MANCHESTER UNITED AS A BUSINESS
MANCHESTER UNITED AS A BUSINESS
INTRODUCTION
Football having become successful worldwide has received a lot of recognition. At some point, it has been seen as an avenue that can be successfully be studied as a business. The industry is estimated to be worth £150 billion presently with an accumulative revenue the EPL being approximately £1billion annually (Kapferer 2008, p.34). The sport has become as well-known industry that has been made successful through the Spanish La Liga, English Premier League, the World Cup and the Italian Series A. One of the most admired teams in the sport is Manchester United. It has drawn a big following and its fans are distributed all over the world. The football club has a global followership of more than 350 million fans (Verma 2006, p.41). Several things as contributed to its success. This includes an efficient corporate and football strategy that has borne results all through. This article will therefore analyse the club as a business since its establishment in 1878.
From the time the Manchester United was established, it has won the league fourteen times. This has made it become the most popular soccer club in the world. the club started gaining popularity in the 1990’s when it started becoming successful. It has so far gained over £130 million turnover. This has landed it in the stock exchange market. The football club is additionally involved in some other activities apart from playing soccer. Other activities the club is associated with are cable networking (MUTV), Conference and catering services, Banking, Museum services, selling Souvenirs and providing free email services.
Key Issues
These are the things that make the company unique i.e. It distinguishes the business from the others. There are of course things that the club does to help elevate it and keep it very competitive. Manchester united has concepts that makes it remain competent, inimitable and highly acceptable in the markets (Aggarwal 2008, p.44). The clubs started being popular between 1990 and 2012. They had started upping their game. They had already done the following to ensure that they remained their fans’ favourite team; They had Expanded their portfolio of regional and global sponsors. The club has offices in North America and Asia. This is an addition to those that are found in Manchester and London. They have done this to ensure that the top position is secure making them the leading global brands.
During the 2010-2011 period, the sponsorship of the club was at its all-time highest. It was at 31% making it one of the top soccer clubs in Europe. During that period, there was a 27% increase in commercial revenue attained by the club. It hit its all-time high revenue of £331.4m. in 2010. This made the club one of the most selling club among the sponsors. Its fan base was the most attractive since it was a sure guarantee to the sponsors. Manchester United Further developed their merchandising, retail and product licensing service provision. This strategy helped then increase their scope and popularity. they were able to expand their base to various locations all over the world. The team has over a half of its fan base based in Asia. They buy many of the club’s merchandise Increasingly. They have as well been able to exploit of new media such as mobile opportunities. These media include internet mobile and social media that that happened to be new windows of opportunity for the increasingly growing opportunities and revenue for the company. The company has a great followership on twitter. This has been a great thing for the club since it has been able to develop their own digital properties. Manchester is among the five most popular clubs followed on social media. This includes Facebook and twitter. It presents an opportunity for the soccer team to keep its followers more entertained and engaged.
The club has as well been able to enhance its broadcasting rights across the globe. Starting from live sports which is the greatest provider to other smaller broadcasting companies. The ever increasing audience has attracted the attention of investors to be able to reach their already-existing and their potential customers through advertising. Furthermore, MUTV that delivers the club’s programming to over fifty-four countries worldwide plan to expand its scope by increasing its content and production capabilities (Kotler 2008, p.31). Manchester United, also popularly known as Man-U diversifies revenue and improves its margins. This is at the verge of increasing its operating margins and revenue as well. The club has been increasing the emphasis on their commercial activities that seem to be constantly diversifying. This enables them to realize more profits
The club has efficiently been able to maintain a strong structure that enables it to be successful both in the pitch and off the pitch. This has been through well-laid structure that are clearly defined. They have set rules that they stick to. The owners of the club, the Glaser family, are part of the Board and do little to interfere with the club’s activities. This has over the period given its mangers including David Gill, sir Alex Ferguson and Jose Mourinho an easy time. This has been different from their rival teams such as Liverpool and Chelsea managers do. They are left to deal with the weak corporate governance structures. This is what made Jose Mourinho to leave Chelsea. Roman Abramovitch, who is the owner of the latter kept on interfering with the club’s activities and operations. He kept interfering with team strategies and player acquisition (Chevalier & Mazzalovo 2012, p.54). The smooth running of Manchester United allows its over 350million fans to have a continued loyalty hence creating a reputable brand equity for the club. Sir Alex Ferguson independently, without the intervention of the club’s owner developed a Scouting and training team that increased the players’ tactics and expertise. The established system has seen the club succeeding for the last 26 years. The Ferguson regime was keen on attendance, punctuality and effort (Dhar 2007, p.34). This enabled the club to refine its techniques and be in a position to cope with seemingly difficult skills. The club’s leadership style therefore played a major role in the club’s success.
During his reign, Sir Alex Ferguson made sure that he increased the player turnout through signing more young players. This have had a long term effect on the club’s success. When he took the leadership of the team, he signed talented young players including David Beckham, Nicky Butt, Ryan Giggs, Gary and Phil Neville, and Paul Scholes which enabled them to win the English Youth League from as early as 1990 (Temporal 2010, p.12). The club then continued dominating in the league in 2003. This relays Ferguson as more than a coach. During his leadership, the club was successful and adorable. He and the owner have set in strategies that have enabled them to efficiently set corporate strategies that have developed the club and turned it to a brand from being a football club (Kotler 2008, p.11)
The management is keen to ensure that the players enjoy the greatest percentage of it operating revenues. This stands at 46% compared with 69.3% which is the top 6 average (Elliott & Percy 2007, p.09). This shows accountability of the club in spending its resources in an efficient way. The company strategy of the club has enable Manchester united employ a cost-cutting strategy where necessary. It was Ferguson’s dream to come up with a strong team that boasted of high competence and skills. This saw most of its players appear at the all-time best player list in 2012. Those who appeared on the list of the top 50 performing footballers were Wayne Rooney and D. Welbeck. The competence and skill of the players went ahead to make the club one of the highest valued club that stood at the value of £1.62billion in 2013.
The team has attracted many investors and sponsors including international trading organizations. The team’s success and support from fans explains why companies such as AON will spend millions sponsoring the team. The organization entered into a four-year deal with the club as a sponsor that then saw its revenues increase to 27% (Elliott & Percy 2007, p.15). They then signed a contract with Nike and Telecom Malaysia and Turkish Airlines (Glynn & Woodside 2009, p.12). During the 2012/2013 period, the club signed yet another sponsorship with General Motors, popularly known as Chevrolet. The sponsorship was valued at a whopping cash value of £357million (Elliott & Percy 2007, p.23).
All these sponsorships are as a result of having a well-established brand that is beneficial to the sponsors as well. The club has given the sponsors access to new markets in in Asia, and even in Africa.
FINANCIAL ANALYSIS OF MANCHESTER UNITED FOOTBALL CLUB
The Key sources of revenue and the drivers behind the sources play a major role in influencing revenue generation in Manchester United Fc. Manchester United can boast of three major revenue sources that include commercial revenues, media revenues, match-day revenues.
Match day revenues are the monies received for successful games in leagues and cups. Media revenues are the TV deals they get and live broadcasts. Commercial revenues are the revenues gotten from other business activities. They include a Radio Station, a TV channel, a magazine and the desktop alert service they provide.
Drivers
The KPI is a short form of Key Performance Indicators. This could be studied in relation to the revenues achieved by Manchester United Ltd.
Key Performance Indicators (KPI)
It has a Sound business plan
locally based players are developed through soccer academy
Highly qualified coaches at senior and underage levels
Stable administration in the club.
Strong Club presence in schools
Sound financial management, this enables them to keep expenses in line with the income base
High and acceptance by the society
high standard of club facilities and equipment
To further refine Manchester United’s revenue drivers measure application of the Porter’s Five Forces Model and pestle analysis will be crucial.
The five forces model of Michael Porter in relation to Manchester United.
SUPPLIER POWER
Switching costs of firms in the industry are not high
Volume is significant to supplier
There is a high diversity of suppliers
high impact on costs and differentiation by inputs
low Presence of substitute inputs in the industry
Manchester United differentiates of inputs
BARRIERS TO ENTRY
There is a strong brand identity in the football industry
government policy that promotes free entry in the game when the necessary registration requirements are met
an easy access to inputs in the industry
High capital requirements for one to run the business
There are economies of scale
Low expected retaliation
Easy access to distribution
Switching costs are high
THREAT OF SUBSTITUTES
Buyers are not highly inclined to substitute
Low switching costs
Trade-off of substitutes
Price-performance has no influence on the preferred team up to a certain level
DEGREE OF RIVALRY
Low product differences
High fixed costs that means there is a High value added tax
High exit barriers
Low industry growth
Low industry concentration
High diversity of rivals
Low switching costs
High brand identity
BUYER POWER
Price sensitivity is not extremely high
Buyer information is at times considered to be high
Product differentiation is very high
Buyer volume are high upon successful times
Brand identity is strong
Bargaining leverage is balanced not high and not low
Buyer concentration vs. industry is low
Many substitutes are available
PESTLE AALYSIS
Political
There are political factors that surround Manchester United. The major ones include the English Football Association and the global equivalents. These are the likes of FIFA and UEFA. The organisations set rules for the clubs and determine how the clubs’ operations are run. This includes signing of players and conducting on-pitch activities. In the light of this, Manchester United could therefore have a hard time signing players considering their level of debt. If the debt problem I not solved, it could cause dire consequences in the near future.
Economic
As with any other business, Manchester United would be affected by the prevailing economic conditions. In particular, Brexit might affect the club since an economic go-down is expected. This would affect the club’s revenue in a negative way. It currencies such as the sterling pound and the Euro are going to be affected, the Manchester United will incur subtle losses.
Social
Manchester United has continued receiving acceptance since the society has come to appreciate and like football. This is not like then part where football matches were filled with hooliganism. It has now become a social activity that attracts many people. Manchester United has therefore gained a huge fan base that increases its upper hand against its rivals.
Technological
Manchester United is currently being aided by the presence of technological expertise that enable its fans all over the world to get its happenings. Rise of the internet and cable services help in dissemination of information and matches.
Recommendations on the key issues
Even if Manchester United might have the debt problem, they have to fight hard to maintain their dignity. As seen from the above analysis, they have quite a good base on fans and sponsors hence making the club stronger and superior to its rivals. If Manchester United do nothing about the current situation, then they will end up losing the honour and dignity they have built for so long.
SWOT ANALYSIS OF MANCHESTER UNITED FC
The swot analysis consists of Strenghts, Weaknesses, opportunities and threats a business have. Below is the analysis of Manchester United Football Club
Strengths Weaknesses
Opportunities Threats
Based on the business analysis done concerning the club, we can see that its attractiveness in the Asian market continues to boost its revenues.
Outlining the core card for Manchester united football, club, there are some factors to consider. This includes financial, customer relations, internal business processes and growth of the club. The objects should be broadening revenue resources, stabilizing their sources of income and having an intangible value of goodwill in the sport and for the players. Financial factors include setting up strategies to decrease their debt, expand their viewership across the world and come up with other ways of earning revenue. This will be achieved through making a number of steps that might include making partnership deals with other companies. They might also consider opening up other avenues of incomes that are not related to football. The club should, as well, increase the number of their commercial activities to widen the scope of revenue that will enable them to have better internal control of their activities. This should make the best of their customers who range from sponsors, fans, visitors, restaurant customers and soccer academy students. They should take control and improve their customer relations through market strategies that will make them adorable to new customers.
They should then make sure they respond swiftly to their fans’ complaints in a positive way. But as much as they respond to it, they should as well seek to understand and impress their sponsors to attract more funding. They should work towards retaining their existing customers and fans and then seek to win more of them. they should avoid negative publicity at all costs. They should seek to increase the number of students in their soccer academy to continue having competent players in the club as well. To ensure that they get to the most desired position and remain there in the league and in business, they should have continued improvement in their team performance, increase stadium services and safety to fans and supporters, provide valuable advertising space to sponsors, ensure diversification in seeking for sponsorship, sign players who are the best in the market and customers’ favourite, give their players increased rights in the club’s operations and advocate for quality broadcasting of their matches that include clear voice and images.
Although strategic analysis has been done using financial models and conventional analysis, there are some limitations of using the same. Focusing on the financial models, some of them might be vague. This is because some of the are too simple to be relevant while at the same time it is difficult to account for every possible variable in a financial model. Additionally, many variables might be misleading therefore producing ineffective results to the consumers. On the other hand, the limitations of conventional analysis include the following. They tend to solely focus on incremental volume and always recommend an increment in the budget towards promotional budget (Kapferer 2008, p.34). They also ignore the long run view that is supposed to be the overall goal of the business.
RECOMMENDATIONS
After the keen assessment of the club’s activities and operations, I would like to recommend the following to make Manchester United a stronger and a far-reaching football club:
Refurbish The Old Trafford Stadium
I would also recommend that the club refurbish the Old Trafford Stadium since it has been long since new technology was incorporated in it. The management should as well ensure that there is an efficient ticket system. In so doing they will be a better team than is now.
Franchising Manchester United
Even if the club is not the most popular team in Asia, it has managed to win quite a recommendable backing from the region. We understand that the team does not have any active participation in that area, but its style of playing soccer as well as it leadership has been quite recognizable. Franchising Manchester United to the Asian investors will help the club gain a big sum of revenue to help it carry on with its operations. This will in turn create a new source of income to the club. The club will be a success both in the field as well as in the market. the team will, by owing this, attract a huge inspiration to many who will then seek ways of getting associated to the club. Many of them will come with sponsorship and partnership offers which in turn will be a big advantage for the club. After getting enough revenue, the team will them be able to venture in areas like Africa and expand its influence there. Although the price of the franchise in Africa might be lower than that in Asia, it might increase in a matter of time. This will enable the club to have a representation in almost all parts of the world.
Clearing the unbalanced sheet
The team has been in a huge debt, something that has limited the club from being able to purchase some of the best players in the world. The effect of the debt has, of late been spread to the players which is affecting their ability to play well in the field. Their rivals Manchester City, have almost overtaken them in term of player acquisition. They seem to be having an upper hand since they are in clean books and therefore can spend millions in in their deals to acquire the best players at will therefore resulting to a better performance in the field.
The team will not be having a difficult time winning sponsors and selling itself in the market since they have been doing well. They can therefore offer some percentage of its ownership to investors in other regions in the world to increase its scope and clear its debts. Then they would set rules that will see the new stakeholders sit back and not interfere with the team’s activities just as Glazers have been doing for all this time. Though some amount of debt is healthy for the business since it makes the management ensure smooth running of the business, it is always good not to let the debt get out of hand. And since the club has a low debt-to-equity ratio, it is a good sign that they could be one of the most respected football clubs in the world. The stage is already set and it is now upon the management to ensure that this becomes a reality.
Reference List
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