Internationalization in professional European Football A case study defining the successful strategy

Internationalization in professional European Football

A case study defining the successful strategy

A master thesis

by

Ton Koop

1771825

University of Groningen

January 2015

The football industry is booming, revenues are growing and clubs try to widen their strategies and views. The past 20 years clubs tried to achieve success overseas, with different outcomes. This explanatory qualitative research will focus on the successful strategies of two selected

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Content

1. Introduction ... 3

2. Theory ... 5

Internationalization ... 5

The international football organization ... 6

Success factors ... 7 Internationalization strategies ... 9 3. Methodology ... 16 Method of analysis ... 17 Case selection ... 17 Analysis instrument ... 19 Data sources ... 19

Analysing the sources ... 20

4. Analysis ... 22 Manchester United ... 22 Real Madrid ... 29 5. Results ... 34 Similarities ... 34 Brand: Merchandising ... 34 Brand: Pay-TV ... 35 Brand: loyalty... 37 Sponsorship ... 38 Differences ... 38 Player acquisition ... 38

AFC Ajax and Liverpool FC ... 39

6. Conclusion ... 42

7. Discussion ... 44

Practical implications ... 44

Limitations and future research ... 45

8. References ... 47

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1. Introduction

European football is of increasing importance to continuous research in the field of

International Business. It is a huge and fast growing business, operating worldwide. Despite these facts, it still lacks systematic knowledge. Today’s football is International Business. Football players are transferred on high frequency all around the globe, football is played in international leagues, sport goods are traded worldwide and the finals of the European Cup or FIFA World Cup are top media events shown all over our globe (Horne & Manzenreiter 2002). The FIFA, (the international body governing football, Fédération Internationale de Football Association) recently published the list of all territories that obtained the right to broadcast the upcoming World Cup 2014 in Brazil, whereby the total number of territories equals 200 (FIFA, 2013). Not only in 2014 can the World Cup be seen all around the globe. In 2010, the World Cup took place in South Africa. According to an official FIFA statement, the total world cup in-home television coverage reached more than 3.2 billion people around the world, or 46.2 percent of the global population at that time, based on viewers watching a minimum of one minute of coverage (FIFA World Cup South Africa, 2010).

Football is also related to many government policies, emphasizing the importance of the industry. A research by the Dutch government has shown that the organization of a World Cup has positive effects on national pride, solidarity and national identity. (Van den Berg et al., 2010). Japan and South Korea aimed for environmental benefits for their hosting of the 2002 FIFA World Cup. South Korea focused on introducing the finals as a ‘catalyst for peace’ on the Korean peninsula, meanwhile the Japanese aimed for promoting the country’s

infrastructure, high technology and political stability with their bid (Sugden and Tomlinson, 2002, Sugden and Tomlinson, 1998). Awarding the World Cup for the first time to the Asian continent in 2002, also the FIFA made a strategic move towards the globalization of football. Eight years later another continent was awarded with hosing a World Cup for the first time. It was time for the African continent and South Africa in particular to host the world’s largest sport event (Dolles and Soderman, 2005).

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billion GBP (Deloitte, 2013). Professional football thus made a shift from a sport to a

commercial process where the match is only one product and the audience only one source of revenue.

Not only football in general is becoming more global. Also the clubs in particular try to develop global strategies and establish a globally known brand-name. This process started in the early 90’s, when a new ‘type’ of director emerged. The new directors treated football clubs like business and tried to monetize their fan bases (King, 1997; King 2002).

The goal of this research is to investigate the road to international business success that professional football clubs followed during the past 20 years. The central question to this topic will be: what are the strategically success factors for professional Football Clubs that want to gain a more competitive position in the international business market by increasing revenues coming from markets other than their home market. Past research especially focused on one specific club, analysing the entire business model or strategy (Edensor and Millington, 2008; Szymanski, 1998; Callejo and Forcadell, 2006), or globalization of football in general (Dolles & Söderman, 2005; Giulianotti and Robertson, 2004; David and Millward, 2012). Past research is also especially found in sociological fields. About the cultural aspect of globalization (Giulianotti and Robertson, 2004) or describing transnational forces within a sociological model in the world game (Giullianotti and Robertson, 2012). This research digs deeper in the strategies of the clubs that successfully expanded and diversified their income internationally in the past 20 years. Linking strategies of several clubs and trying to seek the critical factors that define and explain these successes.

The structure of this research paper is as follows. After this introduction, a literature review will try to define the concepts related to the research problem and will summarize the most relevant literature on internationalization, brand development and business success in football. Following the theory, the research methodology will be elaborated, including an introduction to the case study, an explanation of the case selection and data resources and lastly the

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2. Theory

Many motives to internationally diversify business can be found in existing literature.

Although a general consensus cannot be derived from the literature, this section elaborates on the most important aspects. A distinction between pull and push factors is made by several authors. Pull factors are factors that make the foreign market attractive, resulting in pulling the company into the foreign market. Push factors are defined as factors that are unattractive at the home market, causing a push movement away from this market into other markets (e.g. Treadgold and Davies, 1988; Kacker, 1985).

Besides this macroeconomic approach, literature also focuses on the firm-based approach. Vernon (1966) introduced the product life cycle with regard to international trade theory. He stated that, in the first phase, innovation occurs in unsatisfied markets because high prices can cover the R&D expenses. After the product is introduced in the market, demand increases and production has to go up. This is the second phase where the product gets standardized. In the third phase demand decreases and sales growth slows down. The last phase is characterized by declining sales and eventually the production stops.

When an enterprise has a reason to go international, theory argues that the enterprise will follow a certain path on their internationalization journey. The Uppsala model is a well-known model describing this path. However criticism on this model says that the model is restricted to manufacturing firms. Therefore the model was changed in 1990 by Johanson and Vahlne and further developed in Johanson and Vahlne (2003). Where the original version included learning in the focal firm only, they included business relationship learning and commitment in the internationalization process. The discussion of Johanson and Vahlne (2006) led to the conclusion that internationalization is not following a path. The authors believe internationalization is rather a result of the process of increasing knowledge and opportunity development through mutual commitment than the risk reducing path that stems from the Uppsala model. Incremental internationalization is a process about exploiting the opportunities that are identified at that moment.

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for European professional sports clubs were gate receipts. National and local governments and firms provided the clubs in some countries with subsidies. In the 1960s and 1970s corporate sponsorship increased in importance as firms aimed for more direct identification in terms of image, audience, notoriety and sales. Typically those sponsorships occurred in situations where the firms were located geographically close to the clubs. Examples include, Philips and PSV, in Eindhoven, the Netherlands and Juventus and Fiat, both in Torino, Italy. The above model of revenue income is referred to as the SSSL model, ‘Spectators-Subsidies-Sponsors-Local’ (Andreff and Staudohar 2002).

The clubs progressively discarded the SSSL model over the course of the 1990s’ by putting more concerns on revenue and profits, regardless of success on the pitch. Where broadcasting income hardly existed in the 60s and 70s, it contemporary is responsible for a big part of the revenue streams of clubs (Deloitte & Touche, 2013).

During this phase, clubs also started entering the international markets in the search for increased profits and competitive advantage (King, 1997, 2002/1998; Dolles & Soderman 2005).

To illustrate the growth in this market we use the article of Szymanski (1998). Szymanski stated that the revenue of Manchester United, one of the most successful commercial clubs in the world, in the season 1988/1989 equalled €13.9M1. Commercial activities of the club at that time generated €5.1M2

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Total revenue of the club in 2012/2013 was €423.8M with €177.9M coming from commercial sources. An increase of 3388% on commercial revenue (Deloitte Football Money League, 2014). The club now possesses marketing outlets in Asia and North America.

The international football organization

This section will take a closer look at the international organizational entity itself. Smith (1997) mentions three features of the TTNC, the truly transnational corporation. Those

features include a corporation: freely undertaking R&D worldwide, recruiting elite employees from all over the world and being flexible in product development and micromarketing. Chang (1998) notes that few corporations act truly transnational. FDI is not distributed globally, but regionally bounded. Only a few ‘stateless’ TNCs produce products that are truly global. Most TNCs are, according to Chang (1998) international firms with assets, key

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Number derived from the official amount, 9.441.000GBP. Exchange rate of 1989 applied: 1 GBP=1.474679 EUR.

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employees and production processes that contain a ‘largely home national imprint’. This is particularly important for football clubs. Football clubs cannot serve as a TTNC since they always have to stick to their own national league.

Various transnational corporations (TNCs) serve as a dynamic agent in contemporary internationalization of professional football clubs. The clubs partner up with merchandise TNCs like Nike, media corporations like BSkyB and sisters. These TNCs are characterized by worldwide infrastructures for distributing, marketing and producing sports-related

commodities like equipment, jerseys and DVDs (Robertson, 1992).

In addition to partnerships with TNCs, also football clubs can act like TNCs. Mainly the top European clubs try to create their own non-local communities of global consumers. Clubs like Manchester United, Juventus and Bayern Munich have global communities all over the world. They stem from the dispersion of club-related products and images around the world and the voluntaristic identification of persons or groups with those club-related symbols and practices (Gulianotti and Robertson, 2004). The organizational structure of Football Clubs differs across countries which can effect international success. In Spain clubs are commonly owned by members, called ‘socios’, and controlled by elected directors, which indicates a more emotionally driven strategy. In the UK the leading clubs are listed on stock markets while the remained are organized as ‘limited companies’. Italian clubs tend to be owned by rich local industrialists, like FIAT and Juventus (Juventus Football Club S.p.A., n.d.). In the 1980s however, owners may emerge from new industries, for example Berlusconi owning AC Milan (Gulianotti and Robertson, 2004).

In recent periods leading clubs in Germany (Borussia Dortmund) and Italy (Lazio, AS Roma) followed the English clubs in their way to stock markets. Despite this dramatic transfer of ownership and control it is unlikely that this will lead to non-national ownership and thus international diversification of ownership (Gulianotti and Robertson, 2004).

Success factors

According to Szymanski (1998) many people would argue that success on the pitch is the only reason for business success for football clubs. Szymanski, however, argues that:

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Criticizers of football business research would argue that financial success and on-pitch success go hand in hand. However, Szymanski (1998) found that no systematic relationship exists between financial success and success on the pitch.

Change in current year league position

Up Down

Change in current Up 27% 22%

year profits Down 25% 27%

Table 1: league position and current profits

Szymanski argues that if above average performance on the pitch would always lead to higher revenues and profits, the table above (table 1) would show half of the clubs that move up with league position, also would move up with profits. The other half of the clubs that move down with league position would move down with profits. Top-right and bottom-left boxes of the table above would be empty. Because all boxes now show almost an equal percentage, it is more-or-less equally likely that profits are influenced negatively or positively.

Szymanski’s conclusion confirms the increased attention of clubs in commercialization. To better understand revenue streams a deeper look at the status of football fans is necessary. Regarding this subject it is interesting to know if it is more appropriate to speak about

supporters or about customers. In literature there is no simple definite answer to this question. Oppenhuisen and van Zoonen (2006) argued that it depends on the type of sport. Where professional football clubs use operational marketing extensively to sell products, this is less present in, for example, athletics. Also the type of fan is important. Fanatical fans, as

employed by Hunt et al (1999) are more resistant to being treated as customers by their supported clubs. A research of Richelieu and Pons (2005) noted that regular or die-hard ice hockey fans in the US can perceive the marketing strategies employed by their club

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Internationalization strategies

Football Clubs most of the time yield historical ties with their home ground. Club names are connected to the cities they stem from. Gulianotti and Robertson (2004) wrote in their article that football has always been tied to nostalgia. Football stadiums transformed into heritage sites that house museums. Classical music is used around its major tournaments. A strong emotional tie moves supporters into wearing particularistic symbolism with dresses, flags and songs. As stated before the football clubs used the SSSL (Spectators-Subsidies-Sponsors-Local) system until the ‘90s as their sources of income (Andreff and Staudohar 2002). Simply because it was not possible to reach out to global audiences. Gulianotti and Robertson

underlined the substantial role played by mass media corporations in football’s globalization process. Global audiences were able to see football images due to world cartels of cable, satellite and free-to-air broadcasters creating a global football culture.

The trend to move towards internationalization was a general one. International markets opened up gradually in the past, with increasing free trade of goods, services and labour. However, the latter seems to be much less apparent due to cultural and social barriers according to Kesenne (2007). The football market is an exception to this rule. The Bosman verdict in 1995 has set free the European player market. The Bosman verdict abolished the restrictions to the number of foreign players that can be fielded and the retain and transfer system for end-of-contract players. This caused an tremendous increase in professional player mobility which increases internationality of football teams.

This section will continue with an theoretical overview of the factors that are influencing business performance in football organizations, in particular international business performance. The few studies that exist on this topic focus on the brand image of an

organization. Andrews and Ritzer (2007) researched the empirical continuum through which globalization can be conceptualized. This continuum is bounded on the one end by

grobalization (organizations, nations and corporations that have imperialistic ambitions and the desire to impose themselves in other geographic areas) and on the other hand by

glocalization (the combination and interpenetration of the local and the global, which results in unique outcomes in different geographical areas). In short, grobalization is focused on creating a world-wide brand image without different perceptions across nations while glocalization is the creation and distribution of a local brand all around the globe.

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customers is needed, creating a customer base.

From those perspectives two subsequent steps can be identified needed for international business success. Firstly the creation of a globally appealing brand image is needed. Secondly the fans attracted to this brand need to be transformed into money spending customers.

What is needed for creating a more appealing brand image? Grundy (1998) estimated the value creating factors in the football industry in his article. Grundy defines this value creating factors as:

'Anything internal or external to a business which directly or indirectly contributes to cash inflows.'

The model is shown in figure 1. Contradicting to the article of Szymanski (1998), Grundy gives a central role to match performance in his model. Szymanski focused on the direct short term effect of league performance on the profitability of a football club while Grundy

highlights the importance of maintaining performance in the long run. This is in line with several documents of the Barclays Premier League (2012), the lower the league performance in the long run, the lower the media attention a particular club will get. A possible conclusion on this contradiction can be that the one does not out rule the other.

An interesting finding of a research of Bodet and Chavanat (2010) was that being too successful can be considered as a disadvantage. A response of one person in the study of Bodet and Chavanat explains this statement:

‘Success on the pitch is very important and decisive but I think it is very boring if a team such as Manchester United can always win the games, then for me, victory is not a key factor to become a fan of the team’.

This statement tends to prove that marketing management programs for professional football clubs for even not so successful clubs can attract satellite fans with a precise marketing strategy.

From the other components in the value model of Grundy we will derive the ones that (can) have an international aspect. The following value components can be taken international and thus add value to the international business success of a football club:

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-Sponsorship -Player acquisition

These components will serve as the red line for the analysis of this research. Firstly brand will be further elaborated since brand is the main basis for merchandising and pay-tv income. Therewith merchandising and Pay-TV will function as the main factors of generating money from a good brand. In the following section modern literature will be used to review the applicability of these concepts to the subject.

Figure 1: Grundy's football club value model ( Grundy, 1998)

Brand

The first step identified for international business success was creating an appealing brand image. Brand is an important component of Grundy’s model. Also other literature focuses on brand while there is hardly to none literature found on the concepts of Pay-TV and

merchandising. Brand, in Grundy’s model has positive relationships with Pay

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What is the process of establishing a brand? A study of Bodet and Chanavat (2010) explains the process of establishing a strong brand. The authors developed a framework on the building of global football brand value necessary for commercial success of a football club. Their conclusion was that football clubs not need to move rapidly into emerging markets, but have to consider every step they take in order to develop a solid strategy. This is in line with the revised Uppsala model of Johanson and Vahlne (2006) stated before.

The role of the tradition and history of clubs in the creation of a brand also needs further explanation. Clubs are according to Perlmutter (1972) ‘ethnocentric’ by retaining key symbolic ties to their home ground. Those ties consist of name, home stadium, kit colour, local support and branding. Brand awareness would increase if the clubs would play their home matches outside of their home stadium or city or if they would hide their geographical origins. Robertson (1995) elaborated on the social process around the globalization of football, namely the glocalization of football. Emphasis is on the history and traditions of football clubs, which is the key to brand associations. Robertson came to four stages of

glocalization. At the first stage, some cultures rejected or reformed the rules of the game when football was introduced. For example the Asian local elite preferred gentle sports like cricket and hockey to intense contact football (or rugby). Australians composed their own football rules (Australian Rules Football) to fit local conditions. The second stage consisted of local cultures adapting the universal football rules and therewith developing their own traditions. The third stage was marked by the ‘particularization of universalism’ from the 1920s to the 1960s. This concept included the introduction of national and regional football associations that worked under the umbrella of a governing body on the world stage. The fourth stage, from the 1960s on, involved the transnational flow of labour, capital, information and commodities. Differences between nations on tactical and aesthetic grounds started to diminish. Spectators in the stadiums played a heightened role while representing the locality of the club, or the nation. Spectators showed particular symbolism in the form of songs, flags and the way they dress. This triggered global audience, which contained communities of followers who relativize themselves into preferences on a world stage for players, managers and clubs resulting in certain associations. This indicates that for the success of a brand, tradition and history is a necessary factor.

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without history, identity and spirit. Respondents did agree that traditions and history are essential assets for a brand, even when they don’t have good knowledge about the football clubs history.

The step to revenue

Once brand awareness is created and fans are connected to the club it is important to maintain that loyalty and earn revenue out of it. One important factor Bodet and Chavanat (2010) gave was that the reason respondents were loyal to a particular football club because this was the first football club they were aware of. This statement means that being fan of a football club is not a rational choice between several alternatives, but more a choice of the first club that moved in position. According to Day, (1996) this could mean that brand loyalty can be more related to inert behaviour rather than an active, behavioural loyalty.

Bodet and Chavanat (2010) however found a change in this inert behaviour. Awareness of competitive clubs and team features is rising because of the availability of direct information like TV broadcasting and new media. One respondent in the study said that an absence of strong emotional bonds, as explained by Robertson (1995), could lead to leaving the club as a supporter. The respondent that gave this answer left an English football club due to a strong affiliation to a local Chinese club. This could indicate that increasing direct information, via for example Pay-TV, towards the fan base or increasing direct contact between fans and the club could lead to customer (fan) acquisition and club (brand) loyalty.

The importance of television broadcasting is also directly related to income for football clubs. The international Champions League is responsible for 169 million euro in total in the UK, going to all clubs participating in that league (for the year 2010). In Spain the participating clubs received 91 million.

Wann et al. (1996) found that talent level and personality of the players, familial and parental influence and success of the team are most important to maintaining loyalty to a sports club. In addition to this, Jones (1997) stated that familial, cultural and geographical binding appeared to be the most important reasons for staying supporter of an English football club. Above literature indicates a need to take a closer look at the ways football clubs increase loyalty among their fan base, through for example direct information facilities. It is also necessary to take a look at the different channels clubs use to serve their fan base with products that generate revenue for the club.

Sponsorship

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quality enhancing factor of brands. The importance of sponsorship is also emphasized by Deloitte (2012). Total sponsorship in the European soccer market was estimated to be 20.9 billion USD. Sponsorship is defined as ‘an investment, in cash or in kind, in an activity in return for access to the exploitable commercial potential associated with that activity’

(Meenaghan, 1991). Clubs sponsorships are a valuable stream of revenue for many clubs and represent an important marketing tool (Bühler, Hefferman and Hewson, 2007). Henseler et al. (2011) states that sponsorship can be viewed as a business to business relation between a sport entity and a sponsor for mutual benefits. However, existing literature focuses on the benefits for the corporation only, where the only benefit literature mentions for the sport entity, is the amount of cash flowing to the entity. For example, benefits for corporations are overcoming cultural barriers (Cousens, Babiak and Bradish, 2006), building relationships with media (Chadwick & Thwaites, 2004), involvement in society, enhancing brand awareness and promoting positive brand images, entering new markets and protecting against competitors (Apostolopoulou & Papadimitriou, 2004). Exploring the sponsorship relations of successful football clubs is therefore an interesting and necessary topic in the analysis of this study.

Player acquisition

The next part will go deeper in the influence of player acquisition on business success. McGovern (2002) states that a circulating class of players, coaches and agents is growing in the past decade in the major leagues of Spain, England, Italy and Germany. Recruiting foreign players can be seen as a form of extra football FDI which raises awareness of a club. The transfer of David Beckham to Real Madrid in 2003 drew many direct connections between the club’s global ambitions and player celebrity status from football commentators. High

merchandise sales can lead to increased transfer budgets for new players. However club performance is, in the end, related to financial performance, therefore no director would harm their club’s competitive status on the pitch by demanding that highly marketable, weak

players have to participate in the team.

Hugh Tallents, strategy director at Interbrand in New York says the following on signing players from foreign countries (Korosec, 2013):

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3. Methodology

For this research the chosen methodology will be the explanatory case study research design with theory building as its goal.

As became clear in the previous sections existing literature on research in the field of football club management is small in numbers. The result is that little is known about the phenomenon of interest, internationalization strategies for professional football clubs. The case study design will produce detailed rich information of the typical cases that are subject to the research. Comparing the situation of the cases with existing general theory on

internationalization will lead to construction of explanatory theories and propositions on the topic.

The analysis of the cases will be based on Yins’ (2004) strategy: developing a case

description. The original and explicit goal of this study is a descriptive one in order to develop hypotheses and propositions for further enquiry. Developing a clear case description will make sure all the facts are rendered in the cases and will give a broad base for further research. Later in the methodology section a note to this strategy will be presented. To produce a high quality research outcome it will be a single case study design with two cases. Two cases will also increase the external validity of the research. Wilkins and Dyer (1991) argue that the essence of a case-study research is the in-depth investigation of one or two cases. They suggest that many of the classic case studies in management research were based on one or two cases.

Various data sources will be used to identify key activities that are absolutely necessary to the organization for grasping income successful internationally. The key subjects for

internationalization within a football organization were defined in the previous chapter. Those subjects will give guidance in the analysis of the data. The observation list in Appendix I is used as a practical guidance for the data analysis. As will become clear in the next section, the clubs researched are two of the most internationally diversified clubs regarding income in the world. This indicates that the general strategy they follow is successful. However it is

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annual report? And how often is it mentioned in official club documents?

The goal is to identify a congruent path that clubs follow with successful internationalization strategies. Producing one strategy theory out of the two cases can be helpful to the managers of clubs that struggle with international business success.

Method of analysis

Identifying similarities, patterns and linkages between the different strategies that clubs follow is the main objective when analysing the data. These similarities will reflect the most successful strategy of the clubs. Not only are the similarities relevant. Also the differences are interesting for this research. Identifying the differences and seeking explanations for the specific differences in existing business literature will lead to a higher level of analysis. The principle behind finding the similarities, patterns and linkages is content analysis. The content is classified in terms of internationalization, strategy and success regarding the concepts explained in the literature section.

To identify strategic decisions it is important to look at the intentions of the organization. A pure strategic move requires an intention announcement before the move is made.

Also making a précis is important. The large amount of data will be reduced in order to summarize and condense them so that they are meaningful in terms of the study’s objectives, by for example, condensing a larger volume of text into a category label, a type name or a few sentences. The data has to be made more intelligible with as little loss of information as possible. The goal is to find patterns of internationalization processes between the different cases.

In order to make the relations between the similarities and patterns story telling will be used. The goal is to link the specific events and actions in a sequence that leads to the outcome to be explained.

Case selection

This research will focus on two main cases. Since the goal of this research is finding a

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performance over 20 years in both databases will be used. Two clubs clearly stand out: Manchester United and Real Madrid. The unit of analysis of the two cases will be the entire organization since the year 2000, bounded by the topics given in the theory section and listed in the Appendix.

Besides the two main cases, a closer look will be taken at Liverpool FC and AFC Ajax. Liverpool FC operates in the same league as Manchester United FC. They also won the Champions League trophy in the past decade. However there revenue is almost twice as small. This indicates that although they operate in the same institutional environment as Manchester United, they lack the ability to compete on the same level. Analysing Liverpool FC however could lead to interesting insights regarding the successful strategies.

AFC Ajax has a very successful sportive history in Europe. There revenue however is over four times as small as the revenue of the two main cases. They operate in the Dutch League. This could lead to interesting findings about the role of the league in the performance of a club.

External validity and method bias

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Its use is limited to a certain area of application. Van Aken states that design studies generally use both description and prescription driven research. Management research however has a strong bias to just description driven research, with the latter resulting in mainly conceptual research outcomes. The description research tends to treat management implications as an afterthought or conclusion of the analysis and is not tested as such. This research is mostly from an observers perspective. The instrumental outcomes, coming from prescription research however, should be gathered from a player's perspective. This perspective uses 'prevision' intervention-outcome logic: what is the intervention a player should use in a certain context to come to the desired outcome.

Another important aspect is the generalizability from a ‘what is’ research. This research uses a ‘best-practice’ method. The successful organizations are used to generate a conceptual theory. It is interesting to look at the application of the results when the context is changing. Is a successful strategy still successful when many other clubs are using the same strategy? In order to answer those questions a more in-depth look at the strategic decisions is necessary. Therefore in order to make the results of this research applicable to the management of football clubs, the propositions (or technological rules, as van Aken calls them) should be field-tested.

Analysis instrument

For the analysis of the data sources an observation list will be used. The list is provided in appendix I. The observation list is based on the framework elaborated in the theory section of this research. While analyzing the football clubs the observation list will serve as a guideline to increase the accuracy of the information.

Data sources

Because of the public interest in football in general a lot of information and data can be found for the two cases. The most detailed information, however, can be drawn for interviews. Especially for identifying the intentions of the soccer clubs interviews would be a good source. In the pre-stage of this research several professional Football Clubs were contacted. The only club that answered was AFC Ajax. They said that they are only participating in interviews to national or international media corporations. Therefore sources for conducting this research were limited to the sources listed below:

Annual reports

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excessive access to their financial accounts and investor information. Some clubs are also listed in one of United States of America’s stock exchanges. These clubs are obligated to hand in a SEC filing every quarter year and an annual report on last year at the beginning of the next year. The SEC is an official government body and therefore the data can be rated of high quality. The standard annual reports can, unlike SEC filings, sometimes produce misleading information.

Academic Journals

Some Football Clubs in Europe have been subject to academic research already. This research includes business model analysis and corporate strategies. The limitation of this source is that relevant information in the source is lacking. It is furthermore a more time consuming source.

News- and media articles

As said before, Football Clubs draw a lot of media attention. Especially the big clubs are every second of the year in the picture of large media corporations. This data source will make the research appropriate for longitudinal purposes. Every move they make is pictured out in the media, already for decades. Plenty of information can be found in the archives. The quality of this data can vary. Not every article is reliable; therefore every source is checked before the article is included in the research.

Official documents and reports

many reports on the modern football are available online. These can vary from reports of the FIFA to reports from international accounting firms like Deloitte. This data source will make the research appropriate for longitudinal purposes. Most of the documents available go in the past and therefore it is suitable for identifying paths over time. The quality of this data is high because most reports are based on objective facts and go far beyond the abilities of this author alone. Possible limitations are that the data in the document or report may be only partly relevant to the topic or that the documents come with closed or restricted access. Furthermore the recording of documents overtime or between clubs can be inconsistent. It is essential to treat this source with the same critical scrutiny as with using other sources of data.

Analysing the sources

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according four steps that have been proposed by Scott (1990).

First of all the authenticity of the source is important. Is the information genuine? It is

important to judge whether a statement of a director in an Annual Report of the Football Club is made by the director himself or that the statement is shaped and transformed by the press office. This is not always the case. When the statement is based on facts, for example opening a subsidiary in Asia, it is not particular significant that the press office assisted with the production of the statement.

Secondly it is necessary to assess the extent and nature of biases that the author brought to the document. What is the interest the author had in producing the document? Are the statements in an Annual report just ‘good news’ to talk up a bad situation, or are they based on reality. As an analyst it is necessary to judge whether it is possible to generalize from the

documentary data. Documents can be subject to selective deposit or selective survival. In the case of selective deposit documents are more likely to be written about top business leaders and large companies. Selective deposit is not necessarily a disadvantage for this research since the focus will be on successful big clubs. Selective survival refers to the process

whereby only an unrepresentative subset of documents survives over time. This might happen when firms destroy evidence on embarrassing or illegal corporate actions.

Lastly it is important to have a look at the essence of the document. The text it contains. A good understanding is necessary to ensure an appropriate judgment of the document.

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4. Analysis

General

Manchester United FC is an English football club, currently playing in the Premier League. The club was founded in 1878 as Newton Heath LYR FC and changed his name to

Manchester United in 1902. Manchester United moved to Old Trafford stadium in 1910 and has been one of the most successful clubs in English Football ever since.

Manchester United is currently owned by the Glazer family. The Glazers acquired the ownership of the club by gradually buying shareholders out between 2003 and 2005. Total stake of the family in the club is nowadays 90%. Manchester United has 1.7 million twitter followers and 39.6 million likes on Facebook3.

Total revenue of Manchester United in 2012/2013 was €423.800.000. Broadcasting revenue this season was €118.600.000 for the club. Manchester united earned €177.900.000 from commercial activities.

Manchester United is operating in the GBP currency market, which is different than most European clubs who operate in the Eurozone. In 2012/2013 Manchester United suffered from unfavourable movements in the GBP exchange rate.

Their commercial efforts continue to grow every year, increasing 30% in 2012/2013. They have added several new regional and global partners and opened a new sales office in Hong Kong. Signing a record breaking deal with GM’s Chevrolet earns them 559 million dollar in seven years. Their current main sponsor, AON, will remain partner of the club by attaching their name to Manchester United’s training ground and training kits

On behalf of Manchester United, a company conducted a research which led to the result that they claim having 659 million followers in the world. Followers are defined by those

individuals that answered survey questions with the answer that Manchester United was either their favourite football club in the world, or a club that they enjoyed following next to their favourite football team. (Manchester United Football Club, 2013; Manchester United Football Club, 2014; Deloitte & Touche, 2012; Deloitte & Touche, 2013).

Strategy

Success on the field drives exposure on TV, which is the key consideration for potential

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sponsors when deciding on the price they can afford for a sponsorship. In the English premier league, Manchester United has a consistently higher turnover than its main rivals. Manchester United also always had the highest commercial income in the English Premier League

(Deloitte & Touche, 2010; Deloitte & Touche, 2011; Deloitte & Touche, 2012; Deloitte & Touche, 2013).

Due to the fact that Manchester United always had the highest turnover, they were also able to pay the highest wages and transfer fees of all English clubs. This led to better players which resulted in a higher attractiveness to the world. This drives a virtuous circle, better players leads to more success, which leads to higher revenues from broadcasting, better sponsorship deals and higher merchandise and ticket sales. (Hamil, 2008)

In addition to having a focus on success on the pitch at any price like other clubs, Manchester United always had a focus on building a business. While other clubs’ revenue income went straight through increased player wages, leading to hardly any pre-tax income, Manchester United consistently reported a pre-tax profit (Chadwick and Arthur, 2008). In Manchester United’s 2004/2005 annual report 5 sub strategies to achieve this profit were identified (Manchester United Football Club, 2005).

- Maintaining playing success - Treating fans as customers - Leveraging the global brand - Developing media rights

- Maximizing the use of Old Trafford football ground

One of the aspects above is confirmed by Deloitte and serves a red line through the club’s strategy. This key element according to Deloitte (2013) and Manchester United’s annual reports (2005; 2012; 2013) in the club’s strategy is the ability to find ways to encourage fans to spend more on United-related goods and services in such a way that they were able to demonstrate their affinity with the club. They addressed this challenge in three key manners:

- Developing a membership concept called ‘One United’ which enabled anyone with some affinity for the club to purchase branded services and goods from the club and their partners such as mobile phones and credit cards.

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Manchester United also developed a CRM system to actively enter the Asian market. The club pursued an aggressive strategy to sell the services above. A CRM system enables the club to effectively target product and service offerings to their followers. The system also provides useful and valuable insides for sponsors who can use the data for accessing the customer segments with their own products.

Merchandising

As a general strategy in merchandising Manchester United strongly diversified it’s product range. Manchester united markets and sells match apparel, training and leisure wear and other sorts of clothing on a global basis, all featuring the Manchester United brand. In addition to clothing, Manchester United also sells other licensed products, ranging from bed spreads to coffee mugs, again featuring the Manchester United brand. Distribution of these products happens through retail centres that carry the Manchester United brand and e-commerce platforms. Furthermore Manchester United uses the distribution network of their partners. Retail, merchandising, apparel and product licensing is outsourced to and managed by Nike, a global distributor of sportswear. The deal with Nike consists of a minimum guaranteed

amount (25.3 million pounds in 2012/2013) and a share of the cumulative profits (12.8 million pounds in 2012/2013) coming from the distribution. A subsidiary has been

incorporated by Nike, Manchester United Merchandising Limited ("MUML"), to which the company granted a sublicense of those certain license rights (Manchester United Football Club 2013; Manchester United Football Club 2014).

MUML currently owns over 200 licensees divided over 120 countries. The club receives loyalties from the sales of specific Manchester United branded products. Some product licensing agreements, earns the club a minimum guaranteed payment. Some licensees have global rights to exploit their license; other licensees have only regional rights. In 2012/2013 Manchester United sold over 5 million club branded products.

Global e-commerce is outsourced to Kitbag and the club receives a percentage of gross sales coming from online sales channels. Besides official Manchester United branded products, their online store also sells Nike products.

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Besides products, Manchester United also offers services. Financial services are one of the key factors in their commercial strategy. The club believes that there is a significant growth opportunity to further develop and grow financial services products carrying the Manchester United brand. Examples of the financial services products targeted by the club are credit cards and debit cards. The club believes key commercial opportunities exist with credit and debit cards. Particularly attractive opportunities are credit and debit cards that also serve as a way of follower expression and loyalty. Dependent on the product category, Manchester United pursues affinity agreements on a territorial specific or regional basis. Examples of the club’s financial services affinity sponsors include China Construction Bank (China), Shinsei Bank (Japan), MBNA (UK), Denizbank (Turkey), Santander (Norway), BIDV (Vietnam) and Ekspres Bank (Denmark).

Brand

Manchester United uses various ways to increase their brand value and image. First of all Manchester United conducts exhibition games and yearly promotional tours worldwide. The club’s promotional tours enable them to engage further with their followers, enhance the marketing goals of their sponsors and extend and grow the reach of the club’s brand in strategic growing markets. In the past 3 years, the club has played 18 exhibition games in Australia, China, Germany, Ireland, Hong Kong, Japan, South Africa, Sweden, Norway, the United States and Thailand.

Manchester United was the pioneer located in Europe for entering the Asian market (Hill and Vincent, 2006). They succeed to maintain their first mover advantage thanks to their global vision, which ‘sets the pattern of consumer preference’ (Johnson and Tellis, 2008). Compared to Real Madrid, this advantage is essential because now Real Madrid is lagging behind

Manchester United. Bridgewater (2007) did a study which concludes that Manchester United’s shirts are most seen on the Chinese streets. Furthermore Manchester United is also the club that is most shown in the news, emphasizing their advantage.

Broadcasting

Broadcasting revenues are coming from the revenue received from distributing and

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The Premier League matches are sold in packages. These packages are distinguished by the time at which matches are played and thus can be broadcast. This can be seen as selling matches on a collective basis, which is in contrast with other European Leagues, where rights are sold individually by clubs. The consequence is that a much higher share of the income goes to the few top clubs participating in that league. Domestic broadcast revenue in the Premier League is divided on a 50:25:25 bases. Fifty percent is divided equally among the clubs, 25% is divided on a merit basis determined by a club’s final league position and the last 25% is distributed as a fee for the number of matches that are shown on television involving a specific club. Most important, the income of overseas Premier League matches is divided equally.

In 2012/2013 Manchester United earned €69.663.7874

from Premier League broadcasting, while relegated Queens Parc Rangers earned €45.537.3285

. Around 33% of Manchester United’s payments is coming from overseas broadcasting, namely €21.686.701.

(Barclay Premier League, 2014).

Selling of exclusive rights actively from Manchester United’s own MUTV to TV stations is part of their strategy to grow revenue from broadcasting. This is confirmed by a press release on 23-06-2013 on the club’s investor website where they announce an extension of their TV channel. MUTV extended their partnership with Icelandic TV station, ‘365’. They also teamed up with two new TV stations, TV2 Norway and SkyNet Myanmar. The goal of the new agreements is to bring the club closer to its fan base by providing them access to club related programs.

Manchester United’s digital media properties are of increasing importance as a way to engage with their global fan base. The club believes that in international markets they face less competition for Manchester United coverage and can therefore attract a greater portion of their followers to the club’s own digital media offerings. The major advantage is that revenue coming from own media offerings is not subject to collective sharing system of the English League. The club tries to continuously attract more followers by adding new and exclusive media content. The club’s followers generally prefer following the club in their own language. Therefore Manchester United is providing tailored services to their followers globally in various languages and through geographic targeting and personalized content. The club

4

Rate derived from exchange rate GBP to EUR at 1-8-2013

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currently has international language websites in English, French, Spanish, Chinese, Arabic, Japanese and Korean, enabling the club to engage with followers in their native language. The club aims to expand this portfolio of languages on the short term. By also providing

personalized content to the geographic locations of each language, the club believes to further engage with their followers which increase loyalty and revenue streams.

One digital media example the club uses are a mobile application called MU Mobile. Manchester United entered into various agreements with local mobile operators who are granted access to operate MU Mobile in specific regions or countries. (Manchester United, 2013)

Sponsorship

Attracting sponsorships with leading brands is part of Manchester United’s strategy. They pursue an active which enables them to identify, secure and support sponsors. This led to an annual 28.7% growth rate in sponsorship revenue from 2011 to 2013. In season 2012/2013 the club announced 7 global partnerships, including a record-breaking deal with Chevrolet.

Furthermore 4 regional sponsorships and 9 telecom agreements and financial services were contracted. Their focus is on a mainly regional sponsorship model. Opportunities are

segmented by product category and territory. Growth is established by constantly expanding their segmental and territorial portfolio. Their newly opened office in Hong Kong has already completed multiple sponsorship contracts in the region (Manchester United Football Club, 2013).

An example of the regional sponsorship model is given on Manchester United’s investor website. On July 31, 2013 Manchester United Football Club announced a regional

sponsorship agreement with PepsiCo in Asia for multiple years. PepsiCo is now the club’s official Soft Drinks Partner in Malaysia, Singapore, Myanmar, Laos, Brunei and Cambodia. In these countries Manchester United’s fan base is estimated to contain around 38 million consumers. PepsiCo holds exclusive rights to use the club’s branding on their products in the seven countries. By connecting the club’s fan base to PepsiCo’s extensive and strong portfolio of brands Manchester United expects to unlock new growth opportunities. PepsiCo has

proven to be a successful player in football marketing, leveraging their brands as a vehicle to connect with consumers in engaging ways (Manchester United Football Club, 2013).

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n.d.) A global brand, like PepsiCo, could mean a global vehicle to access consumers through the partner’s network. Manchester United’s regional focused strategy works in a different way, as will be explained by the following press release of Manchester United on the 15th of January 2013. Manchester United announced a partnership with a Chinese soft drink

company, Wahaha and not PepsoCo. Wahaha is the largest soft drink producer in China and has been carrying this status since 12 years. Manchester United will be able to engage with the growing fan base, exceeding over 108 million people, through the popular soft drink brand (Manchester United Football Club, 2013).

Manchester United owns offices in U.K., New York and Hong Kong with the goal of developing and monetizing the global Manchester United brand by discovering new

opportunities. They specifically pay attention to create a win-win situation for their partners by researching specific opportunities for certain sponsor categories per region. (Manchester United Football Club 2013; Manchester United Football Club 2014).

Player acquisition

Signing Ji-Sung Park, the Korean star player, was probably one of the best moves Manchester United made in order to increase their merchandising income (Rosner and Shropshire, 2004). In other sports this is confirmed by Yao Ming, the most famous Chinese player in the NBA and Jeremy Lin, the Asian American that recently became a star in the NBA. They

undoubtedly made basketball more popular in China.

The problem with signing players from (emerging) foreign markets is the quality they yield. Usually the players don’t have the quality to play for a squad like Manchester United. In order to rise the quality of, for example, Asian players Manchester United opened several soccer schools in the continent.

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Real Madrid

General

Real Madrid Club de Fútbol is a Spanish football club located in Madrid. The club was founded in 1902 as ‘Sociedad Madrid FC’. In every days language the club was called Real Madrid. Real Madrid is the most successful club in Spanish football and they were granted the title best football club of the 20th century by the FIFA.

Revenue of Real Madrid in 2012/2013 was €518.900.000. Real Madrid earned €188.836.000 from broadcasting in 2012/2013 season outcompeting every other football club. Marketing or commercial revenue equalled €211.600.000. Real Madrid has 49.1 million likes on Facebook and 9.9 million twitter followers6.

Deloitte states that Madrid is especially good at generating revenue outside the difficult Spanish Market. Real Madrid closed a new sponsorship deal with Emirates from 2013/2014 on, which significantly increases revenue. They also play pre- and mid-season friendly matches all over the globe, which provides a substantial revenue source that few clubs can match. (Deloitte Football Money League, 2013., Real Madrid, 2014)

Strategy

Callejo and Forcadell (2006) identified two key steps in Real Madrid’s strategy for commercial success. Real Madrid first tried to improve and rationalize the exploitation process of its current businesses. Secondly they tried to increase their brand value to create new revenue sources for their business. A big part of those two steps came from recovering assets that have previously been exploited by partners, to increase their span of control to create a more coherent and rational management. The arrival of Florentino Perez as the club’s new president accelerated the process. His goal was to make Real Madrid the top sports firm in Europe. The two steps of Real Madrid’s strategy switch were focused on the following points:

- Restructuring the organization of Real Madrid around three broad areas: sporting, corporate-economic and marketing.

- Continuously improving Real Madrid as a global brand name.

- Recovering of essential assets that previously had been outsourced to improve their span of control.

- Diversifying their sources of revenue by developing new lines of business.

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- Transforming followers or fans into effective customers. Real Madrid launched products featuring their brand name that fans would buy in order to identify themselves with the team.

After this strategy was implemented, Real Madrid’s income grew from $165.48 million in the 2000-2001 seasons, to more than $331 million in the 2004- 2005 season.

The above strategic intentions are structured below in the dimensions presented in the theory section of this research.

Merchandising

Real Madrid uses several channels to sell its products: internet, telesales official Real Madrid club stores and franchises. Together with Adidas they set targets for expanding and managing their international network of official Real Madrid stores (Real Madrid, 2014). A result of this strategy is that Adidas took over the management of the club’s official shops, both online as well as traditional retail shops. The expansion of the official shops internationally is planned for the medium term. The club has reported growing sales in the past years. The international sales have outstripped sales in the home market in 2012/2013 season by a ratio of 65% international to 35% domestic. Main foreign markets for Real Madrid are Germany, China, the UK, Japan, Portugal and Latin America.

In order to get fans spend money on the club’s products, the focus of Real Madrid is to rule out any barrier or limitation in the relationship between the club and its supporters. The club uses a multichannel strategy for exploiting the brand with a particular emphasis on the new internet-based technologies of the past decade. To rule out the barriers internationally the club develops different websites for different local populations. In 2013 Real Madrid launched a Japanese site, Indonesian site and Arabic site. The supporters of Real Madrid in those areas felt closer to the club because they could enjoy information in their own language.

The eMadristas program is an example of a new technology the club uses. The program is at least twice a month in touch with its members by sending informative newsletters and product information. The program contacted in the 2012/2013 season over 1.200.000 Real Madrid supporters. (Real Madrid, 2014) Real Madrid constantly focuses on launching new

innovations on new media technology. The club was the first football club to launch a sport fantasy game for example. The results were clear, with almost reaching three million

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and launch the first app with the capability of measuring the shooting speed of amateur and professional football players. No app before is capable of obtaining this data.

In Real Madrid’s annual report (2013) specific importance was put on a new strategy. The club, together with their official partner Adidas, developed a strategy for developing and broadening their portfolio of official club products. The club created a separate brand, ‘Hala Madrid’, to enter markets different from those of official match-clothing. The Hala Madrid brand differentiates itself from the official brand in price, quality and distribution channels.

Real Madrid also introduced the Real Madrid Fan Card with the goal of being a medium for managing its fan base worldwide. Cardholders get the title ‘official Real Madrid fan’, receive the club’s magazine ‘Hala Madrid’, get discounts on club products and priority to match tickets (Callejo and Forcadell 2006). Real Madrid claims a continuing growth of their loyalty program, which is present in 140 countries and reaches over 500.000 members. (Real Madrid, 2014)

Brand

A quote from José Ángel Sánchez, responsible for Real Madrid’s marketing in 2005, serves as an example for their brand strategy:

“Ferrari went twenty-one years without winning the World Championship and yet the public continued to regard the Italian company as the world’s greatest automobile brand.”

Therefore, Real Madrid’s strategy is has been focused on consolidating their brand name as a symbol of excellence, prestige and leadership, enabling the club to generate revenue streams from various sources without dependency on the sporting results of the first team. The result is that their model requires economic success before sporting success.

As mentioned in the strategic switch the club made, Real Madrid constantly focuses on promoting the exploitation of its brand, transforming its fan base into customers purchasing their goods and services. The following aspects stand out of their commercial strategy that enhance brand value:

- Exploiting image rights of their players in the advertising market

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Real Madrid started exploiting player’s image rights by negotiating with commercial firms for advertising contracts. Their players were highly attractive because the club’s sporting strategy included the signing of major soccer starts with a high media impact. Different from other club’s Real Madrid forces their players to share revenues from individual sponsorship deals with the club. An example is the signing of Marcelo (Real Madrid player) by Adidas in 2013.

Broadcasting

In the Spanish league TV rights are individually sold by clubs. Barcelona and Real Madrid are selling their broadcasting rights individually to media corporations, creating a huge disparity. Real Madrid is top-owners with 189 million euros revenue coming from TV rights in 2013. The number last in the league, Granada, earned 12 million euros (Liga de Fútbol Profesional, n.d.).

Real Madrid owns its own dedicated TV channel, ‘Real Madrid TV’, as a vehicle to exploit sporting contents. The club regards this channel as a strategic tool for managing the content and information fans or potential customers receive. The strategy outlining at the beginning of the 21st century had one element containing the recovering of strategic assets that are

currently being exploited outside of the club. The club’s TV channel was one of those assets and Real Madrid regained this asset in 2003 in order to increase their span of control. Real Madrid’s owned television channel broadcasts now in more than 84 countries around the world (Real Madrid, 2005, 2013, 2014)

Sponsorship

Real Madrid moved away from a concept of sponsorship to a concept of partnership. The club is always looking for partners that create synergies by adding complementary values to the brand in order to enter strategic markets. The club is targeting industry leaders at the national and international levels. One of the goals of Real Madrid’s new international partnership with Emirates includes helping the club get even closer to all its global fans, especially in countries where Emirates operates. Emirates is operating in 66 countries and is transporting more than 31.4 million passengers each year.

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Madrid has, which can attract more customers to their products. (Real Madrid, 2005, 2013, 2014)

Secondly the club has a business development department internally which is responsible for developing international partnerships. Part of this department’s tasks is negotiating brand development agreements with local partners in certain geographic areas. A brand

development agreement includes the local version of the web page, the signal for Real Madrid TV, the exclusive rights to sell Real Madrid branded products and starting Real Madrid’s stores. Examples of local partners are Pegaso in Mexico in 2002, Platia in Japan in 2004 and Citic Conglomerate in China in 2005.

Player acquisition

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5. Results

In the results section a closer look at the differences and similarities between the clubs will be presented. This will help to draw conclusions and generate propositions from the data. The structure of this part will follow the leading concepts of the theory section, starting with the factors that belong to brand; merchandising and pay-tv (broadcasting).

Similarities

Brand: Merchandising

Both clubs use leading sportswear companies as their partner for official club clothing. Manchester United has been using Nike for several years, while Real Madrid has been cooperating with Adidas as their official partner for many years already. The most important thing that stands out when comparing the two cases is that they outsource their

merchandising, retail and licensing operations fully to their partners.

For example, the contract between Manchester United and Nike provides Nike certain rights to operate the clubs’ global retail operations, merchandising and product licensing.

The clubs remain subject to the contractual provisions and their businesses could be

negatively impacted by non-compliance or poor execution of both clubs’ partners. Another risk for both clubs is that when their arrangements with these partners is modified or

terminated against their interest, the clubs may not be able to find alternative solutions for this portion of their business on a timely basis or on favourable terms to both.

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Brand: Pay-TV

At first it is important to notice that the institutional environment of both clubs is different since they operate in different countries with different leagues. As stated before in Spain broadcasting deals are done by clubs individually with most income flowing to Real Madrid and Barcelona. As well foreign as domestic rights negotiations are executed together.

Sportingintelligence estimated €160m coming from foreign broadcasting sales in the Spanish league as a part of €550m of total annual broadcasting sales. The English league receives an annual amount of €581m from foreign TV sales, which is almost 4 times as much as the Spanish deals (Harris, 2014). However, when we compare this at club level the advantage of Manchester United coming from playing in the English league with the higher, collectively sold, broadcasting income is offset by Real Madrid’s advantage of individually selling their TV rights.

Figure 2 and 3 show that Real Madrid has significantly earned more broadcasting income than Manchester United. While Manchester United has to share the Premier League’s income equally with all other clubs in the league, Real Madrid can keep all their income.

The big disadvantage of the individual selling system in the Spanish League is that the two biggest and most successful clubs, Real Madrid and Barcelona, get all the attention and thus the money. Acting in a more competitive environment however is a possible advantage for Manchester United. Competitive environments generally lead to more innovation, better quality and higher productivity (Stucke, 2013). Barcelona’s president, Josep Maria Bartomeu, reacted in the Daily Mail (Mackay, 2014) on the disparity of income in the Spanish league.

0 50 100 150 200 250 2010 2011 2012 2013 €milliion

Figure 2: Real Madrid broadcasting income

0 50 100 150 200 250 2010 2011 2012 2013 €million

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'Barcelona and Madrid sell individually and we negotiate with a lot of success. That helps us to have as many of the best players in the world as possible. But we know the problem: the Premier League is very competitive. You never know who will win. In Spain, between 2004 and 2014 it has been just Barcelona and Madrid, mainly Barcelona.’

Barcelona’s president is convinced that a highly competitive league will earn the two

successful clubs more income in the long term. Therefore the clubs in the Spanish league are now in the process of negotiating an agreement on selling the rights collectively, which would earn the other clubs in the league more money.

Besides the collective rights of the Premier League, Manchester United sells the rights from its own club dedicated TV channel, MUTV, to TV stations all over the world. However, this is not enough to compensate for the higher broadcasting income that Real Madrid earns as shown in figure 1 and 2.

A study by Porter and Sakakibara (2006) on the influence of home market competition on export performance can be projected on this situation. Porter and Sakakibara found robust evidence that a highly competitive home market has significant positive influence on trade performance. In another article of Porter (1990), he states that domestic rivalry pushes firms to innovate and upgrade their products. Local rivals, like is the case in the Barclays Premier League, neutralize advantages due to local business conditions. Dynamic domestic

competition would foster innovation and in turn, also international competitiveness. This literature indicates that Manchester United has an advantage for competing internationally by acting in a competitive home market.

New media sources

The clubs both use new media sources as a way to maintain contact with their global fan bases. Those services include internet, mobile services and social media. The problem Manchester United reports is that digital media strategies are unproven because digital media is relatively new.

However so far both clubs report a growing number of followers to their media so their strategy can be considered successful. Real Madrid reported a 3.500.000 downloads of their new ‘MyMadrid’application.