Business of Sports and Entertainment - Coursework Example

Business of Sports and Entertainment World Cup The FIFA World Cup will be conducted in South Africa. It is for the first time that a FIFA World Cup is going to be hosted in South African continent. The event is expected to bring in drastic changes to the present outlook of the continent. This will be the 19th FIFA World Cup. The event is scheduled for June 11 to July 11. ‘Zakumi’ is the name of the official mascot of World Cup 2010. The match ball will be named ‘Jabulani’ and it will be made by Adidas. The game will be held in 13 venues. Major world cups in the past 18 tournaments have been held ever since the first World Cup in 1930. Italy is the current champion and is its Italy’s fourth title. Brazil is the leader by having won the game five times. The last world cup, world cup 2006, was held in Germany. Italy was the winner of 2006 World Cup. Cost and benefits of hosting such big events to the business and economy Nations bid very aggressively for hosting such big events. The impact that such events can bring to the host country is dramatic. The host country will benefit by developments, both business and economical. But as always, benefits come with an inherent cost. The impact of big events on host countries can be explained with the concept of multiplier effect. Multiplier effect states that an initial spending of cash leads to a continued increase in the economic activity. Multiplier effect happens as a chain activity. One person’s spending will lead to the income of other person. The benefits of big events to the economy can be analyzed based on the multiplier effect as follows. Infrastructure development: Host countries make huge investments in developing the basic as well as the sports infrastructure of the nation. Due to the improved infrastructure, more business opportunities will arise in the region. For example, Munich has built a subway system for 1972 Olympics and it serves the public even now. Similarly, terminal 3 in Beijing International Airport was also an initiative to welcome the Beijing Olympics. Here, the cost of developing terminal 3 has resulted in profits for the International Airport. Tourism: Tourism is one of the primary beneficiaries of hosting big events in a country. FIFA World Cup has given a boost to Germany’s tourism sector. Germany has witnessed increased inflow of tourists towards the country much before the event has actually begun. “The long term effect and lasting impact of this major sporting event is borne out by the fact that 16 per cent combined their visit with a holiday in Germany and 10 per cent used the World Cup as an opportunity to visit friends and family.” (Germany Tourism, 2006) The country recorded an inflow of around 2 million foreign tourists who spent around 600 million Euros during the period. The tourist spending in Germany leads to profits for businesses. Increased consumer spending: Due to the party mood existed in Germany during the World Cup; consumer spending was at a higher rate. “The retail sector certainly appears to have benefited from the soccer championship, with preliminary figures suggesting that shopkeepers saw additional revenues of two billion euros ($2.6 billion) during the month-long World Cup.” (Deutsche Welle, 2006) Durex Condoms, a popular condom manufacturing company has recorded a 30 percent increase in sales during the period. Benefits to the transportation industry: By 2008, a 11% increase in the traffic was reported at the international airports in Germany. Similarly, 15 million people had used the railways and trams during the period of the event. It can be noticed that the profits generated by transportation industry is a fraction of the total consumer spending. This is exactly what multiplier effect states. Job opportunities: The world cup has created an additional 50000 jobs in Germany during the world cup period. Job opportunity is not only limited to the period of world cup, but also in the subsequent years too. As the country that host the big event get more international outlook, more investments will be attracted into the country. These investments will trigger the employment rate of the host country. Increase in tax revenues: Due to increase in the business environment and job opportunities, the national income will increase in the form of increased tax revenues. Tax revenues from both individuals as well as the corporate are increased due to big events. Increased outlook in the global market: “Hosting a major event gives the host instant or accelerated credibility in the global marketplace.” (Deloitte, 2009) The 2008 Beijing Olympics helped China to portray itself as an economic superpower. This in turn helped China to attract more foreign funds into the country. China was increasingly being looked upon as a strong partner for trade and commerce ever since the Beijing Olympics. Long term economic development: The changes being made in a country as part of hosting big events have long term impacts on the country. Infrastructure development is the most important among them. Though the impact cannot be quantified it can be felt in the developments that the country witness after the event. It creates more business, more employment and economic growth. Barcelona has shown an immediate boost in its economy ever since the 1992 Olympics. “As well as putting Barcelona on the sporting map, the 1992 Olympics delivered significant economic and cultural benefits for the Catalan capital, including an increase in tourism that saw demand for hotel rooms rise by 150 per cent in 10 years.” (The Scottish Government, 2008) The cost of hosting big events can be explained with the concept of externality. “Externalities create a divergence between the private and social costs of production.” (Tutor2u, 2010) Less consumer saving: When on one side the consumers spend, they save less on the other side. Big events are usually marked by big consumer spending. Less consumer spending can even lead to growth of debt. This is a social cost of the event as per the externality concept. Traffic congestion: As more tourists enter the country, the traffic congestion in the city will increase. It is a social cost that arises as a result of big events. More emissions: As per the multiplier effect it is seen that, big events will invite more investments in the country. Any sort of production activity from such investments will lead to pollution of the environment, which is again a social cost. Increased public spending: Most often the government of host country spend huge amount for the event’s opening as well as closing ceremonies. “Such massive investment of public sector finances is a waste especially in developing countries, where precious government resources are needed more urgently elsewhere.” (Institute for Public Private Partnership, 2006) In most cases the investments are focused only on sports infrastructure which cannot be used for the macro needs of the country. White elephant infrastructure: Though at the first glance the increased spending seems to be highly beneficial to the economy, most of the infrastructure remains as white elephants. “Certain types of investments related to mega-events, such as the construction of new stadiums, often fail to generate significant economic benefits after the mega-event is over.” (Defence Technical Information Center, 2008) Opportunity costs: A huge opportunity cost is involved in hosting of big events which often stay unnoticed. Amount spent on stadiums will generate income only during the event. But if the same amount was spend for some other facilities like hospitals and educational institutions, revenue will be generated all throughout. Another factor is that construction of infrastructure involves displacing people and business. The cost involved in displacing people and business are not considered while calculating the benefits. Likely impact of World Cup 2010 on South Africa South African property market will benefit from the World Cup 2010. The South African property market is already in a growth path. “South Africa is currently enjoying a strong position and consumer confidence is buoyant. International buyers, locals and expatriates are major buyers of South African properties.” (Searchwarp, 2006) The country can use the upcoming event as a marketing opportunity. Similar was the case with property market of France. The property price of France had increased by 55% during the one year period of 2002 as a result of World Cup. Tourism is another area where the country will witness growth. South Africa is already regarded as one of the best and growing tourist destination in the world. This event will help to increase the tourist inflow. The event is also expected to create an additional 415000 jobs in South Africa. Works Cited Germany Tourism, 2006. The 2006 FIFA World Cup and its effect on the image and economy of Germany. [Online] Available at: http://www.germany tourism.de/pdf/DZT_WM_Bilanz_Bro2008_Eng.pdf [Accessed 2 March 2010] Deutsche Welle, 2006. World Cup scores goal for German Economy. [Online] Available at: http://www.dw-world.de/dw/article/0,,2086103,00.html [Accessed 2 March 2010] Deloitte, 2009. How major sporting events can drive positive change for host communities and economies. [Online] Available at: http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Public%20Sector/dtt_ps_lastinglegacy_160209.pdf [Accessed 2 March 2010] The Scottish Government, 2009. Barcelona ‘template for success’. [Online] (Updated 15 December 2008) Available at: http://www.scotland.gov.uk/News/Releases/2008/12/15082200 [Accessed 3 March 2010] Tutor2u, 2010. What are externalities. [Online] Available at: http://tutor2u.net/economics/content/topics/externalities/what_are_externalities.htm [Accessed 3 March 2010] Institute for Public Private Partnership, 2006. PPP and the World Cup: Strategies to help the Emerging Markets Attract Major Events and Finance New Infrastructure. [Online] Available at: http://www.ip3.org/pub/2006_publication_009.htm [Accessed 3 March 2010] Defence Technical Information Center, 2008. China’s Economy and Beijing Olympics. [Online] Available at: http://www.dtic.mil/cgi-bin/GetTRDoc?Location=U2&doc=GetTRDoc.pdf&AD=ADA486071 [Accessed 3 March 2010] Searchwarp, 2006. 2010 World Cup Soccer – A property marketing opportunity for South Africa. [Online] Available at: http://searchwarp.com/swa33664.htm [Accessed 3 March 2010] Read More