SWOT Analysis of FC Bayern München and Manchester United with Respect to the Competition in the Internationalization of the Football Business PDF

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Seminararbeit zum Thema SWOT Analysis of FC Bayern München and Manchester United with Respect to the Competition in the Internationalization of the Football Business, 4. Semester International Management...

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SWOT Analysis of FC Bayern München and Manchester United with Respect to the Competition in the Internationalization of the Football Business

Bachelor of Arts (B. A.) – International Management

4th Semester Professional Business English

Mentor: Professor Jochen König M.A. Submission Date: 16.07.2018

Table of Contents List of Abbreviations........................................................................................................II 1

Introduction...............................................................................................................1

2

Theoretical Background: SWOT Analysis................................................................1 2.1

Internal Factors..............................................................................................3

2.2

External Factors.............................................................................................4

3

Internationalization of the Football Business...........................................................5

4

SWOT Analysis using the example of FC Bayern München compared to Manchester United.....................................................................................................7 4.1 4.1.1.

Internal Factors..........................................................................................8

4.1.2.

External Factors.......................................................................................12

4.2

5

FC Bayern München.....................................................................................7

Manchester United......................................................................................15

4.2.1.

Internal Factors........................................................................................15

4.2.2.

External Factors.......................................................................................19

Conclusion and Future Perspectives........................................................................21

Works cited......................................................................................................................23 Internet Sources...............................................................................................................23

II List of Abbreviations FA – leading Football Association in England

1 1

Introduction

“You can change your wife, change your politics, change your religion. But never, never can you change your favourite football team!”1 This famous quote from Manchester United legend Eric Cantona describes what most fans are feeling about their favourite team. But it also describes how difficult it is for the clubs to gain new fans. In their domestic country, most fans decided whether they support a certain club or not. Thus, the clubs need to search for further expanding capacities in foreign countries. Just as in almost all other industries, the internationalization does not stop when it comes to football. Clubs are buying players for millions of Euros not only to improve their team but to gain the attention of foreign fans, especially in Asia, the USA or South America. When trying to reach new fans worldwide, the clubs do not only have to face their national rivals but other clubs mainly from Europe as well. The following thesis aims to analyse the efforts of the clubs FC Bayern München and Manchester United regarding the internationalization of the football business in order to stay competitive when it comes to trying to reach new fans. First of all, some theoretical principles will be explained with the introduction of the SWOT Analysis and the meaning of the internationalization of the football business. After that, the SWOT Analysis for the two clubs is executed. It analyses the strengths, weaknesses, opportunities and threats of the internationalization efforts. Finally, the results are summarized and recommendations for the future are given. 2

Theoretical Background: SWOT Analysis

In the following paragraph, the SWOT Analysis is introduced. This tool has been chosen since it allows an easy but precise analysis of the market positioning and strategy of a company. It can be used not only for an organisation but for a single product, service, acquisition, partnership or the outsourcing of a business as well. Disadvantages are that the four factors that will be presented in the following are not weighted and that every evaluation of aspects is based on subjectivity. Further tools that could have been chosen are the BCG matrix, the PESTLE Analysis, Porter´s Five Forces, or the GAP Analysis. The BCG matrix is focusses more on a cer1 Fifa.com. 2012-12-14. “A club for life, and beyond” (2018-0416).

2 tain product or service than on external influences. In contrast to that, the PESTLE analysis focusses only on external factors ignoring internal factors. Porter´s Five Forces has already certain points of analyses given which would not have perfectly fit to the developments in the football business, like e. g. the influence of suppliers. For the execution of the GAP Analysis, quantifiable values and specific company-insides are necessary which are not sufficiently enough available of the two clubs. Because of these reasons, the SWOT Analysis is the best fitting tool. The SWOT Analysis is a tool used to identify strengths, weaknesses, opportunities and threats of a business. The name results from combining the first letter of the four words. With the help of the analysis a company is not only able to identify the organizations’ strengths and weaknesses (internal factors) but also opportunities and threats it is facing in the market they are operating in (external factors). Four professors at Harvard Business University developed the SWOT analysis in 1965. They were the first to combine the analysis of company-specific strategic decisions with external factors in the environment of the company.2 This analysis can be executed for organizations as well as for single products and services or a certain market.3 It is used to make and evaluate strategic decisions for the organization not only regarding the current but also the future situation.4 Thus, it is a tool used for the strategic situation analysis and strategic planning of an organization, especially within the marketing department.5 It helps to illustrate a company´s competitive standing.6 The more realistic the analysis is made, the more value does it bring for the organization. Thus, it is essentially to avoid pessimism or optimism as much as possible. Since especially external factors are influenced by competitors, it is necessary to execute the SWOT analysis not only for the own organization, product or service but compare it to competitors that are in a similar market position or follow similar strategies. If

2 Cp. Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2. 3 Cp. Team FME. 2013. “SWOT Analysis – Strategy Skills” (2018-02-26). 4 Cp. Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2. 5 Cp. Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 1; Wirtschaftslexikon24.com: Unknown. “SWOT-Analyse“ (2018-02-26). 6 Cp. Patrick Siegfried: Hidden Champions – Die unbekannten Marktführer Band 2 – Flyeralarm, Otto Bock, Liebherr, Aenne Burda Verlag, Krones, Wild Flavours, Ludo Fact, HeidelbergCement, Olymp. München: AVM Akademische Verlagsgemeinschaft München 2016, 15.

3 one does not know about strengths and weaknesses of competitors one is not able to identify possible threats and weaknesses of the own organization.7 In most cases the SWOT analysis is presented in a matrix combining the four factors as follows:

Source: Following Carly Propert, Christophe Speth, The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2. 2.1

Internal Factors

There are several internal factors that might be strengths or weaknesses of a company: Firstly, there is the point of cost competitiveness. This refers to questions about an efficient way of producing and allocating resources in order to minimize costs. Connected to that, the aspect of financial stability needs to be considered. That means reflecting the money-management, shown e. g. by the ability to finance investments by liquid assets. Secondly, the network and distribution capacity plays a major role. It deals with the procurement structure on the one hand, with the way of distributing on the other hand. Accompanying that, one should consider sales and marketing when thinking of strengths and weaknesses. That means analysing customer needs, market positioning and attracting customers.

7 Cp. Waldemar Pelz. January 2018. “SWOT-Analyse – Definition, Beispiele und Vorlagen zum Erstellen einer SWOT-Analyse“ (2018-02-17)

4 Moreover, the human resources factor should not be forgotten implying the quality of staff, recruiting processes, internal communication and further incentives are keeping employees motivated. The last internal factor that might define strengths and weaknesses is the innovation policy going hand in hand e. g. with the number of patents following strategic visions.8 These aspects need to be analysed against the background of the culture of an organization like a certain ethos, beliefs and the public image.9 Keeping that in mind, strengths and weaknesses of an organization can be defined.: Determining “strengths” academically, they can be seen as a factor influencing the development of an organization positively leading to competitive advantages. They are elements separating an organization from others by having unique qualities persuading customers to choose these specific products or services.10 In contrast to that, weaknesses are factors reducing the value of a company and decreasing growth leading to a disadvantage compared to competitors. Thus, it is essential to identify them thoroughly in order to improve and re-organize structures and strategies.11 2.2

External Factors

Opportunities and threats of an organization are caused by external factors in an organization´s environment. Thus, the organization itself cannot influence them directly but only react to them. The better the organization is aware of these factors the better it can deal with them.12 First of all, the economic climate of the market an organization is operating in has to be mentioned as it can be influenced by growth or recession. This can be seen e. g. in the spending habits of consumers that are spending more money when they have it boosting the economy and single organizations. 8 Cp. Waldemar Pelz. January 2018. “SWOT-Analyse – Definition, Beispiele und Vorlagen zum Erstellen einer SWOT-Analyse“ (2018-02-17); Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2. 9 Cp. Team FME. 2013. “SWOT Analysis – Strategy Skills” (2018-02-26). 10 Cp. Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2; Team FME. 2013. “SWOT Analysis – Strategy Skills” (2018-02-26). 11 Cp. Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2; Team FME. 2013. “SWOT Analysis – Strategy Skills” (2018-02-26). 12 Cp. Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 1.

5 As a second external factor, the ecosystem including global consumer trends and their needs has to be considered.. Changes in the market need to be forecasted and adapted to in order to keep products and services up to date and to be able to maintain them through the whole product lifecycle. Furthermore, third parties which are all entities that are not an organization´s customers like suppliers, partners, competitors, the government and the media are influencing an organization. They might e. g. set regulations and function as benchmarks for an organization.13 Having a closer look at that, opportunities of a company as external factors improving “progression and competitive position can be defined”14 in order to positively influence an organization´s development. On the other hand, threats are often resulting of conservative orientation of an organization ignoring the environment leading to negative developments. It is possible for every organization to turn threats into strengths. Likewise it can happen that opportunities become weaknesses.15 3

Internationalization of the Football Business

The term “internationalization” implies the idea of the admission or increase of economic activities across national borders.16 Caused by the global trend towards openingup of markets, organizations have to face new challenges regarding the use of resources, the optimization of value-added chains and the choice of locations.17 Just as the related term “globalization”, internationalization can be described not only as a condition but as

13 Cp. Beth Bertelsen. Everything You Need to Know About SWOT Analysis. Newmarket: BrainMass Inc 2012, 9; Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2.; Team FME. 2013. “SWOT Analysis – Strategy Skills” (2018-02-26) p. 16f. 14 Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2. 15 Cp. Carly Propert, Christophe Speth. The SWOT Analysis: A Key Tool for Developing Your Business Strategy. Namur: 50Minutes.com 2015, 2. 16 Cp. Hermann Sebastian Dehnen. Markteintritt in Emerging Market Economies – Entwicklung eines Internationalisierungsprozessmodells. Wiesbaden: Gabler Verlag Springer Fachmedien 2012, 8; Gabler Wirtschaftslexikon. Unknown. “Internationalisierung“ (2018-02-28) 17 Cp. Jürgen Bruck, Rüdiger H. Jung, Sabine Quarg. Allgemeine Managementlehre – Lehrbuch für die angewandte Unternehmens- und Personalführung. Berlin: Erich Schmidt Verlag 2008, 531.

6 a process as well. Contrary to globalization, internationalization also takes cultural and 18

economic country-specific features into account.19 Internationalization is a phenomenon influencing all industries and it does not stop when it comes to football. Explaining the internationalization of the football business, having a glance at the history of football is useful: The origins of football go back to England where not only the first football club has been founded (Sheffield FC in 1857) but also the first binding rules have been developed by the Football Association (FA) in 1863. Already seven years after that, international comparisons were held with the first international match between England and Scotland. Today, a football fan does not want to image a world without World and European Championships, the Champions and Europa League.20 The aspects of internationalization mentioned above can be seen in the football business as well: Football clubs are expanding their action area to international regions. Most of these actions are intended to reach a wider range of fans worldwide in order to generate revenue through the sale of medial right of use and merchandise items like jerseys.21 Capacities in the home countries are fully exhausted as the stadiums of Bayern München and Borussia Dortmund are always sold out. Instead, especially foreign TV-channels are offering huge potential for promotion.22 The most attractive target markets clubs are concentrating on are the Asian (especially Chinese) and American market.23 Therefore, the following analysis concentrates only on the internationalization towards these markets.

18 Cp. Harald Germann, Bert Rürup, Martin Setzer: “Globalisierung der Wirtschaft – Begriffe, Bereiche, Indikatoren.“ In: Ulrich Steger (Ed.): Globalisierung der Wirtschaft. Berlin/Heidelberg: Axel Springer 1996, 23f. 19 Cp. Wiesner, Knut. Internationales Management: Wirtschafts- und Sozialwissenschaftliches Repititorium. München: Oldenbourg Wissenschaftsverlag GmbH 2005, 11. 20 Cp. Pascal C. von Overloop. Internationalisierung professioneller Fußballclubs – Grundlagen, Status quo und Erklärung aus Sicht des Internationalen Managements. Ottobrunn bei München: Springer Gabler 2015, 2f. 21 Cp. Pascal C. von Overloop. Internationalisierung professioneller Fußballclubs – Grundlagen, Status quo und Erklärung aus Sicht des Internationalen Managements. Ottobrunn bei München: Springer Gabler 2015, 4. 22 Cp. Jonas F., Thorsten Wirth: “Die Internationalisierung des FC Bayern München. Konfiguration, Koordination und Kundenintegration bei einem international tätigen Fußballclub.“ In: Dirk Holtbrügge, Hartmut H. Holzmüller, Florian von Wangenheim (Ed.): Management internationaler Dienstleistungen mit 3K – Konfiguration, Koordination, Kundenintegration. Wiesbaden: Gabler GWV Fachverlage GmbH 2009, 114. 23 Cp. Julian Kawohl, Ewald Manz, Dieter Zeibig. 2016. “Profisport 4.0 Wohin rollt die Fußballbundesliga? Eine Analyse zu Digitalisierung, Innovationen und Internationalisierung des Geschäftsmodells“ (2018-03-05).

7 But how do clubs make the market entry in new countries and expand their foreign activities in order to internationalize a club? There are four aspects generating most interest: Firstly, one needs to mention physical appearance of the team via test matches and marketing performances. Secondly, using digital media activates a virtual fan base. Thirdly, cooperation with global organizations and sponsors located in the target market in connection with the support of the youth work of a club leads to increase of interest. Fourthly, having a key player from the target market generates further identification.24 Having these aspects in mind, the following chapter aims to analyse the internationalization activities of the two football clubs FC Bayern München compared to Manchester United with the help of the SWOT analysis. 4

SWOT Analysis using the example of FC Bayern München compared to Manchester United

The following paragraphs include the execution of the SWOT Analysis using the example of the two football clubs FC Bayern München and Manchester United. The two clubs have been chosen since they are the market leaders regarding the internationalization in their respective home countries. Moreover, they both are national record champions in their home countries and are attracting millions of fans around the world. Since England and Germany are two of the biggest football nations worldwide, one can compare internal and external factors of the two clubs and point out similarities and differences regarding the internationalization strategy. 4.1

FC Bayern München

Founded in 1900, the FC Bayern München AG has become the most successful German football club having won the German championship 28 times (including season 2017/2018), the DFB cup 18 times, the Champions League five times, the Intercontinental Cup twice and the UEFA Cup once.25 The club is led by CEO Karl-Heinz Rummenigge and deputy CEO Jan-Christian Dreesen. The management board is completed by Andreas Jung and Jörg Wacker. 26 24 Cp. Julian Kawohl, Ewald Manz, Dieter Zeibig. 2016. “Profisport 4.0 Wohin rollt die Fußballbundesliga? Eine Analyse zu Digitalisierung, Innovationen und Internationalisierung des Geschäftsmodells“ (2018-03-05). 25 Cp. FC Bayern München AG. Unknown. “Von Beginn an erfolgreich“ (2018-03-05); FC Bayern München AG. Unknown. “Erfolge“ (2018-03-05). 26 Cp. FC Bayern München AG. Unknown. “FC Bayern München Management“ (2018-03-05).

8 Since October 2017, the team is managed by...