Evidence on the Effectiveness of Sport-led Development - Coursework Example

Student’s name] [Course code+name] [Professor’s name] [University name] [Date of submission] TABLE OF CONTENTS TABLE OF CONTENTS 2 EXECUTIVE SUMMARY 3 1.0 Introduction 3 2.0 Arguments against sports as a business 4 3.0 Economic Development and Sports 6 4.0 Evidence on the Effectiveness of Sport-led Development 6 5.0 The principle of expenditure and multipliers 7 5.1 Opportunity cost 8 6.0 How can government use the multiplier effect for the benefit of all? 8 7.0 Conclusion 9 References 10 EXECUTIVE SUMMARY Economics of sports is one of the academic areas which many scholars have discussed widely concerning whether sports are profit making enterprises or they are not for profit making enterprise due to its social cultural uniqueness. In this paper, we analyses the nature of spots activities in terms on its economic impact on the economy development of people and how the government intervene without interfering with the major leagues performance but spreading its benefits for the development of all. The paper presents the arguments against sport as profit making organization and the idea of it as a tool for socio cultural development, examining the development in the management of sporting activities. The development of economic and sports are examined and it extends by examining the multiplier effect and benefits of direct spending in sports to the economy at large. The paper concludes by enumerating some of the issues which government can undertake to ensure that everybody benefits from sports activities and without looking at it as an enterprise which benefits few individuals who are the owners of the clubs and theatre platforms. Though income from sporting activities is marked with mixed fortunes, the indirect benefits from sporting activities are essential and government should involve themselves in sporting activities. 1.0 Introduction The history of sports is marked with ambiguity concerning to perspective of its management (Ahuvia, 2005). Traditionally the management of sports has been divided between two antagonist philosophical theories and approaches (Ahuvia, 2005). First theory views sports as an institution which is culturally unique having some special characteristics which reflects use of specific standards while carrying out their business which reflects both poor management styles characterises with poor decision making which erodes both the rich history background of the sports, tribal link, emotional connections; and social relevancy of sports(Ahuvia, 2005). The second theory it looks at sports as like any other business which main aim is to maximize profit and makes the owners rich and wealthy and is subject to the normal rules of the government, customer demands and the normal market forces and this give the management of sports to be better handled by using the normal standards of the business tools which can assist in both financial planning, administration and marketing functions (Ahuvia, 2005). Due to sports corporations, many divisions have blurred as the management of sports activities has emerged as a separate and distinct discipline in the academic arena (Commission of the European Communities, 2007). The problems which exist in the management of sports is its existence in double edge kind as it can be used for both not for profit organisation and for commercial services. As much as the sports has been commercialized, they have not been in a position make profit as and serve the interest of the community (Commission of the European Communities, 2007). What should governments do to ensure that the interests of all stakeholders are protected without jeopardizing the competitive environment established by leagues? This is the question this report will answer in its analysis of sporting economics. 2.0 Arguments against sports as a business One of the special characteristics of sports is its separation from the business and its general implication for effective management which has to consider both the social and cultural background (Armstrong, 2002). Sport is one of the unique cultural institutions that operate in both commercial environment and socio cultural environment (Armstrong, 2002). Management of the sports should be differentiated from the general management of other businesses this is due to the belief sports have social value a part from the exclusive economic value it has, all these must be taken into consideration when managing the sports (Armstrong, 2002). Chen (2007) emphasizes on the need for connecting the contemporary issues in management and the theories of management in sports not only to boost the credibility in the sport management also to use sports management as a testing base for broader management theories in economics. Though sports and business normally share some common values, funding from new sources of revenue, branding, innovation in the product, expansion in the market, but sports in most cases are concerned with beating their rivals, sharing revenues, winning of trophies while maintaining the passion of the players which are the employees and also maintaining and entertaining the funs which are their customers (Compton and Howard, 2002). This is the only areas which differentiate sports from other business activities. Sports people like athletes are argued to be real business assets and are able to attract large fans, sponsors and the media exposure, therefore it is not surprising to see that the sports men who are the employees, gets more money and earnings more than their immediate supervisors which is opposite in the business environment where senior supervisors are always earning more than other junior employees (Compton and Howard, 2002). Cornwell and Coote, (2003), aargues that sports have several features which demarcate it from other forms of businesses and are well played out across the major three sectoral areas which are; not for profit, public and corporate world. Some of the unique characteristics of sports include behaviour s of consumer, how the government relates with the sport, the regulations regime, the organisational structure, the sports governance, the organisational structures, organisation culture and the management performance (Cornwell and Coote 2003). All these features clearly demarcate the sports arena and business arena. 3.0 Economic Development and Sports Superficially, sports looks like a strong economic development instrument within the economy as most governments normally initiate big projects in constructing sports facilities in the country and taking in mind that this will help in growth and development of urban centres (Compton and Howard, 2002). Though other economic stimulus instruments are not visible, sports facilities are so much visible. Many urban residents cherished and value sports. Research indicates that there is very little if any economic development which is being brought by sports franchises and facilities (Mangan and Nauright, 2000). In the essences good sport activities, teams and franchises provide good economic development for both in terms of large public subsidies and in terms of lost income and employment (Mangan and Nauright, 2000). Government should concentrate in giving support to local sporting activities so that the sport subsidies can help in economic empowerment of local people. Development of sports not necessarily give economic development but through its indirect contribution to development of many social amenities help in economic development of the country. 4.0 Evidence on the Effectiveness of Sport-led Development There are two main evidences which show the economic impact of the professional sports and sports facilities on urban economies. In most cases, assessment is done before any public finance can be used to build any professional sports facilities and the assessment must justify the economic impact of such facilities (Milne and McDonald, 1999). The economic impact on the sports and sporting activities includes creation of new jobs, talent development, and increase in the government revenue collection among many other benefits. The effective sport led development is crucial in any country development and bringing up the talents of young people. Apart from direct economic development of sport and sport facilities; there are social benefits which the country can derive from the sports like bringing the community; (Milne and McDonald, 1999). 5.0 The principle of expenditure and multipliers Direct expenditure: the direct expenditure in sports represents the money which is spent by the professional sport franchise employees, the sportsmen, its patrons and matrons currently (Milton, 2002). The methodology which is frequently used to calculate the economic benefits of sporting activities and the facilities is to first calculate the direct expenditures by the customers, that is fans on the services and goods excluding the tickets of the game which are purchased add to the expenditure by the team on the facility then lastly you add the expenditure by the players. The resultant amount gives the value of direct expenditure benefits which the society gets from the sport team (Milton, 2002). Mathematically it can be represented as follows Social benefit = {expenditure by funs [excluding the cost of tickets] + expenditure by the team+ expenditure by players} The direct expenses are normally spend on the hotels, restaurant, transport and other social amenities which then are received by the owners of these facilities after receiving this income, they again spend it on other facilities including paying of their employees who again spend it again on other goods and services (Ahuvia, 2005). The cycles continue with the sporting expenditure spread to other people who were not even part of sporting activities. This spending constitutes the indirect benefits expenditure to the whole region and to the countries (Milton, 2002). Because the result of direct expenditure is indirect expenditure then the direct expenditure is said to be multiplier through. Higher level of direct expenditure multiplier indicates higher level of economic impact. 5.1 Opportunity cost It is not reasonable to discuss the impact of the professional sporting activities without discussing the opportunity cost which the government undergoes when she puts sporting facilities like stadium and other sport franchise. The value of the other alternative options which the government for go for building sporting facility is what is describes as opportunity cost (Mangan and Nauright, 2000). The assessor must evaluate whether the cost of the putting up the sporting facilities is much higher than this other best alternatives. 6.0 How can government use the multiplier effect for the benefit of all? In simple economic model of a country, the economic growth usually comes from export transactions like sales and also substitution of import (Armstrong, 2002). In case the export sales increases then the net inflow of spending will automatically increased outside the region. This kind of increase in export can happen if the neighbouring countries have decided to come and watch the games in the country, local movies or any other entertainment. The government can take the advantage of this and built many social amenities like hotels to accommodate the customers because the stadium itself will not increase this export but will only shift it to other areas of economy (Milton, 2002). in case of the import substitution, it happens when the local resident have decided to keep the money which they might have spent elsewhere within their economy(Armstrong, 2002).. Suppose the local resident have decided to spent their money in their local stadium by watching the football within their area, then we can said that the stadium has been and substitute for import. And in case they the local residents have decided to spend their income on the international stadium then the spending has only been shifted and the import substitution have not occurred. The government can take advantage of this and encourage more local sporting activities (Mangan and Nauright, 2000). 7.0 Conclusion In summary, for the government to ensure that everybody is benefiting from sporting activities, then they should ensure; i. Good sporting and professional activities within the country ii. Build good infrastructures like road networks within the country iii. Ensure good security within the country iv. Support the development of good hotel facilities within the country v. Other social amenities like hospitals, talent academy vi. Entertainment facilities and vii. Encourage and built local talents. In this manner the leagues will not be seen as profitable enterprises for individual investors but also the tool to empower the whole community without direct involvement in the sporting activities but as a result of spill over benefits and multiplier effect of direct expenditure. In this way government will be participating in managing sporting activities without affecting the manner and operation of the major leagues in the country. References Ahuvia, A. C. (2005). Beyond the extended self: Loved objects and consumer’s identity narratives. Journal of Consumer Research Armstrong, K. L. (2002). Race and sport consumption motivations: A preliminary investigation of a black consumers’ sport motivation scale. Journal of Sport Behavior, Chen, P. (2007). Sport tourists’ loyalty: A conceptual model. Journal of Sport and Tourism, Commission of the European Communities (2007). White Paper on Sport. Brussels Compton, J., & Howard, D. (2002). The growth and financial status of professional sports in North America: Insights for English soccer leagues? Managing Leisure, . Cornwell, B., & Coote, L. (2003). Corporate sponsorship of a cause: The role of identification in purchase intent. Journal of Business Research Cousens, L., & Slack, T. (2005). Field-level change: The case of North American major league professional sport. Journal of Sport Management Crawford, G. (2004). Consuming sport: Fans sport and culture. London: Routledge Mangan, J. A., & Nauright, J. (2000). Sport in Australasian society: Past and present. London: F Cass. Milne, G. R., & McDonald, M. A. (1999). Sport marketing: Managing the exchange process. Sudbury, MA: Jones and Bartlett Publishers. Milton-Smith, J. (2002). Business ethics in Australia and New Zealand. Journal of Business Ethics Read More