Case

# Fairway

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## Problem Definition

Your client, Fairway, is a manufacturer and supplier of golf balls.

The company is acting globally in almost every market.

They are now planning to expand to Portugal, but they do not have any information about the market there.

Portugal is a small country in West Europe with a population of 11 million people.

The CEO wants to know if they should enter the market and how they should do it.

This case is made to be interviewer-led. Therefore the interviewer should guide the interviewee through the interview.

The case is split into two parts.

The first part describes more qualitative problems and has more open questions that should make the interviewee think about the problem and its solution.

The second part is more about quantitative problems and calculations. Here the interviewee should try to make his own calculations and solve the questions.

The questions in the big boxes should be read out and shared with the candidate.

## Short Solution

Fairway should enter the market.

## Detailed Solution

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Information to share” section.

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

Suggested case structure:

### I. Background

#### 1. How would you analyse the market and approach the strategic issues of the market?

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 sales people.
• Dolp is providing premium quality (\$0.80/ball).
• The other two competitors provide medium quality (\$0.70/ball)
• Fairway Inc. provides slightly better quality then 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 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 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.)?

### II. Market

#### 2. Instead of using sales people, what other ways can you think of to enter the market?

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 less sales people, changing the pay packages, etc.

#### 3. How would you calculate the market size of golf balls in Portugal?

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

There are many different methods (as discussed earlier).
The candidate should EITHER use the consumer or the golf course approach:

Consumer approach:

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.

Golf course approach:

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 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.
• Every hour for the remaining 8 hours, 9 teams will finish the course.

Diagram 1 can be shared to visualize this.

III. Costs

#### 4. Based on the provided data, would it be feasible to enter the market?

Table 1 can be shared with an overview of the cost.

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 utilised and has a capacity of 2,500,000 balls per year.
• 1 sales person 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.

### IV. Conclusion

#### 5. If you have to report to the CEO right now, what would you tell him/her?

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

## Difficult Questions

### What are the biggest assumptions made for estimating the market demand in this case?

• 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.

If the interviewee solves the case very quickly, you can come up with more challenging questions to ask them.

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Case exhibits

*1 Salesperson is responsible for up to 40 golf courses.