golf and Leisure.
The impact of proprietary clubs on traditional members’ clubs and the municipals
has, been significant. Whereas, at one time, golfers might learn to play on a municipal
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Year One 2014/15
course and then move to a members’ club, now they might start playing at a
proprietary club and stay there. In an environment where membership levels are
fairly static, this has put a lot of pressure on many clubs to seek new members.
Driving Ranges
Commercial driving ranges are highlighted by Mitel (2009) as an important area of
development, pointing out that the combination of driving range, tuition and good
catering facilities are creating family orientated golf centres. In addition, England
Golf’s (2014) Strategic Plan views driving range usage as a way of combating poor
weather conditions in order to keep people playing. In 2014, Sports Marketing
Surveys (2014) estimated the total revenue of independent driving ranges in England
to be around £88 million. According to Sports Marketing Surveys the number of
adults, in the UK, who have played golf at a driving range at least once a year has
declined in the last five years from 2.9 million in 2008 to 2.5 million in 2013. With the
development of such concepts of Top Golf, the range industry could be viewed as
both a source of new golfers, but also as a source of competition.
Slide 10: Direct Competitors: Retailing
Voiceover:
If we now turn our attention to golf retailing, direct competition for Pro Shops is
becoming increasingly fierce with a growing concentration in the hands of a small
number of dominant companies.
Slide 11: Golf Retailing
Voiceover:
At one time, if people wanted to buy golf products, they visited the Pro at a local golf
club. (If you go back far enough, most of those Pros would have actually made the
clubs). Today the situation is quite different and, as the diagram below shows, golf
products can be bought from a variety of different retail outlets. After studying the
diagram, please click continue to learn more about the distributors of golf goods.
Adapted from Mintel (2003)
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Year One 2014/15
Slide 12: Interact: Distributors of Golf Goods
Specialists & General Sports Stores
Around 60% of golf products are bought from specialist golf shops, the rest are
purchased from general sports retailers such as Sports Direct. The specialist golf
retailers include PGA Pros but also include big retailers such as American Golf and
Direct Golf, both of whom have a great deal of bargaining power and the resources
to advertise nationally. As with the golf equipment market, there is increasing
concentration in the hands of a small number of dominant companies and it is
unlikely that this trend will reverse.
E-Tailers
It is estimated that the Internet accounts for around 12-13% of golf sales. Whilst
there are some specialist Internet retailers in golf, the main force is probably the
established golf retailers such as American Golf and Sports Direct who operate
using what has come to be known as the ‘bricks and clicks’ model (i.e. a combination
of physical retail outlets – the ‘bricks’ – and Internet based distribution – the ‘clicks’)
(McGoldrick, 2002). The demographic characteristics of a ‘typical golfer’ i.e. ‘male,
well-educated, affluent and professional’ is very similar to the profile of a typical
Internet user (Mintel, 2003). Therefore, it is highly likely that this form of golf retailing
will grow.
Home Shopping/ Mail Order
Direct selling through home shopping and catalogues is also a significant part of golf
retailing. Mintel (2003) suggest three reasons for this:
1. Women often buy sports goods as gifts and have a tendency to use mail order
catalogues for this.
2. ‘Typical golfers’ are the least likely consumers to want to visit shops.
3. Golf products can be identified precisely through golf magazines and can
then be ordered directly.
Slide 13: Golf Retailing (Continued)
Voiceover:
Golf Retail Analyst, Andrew Palmer, summarises the key trends in the golf retail
environment in the following way:
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Huge increase in choice.
Big increase in associated advertising.
Rapid product changes and increasingly complex products.
Rapid price escalation and subsequent price volatility.
Major competition is now far more accessible through mail order/online and
big off-course superstores.
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Golf Retailing: The Golf Business Environment
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Increasing power of big brands- hence the focus on Tour endorsement and
big budget advertising campaigns.
Therefore, it is clear to see that the PGA Pro faces an increasingly challenging
environment when it comes to the retail side of the business.
Slide 14: Indirect Competitors
Voiceover:
Golf is an industry that competes for consumers’ discretionary income. Therefore,
effectively any other business that does this is a competitor. The most obvious
substitutes include other sporting activities. According to Sport England (2014),
since the 2012 Olympic Games the two sports which have seen the largest increase
in weekly participation are Cycling and Athletics. Both of these sports are less
expensive than golf but, perhaps even more significantly, they have greater flexibility
in terms of time constraints that golf cannot provide.
So, if there is a leisure centre close to your golf facility, they should be regarded as a
competitor. Other leisure activities such as restaurants, cinemas and pubs also
compete for discretionary income. Increased television coverage of live sporting
events can also be considered as a significant rival.
The Golf Research Group single out Sky football matches as a particular alternative
form of entertainment (Hegarty et al, 2002). Big sporting events such as the World
Cup and the Olympic Games generally have a negative impact on golf participation.
Potentially, the list of indirect competitors is endless but it is important to be aware
that, if you do not provide customer satisfaction, there is someone else who will,
whether from inside the golf industry or from outside.
Slide 15: Analysing Suppliers
Voiceover:
The second key element of the micro-environment concerns the forces exerted on
golfing businesses by suppliers.
Undoubtedly, the strength of the market leaders in supplies of golf equipment gives
them a great deal of power in dictating trading terms with golf retailers. This power
not only enables leading suppliers to dictate minimum order values, but also to
influence the terms of the sale such as pricing and other merchandising decisions,
including space allocation within golf shops. A company like Callaway, for example,
has a great deal of bargaining power relative to a Club Pro and, for this reason, they
are able to dictate the terms of the deal. (Hence, profit margins are much less on
Callaway products than many other brands).
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In merchandise areas where there is a choice of substitute products, supplier power
is effectively reduced and competitive differentiation can be gained by choosing to
stock alternatives. In certain merchandise areas where consumer brand loyalty is
less significant and the selling skills of Pro Shop staff are strong, this policy can work
well (e.g. clothing, golf gifts, and accessories). However, in areas where branding is
strong and suppliers are investing heavily in advertising to promote brand
awareness, substitutes are less likely to succeed.
Although there are large numbers of golf equipment manufacturers, the market is
becoming increasingly dominated by a few, extremely large companies. For example,
Acushnet and Callaway both have an annual turnover of around $1 billion. Many of
the biggest companies also operate in other areas of the sports equipment market.
Slide 17: E-Lecture Outcomes
You should now be able to:
•
•
•
•
•
•
Outline the value of carrying out competitor analysis.
Identify why it is important to know about competitors and where that
information might be gained.
Define the term ‘direct competitors’.
Define and give examples of the indirect competitors faced by Pro Shops.
Distinguish between different types of golfing facility.
Outline some of the key trends in golf retailing.
If you are unable to achieve any of these outcomes, please revisit the relevant part
of the e-lecture.
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