Future Strategy for Arsenal FC in Business Report

Introduction

The main purpose of this report is to discuss the position of Arsenal FC in the business environment and to propose a future strategy for this club. In order to do so, this paper will address several models, such as SWOT, PEST analysis, porter’s five forces, the resources and capabilities, and four performance measures to assess the success of the strategy.

Background of the Arsenal

The Arsenal Holdings Plc had maneuvered the Arsenal Football Club in 1886, and since 1893, this club connected towards the first-class football league, and at the end of World War I, this club enriched by spreading out twenty-two contributor teams. It has a legendary record for holding the top rank in this league for a long time rather than other football teams and it qualified for the Champions League for 9 consecutive terms commencing in 1998. Consequently, they have been honored by numerous rewards, such as league championships, both single and double FA clubs, etc. (Arsenal Holdings plc, 2006). Besides first-class football club, the Arsenal has also operated a club for a woman named the Arsenal Ladies, which has triumphed five consecutive seasons within six, and the Junior Gunners for the young or teenagers and the Emirates stadium that was located in the north London, and it contained sixty thousand viewers at once. A new stadium on track with more containment would have a great opportunity for both of the devoted viewers as well as for the profits generation of the Arsenal and concerning this purpose, this club has recently established a new football stadium that has proficient to grasp 20 thousand more viewers than before (Arsenal Holdings plc, 2006).

PEST Analysis of Arsenal

Arsenal’s political surroundings encompass the rules and policies granted by The Barclays Premier League authority; the league handbook states the regulations, which are as follows:

Political Factors

• It is worth mentioning that Arsenal has been contracting mutually to players and managers in a liberated and reasonable approach exclusive of any political intrusion; the recruitment of the present manager Arsène Wenger who has shown terrific presentation from the year 1996 is evidential to this,
• Besides this, the government’s pose on advertising morals have permitted Arsenal to carry out ads devoid of any limits considering that it is a huge contributor to the financial system,
• However, all clubs go through a contract with the league and with other member clubs ensuring that the relevant clubs are abide by the rules and regulations of the league; the administrators stipulate the clubs’ legal responsibilities to them,
• There are some regulations concerning the game plan and the purpose of the championship.

Economic Factors

• The club operates in a sound economic situation; sponsors are accessible for them. Besides Emirates, Arsenal also manages some blue-chip companies for sponsorship and they had a long-standing deal with the O₂ Company, the largest mobile operator in the market
• The government charged interest rates on Arsenal’s functions at a rate of 22.3 percent, whereas its earnings before tax were £62.7 million on 31 May 2009, as per the 2008 ‘Forbes business magazine report’, Arsenal was the 3^rd most expensive football squad on the globe, apart from the debts.
• Arsenal’s retail and e-business is very profitable and they have a very good commodity business in Europe,
• The income level of the industry is very optimistic and all the members of the league engender a high level of income.

Socio-cultural Factors

• It believes in equal opportunities and ensures that its employment policies are free from any sort of discrimination (based on race, colour, sex, ethnic origin, or disability). It focuses more on youths at schools, and possesses an approximate international supporter base of about twenty-seven million; additionally, a 2002 report specifies that the club encompasses a big number of black spectators as well,
• Persons from 16 to 19 years who are uneducated or jobless are provided with a four months course by Arsenal that offers vital expertise and literacy for societal enhancement
• It perseveres on inflating its schemes in a local and global commune, offering a range of gaming, schooling, and diversity programs.

Technological factors

• Arsenal commenced intensive efforts to make sure that the pitch is modernized with the utmost standards with installation of close circuit cameras and further scrutiny tools to avert soccer hooliganism throughout games
• It stimulates a great sum from their e-business using digital technology for all their operations
• It is using the internet for its customers; spectators can reserve their match tickets by phone and match news are available on the internet and cell phones.

SWOT Analysis

Strength

• Premier League (2009) reported that some latest Premier League broadcast contracts and the place of the club in the league raised £70.4 million profits, which is a £25 million (55 percent) augmentation; in 2008-09 session they assured the fourth position in Premier League with unbeaten 21 games and reached to semi-finals in both UEFA Champions League and FA Cap,
• Its annual report illustrates that in 2008 the Group return was £223 million, where as its profit before taxation was £36.7 million and earnings per share were £413.49 (Arsenal Broadband Ltd, 2009),
• Some projects like the Highbury Square project brought a large amount of yield, showing a rising drift throughout the last three years,
• With the sponsorship support of Emirates, Arsenal developed a strong home ground; in 2007 Emirates assisted to impel match day profits up to £94.6 million, contributing 45 percent to the total income,
• Currently, most of the popular and skilled players are performing here and the trade of player registrations generated an income of £26.5 million,
• It has several fair play trophies showing the player’s modesty.

Weakness

• Arsenal’s commercial returns embody merely 21 percent of the total revenue, which is one of the lowly amounted clubs in the League,
• Some key players departed,
• It invested huge amounts in the Emirates Stadium creating pressure on the operating funds.

Opportunity

• Due to the global commercial enhancement of recent years, a possibility for the club to enlarge its existence all over the world arises, mainly in the markets of Asia and the USA,
• The addition of a few skilled players in the club could improve its performances at the playing field through winning matches rather frequently resulting in the boost of growth,
• It can use its field more economically by organizing other programmes and concerts,
• It can attract more sponsors.

Threats

• In the past two or three years, they were not able to win a trophy in the league; if this remains to continue, the prospect of the club plunging down from the top fourth position will strengthen resulting in lower-income, causing an immense risk for itself, and influencing its ability to pay back the loan of the Emirates stadium
• In the present condition of the property business and mortgage market, sales operations are quite restricted; so, loans taken to finance the building works in Highbury Square have amplified its net dept to £318.1 million in 2008 against the £268.2 million of 2007 (Arsenal, 2008)

Porter’s Five Forces Analysis

The five forces analysis will facilitate Arsenal to distinguish the environment:

• Competitive Rivalry: In recent years, the competitive rivalry of Arsenal is very high because almost all the competitors are operating closely and many smaller clubs are nipping at their heels; the key rivals in the home league are Manchester United (£257.1 million), Chelsea (£212.9 million), and Liverpool (£167.0 million); globally Arsenal’s main competitors are Real Madrid (£289.6m), and Barcelona (£244.4m).
• The threat of Substitutes: There are many contending clubs in the industry and most of them offer similar services, but there are no clear and prominent substitutes of this sector, so the threat of substitutes in the industry is very low (Porter, 2004).
• The threat of New Entrants: there is the possibility of new entrants to come as the barriers to the entrance into the industry is relatively low; skilled trainers, players, strategies, and large amounts of capital are required to achieve economies of scale and to build a triumphant squad.
• Bargaining Power of Suppliers: a few large clubs dominate Arsenal football club, there are fewer available satisfactory services from the suppliers, and their contributions are critical for success; the industry involves high switching costs.
• Bargaining Power of Buyers: Arsenal has mainly two sets of customers: viewers and buyers of the apartments. The bargaining power of buyers is low for the buyer of apartments but high for viewers who come to Emirates stadium to enjoy games.

The strategy of Arsenal

The principal strategic activities of the Arsenal have operated through two significant modes, are the professional football league contest, and the other is correlate business operations. For instance, by operating professional football league during 2004, net operating profit has turned into ₤20.1m in terms of player trade; although at the beginning stage Arsenal faced a loss of ₤4.7m, moreover; entire return has touched ₤115m along with ₤85m amounted total assets. On the other hand, correlate business operation of the Arsenal has involved in property development in terms of real estate or building construction and in this case, Arsenal has already unfastened their new stadium that has sixty thousand viewers capacity during the 2007 football term.

Getaway from the business operation strategies, Arsenal has also enthusiastic awareness of supporter or fan satisfaction, such as, with the financial aid by the Granada Media, a database of the fan has composed and symbolized as Gooners. Adjacent to accumulate and nursing of the supporter’s information, the Arsenal has also executed several schemes includes repair, and recently manufacture of houses for the local community, offer space for rent, continuous development of the transport equipment, etc. Moreover, it has to be quoted that before tax payment the Arsenal has earned about 20 million pounds including 0.6 million liability (Arsenal Holdings plc, 2009).

The accomplishment of the business strategies

The strategic implication of the Arsenal has occupied following expanses to fulfill their supporter’s demand as well as profit generation.

1. Broadcasting: broadcasting is one of the prime strategic functions of the Arsenal Club and most of the football term they have targeted championship league tournaments. Earning from this area has arrived at about six and a half core pounds (Arsenal, 2009).
2. Improvement of properties: with the support of bank credit Arsenal has begun to repair more than 7 hundred residential buildings in the community of Highbury. With their dedicated employment in the Highbury Square stadium, an advance trade arrangement has been required alternatively, about 650 units among whole has traded in advance (Barthold, 2009).
3. Crafted revenues during the entrance of football contest: improved facilities available in the recently opened stadiums have the innovation of key business strategic part of the Arsenal and utilisation of this approach and the latest commodities the club has earned a lot. However, it has fretful point that during the near future high maintaining cost of this equipment would be hampered their profit flows.
4. Player trade: trade of the proficient football players has generated huge returns in the net revenue of the Arsenal club and at the same time, it has cherished the first-class football league image. During the period of the 2005 football term, the Arsenal club has profited almost 20 million pounds, which was greater than the immediate last season.
5. Commercialization and retailing: commercialization and retailing are another two-strategy implementation area of the Arsenal club and their business trade-off has been continuously moving forward within the last decades. For instance, in terms of sponsorship, the Arsenal Club has signed numerous enduring commercial business agreements with the Emirates. Moreover, considerable proposals have been drastically observed such as the Nike Inc. for athletic equipment supply, the Delaware North, O2, the LG mobile Co. for the official cell phone supplier, for power supply the EDF Energy, and for multimedia commodity supply the Sony Electronics and so on.
6. Precautions against economic downturn: Whilst the economic downturn or recession has hampered regular business functions at the beginning of the fiscal year of 2007/08, the Arsenal has also been stunned by a debt claim of 100 million pounds in 2008. Therefore, the chairperson of the club has initiated that to cut off unnecessary maintenance costs of their existing stadiums (Phillips, 2008).

Future strategy

For the period of strategy implementation, the football club has overtaken a few major obstacles since the beginning of the fiscal year 2007 and in order to frustrate those, Arsenal has established Arsenal for everybody strategic program. In the light of this scheme, the future strategies of Arsenal have been structured out below in order (Arsenal, 2010):

• Equivalent opportunity strategy: removal of all categories of employment discrimination like racism, color, nationalized derivation, religious status, age limit, married condition, cross-cultural features, gender/sexual discrimination, disability, etc. Moreover, the football club has to significantly take into account equal appraisal practice of the recruited personnel (Arsenal, 2010).
• Speak in opposition to racial discrimination: a decent step of the Arsenal football club would be to arranging a campaign program against racial discrimination since their tournaments have been viewed by many people on TV screens and in a stadium. Therefore, the club would have more acceptable to the football fans worldwide as well as it could be expanded their business functions more effectively.
• Facilitate the remote communities: in the underdeveloped area, for instance, numerous African countries, the middle east region, etc. are still isolated from modern facilities as well as infrastructures in the area entire human needs. In this case, Arsenal would have arranged football-training schemes. This initiative would also assist the war distressed areas as well as natural or chemical catastrophe places.
• The Emirates trade agreement: The Emirates is one of the largest trade collaborators of the Arsenal for this rationale it would be as wise as smart to keep continuing this practice in addition to observance of the publication and disruptive behavior of the supporters during tournaments (Arsenal, 2010).

• UEFA ten programs: With the aim of football, racism obliterates the UEFA ten programs have designed for all of the European football leagues and clubs. Implementation of these philosophies in the near future the Arsenal would have promoted toward a rather higher standard than at this instant. Moreover, the establishment of reward on behalf of the appraisal of executions of these principles would also enrich the ethical views of the Arsenal Football Club.

Conclusion

The paper has examined Arsenal’s pragmatic preference of the potential strategies. On behalf of this reflection, the preliminary part of the paper has outlined both external and internal environmental analysis, such as SWOT and PEST analysis, industry competition assessment in the course of Porter’s five factors model. In the second phase, the current strategic investigations along with the implementation area are also structured. The paper has summarized administrative strategic amendment, social responsibility, ethical standards, and potential commercial initiatives. The appropriate executions of these strategies would facilitate Arsenal football club to boost their success over any other clubs.

Reference

Arsenal (2009) Arsenal Confirms Record Profit And Significant Progress On Highbury Square Project. Web.

Arsenal Broadband Ltd (2009) History: Laying the Foundations – Overview. Web.

Arsenal Company Profile: Arsenal Broadband Limited 2010. Web.

Arsenal Holdings plc (2009). Arsenal Confirms Record Profit and Significant Progress On Highbury Square Project. Web.

Arsenal Holdings plc. Company Information 2006. Web.

Arsenal Statement of Accounts and Annual report 2008 of Arsenal. Web.

Barthold, D. (2009) The Business of European Football. Web.

Kotler, P., & Armstrong, G. (2006) Principles of Marketing. 11^th ed. Prentice-Hall of India Private Limited.

Phillips, N. (2008) Arsenal Holdings Plc. Web.

Porter, M. E. (2004) Competitive Strategy. Export Edition. New York: The Free Press.

Premier League (2009) A History of the Premier League. Web.