Discussion Questions for the Performance Indicator Case Synopsis
The case of Performance Indicator (PI) provides a nice application of the basic economics underpinning strategy decisions facing firms, as summarized by the Value Creation & Capture Framework. The central question to think about is the following seemingly inconsistent set of facts: (1) From the description in Osinski and Winskowicz’s (Robb and Bob) sales pitch and the supporting calculations presented in the case (especially Exhibit 5), PI seems like an obvious source of profits for golf-ball manufacturers.
(2) Not a single golf-ball manufacturer has adopted and implemented Performance Indicator’s technology.
Assignment:
1. What is PI selling, exactly?
PI is selling
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3. What determines PI’s potential customers’ willingness-to-pay?
The amount of benefit (i.e. increased profits) the manufacturers expect to earn from adoption of the technology determines their willingness-to-pay. Specifically, if we consider the ‘Value Creation & Capture Framework’, manufacturers are thinking about how this will impact the value creation & capture framework in relation to their customers. For example, will a golfer who buys new balls feel any new value from the implementation of the technology? The answer is, probably not, so the prices will not change. However, if a manufacturer feels that it will push the outer edge (quantity) out and increase profits, then the increase in quantity * gross profit less the increase in cost will determine the manufacturers willingness to pay. See chart below.
B Price C
In determining how the edge will move, there are multiple assumptions each manufacturer must make such as, will anyone else in the industry do this where I will get the benefit from them as well? Is it beneficial if I’m the only one? Will this put pressure on pricing since customers will have to purchase new balls? Will there be additional costs to educate the end consumer so they understand what the color means? Is there a negative impact of seeing my ball grey that
Companies currently operating within the golf industry, specifically Calloway Golf, must change their current marketing approaches and strategies to withstand the recession and threats facing the industry. Although Calloway has a strong R&D department that tends to remain competitive with products and technology, there have been little results in reference to scores. It is imperative that if companies are going to market a product that will help golfers drive further and straighter that the results depict this so that not to damage the brand name of a product. Secondly, due to the decline in equipment sales and the number of golfers, prices are dropping and companies are outsourcing to maintain the volume needed to remain competitive. Companies must be cautious and aware so that counterfeiting may be reduced. This reduction would also allow companies to reduce their pricing and have more sales without the competition of these cheaply priced knock-offs. In the instance of
The brand image of Altius is still positive and professionals are open to trying other brands so Altius should not worry about innovating. The elevate strategy also packages the balls in the same packaging so the brand is not undermined and the perception of the ball by customers is that it is of high quality and better. Furthermore the new Elevate line will only be offered in the off course channels so the professionals using Altius who get their equipment mainly in the on course channel don’t have to worry about the prestige of the brand as the only products offered there are the professional golf ball lines, hence Altius will make a clear distinction between who the balls are targeted for. In the qualitative analysis we see that the margin for elevate is higher than it is for competitors at 64% compared to their estimate of competitors being between 50-60%, even though it is lower than the normal 70% Altius enjoys it is necessary to cut down the margin now in order to penetrate the off course channel and target the new golfer segment.
As a member of management Clive Jenkins is responsible for boosting employee morale to ensure that company goals are met
• They also mentioned the fear on the coloring of the ball into gray and impact of the same over the brand.
This new concept became essential after a meticulous work in gathering information about general consumer’s needs. Marketing team has reached out to a younger generation though different channels of social media and social network such as Facebook, be it Twitter, MySpace and then internationally, High Five and Orchid (Video Case 9) to understand what type of technological breakthrough will satisfy potential customers’ need. Prince Sports, Inc Marketing team work directly with R&D team to combine and collaborate marketing knowledge and technological ability. Together these two teams have created an evolutionary O3 technology with a 24 percent faster swing speed than traditional frames. The explanation of why their technology works better than other brands is pretty simple: “The secret is in the holes”. Like all world-changing innovations, O3 technology is based on an ingeniously simple idea. By replacing traditional pin sized string holes with massive O-ports, Prince Sports created a class of racquets that move through the air faster for increase power and greater control. (Tennis Express, Online Store, http://www.tennisexpress.com).
Secondly, composite sticks have been the dominant stick used among NHL players over the past decade (Zhang & Beamish, 2011, p.18), and as such have grown rapidly in popularity amongst children and amateur players (Zhang & Beamish, 2011, p.19). Despite the fact that Sher-Wood anticipates the composite stick business to grow in volume and profitability, there is a sufficient imbalance between market demand and Sher-Wood’s product output, since wooden sticks still account for approximately half of their hockey stick models. (Zhang & Beamish, 2011, p. 24)
Modern balls have a more durable cover of balata or surlyn and various solid core balls with new synthetics have become popular. As well, we have seen the art of club making go from the original wooden clubs, to forged irons,
AE = Profitability and/or decision analysis is applied appropriately in the analysis of at least three strategic alternatives and at least one other relevant performance management concept or tool is applied appropriately in the quantitative analyses;
Finally, the difficulty in quantifying non-financial performance also contributes to the complexity of performance measurement. The innovative approach Viet Nam developed to cut distribution costs also benefited Indonesia and Philippines. But it is not straightforward to incorporate the benefit of such innovation into performance measurement.
Golf ball manufacturers would be looking to achieve several key strategic goals, such as increased sales, increased market share and / or increased profitability, to adopt and implement PI’s technology. Accordingly, manufacturers are mainly concerned with the cost and implications on manufacturing, competitor reactions (and customer perception), the forecast growth in the new balls market, the share they could capture and the financial details of agreement.
As Ely Callaway’s vision: “If we make a truly more satisfying product for the average golfer, not the professionals, and make it
The U.S. Golf Association (USGA) specified the characteristics of legal balls within tight parameters. These restrictions on size, weight, materials, texture, etc., seemingly left little room for product innovation. In fact, the USGA regulations specified not just what went into a ball, but how it could perform, stipulating to within 10-20 yards how far the ball could travel when hit by a certain type of club traveling at a certain speed, all verified under controlled conditions with robotic testing equipment. Nonetheless, new product introductions were rampant in the industry, with slight changes in surface coatings and dimple patterns, for example, being touted for their ability to add a handful of yards to a golfer’s shots, to give more accuracy, or to create greater control through faster spin on the ball. In addition, ball manufacturers spent millions of dollars on advertising campaigns for their balls. There were three basic types of balls, all conforming to the same general specifications. The oldest technology still in use was the three-piece ball, which consisted of a core, windings, and a cover; this ball was good for spin and overall control. The second, and most popular, type of ball was the twopiece ball, which eliminated the windings of the three-piece ball; this ball produced more distance. The newest technology was the “solid core, multi-layered ball,” which had taken the
Performance management is a tool that managers use to ensure that their companies remain at the top of their competitive edge. The Chartered Institute for Personnel Development (CIPD, 2008), defines performance management as a method by which individuals and teams are managed in a way that achieves high performance at an organisational level. The individuals within the organisation share an understanding of the achievement goals of the organisation. In order to achieve this, a general strategy is created, with each individual within the organisation understanding his or her role and requirements within such a strategy
1. Cultivating Technology to meet player’s needs. Prince Sports, Inc implemented a new technology progress in order to solve the main problem that most of tennis racquets had: contradiction between racquet speed and sweet spot. This new concept became essential after a meticulous work in gathering information about general consumer’s needs. Marketing team has reached out to a younger generation though different channels of social media and social network such as Facebook, be it Twitter, MySpace and then internationally, High Five and Orchid (Video Case 9) to understand what type of technological breakthrough will satisfy potential customers’ need. Prince Sports, Inc Marketing team work directly with R&D team to combine and collaborate marketing knowledge and technological ability. Together these two teams have created an evolutionary O3 technology with a 24 percent faster swing speed than traditional frames. The explanation of why their technology works better than other brands is pretty simple: “The secret is in the holes”. Like all world-changing innovations, O3 technology is based on an ingeniously simple idea. By replacing traditional pin sized string holes with massive O-ports, Prince Sports created a class of racquets that move through the air faster for increase power and greater control. (Tennis Express, Online Store, http://www.tennisexpress.com).
The aim of Performance Indicator is to increase golf ball manufacturers’ value by increasing revenue from new ball sales as a result of eliminating older, used balls through its color change coating technology. Although there appears to be a possible financial benefit based on the future perceived demand for new golf balls, PI’s new technology does not appear to have any transparent benefit or value creation for the end consumer (golfer). Consequently, no manufacturer has yet to adopt this technology.