Real Madrid Football Club: Business Model Report (Assessment)

What is the Real Madrid business model? Is it unique?

The football club of Real Madrid is an organization that utilizes the business model according to which it is possible to use its name as a brand and to employ the plans for sponsorship and product sales to attain additional financial resourced during football events (Callejo & Forcadell, 2006). It should also be pointed out that the club commercialized and sold the tights for TV and audio-visual broadcasting rights to various organizations, which also permitted for achieving additional income (Callejo & Forcadell, 2006). This strategy has been successfully utilized by the Real Madrid Club on an international level.

It is stated that the business model which Real Madrid used was not unique, but instead had been previously employed by some other sports clubs, for instance, by Manchester United in the United Kingdom, which had pioneered the process of commercialization of sports brands, and that the utilization of this strategy had proven highly successful for that club in the 1990s, allowing for obtaining additional income for the matches in which the sports team of the club participated (Callejo & Forcadell, 2006).

In the 21^st century, however, Real Madrid gained increased fame and popularity, at the same time becoming the leading world of the commercial use of its name as a brand. It has been noted that their commercial success in using its brand led to several critical remarks, according to which the name of the club had been used as a brand too much; the club’s director of communications, as noted in the case study, even observed that the brand of the club had been stretched too far. Nevertheless, the commercialization of the club’s brand permitted for attaining substantial additional income, which was instrumental in assisting the club to develop further.

Who are Real Madrid’s customers? How is the market segmented?

When considering the question about which groups played the role of clients of the Real Madrid Football Club, it is important to observe that there existed multiple groups the representatives of which purchased something from the club. First and foremost, the clientele of the club included the individuals who watched the football matches in which the players from the club participated. Therefore, the first and the most important segment of the market for which Real Madrid proposed services (entertainment) was comprised of the fans of the club, as well as of fans of some other teams, who would support their favorite team if it had played against Real Madrid, but would support Real Madrid, e.g., in an international soccer event. Besides, it should be stressed that the fans of Real Madrid enjoyed additional benefits when visiting or otherwise viewing the matches of the club.

Another segment of the market that Real Madrid utilized included a variety of media companies to which the organization sold the exploitation rights about the use of the products created by Real Madrid, such as the right to broadcast a match by Real Madrid.

Also, it should be pointed out that Real Madrid used and sold its name to, or simply collaborated with, several other companies, such as Siemens, who served as sponsors of the organization in exchange e.g. the right to advertise their product on T-shirts of the representatives of the football club.

Who has more power, Real Madrid, or the players?

On the whole, it is difficult to assess who has more power: the players of the club of Real Madrid, or the club itself as an organization. On the one hand, the club formally has the power to hire new players and to sack those players who are currently working for the organization; it can “sell” players for whom it gets large offers (for instance, under the president Lorenzo Sans since 1995, the club was able to “sell” a large number of its players to other clubs or sporting organizations for considerable amounts of money, which were needed to cover the club’s expenses and operating losses).

On the other hand, the players of Real Madrid are its most valuable assets, and the club does not economize money when it comes to hiring the best players, which means that the latter attain a certain degree of influence over their club. Nevertheless, this degree of influence is also limited by the fact that the players want to work for the club; for instance, when the Russian oil tycoon R. Abramovitch offered some players of the Real Madrid football club a double salary in case these players agreed to work for him, the players refused to do so, realizing that Real Madrid has a history of its own, as well as a considerable fans base, which would keep it in the world of sports for a large amount of time, whereas the football clubs that are sponsored by magnates are probably not going to last long if such sponsorship ceases.

Therefore, it might be possible to sate that the club has more power over its players, simply because it is the decision of the club about whom to hire and whom to dismiss, for example; simultaneously, the players also have a significant amount of power over the organization, because the club values them and depends on them to a very large degree.

What risks does Real Madrid face?

Currently, there exist several risks that the football club of Real Madrid is faced with. For instance, one of the major problems related to its operation is the search for new, talented players. For instance, while planning for 2008, it is stated that the contracts of some of the players of the club had previously expired or were to expire after some short periods, which meant that there was a need to either convince the players to further extend the contracts (which probably was successful in many cases) or to replace them with new players.

The latter option was problematic, especially if some contracts were to expire simultaneously because it was rather difficult if not impossible to find a large number of very talented players in a situation when the contract term of one of them came to an end. It is possible to conclude that the problems of looking for new contract members should be important nowadays as well.

Also, there exist several risks about the problem of commercialization of Real Madrid’s brand, assets, and so on. Excessive commercialization and overuse of the brand name have its adverse influences and threats, such as the potential loss of fans/customers, so it is paramount for the management of the club to limit the degree to which the club is commercialized.

Also, potential risks for Real Madrid are related to the fact that there are a variety of possible unexpected happenings that could cause significant harm to the club. For example, another football club with which a match is planned might suddenly quit an agreement, leaving Real Madrid without profits for the arranged matches.

Who are the main competitors of Real Madrid as a brand?

There exist some competitors of the Real Madrid football club that also can be considered their rivals as a brand. For instance, the list of such competitors might include the Football Club Barcelona, which is a Spanish club that, similarly to Real Madrid, has attained fame all over the world. Another famous football brand that can be considered a serious rival of Real Madrid is the club of Manchester United from the UK. In this respect, it should be pointed out that Manchester United was the football club that pioneered the process of turning the names of football clubs into brands, and that Real Madrid followed suit when they turned their club into a brand. On the whole, it is possible to consider these two football clubs to be the main rivals for the Real Madrid Club worldwide.

What factors contributed to the branding of “Real Madrid”?

There existed a large number of factors that contributed to the transformation of the name of the football club of Real Madrid into a brand. For instance, it is known from the provided case study that before and in the 1990s, the Real Madrid club experienced a large number of downfalls, which meant that it had considerable financial problems and needed money to properly recover from them.

Also, when in the 2000s, a new management team was formed in the club, it was decided that the marketing and operations approaches of the club did not match their potential and their achievements in sport, which prompted the team led by Florentino Perez to introduce new marketing tools. Therefore, the process of turning Real Madrid into a brand was carried out. In the case study, it is noted that the managers considered four factors to serve as the main drivers of the value of the brand:

1. the large size of the audience, for the club, was known and loved all over the world;
2. the high frequency with which the fans/customers engaged in any type of interactions with the club;
3. the social and demographic features of the representatives of the audience of the football club;
4. the “bridges,” or additional links, which could be created to establish and maintain the links with the audience of fans and admirers of the club.

It is also pointed out that when turning the name of the Real Madrid Football Club into a brand, the management team was driven by three main goals of such an operation; more specifically, a) the desire to make the club flexible concerning its financial resources and capabilities, therefore permitting it to recruit new, talented players to further expand, as well as to replace the players who left the club for some reason; b) the desire to assemble a team of top football players, which would allow for becoming the club that has the strongest footballers only; and c) the potential of exploiting the leverage which the creation of a brand for the Real Madrid Club would allow for, and the possibility to provide the content made by the club via a wide range of channels to a variety of customers.

Reference

Callejo, M. B., & Forcadell, F. J. (2006). Real Madrid football club: A new model of business organization for sports clubs in Spain. Global Business and Organizational Excellence, 2006(11/12), 51-65. Web.