Sporting Events Industry Is Affected by Macro-Environment Factors - Report Example

Events Industry Environment Name Course Lecture Date Table of Contents Introduction 3 Environmental Analysis 3 The Political Environment 4 The Economic Environment 6 Social Factors 8 Environmental factors 10 Technological factors 12 Legal factors 13 Conclusion 14 References 16 Ethical Consumer n.d, Ethical Consumer guide to Football, accessed 28 January 2014, www.ethicalconsumer.org%2Fbuyersguides%2Fmiscellaneous%2Fpremiershipfootballclubs.aspx&ei=fcXCVPHoLMGuUefCg-gD&usg=AFQjCNF8K5N53Noo5PYm5-HWJRlpwKjsZg&sig2=3HYUkQ0-L58IKaY25Kc3Tw&bvm=bv.84349003,d.d2s 16 Appendices 18 Charts and Graphs 18 Introduction Like all other industries, the sporting events industry is affected by Macro-environment factors. It is therefore imperative for businesses in the sporting events industry to have an understanding of political, economic, social, technological, environmental and legal (PESTEL) factors that impact their businesses. These factors make the macro environment of a business and are accessed used the PESTEL framework. The factors have the potential to impact present and future supply of sporting events. A successful sporting events business has to have a good understanding of the needs and wants of its consumers and how to satisfy them. This understanding can only be achieved by understanding the external forces that impact the organization. A key to survival is being flexible to changing situation in the external environment. Sporting event organizations have to deal with an environment that is constantly in flux. This paper identifies the macro-environment factors that impact the operation of sporting event organizers and organization. It starts by an analysis on macro-factors that impact on the sporting event environment. While some external forces can be controlled sporting event organizations have to adapt their practices to some key forces. Political and legal forces are some of the macro factors that organizations do not have a choice but to comply with. For each PESTEL factor, the paper analyzes its potential impact on the demand and supply of sporting events. Secondly, it gives example of the factors in the UK settings and their likely impact on the operation of sporting events organizations therein. Environmental Analysis The operations of many businesses have gone through many changes in the last two decades, many as a result of a changing macro-environment. While some businesses changed intentionally others were forced to make changes by a changing environment (Wetherly and Otter 2014). For example, the advancement in Information Communication Technology redefined communication of sporting events. Nowadays, events programs can be sent by email while event tickets can be sold through online portals. Nowadays, sporting events organizers can communicate easily with consumers, suppliers, and sponsors. Technology has also impacted sports in more than one dimension. Sporting events organizations must appreciate the possible effects of numerous PESTEL factors to survive and thrive in business. Organizations need to gather enough information to be able to keep abreast of changes in their external environment. In this section, the general factors that are likely to influence the operations of the sporting events industry in the present and future are analyzed. It must be remembered that successful marketing of sporting event is dependent on a good understanding of the industry’s external environment. Sporting events organizers must understand the opportunities and threats that arise from each of the PESTEL factors (Wetherly and Otter 2014). PESTEL provides a systematic and logical way to scan the external environment of an organization. PESTEL stands for the political, economic, socio-cultural, technological, environmental/ethical, and legal/regulatory environments. Once the external environmental factors are identified it is important to analyze their possible impact. The impact and opportunities that are identified in the analysis are then used to come up with an operational strategy to take advantage of the opportunities and adapt to the impacts. The Political Environment Political factors impact the operations of all organizations in the country and include such factors as political ideology and political stability. Indeed, Political influences impacts on business operations are profound. Political influences may sometimes mean an event gets cancelled or postponed. In the UK support for sporting events is closely associated with the party in power. UK government keeps a close association with sporting events as they are hugely popular with the UK populace (Campbell and Craig 2005). The Labour government was keen to formally welcome the English Rugby team after their triumph at the World Cup. In some countries, counties and states sponsor and fund sporting events. For example, Australian states Governments support sporting organization in an effort to attract tourist to the state. Similarly, Governments in the Middle East are keen to bring as many sporting events to the region as possible. The Bahrain government developed a F1 racing track and now a Formula 1 grand prix round is held in the country (Govers 2012). In contrast, the UK government has not been keen to sponsor the British Grand Prix which was almost dropped from the Formula 1 calendar. Many governments are supportive of events that are likely to change the wellbeing of locals for the good. There is a fierce contest for holding the World Cup as it is known to bring economic benefits to the hosting community (Govers 2012). The UK government have used sporting events as part of a program to economically regenerate urban areas. The London Olympics was hailed as UK largest sport regeneration project (Imrie and Lees 2014). With the support of the government the lives of people living in the Lower Lea Valley of East London were significant transformed. It can be therefore concluded that the UK government is willing to support sporting events if they have a positive effect on the wellbeing of the host communities. Local governments are also supportive of events that also champion development and participation of Local communities. Sporting events that have social goals like healthier children, cleaner environments and efficient energy use receive funding from local governments in the UK. Political stability is another political factor that may affect the future supply and demand of sporting events (Campbell and Craig 2005). Sporting events cannot take place in countries where there is violence and disorder. Political stability greatly influences the number of people willing to travel to an event. Events that are held in politically unstable regions are avoided. If the government of the UK fails to ensure political stability, disorder and riots may occur frequently leading to significant reduction in event attendance. Recent events like the London riots and the London Train bombings suggest that aspects of political instability are still present in the UK. After the 2005 terrorist attacks, the UK was increasingly viewed as a country that accommodates extremist groups that are a threat to the country’s security (Drury, Cocking and Reicher 2009). Future attacks at sporting venues could affect the number of people willing to attend sporting events. Terrorism can also affect the number of people willing to travel by air as in the case of the 9/11 terrorist attacks in the United States. The Economic Environment Macro- and micro-economic conditions in a country greatly influence the supply and demand of sporting events. The Macro-environment is concerned with a country’s wider economic policy, on the other hand Micro-economic focus on individual expenditure and income (Tribe, 2011). Both spheres of the economic environment have the potential to influence demand and supply of sporting events profoundly. Recent slowdowns in economic growth in many western countries have caused a decline in purchasing power in some countries (Tribe, 2011). Macro environmental factors influence the supply and demand of sporting events at various levels. The economic ideology of a country greatly influences investment in a particular industry. The UK is a free market economy and allows both foreigners and locals to invest in sporting events. Major foreign-owned sporting events organization including premier league clubs Chelsea, Manchester United and Manchester City. Economic factors such as inflation, interest rates and per capita income greatly influence the demand of goods and services. For example, in times of high inflation people may forego sporting events to buy basic needs as the cost of commodities increases. Fortunately, national income, interest rates and inflation has remained fairly constant and predictable in the UK for many years. Furthermore, per capita income in the UK is high compared to other countries across the world. Per capita income in the UK is estimated $41,787 in 2013 after recovering from a slump in 2009 (World Bank 2014). This higher per capita income means UK citizens have relatively higher disposable income and are thus able to easily purchase season tickets to sporting events. Many English premier league sporting teams are able to sell all their tickets to matches. Figure 1: UK per capita income comparison Country/per capita income in US$ 2010 2011 2012 2013 Ukraine 2,974 3,575 3,873 3,900 United Arab Emirates 33,886 38,930 40,444 43,049 United Kingdom 38,363 40,972 41,054 41,787 United States 48,377 49,803 51,496 53,042 Sources: http://data.worldbank.org/indicator/NY.GDP.PCAP.CD Economic slumps have the potential to affect sponsorship of sporting events negatively. In times of economic boom many corporate sponsors are comfortable with funding sporting events and teams (Morrell 2001). In periods of economic decline, corporate funding for sporting teams also declines. After the 9/11 attacks in the US, many corporate sponsors withdrew their spending on sponsoring sports’ franchises (Morrell 2001). Many US professional sports relied on this support as they sold luxury seats to their corporate funders. With poor funding sporting organization may not be able to market their events as they wish. Governments have the ability to influence many Macroeconomic variables through fiscal policies. The Australian government adjusts interest rates in the economy and thus affects factors such as inflation and consumer spending (Morrell 2001). According to Morrell (2001), interest rates on loans have profound impact on spending in a country; when they are high people spend less and vice versa. Sometimes interest rates are increased in order to dampen consumer spending and bring inflation levels down. Fiscal policies also influence how sporting event organizers finance their operation and the buying power of consumers. The effect of political influences is also felt through incentives offered by regulatory bodies, national and regional government and league associations. In some countries governments’ sponsor sporting events and sporting leagues attracting talented athletes and audiences from all over the world (Govers 2012). Many governments in the Middle East give incentives for sporting events to be held in their country. The final of the Italian Super Cup in 2014 was played in Qatar after an agreement between the government of Qatar and organisers of the Italian Premier League (Govers 2012). The recent decline in oil prices is another factors that is influencing the demand of sporting events in the UK and internationally. Lower oil prices allow fans to travel to events that are being held further away either by road or by air. In Europe, Football fans travel to watch EUFA champion’s league and Euro Championship matches held in foreign cities (Giulianotti, 2011). With sharply discounted air travel available more fans can travel to matches all over the continent. Social Factors The social-culture of a nation is very influential on the tastes and preferences of consumers. According to Wetherly and Otter (2014), failing to account for the culture of consumers is one of the leading causes of failure of marketing strategies. Fortunately, for sporting events businesses, sports especially cricket, football and rugby are very popular with the UK populace (Wood 2005). In many cases, most sports stadiums are filled to capacity during sporting events. Almost every resident of the UK supports a football team and many attend matches to support their teams. In some cases whole families attend sporting events. The apparent popularity of sports in the UK increases the demand for sporting events in comparison to other countries. However, the popularity of sports means there is intense rivalry between fans especially in football. On many occasions football hooligans have crashed with other fans and the police. The act of causing trouble and chaos is referred to as hooliganism and is common in many countries where football is popular (Giulianotti, 2011). In the 1980s and 1970s, English football fans were infamous for causing mayhem when they travelled with their teams abroad. Nowadays, hooliganism is more prevalent in non-European countries including Brazil and Argentina. The reduction of hooliganism in the UK may be owed to regulatory and legal steps that were taken to curb the vice. The culture of hooliganism has the potential to cause disasters like the Heysel Stadium disaster and thus must be discouraged (Giulianotti, 2011). Hooliganism thus can force fans to avoid stadiums and dampen demand for sporting events. In recent times security measures have been taken to guard against cases of Hooliganism. These measures include installation of CCTV cameras in railway stations, in and around stadiums and formation of special police units to fights hooliganism The ability of the UK populace to live with people from other parts of the world also influences demand for sports (Reiss, 2008). Many players in the professional sports in England are not UK nationals. However, the people of the UK have continued to live and support them in their sporting events. In contrast, cases of racial hostility are common in some European cities (Cashmore and Cleland, 2014).Its commendable that the people of the UK continue to live in harmony with people from all over the world who participate in various sporting events held in the country. The question of labour relations also affects the ability of sporting event companies to offer their services in the UK. Most sportsmen demand very high salaries for their performance in sporting events (Giulianotti, 2011). Soccer players in the UK elite Premier League are among the most highly paid individuals in the world. The high salaries that workers in this industry earn may discourage would be investors from investing in the premier league as most of the revenue collected from the events get taken by the players. Figure 3: League Wage 2009/2010 Chelsea £174m (£167m) Man City £133m (£83m) Man Utd £132m (£123m) Liverpool £121m (£107m) Arsenal £111m (£104m) Source: Deloitte UK 2010, Deloitte Annual Review of Football Figures. Deloitte, London. Environmental factors The effects of sporting events on the environment have largely been ignored. However, some sporting organizations and teams are focusing on the question of environmental sustainability of events (IHRB 2013). However, environmental standards for sporting events are still absent and event organizers are guided by sporting association guidelines, textbooks and checklists. It falls on most sporting association to develop guidelines of their own in relation to events that they organize. Large scale events strain a destination infrastructure and capacity. During the 2004 FA cup final in Cardiff, fans left tonnes of litter strewn on the Streets of the Welsh city (Ethical Consumer n.d). Sporting event affect the natural environment in many ways. Major sporting events like the Olympics have the potential to impact the environment of host cities negatively. Sporting events are therefore subject to various environmental legislations and regulations. Furthermore, consumer pressure means that sporting events are increasingly viewed as forums for raising awareness of environmental issues (IHRB 2013). In a world where consumers are more aware of the need to use the environment sustainability, environmentally responsible organizations have a competitive edge over rival. Many consumers are likely to attend events if the event organizers demonstrate environmental responsibility. Sporting organization must be aware that their fans are likely to emulate environmental sustainable practice, if they see their favourite sports teams, athletes and sporting organizations practicing environmental sustainability (IHRB 2013). Sporting events planners have to comply with a number of environmental regulations in their UK operations. For example the Clean Air Act of 1993, prevents event organizers from emitting dark or black smoke (CIA 2014). This regulation may apply where sporting events need backup generators. Under UK Law, the generators should not emit black or dark smoke. The Environmental Protection Act 1990 also obligates event organizers not to produces and noise and nuisance in the games environments (Cullingworth, 2002). The organizers of events that produce loud noises are required to obtain a license. If event organizers make extensive use of non-renewable energy in their operations they are charged a tax under the Climate Change Levy (General regulations) which are part of the Finance Act 2000. Event organizers can be exempted from the Climate change levy if they use renewable energy in their operations. The Environmental Protection (Controls on Ozone-Depleting Substances) Regulations 2011 also place obligations on event organizers if they use Ozone depleting substances in their operations. Event organizations in the UK also have to report annually to the Environmental agency about the levels of carbon they emit (Pan and Garmston, 2012). The way buildings that house sporting event are built and lighted is also affected by the Energy Performance of Buildings Directive 2003. The Building Regulations 2010 also significantly affect the way sporting building are constructed. Under the Building regulation 2010, stadiums and other event venues must be built in a way that (Pan and Garmston, 2012): They manage the effects of the wind; Prevent fires; Ground contamination does not occur; The use of potential complex toxics is managed; Noise is managed; Adequate ventilation is provided; Water usage and sanitation is ensured; Waste disposal and drainage is provided for; Fuel and power are conserved. Technological factors In the last two decades large leaps in technology have been made in numerous fields. The advancement in Information Communication Technology (ICT) is considered one of the most influential factors in business nowadays. Sporting organizations have the opportunity to use new ICT technology to their advantage. The Internet can be used for advertising and popularizing events, following the activities of favourite teams on social media and even buying match tickets (Salih 2009). Many sporting events organization are using the internet and Smartphone technology for the above purposes and are therefore increasing the popularity of sporting events. Broadcast technology has also enabled many sporting events to achieve World Wide popularity. The English premier League is one of the most watched sporting leagues in the world. Broadcast rights of the Premier leagues are among the most expensive in the world as media houses fight to broadcast matches to viewers. Clubs also have their own TV stations where they broadcast their activities to fans. As a consequence, sporting events are now supplied to a worldwide audience easily. Figure 2: How European Leagues earn revenue Source: Deloitte UK 2010, Deloitte Annual Review of Football Figures. Deloitte, London. Legal factors Many legal factors influence the operations of sporting events organization in the UK. Some of the legislation either has a direct effect on event organizations or an indirect one. Immigration laws and regulations are among the legal factors that affect sporting events. UK Visa rules are very strict and this may mean that some competitors are occasionally locked out of competition held in the UK (Reiss 2008). For example, some athletes have missed the annual edition of the London marathon as they were denied entry Visas. Work permit rules also affect who can play for UK sporting teams. In effect, Visa and Work permit rules may reduce the demand of some sporting events as some fans may want to come to the event to see star Athletes who have been barred from entering or working in the UK. As mentioned earlier hooliganism was a major headache for sporting event organizers. However, a number of legislations were passed in the late 1980s which brought order to UK football stadiums (Giulianotti 2011). The Public Order Act 1986 allowed rowdy fans to be banned from sporting grounds. Later in 1989, the Football Spectator Act provided courts with powers to ban disorderly fans from international matches. In 2000, the distinction between international and national bans was removed. The effect of these legislations was a more peaceful atmosphere at sporting events with cases of hooliganism almost becoming non-existent. Consequently, demand for football events went up and the UK premier leagues became the most popular football league in the world (Giulianotti 2011). However, a new menace of racial abuse has been growing in the football grounds of some major European teams. In Scotland, religious incitement and other threatening behaviour was also growing in sporting venues (Lavalette and Mooney, 2013). Thus, Scotland in 2012 passed the Offensive Behaviour at Football and Threatening Communications (Scotland) Act 2012. The new law created the offenses of Threatening communication and Offensive behaviour related to football. The new law covers such offense as racial and religious incitement, threatening behaviour and all forms of hatred. It also makes it an offense to send threatening messages and incitement to racial and religious hatred through the internet media. This new Scottish law has the effect of making stadiums safer and thus they can attract people from all social, racial and religious backgrounds. Conclusion Sporting event organization must always bear in mind that they operate in an external environment with numerous factors that could impact their operations. External factors profoundly impact on the demand and supply of sporting events within a country. Some external factors like environmental or hooliganism laws may prevent sporting events from being staged. Political factors have a profound effect on how businesses operate in a given country. The UK government is supportive of sporting events especially if they have social goals like urban regeneration. However, the UK government has failed to provide incentives for hosting some popular events like the British Grand Prix in Silverstone. Security concerns also have the potential to lower the demand of sporting events in the UK as seen after the London bombings. Economical factors also impact the demand and supply of sporting events. In particular, economic forces such as inflation and interest rates affect disposable income and thus the ability of spectators to travel to events and buy event tickets. Relatively, high disposable income in the UK has enabled many sporting event organizations to run successful operations in the country. Success has also come as a result of a culture where sports especially football, cricket and rugby are very popular. However, the sporting events companies also have to comply with a number of environmental regulations in order to be allowed to operate. Laws on immigration and hooliganism also affect the supply of demand of sporting events in the UK. 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Govers, R 2012, Brand Dubai and its competitors in the Middle East: An image and reputation analysis. Place Branding and Public Diplomacy, 8(1), 48-57. Imrie, R, & Lees, L 2014, Sustainable London?: The future of a global city. Policy Press. Institute of Human Rights and Business (IHRB) 2013. Striving for Excellence: Mega-Sporting Events and Human Rights, Occasional Paper Series, Paper Number 2. Lavalette, M, & Mooney, G 2013, The Scottish state and the criminalisation of football fans: Michael, Criminal Justice Matters, 93(1), 22-24. Morrell, J 2001, How to forecast: A guide for business. Gower Publishing, Ltd. Pan, W & Garmston, H 2012, Building regulations in energy efficiency: Compliance in England and Wales. Energy Policy, 45, 594-605. Reiss, D 2008, Immigration Puzzle-Understanding US and European Athlete Immigration Rules, The. Ent. & Sports Law., 26, 6. Salih, M 2009, Climate change and sustainable development: New challenges for poverty reduction. Edward Elgar Publishing. Tribe, J. 2011, The economics of recreation, leisure and tourism. Taylor & Francis. Wetherly, P, & Otter, D 2014, The Business Environment: Themes and Issues in a Globalizing World. Oxford University Press. Wood, J 2005, Olympic opportunity: Realizing the value of sports heritage for tourism in the UK. Journal of sport tourism, 10(4), 307-321. World Bank 2014, GDP per capita (current US$), accessed 28 January 2014, http://data.worldbank.org/indicator/NY.GDP.PCAP.CD Appendices Charts and Graphs Graph 1: Showing the Leisure Booking Trends in 2012 v 2011. Adopted from; http://www.sportsfeatures.com/olympicsnews/story/49169/olympic-tourism-canada-reports-a-boom-while-london-raises-questions Appendix 1: Image of football Hooliganism Adopted from, http://uk.reuters.com/article/2014/04/01/uk-soccer-hooliganism-insight-idUKBREA301G420140401 Appendix 2: London Olympic Stadium Adopted from: http://www.olympic.org/london-2012-summer-olympics: Showing a well lit stadium, built using modern technological advances and complying with the environmental requirements that are put forth by the authorities. Read More