The Economics of Football: Manchester United Football Club - Case Study Example

Economics and Sports Name: Course: Tutor: Date: OUTLINE Topic: Economic and Sports I. Introduction A. Introduction of Barcelona FC and Manchester United B. Brief information on success of the clubs II. Body A. Ownership of the clubs B. Financial backgrounds C. Why the two clubs are favorite in the world D. Taxes in income of owners and players III. Conclusion A. Conclusion B. Recommendations IV. APPENDIX A. Analysis of the Paper B. Critiques of Efforts Introduction Given football’s eminence in the modern societies either as spectators or participants at all levels, it is certainly important to appreciate the growth and development of Barcelona and Manchester United of Spain and England respectively. In the last decade, these two teams have become center of attraction to many people around the world. Barcelona’s performance has been exemplary during the last six seasons. On the other hand, Manchester United has also displayed exceptional performance in football competition since 2005. Ownership of Barcelona FC and Manchester United FC The team’s prominence is attributed to good governance, an issue that attracts concerns of many around the world. Barcelona FC is a Spanish professional football club based in Spain. The team plays in La Liga, and it has been regarded as one of the clubs which have never earned relegation since it was started in late 19th century. The inception of the club dates back in 1899 when a group of footballers from Spain, Switzerland and England worked together to established the club under the hands of Joan Gamper (Arnaud & Riordan, 1998). Unlike most European clubs, Barcelona is a non-profit sporting club that is owned by more than 150,000 socios or members. A common justification for takeovers of Manchester United and other English football clubs by rich private owners is to enable them meet the highest level of needs of the club. Manchester United has attracted major private owners who have constantly engaged in a very competitive global football labor bazaar. This concept sharply contrasts with ownership and management of FC Barcelona. Many people have wondered why the untypical ownership and management of the club has not adversely affected its ability to compete effectively in the sporting arena. Most European clubs which are not privately owned have suffered major setbacks of mutual form of ownership which has contributed to inherent instabilities. In most cases, these instabilities are attributed to alleged potential of social and political machinations that accompanies democratic elections of the management team. Evidently, Real Madrid is one of the clubs that has encountered such instabilities because of vote-rigging scandals (Grant, 2007). By comparison, Manchester United Football Club does not have similar ownership arrangements. Notably, most clubs across the Europe continent and Manchester United inclusive are well funded mostly by prominent Russian oligarchs. Manchester United is one of the big spending clubs in European continent. The club is owned by wealth Americans, however, the club is highly indebted and its finances are not in the best condition as expected. Manchester United Football Club was formed in 1878 and it remained under private ownership for more than 100 years. According to Telegraph Media Group Limited (2011, 1), the club went public in early 90s when it was taken over from Michael Knighton and Rupert Murdoch’s corporation. In September 2003, Malcolm Glazer bought about 15% of the club’s shares which he doubled up in 2004. In May 2005, Glazer bought club’s shares that were owned by John Magnier and J.P, McManus and this pushed up his shares to more than 57%. Since it was more than 30% threshold, Glazer was forced to launch his takeover bid of Manchester United Club. In early 2006, Glazer took control of approximately 75% of the shares of the club. It did not take him quite long before he acquired 98% ownership of the club, and this forced him to purchase the remaining club’s shares. In total, Glazer used more than £800 million to acquire full ownership of the club (Telegraph Media Group Limited, 2011). The FC Barcelona’s ownership structure is venerated in parts of the world. The structure has been treated as a model of other ideal sporting clubs. As stated before, the club is owned by socis who are required to pay 150euros on annual basis. The large number of members is represented by a group selected by the board. The representatives participate in voting decisions of important things of the club. Why these teams are favorite There is no doubt that the Spanish club is one the greatest and favorite clubs in the world. Since its inception, Barcelona FC has achieved great deal of successes and has managed to produce many star players. The clubs has produced legendary players such as Diego Mara Dona, Joseph Guardiola, Ladisi Au Kubala, Ronaldo Koeman, Ronaldinho and Sandor Kocsis among others. The club has been overwhelmingly praised for producing the best players in the world. Diego Mara Dona was nominated the best player of the year between 1983 and 1984, the time he was playing for Barcelona. In the last six seasons, the club has displayed exemplary performance. Currently, Barcelona team is arguably the best team across the larger Europe. The club has some of the best players in the world. These players include Lionel Messi, Andres Iniesta, David Villa and Xavi Hernandez among others. Most players in other European clubs have showed great interests in the club owing to the fact they would like to be associated with the best players. Recently, three players from the club were nominated to be the best players in the European clubs. Naturally, human beings would like to be associated with something good, and this element has made players to love Barcelona. By comparison, Manchester United of England has also been doing exceptionally well in the last five seasons. The players in the club have displayed very tactical game and this enabled them to earn Champions League title in 2007. Since time immemorial the club has been doing great and it has attracted some of the greatest of the world. Despite the fact that is privately owned, the club has not been spending so much on buying players. It has been nurturing its own football players and sells them later. Basically, the club is in business for business. The club is fond of selling players who are in form. For example, the club under the management Sir Alex Ferguson sold Christiano Ronaldo to the Spanish giants, Real Madrid. When compared with Barcelona, players have preferred the Spanish team simply because it has a habit of retaining players when they are in the best form. Lionel Messi is the best player in the world, but the club has declined to sell him. This is a player who was brought up and trained by the club’s academy hence cannot be sold easily to other clubs (Farred & Grant, 2008). Most Spanish and England teams have fascinating financial grounds. Most of the European clubs have sufficient resources for growth and development of football players from all parts of the world. New players have favored these clubs because f their financial stabilities. Through membership contributions, Barcelona has been able to fund its projects without any economic difficulties. The club has a very stable academy which is famous for producing great players. In the recent years, the club has produced players who have done exceptionally well both at club and international level. The Spanish club has sufficient facilities and equipment useful when training. The players acquire relevant skills that would enable them to compete effectively in the international football labor market. In order to survive competition inn the market, players are forced to seek ways and means of acquiring relevant skills in the football industry. Therefore, every player would wish to join a club where they can acquire skills that will enable them to survive competition. African football clubs have not progress well due to lack of resources to finance the numerous club operations. These clubs lack resources to support training and development of players. In order to be recognized internationally, a team has to meet certain standards that have been specified by FIFA. As per now, there exist no football clubs from African countries which can compete with the European clubs. The clubs cannot progress due to lack of resources (Farred et al, 2001). In short, players prefer Spanish and England teams such as Barcelona and Manchester United respectively simply because these clubs are financially stable. In these clubs, players are subjected to more advanced training and educational programs that enhances their abilities in the industry. The players are trained very well hence they acquire relevant skills. Money is a motivational factor in any sector of economy and football is not exceptional. Players in rich clubs get motivated when they are awarded better wage pay. They tend to work hard to achieve goals and objectives of the club. For example, Lionel Messi of Barcelona is the highest paid player in the world. Through these monetary awards, the players are motivated and dedicated to work hard to ensure that the club attains its stated goals and objectives. In Barcelona, the re-assertion of member democracy and improved transparency and accountability of club government and management is the core factor that has contributed immensely towards financial strength of the club. Both Manchester United and Barcelona FC have implemented an effective commercial strategy aimed at generating more revenues from off-field performance. The strategy has enjoyed success especially in Barcelona as indicated by increased financial turnover from €125m in 2003 to €310m in 2008 (Ghemawat, 2007). Barcelona and Manchester United have prioritized sporting success as evident by well built and refinanced football management teams whose results have been ever promising. These clubs have good track records. Barcelona Spanish La Liga titles for the last six seasons. The club also won Champions league title in 2006. Comparatively, Manchester United has been the hub of football success in England as evident by several Premier titles that it has been winning. The achievements of the two illustrious clubs since their inception constitutes testament to the ongoing success, and these are the fact that have made many players around the world wish to join the teams (Farred et al, 2001). Many soccer clubs have expressed need to sign players from Barcelona and Manchester United. In the recent times, some great footballers from these clubs have been sold at surprising values. For instance, Christiano Ronaldo from Manchester United was sold to Real Madrid for highest value ever in football history. Real Madrid offered the highest price for the player because he was at his best form at the time. Real Madrid has also been eyeing for Wayne Rooney, the Manchester Player. This is because of the great qualities possessed by the players. Barcelona players have displayed unique game in the previous games. Their game is in its own class in the current football arena. Commendably, Barcelona players are discipline and hardworking. They are united and value each other. Therefore, it is beyond doubt that players from these clubs form the cornerstone of success in a club. Barcelona team spirit was displayed during the World Cup 2010 in South Africa. Statistics reveal that about ten Barcelona players formed the Spanish squad during 2010 World Cup. The character and their unique playing styles of players from both clubs have attracted the attention of other soccer teams around the world (Farred et al, 2001). Taxes on Income of players and owners of Barcelona and Manchester United It is a global trend that every income earner has to pay tax for the government either directly or indirectly. Currently, players are the highest paid people around the world and thereby contribute greatly towards increased revenue to the national government (Dobson. & Goddard, 2001). Taxes in Income of football players in Barcelona and Manchester United FC Through the parliamentary groups, the Spanish Socialist Party proposed an agreement to the Annual Financial Law 2010 to establish rules and regulations applicable to the non-citizens of Spain. This cap affects the salaries of non-residents individuals hence players from other internationals playing within the country are not excluded. Initially, Spanish government had defined taxation law in 2004 that was applicable to non-citizens. In 2010, the government realized that the salaries of most players had not been affected by the new fiscal policy (Blackshaw & Betten, 2011). The new tax policy requires that individuals relocating the country on the basis of an employment ought to be taxed as non-residents for a maximum of six years. According to Blackshaw and Betten (2011), this policy saw football players paying taxes to Spanish Government at a flat rate of 24% on their gross income earn within the country’s economy on monthly basis. However, taxes on residential players were imposed using the progressive tax rate of 24-43%. The government also impose 18% tax rate on investment income and capital gains for all both residents and non-residents. The tax rate on investment income affected players uniformly. By comparison, England tax system is applied in almost similar ways like that of Spain. Non-residents in the country are required to pay a basic rate of 20 per cent on taxable income. This is rule also applies to citizens who earn income up to £35,000. Progressive rate of between 20 and 40% is applied to residents who earn salary more than £35,000. Arguably, most players in Manchester United earn more than £35,000 per month hence they are affected by the progressive tax rate system. Highest paid footballers will pay more taxes. For instance, Wayne Rooney pays a lot of taxes to UK government because of the fact that he is the most paid footballer in England at the moment. Manchester United is owned by an American private investor (Citizens Advice Bureau, 2011). In conclusion, Barcelona FC and Manchester United FC have attracted the interests of many players around the world. Both teams have well established financial base hence capable of meeting the needs and the demands of customers. Primarily, both teams can realize better results in future if they embrace good governance in running of various operations. The club should adopt competent management team who are result-oriented. It is recommended that clubs seek for quality players who can bring success. Reference Lists Arnaud, P. & Riordan, J. Sport and International Politics. USA: Taylor & Francis, 1998. Blackshaw, I. & Betten, R. “The International Guide to the Taxation of Sportsmen and Sportswomen.” Journal Global Sports Law and Taxation Reports, 2011, viewed 13 April 2011, Citizens Advice Bureau. “Income Tax Rates in England.” 2011, viewed 13 April 2011, Dobson, S. & Goddard, J. The Economics of Football. Cambridge University Press, 2001. Farred, G. & Dobson, S. & Goddard, J. The Economics of Football. Cambridge University Press, 2001. Grant, H. Long Distance Love: A Passion for Football. Temple University Press, 2008. Ghemawat, P. Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter. USA: Harvard Business Press, 2007. Telegraph Media Group Limited. “Glazer Family Ownership of Manchester United: Timeline.” 2011, viewed 13 April 2011, APPENDIX Analysis of the Data Internet and magazines are the main sources of the facts and figures about various aspects of the two clubs. Through research-quality web searching concept, I managed to acquire great deal of material on the web. These included primary sources, statistical information about each clubs, specialized directories and databases of each club and opinion of all kinds regarding each club. Fundamentally, the information was obtained from original sources in an attempt to avoid fake authors. Critique of personal efforts I believe that the research work was not up to the required standards. This is because I relied on second information from the internet which can sometime be manipulated. The two clubs are thousands miles apart hence making difficult for me to visit their premises to acquire first hand information. The paper would have been of the best quality if I had collected first hand information and data about the clubs. Additionally, limited time paralyzed my efforts to produce good paper. If requested to carry out research on the same, I would request for more time to be granted. Read More