Harvard Case - The Internationalization of the PGA Tour
"The Internationalization of the PGA Tour" Harvard business case study is written by David Pastoriza, Patrick Coulombe. It deals with the challenges in the field of International Business. The case study is 21 page(s) long and it was first published on : Dec 19, 2018
At Fern Fort University, we recommend the PGA Tour pursue a strategic internationalization strategy focused on building a global brand through a combination of strategic alliances, joint ventures, and targeted expansion into key emerging markets. This approach will leverage the Tour's existing strengths in branding, marketing, and event management while mitigating risks associated with direct ownership and operational complexities in new markets.
2. Background
The PGA Tour, a leading professional golf organization, faces a critical juncture. The organization's domestic market is mature, and growth opportunities are limited. The case study highlights the PGA Tour's desire to expand internationally, seeking to capitalize on the growing global popularity of golf and secure a sustainable future. The main protagonists are the PGA Tour leadership, tasked with navigating the complexities of international expansion and ensuring the Tour's long-term success.
3. Analysis of the Case Study
The PGA Tour's internationalization strategy can be analyzed through the lens of Porter's Five Forces framework:
- Threat of New Entrants: The golf industry faces a moderate threat of new entrants due to high capital requirements and the need for established infrastructure. However, the emergence of new golf leagues and the potential for disruptive technologies could pose challenges.
- Bargaining Power of Buyers: Golf fans have a moderate bargaining power, as they have various entertainment options. However, the PGA Tour holds a strong brand position, offering a unique product.
- Bargaining Power of Suppliers: The PGA Tour's suppliers, including sponsors, broadcasters, and venues, have moderate bargaining power. The Tour's dependence on these partners creates a need for strong relationships and negotiation skills.
- Threat of Substitutes: Golf faces competition from other sports and leisure activities, representing a moderate threat of substitutes. The PGA Tour must constantly innovate and differentiate its product to maintain its appeal.
- Competitive Rivalry: The PGA Tour faces intense competition from other professional golf organizations, including the European Tour and the LPGA. The global expansion strategy must consider the competitive landscape and potential for strategic alliances.
Furthermore, the following key considerations are vital for the PGA Tour's internationalization:
- Globalization: The increasing globalization of the sport presents a significant opportunity for the PGA Tour, but also necessitates careful consideration of cultural differences and market nuances.
- Emerging Markets: Emerging markets, such as China and India, offer significant growth potential but require tailored strategies to overcome cultural barriers and build brand awareness.
- International Business Ethics: The PGA Tour must maintain its ethical standards and uphold its commitment to corporate social responsibility while operating in diverse international markets.
- Global Competitive Advantage: The PGA Tour's strengths lie in its brand recognition, tournament expertise, and strong media partnerships. Leveraging these assets strategically will be crucial for achieving a global competitive advantage.
4. Recommendations
The PGA Tour should adopt a phased approach to internationalization, prioritizing strategic partnerships and joint ventures over direct ownership:
Phase 1: Strategic Alliances and Joint Ventures:
- Partner with existing golf organizations: Establish strategic alliances with established golf organizations in key target markets, such as the European Tour, Asian Tour, and the Ladies European Tour. These partnerships will leverage existing infrastructure, expertise, and local market knowledge.
- Joint venture for co-sanctioned events: Create joint ventures with local organizers to co-sanction major tournaments in target markets. This will increase brand visibility, attract local talent, and foster a sense of ownership within the host country.
- Develop strategic partnerships with sponsors: Seek out global sponsors with a strong presence in target markets to co-promote events and enhance brand reach.
Phase 2: Targeted Market Expansion:
- Focus on emerging markets: Prioritize expansion into high-growth emerging markets, such as China, India, and Southeast Asia. Tailor marketing campaigns and event formats to resonate with local audiences.
- Develop grassroots programs: Invest in grassroots programs to cultivate a new generation of golfers in target markets. This will create a sustainable pipeline of talent and increase the sport's popularity.
- Explore potential for direct ownership: Consider direct ownership of events or facilities in select markets once a strong foundation has been established through strategic partnerships.
5. Basis of Recommendations
These recommendations align with the PGA Tour's core competencies and mission by:
- Leveraging existing strengths: The strategy leverages the Tour's existing strengths in branding, marketing, and event management, minimizing the need for significant new investments and resources.
- Building relationships with key stakeholders: Strategic alliances and joint ventures foster strong relationships with local stakeholders, including governments, sponsors, and golf organizations.
- Minimizing risks: The phased approach mitigates risks associated with direct ownership and operational complexities in new markets.
- Focusing on long-term growth: The strategy prioritizes long-term growth by building a sustainable ecosystem for golf in target markets.
The attractiveness of this approach is supported by:
- Increased brand awareness: Strategic alliances and joint ventures will significantly increase the PGA Tour's brand awareness in target markets.
- Enhanced revenue streams: Co-sanctioned events and strategic partnerships will generate new revenue streams, diversifying the Tour's income sources.
- Building a global community: The strategy will foster a sense of community among golf fans worldwide, strengthening the Tour's global brand.
6. Conclusion
The PGA Tour's internationalization strategy is crucial for its long-term success. By embracing a phased approach focused on strategic alliances, joint ventures, and targeted market expansion, the Tour can leverage its existing strengths, mitigate risks, and achieve sustainable growth in the global golf market.
7. Discussion
Alternative options for internationalization include:
- Direct ownership: This approach offers greater control but carries significant financial and operational risks.
- Licensing agreements: This option allows for rapid market entry but may limit control over branding and event execution.
The risks associated with the recommended strategy include:
- Cultural differences: Adapting to cultural nuances in target markets requires careful planning and execution.
- Political instability: Political instability in emerging markets could disrupt operations and affect event schedules.
- Competition: Competition from established golf organizations in target markets could hinder growth.
Key assumptions underlying the recommendations include:
- Continued growth of global golf: The strategy assumes continued growth in the global golf market.
- Availability of suitable partners: The success of the strategy depends on the availability of reliable and strategic partners in target markets.
- Effective management of cultural differences: The PGA Tour must demonstrate cultural intelligence and adapt its operations to local contexts.
8. Next Steps
The PGA Tour should:
- Develop a detailed market analysis: Conduct in-depth research on target markets, including market size, consumer preferences, and competitive landscape.
- Identify potential partners: Initiate discussions with potential partners in target markets, including golf organizations, sponsors, and government agencies.
- Develop a comprehensive internationalization plan: Outline specific objectives, timelines, and resource allocation for each phase of the strategy.
- Implement a robust risk management framework: Identify and mitigate potential risks associated with international expansion.
- Monitor progress and make adjustments: Continuously monitor the strategy's effectiveness and make necessary adjustments based on market conditions and performance indicators.
By taking these steps, the PGA Tour can successfully navigate the complexities of internationalization and secure its position as a global leader in professional golf.
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Case Description
This case describes the internationalization of the PGA Tour, the U.S.'s professional golf circuit. Propelled in part by the popularity of golf in its domestic market, the PGA Tour built a successful business model attracting the best international players and global corporate sponsors. While the popularity of golf is showing no signs of waning in the U.S., it has been growing fast in other parts of the world. Now attempting to capitalize on opportunities abroad, the PGA Tour faces two challenges: some components of its business model do not lend themselves to internationalization, and its strongest rival, the European Tour, got a head start on the international scene in the early 1990s by gaining a foothold in many important markets. This is a decision-making case. It describes recent events (1996-2017) surrounding the internationalization of the PGA Tour and the competitive rivalry between the PGA Tour and its main challenger, the European Tour. Students are asked to put themselves in the position of Jay Monahan, the newly appointed PGA Tour commissioner, and assess whether the international strategy of the PGA Tour will give it a competitive advantage, particularly since the European Tour is challenging the PGA Tour's dominant position.
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