A Five Forces Analysis of Fulham FC - Assignment Example

FULHAM FC a) Conduct a five forces analysis on Fulham FC. To analyze an organization’s business environment in which it operates, many different techniques are used and of all those techniques, Michael Porter’s five forces analysis is a very renowned technique. “Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products” (MarketingTeacher.com). The Five Forces analysis focuses on five different aspects through which any business or an organization may get affected. The five factors include: Threats of potential entrants Bargaining power of customers Bargaining power of suppliers Threat from Substitutes Competitive Rivalry (ACCA, 2008) Five Forces Analysis – Fulham FC The Fulham Football Club has been a well known club since the last decade or so. The club came in the limelight when it was bought by an Egyptian businessman Mohammad Al-Fayed in 1997. The millionaire owner of the club gave Fulham FC a new identity in the world of football, following its acquisition the club went on to secure a place in the Premier League Division 1 (Fulhamfc.com). The club has been facing intense rivalry and competition since its promotion into the Division1 of the Premier League. Fulham FC’s microenvironment can be analyzed with the use of Porter’s Five Forces Analysis. Threats of New Entrants; The threat of having potential entrants in the football industry for Fulham FC seems to be minimal. The initial investment to launch a football club acts as a possible barrier for new entrant to enter into the football industry. The initial costs of launching a football club are very high and there is a very low chance that a football club may emerge and directly affect the business of Fulham FC. The other barrier of entry is the Premiership structure the division style. No new club can enter directly into the division 1 of the English Premier League. A new club entering into the football industry would have to start from scratch i.e. by playing well and getting promoted through the different divisions till its reaches the Division 1 of the Premier League to challenge the business of Fulham FC. The only threat of new entrant can be from low division clubs such as Brentford FC, QPR, etc. If any of these teams gets promoted into Division 1 of the Premier League, they can affect the business of Fulham FC because of the intense rivalry between the clubs. This intense rivalry can lead to a shift of supporters from Fulham FC to any of the other newly promoted clubs if they were to play better football than Fulham FC. The Bargaining Power of Customers; The customers of Fulham FC are deemed to be its supporters, sponsors and the media. The supporters have a lower bargaining power because the other possible rivals in the Division 1 of the Premier League are Chelsea FC. Chelsea FC already has a higher ticket price as compared to Fulham FC hence the supporters do not have a better alternative to shift to. The supporters do not have enough bargaining power to force a reduction in the ticket prices for the live games played by the club. The sponsors and the media on the other hand enjoy a higher bargaining power because low fame for Fulham FC in the Premier League. The club has not been in the upper half of the points table that much and their major success from the year 1997 to 2002 came in the year 2000, 2001 and 2002 when the club reached the quarter final of the league cup in 2000, 2001 and the semi final of the FA cup in 2002. This trend shows that the company is progressing very well in terms of achievement and may reach a better bargaining term with the sponsors in the near future if the club was to perform in such a way in the near future. (Fulhamfc.com) The Bargaining Power of Suppliers; The major suppliers for Fulham FC are its players. These players are divided into two categories, the better playing, renowned players and the average playing, less renowned players. Both of these categories have a salary/ wages in accordance with their name and playing ability. The renowned players have a high bargaining power as they would be offered in accordance with their expectation. Besides the salary, these players have their own taste of the club; the highly skilled players would definitely not want to play for a not-so-successful club like Fulham FC until they are paid a huge amount. Threat from Substitutes The threats from substitutes may be from other competitive games that are played and watched in England. In England, Cricket may be a substitute game that can affect the supporters of Fulham FC. But the game of Cricket is slowly taken over by football in recent years with respect to the fan following. The only way in which such substitute game can affect Fulham FC’ supporter’s interest is through a shift of a more interesting game of cricket or a more sloppy game played by Fulham FC. Besides the game play, huge events such as the Ashes tour between England and Australia or the Cricket World Cup can affect Fulham FC’s revenues and fan following. As a whole, threats from such substitutes are minimal for Fulham FC. (Baines et al, 2000) Competitive Rivalry Fulham FC had a major rivalry between Brentford FC when the club was in Division 2. As the club promoted into Division 1, its main rivalry has shifted towards Chelsea FC. According to the club’s supporter’s, Chelsea FC are its main rival in the Premier League because the both the club exist in the same region and besides that, Chelsea FC’s stadium is situated in Fulham’s region. Fulham FC is said to be facing intense competitive rivalry from Chelsea FC because of the later club’s increased time in Division 1 of the Premier League and its better playing ability. (Baines et al, 2000) b) What are the major points for consideration for success in the football industry? Success in the Football Industry The major points that can lead to success in the football industry are: Induction of renowned players in the club, leading to increased fan following and better success rate on the field, hence more revenues Having a better command over different sources of revenue generation e.g. Better Shirt Sponsorship revenue which is under exploited in England. Every supporter group should be segmented to gain better benefit from the supporter group by focusing on their respective individual needs. Having a better and competitive ticketing price than its competitors. Offering products of the individual clubs to their supporters at reasonable prices to generate excessive revenues from the sale of such products. 2. The cost of Premiership players is constantly increasing and yet Fulham must continue to purchase strong international players if it is to continually improve. Fulhams wage/turnover ratio is reputed to be around 120 per cent for the 2000 season. In what areas should Fulham Football Club focus its revenue generation activities so that it covers its costs in the longer term? The 120 percent wage to turnover ratio seems to be a very high ratio for the club. The club should address to this problem otherwise it would be in a loss making situation. This problem cannot be solved in the short-run rather it would take some time for the club to improve on this ratio. One way of addressing this issue is to target that particular group of supporters that have not properly followed the club’s run in the premier league. According to the 1999 survey, the 16-24 year age group support for the club was 10%. This showed that the teenage and the younger group had lesser focus towards the club’s performance; hence this should be improved as these supporters would be the future revenue generation for the club. Besides this way, the club should try to bring in players which are more popular amongst the Club’s existing supporters or other rival club supporters. Once such players are bought in, there might be an increased fan following of the club, hence an increase in the revenue. This increased revenue would help to reduce the wage to turnover ratio of the club. The player’s performances should be regularly reviewed and any under-performing player should be transferred or sacked to reduce the wage-turnover ratio. Fulham FC should empower their scouting arrangement; this would help them to find young and talented international players at a lower wage rate. This lower wage rate would also help the Club to reduce its wage to turnover ratio. Except for the players, the manger should also be a competent one. The manager hired by the club should also focus on improving the game play of the club’s players, this way the club would be able to win more matches and attract higher number of supporters. It is always difficult to attract new supporters rather than making them loyal. Old and Loyal supporters should be given incentives to keep them intact. Such incentives would also increase the goodwill of the company which would eventually pull more supporters for the club. Fulham FC should try and focus on revenue generation besides the tickets. Revenues from shirt sponsorships, media coverage and advertisement should be given a boost to increase the revenues for the club. This increased revenue from such activities would also help in reducing the wage to turnover ratio in the long-run. As Fulham FC has just recently been promoted into the Division 1 of the Premier League, the club is less aware of the change in the way of football, it marketing and management style and the appropriate opportunities that need to be grabbed. Fulham FC should focus on a continuous marketing research to address to all these problems and by such means it would be able to secure better revenues from the matches it plays. 3. Fulham has a relatively low fan base and a ground capacity that is currently hindered by the need to obtain planning permission approval. How important are the fans in the generation of revenue? Why couldnt Fulham simply focus on television spectatorship? Although Fulham FC has a low fan base as compared to other successful clubs, the existing fans that it holds are considered to be quiet loyal. According to a survey, the club had approximately 33% fans which had followed the club’s run since the last 21 seasons. Research has further shown that the companies fan following is gradually increasing with the change in the owner and the success that it is slowly grabbing. To cater to all these increasing supporters, the club may need a larger ground with greater capacity but this plan has been obstructed by the local community of the area in which the club is prompting for an extension. The local community has raised its concern over increased pollution, litter and vandalism. This concern of the local community may be held up as they too are a major stakeholder in the expansion plan of Fulham FC. If this expansion plan is not carried out, Fulham FC may loose on the revenue to be generated from the increase in the fans. Fans are one of the major revenue generating units for the clubs in England. According to a survey carried out by Deloitte and Touche, clubs in England account for 37% of their revenue from the tickets sold to supporters as compared to 34% and the 29% from commercial and TV respectively. This survey clearly suggests that fans are the vital form of revenue generator for clubs like Fulham FC. (Deloitte and Touche, 2000) References (1997). 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