Environmental Market Analysis of Arsenal FC - Case Study Example

Environmental Market Analysis- Arsenal F.C Name: Institution: 1st October, 2013 Executive Summary This document does an environmental market analysis of Arsenal FC Club, owned by Arsenal plc. The market analysis is done in two distinct categories of macro and micro environmental analysis levels. The various factors under each category are discussed and applied to the context of Arsenal Football Club FC. Towards the end of the document, a competitor analysis is done based on a review of various marketing concepts including Porter’s factors of competing forces and applied in a general sense to the SWOT analysis of four major competing football clubs in English Premier League including Arsenal FC, Manchester United FC, Liverpool FC, and Chelsea FC, all of which are located in England. In the conclusion and recommendations, it is concluded that Arsenal FC club has a good cash flow relation as it does not operate on debts and has talented players. However, it is noted that Arsenal FC club should expand its recruitment base to include players from India and the United States to further improve efficiency. Environmental Market Analysis- Arsenal F.C 1. Introduction- Arsenal F.C Club Arsenal F.C is one of the oldest well-known professional football clubs of England. Arsenal Holdings plc is Arsenal’s parent company, which operates as a non-quoted public limited company. Approximately sixty two thousand, two hundred and seventeen (62, 217) shares in Arsenal F.C have been issued and are not traded on a public exchange such as the Financial Times and Stock Exchange (FTSE) 100 Index. This club was first founded in 1886, in addition to being the only football club to have hanged about in the top English League ever since World War I. Since then, based at its prominent north London, old ground in Highbury, the club has taken pleasure in many periods of noteworthy success, although the most current era has in all probability been the generally celebrated in its entire history. This essay therefore, does an environmental marketing analysis of Arsenal F.C in order to identify the various challenges, advantages and strategies that can help make it a better club. Arsenal F.C Club, ‘the Gunners’ http://www.arsenalsite.com/huge_club_badge-arsenal_fc_photos-igfpo-7106116.htm 2. External Environment- PEST Arsenal F.C Club In business definitions, an external marketing environment or macro elements refers to the social, technological, legal, economic, political, and environmental (competitive and demographic variables) that surround an organisation (Song et al., 2005). a. Social Factors These are items that can affect or direct the lifestyle of individuals (Song et al., 2005). Arsenal F.C can be affected in a positive way by issues such as improved standards of living as personalities currently earn reasonable salaries, the inspirations that young adults, adults and the aged have gotten from football, and the high preference for leisure that football fanatics have over other games (Song et al., 2005). With improved wages, high preference on football entertainment and soccer inspirations amongst Arsenal F.C followers, more games and goodwill be watched and received respectively by the club. b. Political Factors In a political aspect, there are both threats and opportunities to the club (Song et al., 2005). Threats include the stringent laws of employment that governments implement amongst football players and the imposition of high taxes by the government. Stringent employment laws and high taxes imposition would result in players from other countries, which Arsen Wenger prefers, being denied work permits and wages of football fanatics being reduced respectively to the extent of reducing the money they have for leisure (Song et al., 2005) thus restrictive employment of players. c. Legal and Environmental Aspects The restrictions or policies herein mentioned can similarly fit in the legal aspects that may in one way or the other affect the operation of the club. In a similar manner, policies on noise pollution control can be treated as one amongst other environmental factors that the club should consider in citing and constructing its stadium. Noises from football spectators may not be allowed within the Central Business District of London, thus discouraging the location of a stadium within this environ. d. Economic Factors Economic issues that are likely to create opportunities for the management of Arsenal F.C and improve their income include low inflation, high rates of production, increased migration and recession to recovery (Porter, 2008). These factors are likely to encourage spending in leisure activities, which includes football spectatorship that would improve revenue collection in the club. This is because Emirates Stadium is located at 75 Drayton Park, London N5 1BU, United Kingdom and England’s minimum wage is currently £6.31 per hour. This means that an individual working 2 hours a day can afford a membership ticket for a match costing £10, category B for a junior, while working 5 hours a day would earn an adult London citizen £31.55 which is enough to buy both a Category C centre lower ticket for members at £27.50 (Arsenal FC, 2013, Jan; GOV.UK, n.d). e. Technological Factors Contrarily, technological items in this analysis present various opportunities that Arsenal F.C can venture into such as improving the experience of fans while watching the club’s football matches via use of integrated IT management and marketing their club via the internet to increase followers with the increase in E-commerce. Arsenal FC club uses Buffalo technology to protect secret information and personal data of players (realwire, 2011). In addition, the use of Prozone3 for the analysis of matches is a form of technology that commentators in Arsenal matches are using to improve the experience of the spectators in such matches and encourage more viewing (PROZONE, 2009). Prozone3 is a post match analysis technology that uses 10-camera installation system installed in Emirates stadium opened in the year 2006, July that helps improve match experiences (PROZONE, 2009). Arsenal manager Wenger states that, “The Prozone system provides a dynamic and unique insight into the team’s performance. Prozone have continually provided Arsenal with a product and service of great reliability, consistency and expertise (PROZONE, 2009).” The system was used in 2009/10 season post-match and opposition analysis that helped improve the work rate, physical performance, tactical and game specific skills (PROZONE, 2009). The manager has similarly adopted the use of a goal-line technology, first installed in their home pitch Emirates this season (Beginning August 17, now past) to prevent disputes over whether the ball has crossed the goal-line or not in English Premier League (Lipton, 2013). The camera-based technology by name GDS (Goal Decision System) developed by a British company named Hawk-Eye, would give referees a ruling within a second via their watch buzzing to notify them when a goal is worth counting (a ball has crossed the line or gone in) (Plunkett, 2013). 3. Micro or Internal Environment These are forces that are close to Arsenal F.C plc and include customers, employees, suppliers and the media and others as illustrated below (Song, Droge, Hanvanich, & Calantone, 2005). Micro Environment http://www.learnmarketing.net/microenvironment.htm a. Customers With only 30 days set aside for matches annually, Arsenal FC has restricted number of chances to boost up profits and customer allegiance (Song et al., 2005). It must, for that reason, guarantee that each match is a positive occurrence for the thousands of supporters who are present at its Emirates Stadium (Farmer, 2010). This means making certain that the stadium’s 450 TV screens, 500 hospitality and 50 vend tills, 60n servers, 350 desktop computers and 100-plus turnstiles are all functioning at best performance on a match day or the fans end up being affected (Farmer, 2010). With all these systems dependent on the club’s back-end infrastructure and set-up, IT accessibility and big business continuity are of overriding significance to Arsenal FC (Farmer, 2010). b. Employees Employing players and management staff that have relevant skills and experience in the club is essential for its survival (McNicholas, 2013). Training and development of the players play a vital role in achieving a competitive advantage in winning games. If the club employs players without motivation, experience or talent, it will affect follower service and ultimately reduce its ticket sales. For instance, the arrival of Mesut Ozil in Arsenal has changed the perception with which Arsenal was viewed (McNicholas, 2013). McNicholas (2013) notes that, “In the past, Arsenal has been accused of being staid on the ball and failing to adequately convert possession into genuine goal scoring opportunities. The arrival of Mesut Ozil has changed that dramatically.” Since winning is significant for Arsenal FC, hiring of competent employees such as Ozil help improve the performance of the team further. Payments to employees too are used for motivating them (Song et al., 2005). Arsenal FC spends money in three categories which includes £123,298,000 for wages and salaries, £16, 321,000 for social security costs, and £3,829,000 on other pension costs. The £123 m spent on wages and salaries is spent as broken below. Average Payment to Employees at Arsenal FC Annually (Per Season) Category of Employee Sample Members Average Annual/ Seasonal Wage Board Ivan Gazidis Ken Friar All the rest £2,050,000 £571,000 117,000 Running total £2,738,000 Heads of Departments Tom Fox, David Miles and others £8,000, 000 Running Total £10, 738, 000 Coaches (Excluding Manager) Steve Bould, Neil Banfield, Boro Primorac, Tony Roberts and others (55 coaches @ £80,000) £4,400,000 Running Total £15, 138, 000 Admin and Ground Staff Approximately 250 in number each earning £30k annually (ground staff) £7, 500, 000 Running Total £22, 638, 000 Temporary Staff Working 5 hrs a day, earning min wage (£6.19), say £6.20, 25 hrs a season (845*5*33*£6.20) £865, 000 Running Total £23, 503, 000 Manager Arsene Wenger £7, 200, 000 Running Total £30, 703, 000 Players (young professionals) 35 young professionals, including 5 on loan each earning £1,000 a week and £50, 000 a year £1, 500, 000 Running Total £32, 203, 000 Players (1st Team Squad) Arshavin Podolski, Walcott, Diaby, Wilshere, Arteta, Djourou, Sqillaci, Santos, Park, Denilson, Miyiachi, Ramsey, Gibbs, Frimpong and Campbell, amongst others. 32 players, earning an average of £54, 000 a week (ESPN staff, 2013) Earning between £78.5 m and £1.78m (Admin, 2013) . http://angryofislington.com/2013/01/29/arsenal-wages-breakdown-where-does-it-all-go/, http://www.telegraph.co.uk/sport/football/teams/arsenal/9898851/Arsenal-ready-to-break-wage-barrier-this-summer-to-attract-talents-of-Stevan-Jovetic-and-Mario-Gotze.html, and http://arsenaltruth.squarespace.com/arsenal-truth/2012/2/23/arsenals-130m-wage-bill-exposed.html These estimated wages illustrate that employees at Arsenal FC earn a lot as compared to other employees in other football clubs where average wages annually is about £ 32, 000 thus motivating (Wilson, 2013). c. Suppliers Suppliers provide the club with materials such as complete football uniforms, playing boots, balls, construction materials for stadiums, and players from football academies (Song et al., 2005). The behaviour of Arsenal’s suppliers will directly affect them. For instance, an increase in the price of construction materials will affect Arsenal F.C’s marketing mix strategy and may even force ticket prices to increase. The construction of Emirates stadium cost £390 million, which is higher than the initial expected cost of £357 million which was proposed when Arsenal confirmed funding for stadium project (Arsenal FC, n.da). This illustrates that the suppliers that were finally used supplied materials at a higher cost than budgeted. After it was opened in 2006, the ticket prices went up (Arsenal FC, n.db). For the 2006/7 Premier League season, an adult’s ticket price ranged between £32 and £66 for most matches, but were as low as £13 for juniors (Category ‘B’) (Arsenal FC, n.db). Similarly, the price rose for Category ‘A’ matches against certain top sides to between £46 and £94, with around £20 for juniors in the family category (Arsenal FC, n.db). d. Media Positive media attention can build Arsenal F.C club or its games and followers (Song et al., 2005). Negative media attention can ‘break’ the club. Arsenal F.C therefore needs to manage the media so that the media helps promote the positive things about the club and reduce the effect of a negative event, such as humiliating losses, on their reputation (Porter, 2008). The club can even employ a public relations consultant to help it manage its matches or incidences. For instance, Arsenal FC expands its fan base via use of social media such as Facebook, Twitter, Arsenal site, and Arsenal Fan TV with links https://www.facebook.com/Arsenal, https://twitter.com/Arsenal, https://twitter.com/Arsenal, http://www.arsenal.com/home, and http://www.arsenalfantv.com/ respectively. In addition, Arsenal FC plays host to conference meetings and music events at their Emirates Stadium to improve their publicity and act as a source of revenue. In 2008, 30th of May, Emirates Stadium hosted Bruce Springsteen & The E Street Band (songkick, n.d). The site provides information about the team and even sells tickets at http://www.arsenal.com/tickets/member-ticket-prices , thus significant for easy accessibility of Arsenal football match tickets. The team is currently involved in friendly matches and tours of Asia as a means of identifying players and investing wisely in the growing populations of the East and boost globalization (Sinnott & Masters, 2013). 4. Competitor Analysis This is a strategic technique that is used to analyse outside competitors as illustrated below by Porter’s five dimensions of analysis (Porter, 2008). In this context, Arsenal F.C Club management should obtain information about important competitors that they have and use this information to predict the behaviour of their competitors (Porter, 2008). http://www.coursework4you.co.uk/essays-and-dissertations/competitor-analysis.php a. List of Competitors The main competitors of Arsenal FC in the premier league are Manchester United, Chelsea FC, and Liverpool FC, bringing the total to four big competitors. Others such as Barcelona FC and Tottenham Hotspurs also have similarities and differences in regard to strategy when compared with Arsenal. b. Competitor product and services summaries, Strengths, Weaknesses, and Strategies i. FC Barcelona Spain Team Management Acquisition of Players Financial or Player Culture Total Revenue (2009/2010 Season) Manager: Gerardo Martino Assistant Coach: Elvio Paolorroso Has diverse players Mostly signs domestic players Efficient use of youth players Players highly disciplined Wise investment in players Player’s age well distributed Valued at £365.90 m http://www.transfermarkt.com/en/fc-barcelona/mitarbeiter/verein_131.html i. Arsenal FC Team Management Acquisition of Players Financial or Player Culture Total Revenue (2009/2010 Season) Manager: Arsene Wenger (since 1996) Assistant Coach: Steve Bould ( appointed 2012) Very successful football academy Buys cheap players Hires employees globally Price regulation on signing 25 man team Efficient free cash flow Operate under a debt that is manageable Spends wisely on players and property (AST, 2013). Highly disciplined players Valued at £262.00 m http://www.transfermarkt.com/en/fc-arsenal/mitarbeiter/verein_11.html ii. Chelsea FC Team Management Acquisition of Players Financial or Player Culture Total Revenue (2009/2010) Jose Mourinho (2013 Appointee) Assistant Coach: Jose Morais Has a limited use of youth players Uses diverse players Regularly buys players A 25 man team Players such as Terry and Lampard have high player power Overspends financially. In fact categorised 2nd in regard to debt in the Premier League (Musseleck, 2012) Valued at 242.30 m http://www.transfermarkt.co.uk/en/chelsea-fc/mitarbeiter/verein_631.html iii. Tottenham Hotspurs Team Management Acquisition of Players Financial or Player Culture Total Revenue (2009/2010) Manager: Andre Villas-Boas Assistant Coach: Luis Martins Relative player buyers of cheaper players Effective use of young players A diverse team Sell their players at a profit Function under an effective cash flow Highly disciplined players Financially extravagant Valued at £132.7 m http://www.transfermarkt.com/en/tottenham-hotspur/mitarbeiter/verein_148.html 5. Conclusions and Recommendations Based on the above analysis, it is clear that a conservative financial approach has helped the management of Arsenal FC improve the image of the club, within and without the field. In addition, the use of quality players and the good style of play has steered the team to success at a cheaper cost and attracted a large fan base respectively. However, the club could explore new markets for players such as India and the United States. The club has therefore established a good brand image, delivered innovation via offering quality entertainment services and achieved a strong team loyalty via effective advertising channels and promotion. In order to maintain their customer base, Arsenal FC should win more matches, trophies, embrace diversity, and maintain player discipline and wise expenditures as in FC Barcelona to keep and attract talented players. References Sinnott, J., & Masters, J. (2013, July 23). 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Retrieved October 1st, 2013 from http://businessgametime.com/2012/05/21/chelseas-winning-strategy-a-swot-analysis/ Realwire. (2011, January 28). Arsenal FC uses Buffalo Technology to protect data. realwire.com. Retrieved September 3, 2013 from http://www.realwire.com/releases/Arsenal-FC-uses-Buffalo-Technology-to-protect-data Read More