Abstract
This paper discusses football as a business and more so, focuses on Manchester United as one of the most recognized football clubs in England. The paper analyses the clubs business strategy, its competitive position as compared to other clubs, its resources and capabilities and finally how it can improve on its management strategies to ensure survival.
Introduction
Currently, Football is considered as one of the business industry that is growing tremendously. The business strategy used in football can easily be retrieved since the competition in the football arena has been found to be highly structured and the results easily and clearly measured. The outcomes are measured in the line of success in financial management, performance at the pitch, the number of games won and lost, the number of trophies won within certain duration of time and also the league positions (Szymanski, 1998, pp 47-54).
The wage costs that were recorded in the English Premier League clubs in 2005/2006 increased to above EUR 850 million. The clubs that attained the first five positions recorded wage costs as follows; Chelsea 114 million, Manchester United 85 million, Arsenal 83 million and Newcastle United 52 million. The wage cost is however expected to hit more than 1 billion Euros in the Premier league in the near future (Waltersdorf, 2007). Manchester United and arsenal were recorded to have spent more than 250 million euro in the process of expanding their stadia.
Manchester United has been considered as one of the most successful English football club within the last two decades. It has won the premier league eight times since 1992, the FA cup it has won more than five times since 1970. The club has also performed so well financially generating an income of £249 of which 66m of this was reported as profit and this was between the years 1992 and 1997 (Szymanski, 1998, pp 47-54).
Identify Manchester United’s strategy and explain its rationale.
Manchester United football club has been known currently as one of the best football clubs in the world. The top five current stakeholders of the club include; Malcolm and family, Magnier and McMarui, Fans (shareholders), Mount barrow investment limited and many others (Walker et al, 2004).
The management has tried so much with fruitful efforts to focus the team towards the perspective of making money while winning trophies. The club from its early stages was rescued when it was almost collapsing in 1902, by J.H. Davies who was a local brewer. He contributed heavily towards the development of the Old Trafford ground, which later after completion became one of the leading stadiums in the North England, hosting cup finals and Semi-finals of the Football Association (Szymanski, 1998, pp 47-54).
Manchester United has for many years become a team of expensive players, which have for the years played attractive football hence attracting more fans. This history has made the club to be one of the most sought out club in the recent history.
The brand image of the club which incorporates a range of activities, services and products has contributed to the clubs growth; this is so since consumers most of the times make choices based on the image. The club has strategized successfully by marketing the club beyond their local supporters hence has created massive support both nationally and internationally, this has helped them to convert more fans to customers (Szymanski, 1998, pp 47-54).
One of the shareholders Louis Edwards bought many shares of the club in 1964 when the club was undergoing financial turmoil. Later his son became the Chief Executive of the club in 1981 and tried to lift the club financially. After the sucking of the then manager of the club Atkinson, Ferguson took over in 1986 after which the club started realizing increase in income. This was realized from the commercial activities such as conferences held at club’s facilities.
The club currently has the idea of developing the value of its media rights (Szymanski, 1998, p53). The club has also incorporated some commercial plans by allowing their fans to be treated as customers. This they have achieved through the targeted key markets by providing membership to the fans. The club has resorted to working with the right partners and hence has restructured the rule of sponsorship.
The link that the club has with financial institutions like Bank of Scotland and Zurich Financial services helps in the marketing of the products that falls under the Manchester United finance brand. Also its link with the sports giants Nike in a £300m deal for all the footwear, apparel, equipment and other merchandise bearing the Manchester United’s trademark has created a big boost for the club (Walker et al, 2004).
Compare Manchester United’s resources and capabilities to those of Liverpool. What does your analysis imply for Manchester United’s potential to establish cost and differentiation advantage over Liverpool?
Resources and capabilities in a business entity are often considered to be the primary sources of profitability. The resources are tangible, intangible or human in nature, the tangible resources include; financial, land, buildings, plant and equipments, intangible include; technology, reputation and culture while human resources include; skills, capacity for communication and collaboration, motivation (Szymanski, 1998, pp 47-54).
The resources and capabilities are very vital in a business entity. For instance the tangible resources show the value of fixed assets of a business, the Debt/Equity ratio, credit rating and Net cash flow of the business. The intangible resources indicate the income and expenditure of the firm, brand equity and loyalty of the staff. While human resource helps in determining the employee credentials, pay rates and turnover (Szymanski, 1998, pp 47-54).
Manchester United has been listed as the biggest financially stable football club, generating revenue of £ 172 million and operating profit of £ 58.3 million in the year 2004 while earnings per share was 7.4 pence. Manchester has also emerged as one of the top performing team in the European league due to the quality players it has nurtured as a club, and also its financial ability to acquire star players.
This has been boosted by the fact that top players go for clubs that have got the financial ability to pay attractive salaries (Grant & Peck, 2008, pp 77-86).
In the year 2003/2004 Manchester United was ranked as the club that generated highest revenue standing at £ 259 million as compared with Liverpool’s revenue of £ 140 which was ranked ninth. Also the wages/revenues ratios of Manchester United appeared lower than that of most clubs including Liverpool; this made Manchester to be one of the clubs with the lowest wage bill.
The wage cost for 2005/2006 stood at Manchester United 85 million while Liverpool at 69 million (Grant & Peck, 2008, pp 77-86). Manchester United recorded an increased net profit in the year 2007/2008 to EUR 41 million followed by Liverpool which recorded an average of EUR 20 million (Waltersdorf, 2007).
Table 1: Competitive Analysis, Manchester United Vs Liverpool (Walker et al, 2004).
The above analysis clearly shows that better league performance is what makes a club to obtain higher revenue. The comparison also indicates that higher wage expenditure improves performance.
What threats to continue success does Manchester United’s face?
The threats that the club faces as shown by the table below include; the take over bids currently by the US businessman Malcolm Glazer, improvement in the quality of game by the rival football clubs, the fall in the success by the club, which lies in the winning of the trophies, and finally the drop in the salaries that the club gives to its players. The transfer of most of the star players from the club is also a threat (Grant & Peck, 2008, pp 77-86).
The takeover by Malcolm is a threat since it may lead the club to into debt for the first time. The business man has so far been questioned whether he has got the ability to maintain the good performance of the club and stabilize it financially. Manchester has also been eclipsed in the recent past by Chelsea and Arsenal who appear to be strong contenders of the league trophies (Grant & Peck, 2008, pp 77-86).
Table 1: SWOT table (Walker et al, 2004).
How can Manchester United’s sustain and enhance its competitive position?
Competitive position is the state attained by any organization that enables it to compete favorably in the market. This is ensured through provision of greater benefits and services that justifies its lower or higher prices. The competition that takes place on sports field has led to the creation of incentives for innovation. Manchester United would only loose to Liverpool as a result of poor management of funds and players (Waltersdorf, 2007).
Competition acts a driving force that propels any business or sports towards the achievement of its goals on development. This issue on competition narrows down to the individual players who when fully trained and is able to make good use of the resources, is able to increase their productivity ensuring success of the club by performing on standards higher than other competitors.
The use of the modern technology and the change in the training methods are generally brought about by the type of competition the players engage in. this helps in identifying whether the innovation generated by the competition is of benefit to majority of the population (Waltersdorf, 2007).
There are several ways in which Manchester United can and has been able to enhance its competitive position. Some of these as discussed below include their capability to play good football and also the way they have been able to manage successfully the brand name of the club (Lydrock, 2009).
Playing good football
Manchester United which boasts to be one of the best football clubs in the world has to maintain its standards by playing good football and also having good players. This will enable its capacity to attract supporters and maintain its credibility to the public. The club has to strategize on how to buy the best players alongside developing its own from the football academy (Lydrock, 2009).
According to the operation of markets it is stated that better players win more matches, hence there is a well-staged market for players that assures quality players attract higher wages. Fans and sponsors are always attracted by the success of the club, and therefore the better the club performs the higher the income.
The use of the Brand name
The brand name that the club uses has been strong for quite some time, this is so since the name have got good association with performance of the club and is also rich in tradition. The color that the club uses should provide some attraction that enhances easy recognition. This will enable the club to sell football through several products that they produce like jerseys (Lydrock, 2009).
Merchandising
Manchester is known as a powerful commercial organization which provides them with a good competitive advantage. The club should focus in investing on alternative sectors like the selling of other related goods in order to boost the cash flow. The club should also aspire to use the key resources such as Star players, Manchester United TV, Stadium and fans to retain its value (Lydrock, 2009).
Conclusion
Manchester United’s exceptional character that has made it to survive even the tough times throughout its history can be attributed to its “brand image”. The club’s success has all along been driven by both good and bad fortune; this has made the club to contribute a lot to the transformation of football in England. Other club’s have since learnt and borrowed a lot from Manchester United for example its flotation in the year 1991 acted as model to several clubs enabling them to tap into the market.
References
Grant, M. and Peck, S. (2008). Manchester United: The Glazer Takeover. Case 6 pp 77-86.
Lydrock Essays. (2009). Manchester United Case study. Web.
Szymanski, S. (1998). Why is Manchester United so Successful? Business Strategy Review, Volume 9 Issue 4, pp 47-54.
Walker, K. et al (2004). Manchester United Plc. Web.
Waltersdorf, B. (2007). EURO 2008: The Economic Perspectives. Web.