Written by: Nick Kohler
Whenever you think of sports you think of Nike; however that is no longer the case for Nike Golf. After 15 years in the golf equipment business, Nike has halted all production of golf equipment. Although for many this may have been a complete shock. It shouldn't be it was a smart business decision for Nike with a very low opportunity cost.
The ceiling of Nike’s sales came in 2008 with revenue reaching 1.1 billion dollars. This was also the time that Nike’s number 1 golf endorsement, Tiger Woods, was in his prime. Since then Tiger has faded to near irrelevancy, and the Nike golf overall revenue and income have steadily declined. Last year alone out of all Nike sales, golf equipment fell 8%, and revenue was 700 million. This is nearly 400 million less than 8 years ago.
Nike has never specialized in Golf equipment instead is was just another way to expand the brand. Nike has never been the frontrunner in best performing clubs, yet there endorsements drove up the demand, and the price. As shown below, 7 of the top 50 players in the world are sponsored by Nike. This includes the number 1 and 2 players in the world. One of those players being Tiger Woods, the most influential and popular players in golf history. With him swinging Nike clubs, it was the number one reason Nike golf equipment was in such demand. But with him on the decline it left Nike in the past and heading for a major decline itself.
Although, for some people this change may take some getting used too, the decision was quite simple for Nike to end all golf equipment sales. This is a very low opportunity cost for Nike as they will still be one of the largest and most profitable sports companies in the world.
Works Cited
Germano, Sara. "Nike to Stop Making Golf Clubs, Balls." WSJ. Wsj.com, 2016. Web. 04 Oct. 2016.
Hoium, Travis. "How Nike's Big-Money Golf Strategy Failed." The Motley Fool. N.p., 1970. Web. 04 Oct. 2016.
@Cobbastevens. "World Golf Sponsorship Rankings." Cobbas Infographics Media Solutions. N.p., 2014. Web. 04 Oct. 2016.
Although Nike's revenue from golf has decreased, I don't see this becoming a major problem for the company. They have so many big name athletes in other sports, such as basketball where they have contracts with Lebron James, Kobe Bryant, and Kevin Durant, that the revenue from those sports is more than golf anyways. Nike sure isn't lacking in contracts with other sports, they make the jerseys and pants for every NFL team, and just about everyone is wearing Nike cleats. Dropping golf equipment just further allows them to specialize in the equipment that they were making more revenue off of anyways, by doing this they would increase their revenue more than if they continued to make golf equipment.
ReplyDeleteWhile Nike has decided to stop producing golf equipment, I agree, and do not see this as a problem. Because the company is stopping the golf equipment, they can now use this money and spend it on specializing other equipment that is more desired. I think that the opportunity cost of not producing golf equipment is low, however the trade off for making other products will result in higher revenues. I think that the choice Nike made, will only benefit them in the future.
ReplyDeleteI think it's smart of Nike to stop producing Nike Golf equipment, because if their margins aren't there, it's not worth it for that large of a company. Nike can now forget about producing all their golf equipment and specialize in their largest sports: football, basketball, and baseball. Losing money on golf equipment isn't worth the sacrifice of not being able to produce such high quality in other departments.
ReplyDeleteI agree with your statement that Nike made a good decision in stopping the production of their golf equipment. Not only were they not creating very much revenue with their golf business in the recent past, but also, they could not focus as much on their other markets. Eliminating the golf market from their business plan will allow them to focus more on their other markets, such as soccer, where they rank in the top two in production, or even basketball and football.
ReplyDeleteI agree that Nike made a good decision. They weren't making much from their golf business anymore so they stopped, giving them the opportunity to focus on other sports that people look at Nike for. People in golf still have other great suppliers, but now people in other sports such as soccer will be able to get even better gear from Nike.
ReplyDeleteEven though golf revenue has started to decline over the past years, I feel like it won't make that much of an impact on Nike. One reason is because Nike has other sports that they specialize in like basketball. In basketball Nike endorses some of the biggest names like Kevin Durant, and LeBron James. Another thing that I found fascinating was how big of an impact Tiger Woods had on Nike's golf revenue. If they wouldn't have endorsed Tiger who knows how much they would have made.
ReplyDeleteNike definitively made a good decision. Although, it probably did not effect Nike much, focusing on more other sports, like soccer and basketball, increases their producers surplus. By letting other company specialize in golf equipment, Nike can specialize in a more profitably market.
ReplyDeleteI agree Nike's decision to drop golf they have many more markets to focus on such as the 5 major sports where they profit much more than they do for golf. But if they weren't losing any money and their consumers really enjoyed their product that might lead them to buying other Nike products if they like the overall Nike so much.
ReplyDeleteWith Nike being one of the most polarizing and iconic brands in the entire world, it makes perfect sense that they step back from one sport that wasn’t generating them money. Although, Nike could have continued to produce golf items and still generate a nice revenue, the company made the correct choice. It is hard to believe that Nike is top-rated in any area of sports equipment or endorsements, however, other brands still continue to compete. Even with other brands still attempting to reach the stardom that Nike has, it will never be possible with the numerous resources, athletes, and insistent customers demanding their products.
ReplyDeleteI didn’t realize that Nike was stopping its production of golf equipment until I read your article. I think it was a great decision because not only has Tiger fallen off significantly in the past few years, but Nike has been endorsing several other young athletes that could collectively be worth as much as Tiger was when he was in his prime. I recently heard Tiger is coming back for the Safeway Open. If he’s successful, could Nike begin production of their golf equipment again?
ReplyDeleteWith Nike being one of the most polarizing and iconic brands in the entire world, it makes perfect sense that they step back from one sport that wasn’t generating them money. Although, Nike could have continued to produce golf items and still generate a nice revenue, the company made the correct choice. It is hard to believe that Nike is top-rated in any area of sports equipment or endorsements, however, other brands still continue to compete. Even with other brands still attempting to reach the stardom that Nike has, it will never be possible with the numerous resources, athletes, and insistent customers demanding their products.
ReplyDelete