Altius Golf, the leader in the golf ball market, is planning to introduce a new product ("Elevate") that is 40% below the company's flagship brand, is easier to drive for distance and more forgiving. As the board of directors is divided on whether to support the decision, an analysis of the CEO's proposal is required to assess the risks and potential gains before making the final decision.
Robert J. Dolan, Sunru Yong
Harvard Business School (913578-PDF-ENG)
June 10, 2013
Case questions answered:
- In this case study, you will be asked to consider the possible benefits of introducing a “fighting brand” strategy. You should evaluate the potential benefits and risks of such an action and provide a recommended course of action.
- When reading the case and preparing your written analysis and comments for class, consider the following:
Why has Altius Golf lost market share? What happens if Altius maintains the status quo?
What should Altius’s objectives be? What trade-offs must it manage?
- Analyze the economics of Altius’s overall golf ball business compared to its competitors for the three proposed Altius product lines. What are the implications for this and the advisability of introducing Elevate? The following may help you with this question:
What is Altius’s and its competitors’ 2012 revenue and gross profit?
What is the value of a point of market share for Altius?
What are the implications for Elevate, considering its unit contribution and gross margins compared to Victor TX and Victor?
- Should Altius implement the Elevate strategy? If so, what are the risks to the brand and how can they be managed? What sales result would you expect for each item in the line if Elevate is introduced? If not, what are the alternatives that you recommend, assuming the board expects growth in the profit contribution from the golf ball line? State specifically how these would restore Altius’s market and financial position, and what are their advantages and disadvantages.
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Case answers for Altius Golf and the Fighter Brand
Altius Golf, a major manufacturer of golf balls, is facing a downturn in its financial performance and a risk of losing its position as a market leader (Exhibit 1). Altius has built its leading share by offering super-premium balls, such as the Victor TX line, that are the most popular among the professional players. In fact, within PGA, LPGA, and European tours, Victor TX is the most popular product, giving Altius credibility and prestige.
Company’s investments in aggressive advertisements are twice as much as its closest competitors. Victor TX line also appeals to regular customers as it provides them with a chance to emulate their favorite players. The company’s competitors have already started offering less expensive and more customized products, and Altius is about to launch the Elevate line as a response.
The golf industry as a whole is experiencing a decline in interest levels and the number of golfers due to the global recession and high equipment costs. The customers of the industry can be segmented into three distinctive groups: recreational, semi-professional, and professional golfers.
Professional golfers comprise serious and passionate players who are primarily price-insensitive. They currently prefer Altius for their reputation and do not tend to switch to another brand. Semi-professionals are the players who lie between professional and recreational golfers in terms of price-sensitivity and quality; and are likely to try new brands.
Recreational golfers are most probably beginners, who are price-sensitive, do not play too often, and are more inclined to use non-conforming balls.
As mentioned earlier, Altius is the market leader for golf balls, accounted for…