Football Club Management - Manchester United - Assignment Example

MANCHESTER UNITED - GROWTH STRATEGY FOR A FOOT BALL CLUB Background Factors Club football and the English football league has seeped into traditional British social culture over the centuries. Manchester United (ManU) football club is one of the most famous English clubs which was founded in the late 19th century. Today ManU is more than a football club, it is a brand which is continentally if not globally recognized as a sporting giant providing entertainment, social and group identity to a large community of British and non British people. ManU has emerged as a business oriented sporting organization through a strategy of growth which is multi faceted, though not based on a planned approach and more inclined towards the unconnected strategic model denoted by Mintzberg. (Mintzberg: 1985). It has emerged as a business enterprise with profit orientation as opposed to its original purpose of being a social cum sports club over the past decade and a half or so after over a century of existence. The ManU's strategy of survival and its core policies though not necessarily its strategy for growth has been explained in its club charter which is a document which is publicly available and gives out various core aspects such as, consultation processes, ticketing, membership benefits, community activities, merchandising, standards of staff conduct and complaints procedure. (http://www.manutd.com). The ManU has a social orientation which is designed to contribute to the social culture and sporting life, a common bond which is created by the community of football clubs in Britain. (Morrow : 2003). The business potential of ManU lies in its strong brand awareness which is increasingly attracting multinationals as Nike which has taken over the uniform-replica merchandising business run by the Club internally earlier. The other partners include, Vodafone, PepsiCo and Anheuser Busch. (Maidment:2004). The marketing mix of ManU lies in the plethora of sporting and sports related business activities such as an outstanding football team, merchandising, television rights, marketing of sports venue at Old Trafford, sale of products, promotional activities and branding as a premium product. (http://www.thetimes100.co.uk). ManU thus has retained the top position for eighth year in a row in the English league with an income of 259 million. The lead position achieved by the Club in earning large quantum of revenues has been a result of an increasing proclivity to tap markets beyond Britain. (http://www.deloitte.com) Growth has to be both organic and inorganic, in a globalised world the potential for growth lies in the international markets which can be achieved by a planned strategy based on an innate understanding of the culture and structure of the organization in line with the environmental realities. ManU has the potential for unstinted growth and has to determine its strategy for the same in a cogent manner. Strategy Review - ManU "Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations". (Johnson : 2001). Strategy has been viewed with varied connotations by management pedagogues. The Mintzberg model for instance has classified the main forms of strategies into planned, entrepreneurial, ideological, umbrella, process, connected, consensus and imposed. As is implied in the strategies named thus, it would be evident that thus far ManU has not been following a "planned" strategy for growth, its strong football team and supporter population more than making up for any divergent business requirements and profits were being generated through its brand image. It had perhaps a one point agenda that of winning each and every encounter in the English league and club matches in Europe. This it had been consistently doing with a strong line up of football stars led by David Beckham till very recently. Diversification from its core activity of Football has been a result of strategy which has been "imposed" by the environment on the Club as it went on to leverage the strength of its football team by marketing the venue, merchandise and finally co branding value with some of the best names in the business. (Mintzberg: 1985). And then finally, "consensus" is likely to have formed an important facet of ManU's strategy. Its fans control 17 percent of the stock along with other powerful stakeholders including two Irish businessmen who own nearly 30% of the club stock, John Magnier and J.P. McManus. (Maidment : 2004). Thus viewed from the Mintzberg model, imposed and consensus seem to be very powerful component of ManU's strategy thus far. However it is evident that henceforth it would have to undertake a more planned strategy for growth. Strategy has to also take into account structure before it can be successfully implemented for structure provides it the organization and processes for implementation. While conventional strategists have believed that strategy drives structure and that should normally be the case, practical evidence tends to suggest other wise as has been highlighted by Hall and Saias. Strategy tends to be evolved from a complex interplay of culture, values, past experience and a variety of other related factors in which it is seen that in well established organizations as the ManU, structure drives strategy. (Hall : 1980). The evolution of strategy for organizations is explained by the Figure 1 below: - Figure 1 Reviewing the Club Charter as a Strategic Document A view of the Club Charter as a strategic document will provide us an overview of the strategic options available to ManU. As per David Gill the Chief Executive, the Charter is a public affirmation of a partnership between the Club and its followers. (http://www.manutd.com). A primary feature of the charter is effective consultation and information that the Club carries out on a regular basis through its fan Fans Forums, questionnaires, the FAPL annual fans satisfaction survey, FAPL supporter panels, focus groups and independent customer service surveys. It regularly interacts with its shareholders, thereby it is amenable to evolving the "consensus" strategy with all its pulls and pressures as identified by Mintzberg (Mintzberg: 1995). It also will hold consultations on ticketing policy, since fans are most affected from ticketing, there is limited scope for increase of revenue through raising ticket prices despite the excess of demand. Ticketing has also been placed in the charter, where it has pledged widening access to football matches, creating a broad range of ticketing options, in terms of prices, focusing on the revenue generating class, denoted by private box holders and executive pass holders. The broad based ticketing policy also includes separate areas and concessional tickets for under 16s and over 65s, season ticket holders, exclusive family groups, unaccompanied junior members aged 11-16, disabled fans and their carriers. To ensure fair play it is committed to free or reduced admission to replays of abandoned games. A strategic tie up with MU Finance where concessions are offered on administrative charges to fans buying season tickets also ensures profitability as well as sensitivity towards its primary stake holder. A strict policy of refunds is followed thereby which excess expenditures are controlled. By regulating the policy of tickets sale to away games, the revenue collection is enhanced based on a loyalty factor. Its commitment to the community also forms an important part of Man U's charter and includes support to grass roots football, educational initiatives, coaching service to schools, charitable work to improve the lives of children on an international, national and local level, specifically in areas of education, sport and health/fitness. It has also a very effective support network represented by the Independent Manchester United Supporters Association which is an active group involved in all club related activities to foster growth. (http://www.imusa.org) Merchandising is a major activity, which is generating revenue and the charter decrees that Manchester United's merchandising policy, is in line with football industry standards. Home and away kits have a lifespan of two Seasons and training kits are changed annually. Being a service organization, Customer Service and Staff Conduct assumes great importance and the Charter declares that it will strive to provide value for money in all areas of its business, achieving highest level of service, respond to fan feedback and protect confidential information. The issue of complaints is also important which is addressed by laying down an implementable complaint procedure with the names, addresses and telephone numbers of authorities to whom the complaint can be addressed. The Club has also very effective guidelines covering, health, safety and the environment, people philosophy, equal opportunities, disability discrimination, safety of spectators and disabled spectators. (http://www.manutd.com) Analysis of the Club Charter An analysis of the Club Charter of Man U will reveal that the club has evolved a very effective model for providing sports and community services to its target audience mixing it with profit orientation to satisfy all the stake holders. It has attempted to leverage its assets, the team, and the grounds, the large supporter and fan network, the merchandising opportunities and so on to maximum effect. It has very succinctly linked its business goals with community interests and evolved a revenue model, which has been successful over the years. The Club charter however is not a strategic road map for the future and is more concerned on the present structure, processes and functioning to ensure club profitability and increase in brand value through community and business linking of projects. There is thus a need for drawing a separate strategic road map for the club, which is covered in the subsequent paragraphs. Goals for Manchester United The Deloitte football money league based on data from the 2003/04 season has stated that the world's 20 biggest football clubs, by income, are set to breach the 3 billion income mark in 2005. (http://www.deloitte.com). Manchester United as the top money-earning club has tremendous potential for maintenance of the lead as well as expanding its brand and sporting value. It is also one of the most successful clubs which has won the FA Premier League/Football League fifteen times, FA Cup eleven times and the European Cup twice. It is also reported to have the highest average attendance in English football consistently over the past many decades. (http://en.wikipedia.org) Manchester United should be seen not just as a football club but as a global sports enterprise and franchise. The club's football team can generate revenue from ticket sales. Its media and communications side should be able to manage broadcasting and Internet rights to all the games as well as its players and it should be able to leverage these to merchandise its branded goods to fans and supporters globally rather than locally in Manchester or Britain. Manchester United is presently maintaining its top position for the eighth consecutive year with an income of 259 million. This has been through its constant performance in the Champions league, which has great impact on the money league of clubs. Competing in the Champions league consistently is said to deliver additional income of 10 % to 20 % for the Club. (Maidment: 2004). Thus maintaining the present status of a premier champions league club is essential for ManU and should be one of its primary goals. The revenue model based on broadcasting rights is also a successful one which the club needs to continue to foster and even leverage with the entry of French clubs in the Money league. Greater spread of broad casting internationally should also be an essential goal. The revenue earning capability of the stadium facilities also need to be enhanced to include brand strength of Old Trafford which is a venerated venue. Stadium assets need to be adequately leveraged to gain maximum advantage from the same as this stream as per Paul Rawnsley of Sports Business Group at Deloitte has been "relatively unexploited". Developing commercial activities which can generate revenue needs to be carried out with attentive concern for the fans which are the true strength of a club. Steady focus on building a long term relationship between a club and its supporters is important which has been well covered in the Charter.The need to understand that fan following and merchandising goes hand in hand is essential. Winning over new fans in the English football league may be difficult as loyalties have been marked over the ages. There is a need to look beyond the domestic markets to the international markets. (Maidment: 2004) Putting a financial value on the goals, the current revenues of 259.0 can be easily marked up by an estimated 10 to 20 % in the initial years and even higher later with greater diversification and integration strategies. The overall goal should be to increase its brand value by 10 to 20 % in the larger European and World markets particularly in the South East and South Asian markets which have a large following for football which has been relatively untapped by ManU so far. To summarize the goals, Man U needs to retain loyalty of its domestic fans, increase trans British brand presence through a wide range of activities as venue marketing, broadcasting and so on particularly in the Asian areas and generate value added revenues adding to its bottom line and brand value substantially. Strategic Issues Facing Manchester United For analysing the strategic issues and evolving a growth strategy for a sports club as Man U, Whittington framework can be considered as an ideal paradigm. Whittington has relied on three strategies for growth, innovation, corporate linked strategies of diversification, integration and acquisition and internationalisation. Innovation entails commercialisation of new knowledge by adopting a totally new approach either to the company or to the market as a whole. It can be adopted in a varied model, be it of the product, process, organisational or managerial. Technology is said to be a powerful tool and motivator for innovation. (Whittington: 2001). Diversification can be related or unrelated which in turn will be dependent on the scope of the organization. Diversification can be horizontal or siloed within the same line of business or activity wherein it can be forward diversification leading to distribution of the product or services or backward diversification implying entering in areas which generate value for the organization. Related diversification is carried out more easily as the management has good knowledge and understanding of the current state of business and can build on its core competencies, spreading risk and utilising resources which are surplus or available in house and not being fully tapped. (Whittington : 1992). Whether a firm or business adopts a global, domestically diversified, international or transnational strategy depends on whether there is greater pressure for global integration or local responsiveness. (Whittington : 1992). With high pressure for global integration and low need for local responsiveness, the firm will adopt a global and international strategy, in the former it creates standardised offerings and in the latter it will use its core competence in the home market to tap foreign markets. Where there is greater pressure for remaining locally responsive, the firm will have to adopt a transnational strategy, which will ensure that it can benefit from global scale efficiencies while remaining locally responsive, or diversify mainly locally though independent operating subsidiaries. (Whittington: 1992). Internationalisation as a strategy is favoured through a process of vertical internationalisation, where organisations as Lever Brothers, Cadbury's or Dunlop have spread their businesses geographically thereby achieving growth. British companies followed by Americans adopted internationalisation strategy, the Japanese, Koreans and now even Chinese companies are following the same. The issue is of trading brand value exploiting cheaper labour and other material advantages offered by geographical diversification and exploiting business vacuum in new economy and developing areas. The strategic issues facing ManU are growth of its brand value in the growing professional sporting era. It is apparent that though it has attained and retained the top sporting brand image over the past eight years, there is substantial scope for growth. This growth will have to be based on its existing model and structure as seen by an examination of the linkages between structure and strategy. (Hall: 1980). The existing structure will allow for growth in its sports development strategies in the domestically diversified and transnational markets. For global and international markets it would have to expand its existing structure to take on board global management expertise. For geographical spread corporate linked strategies of diversification, integration and acquisition and internationalisation would be a major concern. There is limited scope for innovation in the layer of businesses it is associated with. Innovation as a strategy needs to be examined in the light of the varied distribution and revenue models adopted by brand reliant service companies including sports clubs as ManU. For diversification it can examine the need for horizontal or vertical diversification and integration. Acquisition will be related to allied sports businesses and alliances with partners. Exercising the choice of internationalisation will have to be considered deliberately without losing it core domestic constituency in the highly competitive football environment in Britain. The second English money earning club in line, Chelsea too has a substantial income of Euro 217.0 millions and could be seen chasing ManU for the top spot. Recommended Strategy and Actions to develop Strategy The recommended strategy for ManU is that of internationalization and diversification. This can be developed through a multi pronged approach correlating social value with sporting activities to generate revenue. All these facets can well be combined to represent the brand value of the Football club. The focus on social values generated by football and sports can be leveraged by partnering with a wide spectrum of bodies including the government which is encouraging club football with parliamentary approval to the game as a form of social culture. This aspect should be linked with business activities subtly to add to the brand value in Great Britain winning over additional fans and at the same time retaining the current population. For this purpose the commitment to community programmes can be enhanced through greater allotment of resources, as presently only an average 18365 pounds donations are being received from English Premier clubs as per records for 1999/2000. There would thus be a need to translate its commitment to the community as pledged in the Annual Report of 2002. (Morrow: 2003). This will also gain international repute and fan members as well as sponsorships and endorsements. Activities as Football in the Community scheme, MU museum / Study Support, Centre, UNICEF partnership, Manchester United Football in the Community scheme can be further fostered. At the international level its partnership with the UNICEF can act as a catalyst for improving its brand value and image thereby gaining it additional supporters and thus marketing and business benefits. (Morrow: 2003). Leveraging brand image globally, as a sports franchise can be an ideal activity to internationalize it global value. Partnering international brands as Nike, PepsiCo and other well recognized consumer goods companies could enable it to carry out this activity through co branding without substantial investments. Royalty sharing would enable generation of revenue. Multi branded merchandising of goods could also be a form of enhancement of sales and deploying brand value through diversified routes. Joint promotion campaigns can be successfully employed to enhance the brand value at low cost. It should increase interest in acquisition of brand image by transforming its image into a media driven sports business, which has substantial monetary value. (Maidment: 2004). It cannot lose sight of its primary activity Football, for which the strength of the football team will have to be continuously built up, as it will remain its unique selling proposition for years to come. The football brand can be converted into merchandising of goods and products. Yet a greater opportunity lies in media rights particularly television and the Internet. These should be exploited to gain international presence. The Internet as a medium of distribution can be exploited to tap global markets in Asia at very low costs. Traditional use of Old Trafford as a venue can continue, which has a premium brand value and thus ticketing can generate substantial revenues for the club as it will continue to be considered as a premium site for sports. This can be developed into a nodal centre for other sports as well as physical training activities for which it has good potential. Conclusion Manchester United is uniquely placed as a sporting organisation with a favourable image in the public eye and a club with excellent financial clout and status. It has a very large support base. It needs to capitalise on these issues, strategy for which has been suggested in the Paper to emerge not only as a Britain or Europe centric football giant but a global sports conglomerate. References 1. Hall, David, J. Saias, Maurice. (1980). Strategy Follows Structure. Strategic Management Journal. Vol 1.No 2. Apr-Jun 1980. 2. Johnson, Gerry. Scholes, Kevan. (2001). Exploring Corporate Strategy: Text and Cases. Paperback Edition. London : FT Prentice Hall. 3. Maidment, Paul. The Rich Battle For Manchester United. http://www.forbes.com/business/2004/02/13/cx_pm_0213manu.htmlhttp://www.forbes.com/business/2004/02/13/cx_pm_0213manu.html. (15 March 2006). 4. Mintzberg, Henry. Waters, James A. Of Strategies, Deliberate and Emergent. Strategic Management Journal. Vol 6 No3. Jul -Sep 1985. 5. Morrow, Stephen. Hamil, Sean.(2003). Corporate Community Involvement by Football Clubs: Business Strategy or Social Obligation Stirling Research Papers in Sports Studies Volume One Number One, 2003. University of Stirling. 6. Whittington R (2001) What is strategy - and does it matter (2nd ed) London: Thompson Learning. 7. Whittington, R. and R. Whipp (1992). "Professional ideology and marketing implementation." European Journal of Marketing 26(1): 52-63. 8. World's top 20 football clubs set to break 3 billion income mark in 2005. http://www.deloitte.com/dtt/press_release/0,1014,sid%253D1018%2526cid%253D74209,00.html. (14 March 2006) 9. http://www.imusa.org/news/index. (15 March 2006). 10. http://www.manutd.com/supportersunited/charter.spsitype=495&icustompageid=821. (14 March 2006). 11. http://www.thetimes100.co.uk/theory/theory.phptID=344. (14 March 2006). 12. http:/wikipedia.org/wiki/Manchester_United_F.C. (15 March 2006). Read More