Basketball Culture: Competitive Environment - Article Example

Basketball Culture: Competitive Environment Introduction This paper conducts an industrial analysis exploring the world of basketball. Basketball has ceased to be just a sport. It has become as Cashmore and Cashmore (2010, p. 5) observed that sports have ceased to be just sports, but have become a part of world culture. Basketball is about ‘give and go’. A basketball player throws the ball to his partner with the expectation that if the situation calls for it he will get the ball back. According to McLaughlin (2010, p. 1), basketball players, team owners, fans, and media are so immersed in the culture of the game that it almost seems inevitable. The energy and interest these players, media, fans, and team owners give to basketball produces a cultural return. Basketball is played by millions of people and watched by millions. Market Definition Governments around the world have different policies regarding sports. For example, in the United Kingdom, sports administration is highly decentralised (Honeybourne et al. 2000, p. 153; Clark 2012, p. 50). This means that power is not centrally help; rather it is shared by many sporting agencies that are self-governing. There is little contribution by the central government. Basketball is becoming one of the most interesting segments of the business world. Basketball leagues enjoy high-customer loyalty. In the business world, customers have a tendency to move to a new product if they dislike the quality of the one they are using. However, in basketball, typical fans (customers) remain steadfast even if the team continues to perform poorly. Basketball stands to benefit from the broadcast market, which is considered to be possibly the most important market within the sports industry (Trimble et al. 2010, p. 102). Basketball league in the United Kingdom can emulate its counterparts such as Barclays Premier League, which generates revenue from the sale of television rights in both domestic and international sports market. Sports broadcast can become both an opportunity for basketball teams as well as a threat. Basketball culture Basketball has gained a lot of popularity to become a part of world culture. Basketball leagues have received many media attention; thus leaving profound impacts on the basketball sports organisations. Basketball leagues the most popular professional sports league in the world. These leagues have enormous followings, which contribute huge amounts of money in terms of revenue each year. Leagues such as National Basketball Association in the United States have had profound effects on the economy. Cultural icons have been created out of these leagues. It is difficult to define the market in which basketball teams compete. Each basketball league competes for labour in a single national labour market, or international labour market Besanko et al. 2009, p. 344). However, individual teams may be monopolists in the output in their home cities. The above facts will be put into consideration as each of the five forces affects organisation and industry profits in basketball. Porter’s Five Forces Analysis The power within the basketball sport is stretched across several different entities as shown in figure 1. The basketball leagues and teams can develop a deeper knowledge and understanding of the distribution of power in order for them to easily identify opportunities and capitalise on their position. Power of suppliers Threat of (Moderate) substitution (Moderate) Threat of New Entry Competitive Buyer Power (Low) Rivalry (Moderate) (Moderate) Figure 1. Porter Five Forces of Basketball Rivalry among existing teams In sports business, internal rivalry refers to the jockeying for shares by the existing firms. Rivalry in UK basketball arena includes Basketball Players Association, British Basketball League, and English Basketball Association (Zietman and Zietman 2013, p. 252). Competition in basketball is not similar to competition in the business world. In order for basketball competitions to attract huge numbers of fans, there must be a considerable collusion among teams. There are certain rules and schedules that are followed by all teams in a league/competition. Basketball leagues also have a pool of referees, and they share national broadcast revenues. In order for the basketball league to capture the interest of fans, some degree of ‘competitive balance’ is required. Most basketball teams have been generating huge amounts of profits from ticket sales. Some teams like Chicago Bulls have been monopolists in the market. However, during the sale of tickets to watch major games, nearly every team in the basketball league has considerable market power. In the traditional business sense, the playing field represents the market for labour (Besanko et al. 2009, p. 349). Due to unionisation of basketball players (rookies), the market for labour is subject to labour laws. These laws come into play when a team is employing new players. Threat of new entry Many owners of basketball teams are prominent businessmen who value this ownership as an ultimate high-priced hobby. These prominent people are many, and there are even potential ones who may want to own a good basketball team. Conversely, the barrier to entry is elevated because the basketball leagues are governed by rules regarding new franchises. The entrants are required to pay huge amounts of money to the current owners. The existing team basketball team owners possess the right to veto new franchises in their geographic markets, and this creates another barrier to entry. It is costly to start a new team from scratch. As a result, the potential owners are forced to purchase an existing team. Some teams are even constructing their arenas. For example, in 2012, Leicester Riders Basketball Club announced its plan to construct an arena on a site at Grace Road cricket ground (Leicester City Council 2013, p. 2). The other alternative for the potential owners is to establish a new league. This alternative raises the barrier to entry even higher. The chances of succeeding in a new league venture are extremely low because the success of the league depends on the success of the teams. The severity of this entry barrier is severe; thus, the need for the league to differentiate its products in order to increase its chances of survival. Basketball sport in United Kingdom is beginning to adopt the American approach to differentiation by introducing side attractions during games break. This analysis has established that the threat to entry is low. This is due to the huge amounts of money required to form a new team or purchase an existing one. It is also hard to win fans from other teams in which they have pledged loyalty. Some teams and leagues have spent a long time and money to solidify their influence in this field. Threat of Substitutes Both the product and the overall entertainment experience concerns the owners. Most basketball owners add value to their product by employing cheerleaders, musicians to perform during the game, and fan participation events during game breaks. Off the court entertainment also adds value to the product. Gambling and betting are also considered to be one of the biggest activities in fan attraction (Besanko et al. 2009, p. 351). Gambling and betting give rise to bribery. In higher extremes, the referees are tempted to accept bribes in order to favour one team. The threat of substitution is considered moderate because the existing basketball leagues have strong followings from fans, and this reduces the possibility of new leagues emerging. However, other sports leagues threaten basketball leagues by offering substitutions. Good examples are rugby leagues, football leagues such as Barclays Premier League, Bundesliga among many others. Sometimes the substitution involves a fan changing the channel. The threat of substitution is considered moderate. Power of the supplier In basketball, the suppliers are the players’ unions. Another major supplier to sports team is the cities. The power of suppliers is moderate because the owners have the power over the players because they pay them attractive salaries. There is also a relatively large pool of players with excellent skills. Underperformance, negative behaviour, and becoming too expensive makes a player face a threat of being replaced (Besanko et al. 2009, p. 351). Basketball players also have a small window of time in which they have to make their living; therefore, they are highly motivated to perform. Power of the buyer In basketball competition, fans assume the role of buyers. Fans are the most important buyers in the sports world. The buyer’s power is considered moderate. Fans’ buying is in terms of tickets to games and buying merchandise. At times, buyers may become more price sensitive especially during the recession. The greatest fans’ power is observed through increasing pervasiveness of social media. Fans have the power to pressure the league owners or individual owners to make decisions. In such cases, league owners or teams are obligated to make decisions that will please their fans. According to Gratton and Solberg (2007) and Cashmore and Cashmore (2010, p. 357), media is controlling sports. The media is influencing fans (buyers) who in turn influence the teams. Media houses are also competing in their fields, and some media houses have been controlling the sports broadcast field. For example, BSkyB in Britain is already effectively a monopolist because it controls the rights for football, rugby, basketball and other major leagues (Taylor and Gratton 2000, p. 221). This analysis establishes that the threat of new entry is low, whereas the power of suppliers, buyers power, and the threat of substitution are considered moderate. Therefore, the overall competitive rivalry that faces the basketball leagues is considered moderate. Discussion The biggest opportunity that may also be considered as a threat to the basketball owners and teams is adapting to the changing culture of traditional media coverage as well as the ever-increasing involvement of fans. Basketball has become a critical part of world society. Its popularity continuously attracts media attention that dig deep into them for stories. Media may pressure basketball teams to make rash decisions that may not be beneficial to the long-term well-being of the teams. Basketball team owners must also take into account the changing role of fans in the world of basketball due to developments in communication and technology (Gratton and Solberg 2007). The two developments are giving fans much power that enables them to pressure the teams. For instance, fans may show overwhelming support for a certain player thus pressuring the team to sign such a player but for the wrong reasons. This is where the power of buyers comes into play. Fans’ desire for instant gratification may pose a direct threat to the team’s ability to make long-term decisions. Currently, social media intensify this threat, which provides a platform for the fans to air their desires. Basketball teams are reducing the threat of damaging stories from media by developing their websites, apps, and television network. According to Barnwell (2013), the sports organisations that wish to be successful in the sports business have to communicate with their fans (buyers) with openness and respect. References Barnwell, B. 2013. The GM of the future. Available from http://www.grantland.com/story/_/id/9531195/bill-barnwell-phil-emery-general-manager-philosophy  Besanko, D., Dranove, D. Shanley, M. 2009. Economics of Strategy. Scott Schaefer. John Wiley & Sons. Cashmore, E. and Cashmore, E. 2010. Making Sense of Sports. New York: Taylor and Francis Clark, G. 2012. Decentralisation: An Assessment of Progress. Department for Communities and Local Government, London. Gratton, C. and Solberg, A. 2007. The Economics of Sports Broadcasting. London: Routledge. Honeybourne, J., Hill, M. and Moors, H. 2000. Advanced Physical Education and Sport for AS-level. London: Nelson Thornes Laughlin, T. 2010. Give and Go: Basketball as a Cultural Practice. New York: SUNY Press. Leicester City Council. 2013. Indoor Arena Site Options: Leicester City Council Scrutiny Summary Report. Trimble, L., Buraimo, B., Godfrey, C., Grecic, D. and Minten, S. 2010. Sport in the UK. Thousand Oaks: SAGE. Zietman, C. and Zietman, B. 2013. The Incredibly Indispensable Web Directory. London: Kogan Page. Read More