Callaway 2005 Annual Report Download - page 21

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through its subsidiaries and distributors) in more than 100 countries around the world. The Company’s
management believes that controlling the distribution of its products in certain major markets in the world has
been and will continue to be an important element in the future growth and success of the Company.
The majority of the Company’s international sales are made through its wholly-owned subsidiaries located
in Europe, Japan, Canada, Korea and Australia. In addition to sales through its subsidiaries, the Company also
sells through distributors in over 60 foreign countries, including Singapore, Hong Kong, Taiwan, China, the
Philippines, India, South Africa and various countries in South America. Prices of golf clubs and balls for sales
by distributors outside of the United States generally reflect an export pricing discount to compensate
international distributors for selling and distribution costs. A change in the Company’s relationship with
significant distributors could negatively impact the volume of the Company’s international sales.
The Company’s sales programs in foreign countries are specifically designed based upon local laws and
competitive conditions. Some of the sales programs utilized include the custom club fitting experiences and the
Preferred Retailer Program or variations of those programs employed in the United States as described above.
Conducting business outside of the United States subjects the Company to increased risks inherent in
international business. See below, “Certain Factors Affecting Callaway Golf Company—Foreign Currency Risk”
and “—International Risks” contained in Item 1A.
Sales of Pre-Owned Golf Clubs
The Company sells certified, pre-owned Callaway Golf products through its website,
www.callawaygolfpreowned.com. The Company generally acquires the pre-owned products through the
Company’s Trade In! Trade Up! program. The website for this program is www.tradeintradeup.com. The Trade
In! Trade Up! program gives golfers the opportunity to trade in their used Callaway Golf clubs and select
competitor golf clubs at authorized Callaway Golf retailers or through the Callaway Golf Pre-Owned website for
credit toward the purchase of new or pre-owned Callaway Golf equipment.
Advertising and Promotion
Within the United States, the Company has focused its advertising efforts mainly on a combination of
printed advertisements in national magazines, such as Golf Magazine,Golf World and Golf Digest, and television
commercials, primarily on The Golf Channel and on network television during golf telecasts. Advertising of the
Company’s products outside of the United States is generally handled by the Company’s subsidiaries and is
consistent with U.S. direction.
In addition, the Company establishes relationships with professional golfers and celebrities from other
industries in order to promote the Company’s products. The Company has entered into endorsement
arrangements with members of the various professional golf tours to promote the Company’s golf club and golf
ball products. For certain risks associated with such endorsements, see below, “Certain Factors Affecting
Callaway Golf Company—Golf Professional Endorsements” contained in Item 1A.
Competition
The golf club markets in which the Company competes are highly competitive, and are served by a number
of well-established and well-financed companies with recognized brand names, as well as new companies with
popular products. With respect to drivers, fairway woods and irons, the Company’s major competitors are
TaylorMade, Titleist, Cobra, Cleveland, Ping, Mizuno and Nike. For putters, the Company’s major competitors
are Ping, Titleist and TaylorMade. In addition, the Company also competes with Dunlop, Bridgestone and PRGR
among others in Japan and throughout Asia. The Company believes that it is the leader, or one of the leaders, in
every golf club market in which it competes.
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