Fairway

i

Information that can be shared if asked by the interviewee:

• There are 3 suppliers operating in the market.
• 2 import their golf balls from China and one supplier (Dolp) imports from the US.
• Each player has 1/3 market share.
• Final sales are made via professional shops situated at the golf courses by using salespeople.
• Dolp is providing premium quality ($0.80/ball).
• The other two competitors provide medium quality ($0.70/ball)
• Fairway Inc. provides slightly better quality than Dolp.
• Consumers are very price insensitive (cost for a ball very low compared to membership fees)

The answer should include some of the following points:

Size of the market (number of balls sold):

• # of players * games played per year * balls lost per game
• Sales per producer * market share of each producer
• # of stores * # of balls sold per store
• # of golf courses * games per year * balls lost per game
• Looking at markets in similar countries

Revenue and costs:

• Pricing by segment
• How are competitors pricing?
• How price-sensitive are customers?
• Cost structure (fixed/variable costs)

Competitors active in the market

• Are the competitors profitable?

Retail structure

Possibilities to enter the market

Value chain

• Who does our distribution?
• Where is the product sold?
• How is the business structured?

Products:

• What can our products offer (quality, etc.)?

This is a very open question; therefore there are many possible answers:

• Using 3rd parties who already have an established distribution system in the market. This would lead to variable costs instead of fixed costs for our own people.
• Trying to convince the 2 companies importing golf balls from China to buy our product instead of the Chinese.
• Trying to reduce the fixed costs by using fewer salespeople, changing the pay packages, etc.

Information that can be shared if asked by the interviewee:

• Number of registered members in the Royal Portugal Golf Association: 40,000
• Amount of golf courses: 200

Information that can be shared if asked by the interviewee:

• Overall 140,000 players (including tourists, casual players, etc.)
• Frequency of playing:
  Registered members: 2 game/week, 1 lost ball/game
  Unregistered members: 12 games/year, 5 lost balls/game
• All lost balls should be assumed to be replaced.

Information that can be shared if asked by the interviewee: 

• Golf courses booked at 100% for 4 months and at 50% for 4 months. Closed for the remaining 4 months of a year.
• Average game: 2 hrs. 9 holes
• 2 players per team and 2 teams per hole à 4 player per hole is the maximum capacity
• 10 hours open per day
• 2 balls lost on an average per game
• All players have to finish 9 holes in a day.

The calculation should look like the following:

The first team needs 2 hours to finish the 9 holes. At that time there are 2 teams/hole.

Information that can be shared if asked by the interviewee: 

• The company already owns a production facility in Spain, where the golf balls for Portugal would be produced and then shipped.
• This production site is not fully utilized and has a capacity of 2,500,000 balls per year.
• 1 salesperson is responsible for up to 40 golf courses.
• Amount of golf courses: 200

With that data the candidate should be able to calculate the break-even point and the needed market share:

The main result is:

Fairway would need at least about 10% market share in order to make no losses. It could provide that amount of balls with the production facility in Spain.

The main conclusion should be:

Fairway should enter the market as they provide a higher quality product than their competitors. They should differentiate their product from the rest of the market and charge a higher price for it. There could also be other possibilities to sell the product

• Not all lost balls have to be replaced with new ones. Changing the number of balls replaced would provide a totally different picture of the market. There could also be a second-hand market for golf balls.
• Some of the balls calculated are lost by tourists and other non-registered members. Those will probably not replace their balls on the Portuguese market, as they almost certainly bring their own equipment including balls to the country. Casual players would also tend to replace the lost balls with second-hand ones. As these groups are fairly big, it would also lead to a completely different situation for Fairway.