The external environment of Manchester United - Essay Example

The external environment of Manchester United Introduction Manchester United Ltd. is a premiere football club of United Kingdom. It is considered to be the most popular football team in the world having a huge fan base around 659 million (Gibson, 2012). The two models that have been discussed here regarding the external environment of Manchester United (MU) are the SWOT analysis and PESTLE analysis. Analysis of the company SWOT analysis Swot analysis is considered to be a tool for making strategic decisions of an organization which helps in the evaluation of different aspects of the company like its strengths, opportunities, weaknesses and threats encountered by the organization (Pahl, & Richter, 2009, p.1). STRENGTHS WEAKNESSES Brand image Sir Alex Ferguson as a manager Ticket revenue Product and services variety Profit oriented Hostile takeover OPPORTUNITIES THREATS Market expansion Website Competitors Salary cap MUST Strengths Brand image can easily be considered as the greatest strength of Manchester United football club. Its brand image is globally recognized. Millions of fans and followers of the football club are present all over the world. Any type of merchandise available in the market having the logo or the name of Manchester United is easily identified by any of its fans all around the world. However the club needs to live up to the expectations of their fans in order to sustain their brand image. Sir Alex Ferguson, the manager of Manchester United for past many years, is one of the powerful and biggest assets for the football club. Manchester United was managed most effectively and efficiently by Sir Alex Ferguson for more than 25 years now and still continuing to do so (Manchester United Ltd., 2012a). He can be regarded as the most successful manager ever in the history of club football in UK. This type of consistency in performance maintained by the club helps in the decision making process regarding prospective investments made by the company. Sales ticket is also considered to be one of the greatest strength of the club because of the huge fan base it possesses. There is a huge demand for the match tickets and the revenues generated from ticket sales are expected to increase significantly in the upcoming years. However ticket sales are not the only income source for the club. It has its products in offer too which contributes towards a significant portion of the revenues generated by Manchester United. Huge number of retail stores is run by MU and its distribution channel is also quite strong. Weaknesses The variety of products offered by MU can be considered as one of its major weaknesses. It is true that MU has a wide variety of products in offer for their fans, starting from the merchandise products to credit cards. However an area of concern is whether fans were involved in this type of decisions or not? It has been observed that MU had concentrated more on a very small number of income channels only. It needs to perform more research in this field and open up new avenues for revenue generation. MU is required to clearly identify its existing products that are in offer; only then would they be in a situation where they could employ different strategic models like Boston Matrix to have a better understanding of their business. This would allow the club to have a sustainable growth and development. Another key area of weakness that has crept up within Manchester United is that the club is more concentrated towards earning profits because of their current success and huge amount of earnings. It is now less focussed in football and more on profit making motives. This can have a detrimental effect on their fans. Hence the club management should be aware of this situation and take pro-active steps regarding this issue. Malcolm Glazer took less than 3 years to have control over the ownership of Manchester United and ultimately succeeded to delist it from the London Stock Exchange (LSE). This type of hostile takeover of MU resulted in the development of two major issues. They are increased resistance and pressure from its fans and an additional debt burden for the club amounting to around £ 667m. The resistance offered by the fans of the club took different shapes worldwide. Some fans were observed holding banners to demonstrate protest against this takeover and many of them got arrested while doing such activities during match days. Some of the fans refrained themselves from purchasing sponsor products and merchandise of the club. On the other hand, the Glazer family was successful in loading huge amount of debt on the club after its takeover. Most of the revenues generated by the club are being used up to pay the interests associated with the debt. Opportunities Manchester United being one of the most successful and largest clubs in UK has the huge opportunity to expand its presence in many different parts of the world where they have huge fan base. By doing so, they can easily increase the brand equity and generate more revenue worldwide using various means such as merchandise sales and other products that they have in offer. Another big opportunity for the club is its website. The website of the club is being visited by ever increasing number of people every day. The website of the club is already available in three languages, namely Japanese, Korean and Chinese. As a result of this more people, who are not acquainted with English would be added in the list of fans of the club. Threats Although MU finds itself firmly placed as one of the most successful football club, it should be aware of the facts that other clubs like Liverpool, Arsenal, Chelsea, and Manchester City possess big threat for MU because these clubs have been recently taken over by the investors in Middle East. All these clubs possess the purchasing ability in the transfer market. This implies that MU would not be able to have the players they would wish to play for their club. Other big threat for the club could be the proposed decision of the Football Association to implement salary cap for the club footballers. This could have a negative impact on MU because it is more likely that the star players would be interested to earn big money which would be available to them if they opt for playing in other competitions like Italian League or Spanish League. Manchester United Supporters Trust (MUST), which was previously known as Shareholders United, poses a threat to MU because soon after the takeover of the club by Malcolm Glazer, they started strongly opposing this takeover move by the club (MUST, 2012). Official papers have been lodged with Office of Fair Trading (OFT) by the MUST group stating that there has been a breach of legal obligations the club has for its fans holding the season tickets (Winter, 2008). This type of continuous tussle between the club management and its fans could have a negative impact on Manchester United. PESTLE Analysis This type of analysis helps an organization to identify different macroeconomic forces that can have an impact on the organization (Allen, 2001, p.54). Political The political environment in United Kingdom can have significant impact on Manchester United. Different types of taxation imposed by the government like the VAT rate could affect the earnings generated by the club. Economical United Kingdom is considered to be placed in the third position with regards to its economic position in Europe (CIA, 2012). However MU being a football club is involved in playing football matches which are conducted by the Football Association on a seasonal basis. Hence this seasonal business cycle for the club can have considerable effect on the revenues generated by the club. Socio-cultural Various socio-cultural factors that can have an impact on Manchester United include the aging of its players and the attitude of the management officials to work and leisure. With MU currently placed in a strong position, it is quite obvious that the company management could take it a little easy, resulting in a negative attitude towards their work. Technological Manchester United needs to be updated with the latest developments and advancements in technology in order to have a sustainable growth in future. It already has been successful in promoting different types of technological advancements like a website, MUTV, MU Mobile, etc. and the club management needs to be proactive in imparting advanced technologies in all these avenues (Manchester United Ltd., 2012b). Legal The legal environment of United Kingdom also has a significant impact on the football club. The rules set up by the Football Association and different Employment Laws can affect the club considerably. The introduction of age discrimination legislation, disability discrimination legislation as well as the obligation for firms to recycle will affect the club’s actions. Environmental Various environmental factors also have an impact on the profitability of the club. Recycling and reusing of different products can prove to be advantageous for the club. With major changes taking place in the climate due to the impacts of global warming and the increasing concern for environmental analysis this has become a momentous issue for the club to think about. Conclusion Manchester United Ltd. is one of the premier football clubs of UK and it has a huge fan following round the world. Manchester United has a strong brand image and due to this reason it earns good revenue from its ticket sales. The club is handled by an efficient manager Sir Alex Ferguson. However the sudden takeover and profit oriented approach of the club might be harmful for its status. Though the club is considered to be a home to stars yet rising competition may act as a threat to the club. The external environment of UK also had considerable effect on the club, such as the changing policies in taxation system, unstable economic conditions of the country due to recession, or changing laws from time to time. Hence the analysis of the external business environment has helped us to increase our understanding about the way in which Manchester United FC operates. References Allen, M., 2001. Analysing the Organisational Environment. Hertfordshire: Select Knowledge Ltd. CIA., 2012. The World Factbook: Europe United Kingdom. [Online]. Available at: . [Accessed on June 4, 2012]. Gibson, O., 2012. Manchester United 'Most Popular Team in World' with 659 Million Fans. The Guardian, 29 May. [Online]. Available at: . [Accessed on June 4, 2012]. Manchester United Ltd., 2012a. Sir Alex – 25 Years. [Online]. Available at: . [Accessed on June 4, 2012]. Manchester United Ltd., 2012b. Official Manchester United Website. [Online]. Available at: . [Accessed on June 4, 2012]. MUST., 2012. About the Manchester United Supporters Trust. [Online]. Available at: . [Accessed on June 4, 2012]. Pahl, N., & Richter, A., 2009. SWOT Analysis- Idea, Methodology and a Practical Approach. Munich: GRIN Verlag. Winter, H., 2008. Manchester United Fans Call in Office of Fair Trading Over '60 per cent' rise in Ticket Prices. The Telegraph, 18 Nov. [Online]. Available at: . [Accessed on June 4, 2012]. Read More