Sample Sports Case Study on Arsenal Football Club

Introduction

Arsenal Football Club was started in eighteen eighty-six at Dial square as the first football club in South-East of London by workers whose intention was to have a club that members in their location could play for as other clubs were too far for daily commuting. Since then it has grown to become one of the biggest sports clubs in the world and with its value at one billion, three hundred million it is the tenth richest sports team in the world. Its current manager is Arsene Wenger who has won the premier league three times and as shown below. Arsenal is a football club about to realize exponential growth due to better sponsorship deals and more title wins.

Brief history/Development and strategic objectives

Arsenal was started at a period in time when Association football had grown in England. The sport was no longer in the developmental stages with a professional league being organized and there was, therefore, demand for a club in South London. The formation of the club was also made possible because the league had many teams and therefore the teams had to be categorized according to their zones; this zoning is what led to the demand for a club in South London. The cost of attending football matches across the city was another reason for the creation of the club as most of the residents of South East London were low-wage earners who found the western teams’ entry fees unaffordable (Joy 1952, p.72). The origin of the club’s name is from the Royal Arsenal manufacturing plant where most of the people worked that manufactured explosives and ammunition for the British Army at the time. The key people in its creation were Joseph Smith, Fred Beardsley, and Morris Bates and it started with the name Dial Square but quickly changed its name to Royal Arsenal Football Club.

The target of the club has therefore been to provide residents of South East London with a football club of their own where they can go and see matches at affordable rates as well as to have their own youth participate in the tournaments. The club therefore while motivated to make a profit was equally as focused on developing its community.  The club however had to maintain profitability to achieve these goals and therefore was also focused on revenue through charges to enter the premises as well as sponsorship from other organizations that would want to affiliate themselves with the club. The club as a competitive sports club targets to win the major trophies and leagues in England and Europe and this includes; the English Premier League (EPL), FA Cup, The European champions league, The Carlington Cup, Europa Cup, and FA Community Shield. The Club has over time changed its marketing strategy as it adopted a team uniform and therefore realized profit from sales of their jerseys and other Arsenal merchandise. With the increased viewership of its matches, Arsenal FC also realizes a significant profit from televising its games and advertising revenue is highly emphasized. The Arsenal training academy is also one of the best football academies in the world and therefore produces many of the past, present and future players and Arsenal realizes significant revenue from the transfer fees of these players as well as fees for players on loan during the season who are otherwise not needed (Harris, 2012). The Arsenal Football Club does have several features that are essential to its successful framework and which are unique to a football club.

Corporate

The corporate side of the sport is important although it is not viewed positively by fans of most sports teams who believe that its emphasis is what leads to the increasing prices in player transfer fees and ticket prices, however, due to the competitiveness of the sport, it is necessary for there to be an aspect of profit motive for the club to grow by hiring the best players, payment of quality training facilities and expert coaches. It is through the pursuit of profit that the EPL signed agreements that gave select broadcasters permission to distribute their matches and this has led to it being broadcasted internationally. The arsenal club does have several strategies in place in order to maximize profitability, the most basic of which is the profit from ticket sales. It was only in fairly recent history that Arsenal moved from its longtime home stadium Highbury to the newly built stadium Emirates which has bigger and would therefore record higher revenue per game than they did previously especially given the loyalty exhibited by its fan base. The new emirates stadium has a maximum capacity of sixty thousand making it the second-largest stadium in England as compared to Highbury stadium which had a maximum capacity of thirty-eight thousand. The new stadium was met with criticism by fans who said it did not have the same atmosphere as Highbury however this was dismissed by the management who appreciate their revenue almost doubling (Wilson 2013).

The corporate side of the football club was seen in the manner that they treated the Highbury stadium which had been the home of the team for more than fifty years. The stadium had been viewed as an icon of London football and many parts of its design were viewed as valuables due to their historical aspect. The club demolished the stadium and decided to put up apartments in the location instead of leaving the stadium to stay as a historical location in spite of protests against this move showing once more how Arsenal does not let issues such as sentimental value prevent their commercial success. The club also auctioned items such as goalposts to maximize its returns from the stadium showing that it is aware of the historical value of the stadium and is willing to maximize every bit of it. The emphasis Arsenal has placed on corporate success is therefore seen on numerous occasions as it will overlook public disapproval at the expense of significant revenue. This pursuit of more revenue has also been seen with the success of its academy that has produced leading players in European Football. Arsenal has continuously sold these players instead of focusing on winning the cup as the revenue they earn from the sale of a single star player is perhaps more than the revenue they will get from winning the smaller cups, this is seen in the fact that in the past nine years it has sold five of its captains. This has been a cause of contention in Arsenal due to the importance of a captain in providing leadership for the other players. It takes time for a player to feel comfortable as a captain and the high turnover rate does signify a leadership vacuum on the pitch when Arsenal is playing (Gould &Voelker 2010).

Not For Profit

British football as a whole has not emphasized the profitability and business aspect of football due to the cultural value of the game (Jones 2007). In spite of the increasing costs in terms of transfer fees, the club has made attempts to prevent over-emphasis on the financial aspect as was seen when they protested the practices of Manchester City which from two thousand and eight was acquired by Sheikh Mansour of Qatar. With the purchase, the club had renewed interest in winning the league title however it lacked the net profit to do so. The Qatar investors then purchased players with their own capital, which was a risk for the club as it meant that if the investors withdrew their support, then the club would be unable to support itself and would close. This was also a hazard to the club as it meant that it had a surplus of players whom it began to sell irrespective of their value and many had to take lower rates as they moved to smaller clubs. Finally, this was detrimental to the league since if the practice was to continue then it would raise the cost of players’ fees to the level which most teams could not afford and thereby make the league uncompetitive. Arsenal was one of the teams that were strongly against this practice and pushed for legislation against such moves which did occur as the Barclays English Premier League insisted that teams can only purchase players with money they make from their profit (Gibson 2013).

The not-for-profit side is also seen with the emphasis on the development of youth talent from London. Arsenal does trace its roots to the demand of a team in South Eastern London where a lot of the resident were poor and therefore could not afford to watch the matches in West London, for this reason, the club does take an interest in the plight of players from less fortunate areas and makes possible for them to watch the game by ensuring that ticket prices are not beyond the rates of most people. The club has also offered scholarships to promising players who are from places within and out of East London who are too poor to afford the rates. The not-for-profit aspect of sports is extremely important unlike with other professions, the teams often grow through the support of fans who will exhibit extreme loyalty to their own and associate the team’s success with their own success. It is for this reason that sports organizations cannot raise prices arbitrarily and let the ticket prices be determined simply by the law of supply and demand. If a sports team is to be viewed as disloyal by its supporters or get negative publicity, it can result in people switching allegiances to other teams, and getting their devotion back will not be an easy task.

The Public

The public aspect of the game revolves around its perception and the relationship it has with its fans and other clubs. The public aspect of sports has become increasingly important in the recent past more so with the development in technology that allows users to take pictures and record short clips instantly making modern-day public figures have more scrutiny than their predecessors. This has also meant that modern athletes are expected to live lives that are exemplary to the public and therefore their duties as members of the team go on much more than after scoring goals and their normal life practices. Issues of indiscipline both within and after matches are taken more seriously and if a football player is caught misbehaving in the public even if within the law they can get a fine from FIFA or the Football Association which is Britain’s ruling football organization.

The public image of Arsenal has been of utmost importance to the management as was seen with their current coach Arsene Wenger who is known to have changed the perception of sports by introducing a change in diet and lifestyle for players that was soon copied by other team managers. The coach has also been very important in assisting players who had trouble in their homes and therefore would have been derailed from their training due to a troubled background. The coach has therefore been instrumental in the wellbeing of the team providing mentorship to the youth that he trains in aspects of life out of the field (James 2007 p.109). This has meant that it is rare for Arsenal players to be caught in misdemeanors and if it does occur they are dealt with through counseling to aid the player not just through fines and punishments.

Arsenal is also one of the leaders in corporate social responsibility in Britain with its thirty-four programs initiated it is second only to Chelsea in charity. The Double Club which targets students in primary and secondary school was started by Arsenal and has been very successful, the club has been a source of education to students as they learn foreign languages from foreign players, and with its partnership with British History, it has become a source of knowledge for the youth in Arts and Culture. The double club is also part of the Arsenal Museum where it teaches future supporters about how it started and offers business classes by using itself as a case study (Rosca 2011 p.321).

Strategic Alliances

In order for Arsenal to succeed it has made partnerships with several groups so as to improve its image, sales, and talent scouting. The importance of sponsorship in modern-day sports is extremely valuable to the corporations as much as to the teams, initially, sponsorships were done as acts of philanthropy by the businesses however as others saw the goodwill that fans gave to the organizers of these events more began to pour and currently a top tier sports team will have more than one sponsor (Weight, Taylor &Cuneen2010, p.120). Brand awareness to others is equally as important since most teams will have their sponsors brands on them, this is seen in the fact that every time a team receives a new sponsor it is reported in several new channels and will be formally announced by the club head giving the sponsor a lot of free advertising (Reinhard&Heribert 2005, p.43). The demand for sponsorship has me meant that they are categorized according to the level of sponsorship. The partnerships that arsenal has entered into can be put into three categories; lead partners, official partners, and regional partners.

Lead Partners

Arsenal has two lead partners and is Emirates and Nike, Arsenal went into a major partnership with Emirates in two thousand and four which saw it receive an initial one hundred million pounds from Emirates. The partnership began when Emirates failed to renew its sponsorship of Chelsea and found Arsenal willing to partner with them. The sponsorship included a commitment to build a new stadium which is now complete and to have their logo on the Arsenal jersey; the shirt sponsorship began with the two thousand and five to two thousand and six seasons. The stadium was built at the cost of three hundred and fifty-seven million and was one of the biggest in the history of English football. The partnership with Emirates has been of significant importance to the development of Arsenal as it is the reason for the club’s migration from Highbury and its ability to set up apartments in its former stadium (Gibson 2004).

Arsenal’s partnership with Nike can be traced back to nineteen ninety-four and is one of the oldest partnerships in premier league history. In two thousand and three Arsenal entered into a new contract with Nike for fifty-five million that was to cover a seven-year period. The deal did bring with it a lot of criticism as many felt that it was not enough for the given time frame however the contract stuck and it is only until the commencement of this year that Arsenal has found a new sponsor from their rivals Puma. Arsenal’s new contract with Puma is the biggest of its kind with its agreement to sponsor Arsenal’s uniform at the cost of thirty million pounds annually from the first of July two thousand and fourteen. The agreement is significantly larger than Arsenal’s agreement with Nike and therefore promising the club significantly more fees for transfer acquisitions (Weir 2013).

Official Partners

Arsenal currently has six official partners, the main difference between a lead partner and an official partner is that the lead partners get exclusive rights to have their logo emblazoned on the Arsenal jersey and training kit as well as have the sports stadium named after them. An official partner however has less branding and will not be required to raise as much capital individually as them. In two thousand and eleven Arsenal signed a contract with Carlsberg that made it its official beer for the following three seasons. This contract meant that Carlsberg is the only beer that is served within Emirates stadium giving it a monopoly in the stadium.

Arsenal has also renewed its partnership deal with Citroen that is now allowed to market its cars with the Arsenal brand. The car manufacturer has been an official partner since two thousand and eight and has used its relationship with the club to market its DS4 model. The car manufacturer has also engaged in corporate social responsibility such as donating cars for prizes in raffles whose profits would go to a teenage fund for cancer. Citroen has also sponsored Arsenal’s ventures in the development of art and support for the poor (Gourley 2011). Arsenal is also in partnership with Gatorade health drink since two thousand and thirteen which means that it is the only health drink that is sold in the stadium and it has engaged the squad in a special nutrition program to improve the squad’s performance.  Gatorade is also to release a select brand of products specifically for the Arsenal partnership. The partnership is significant as Gatorade is an American company and gives Arsenal much-needed brand recognition in America where its football league is not as developed as its baseball, basketball, and American football league.

Chinese smartphone manufacturer Huawei is also a partner of Arsenal since the beginning of the year in a two-year sponsorship deal that made Huawei the official provider of smartphones to the club. This is the club’s first partnership with a Chinese company and shows how the sports viewership has grown. This partnership is of extreme importance given China’s population of one billion, the establishment of a fan base in China will lead to significant revenue creation. Indesit which is a manufacturer of home appliances is also in partnership with Arsenal since two thousand and eleven when they entered into a contract worth forty-four million pounds. The partnership is to last for three years however there is expressed interest by the manufacturer to renew this contract after the time period elapses. The sixth official sponsor that arsenal has is Jean Richard watches which is a recent addition with the contract being signed at the beginning of the year. The sponsorship is to Arsenal fifty million pounds annually while the watchmaker is to release a novelty watch that will be sold exclusively at Arsenal generating significant revenue to correspond with the brand name (Bisson 2014).

Arsenal also has eight regional partners which have the right to associate themselves with the Arsenal brand in their respective areas these include Airtel mobile and Imperial Bank Kenya in Africa and Kenya respectively.  The two have been allowed to make products with the Arsenal brand and players can go in their name to participate in charitable activities. Within Europe Arsenal is in partnership with paddy power while in North America it is with BT sport and MBNA, and in Asia with Godog and India on Track. These partnerships ensure that while the respective organizations do not have the funds necessary to become official partners, the Arsenal brand can grow with them benefitting from the affiliation.

Contextual Factors

The Arsenal Football Club is doing well as compared to other clubs in the same league both financially and in regards to league performance. The club has significantly improved its sponsorships since last year which has enabled it to purchase quality players such as Mesut Ozil from Real Madrid, the club’s soccer academy also continues to train quality players who will either join the team or transfer to other teams at a significant profit for the club. The regulations of financial fair play stated that a football team can only purchase players from money that it earned in profit and not from investment by the owner and this model had already been in operation at Arsenal making it unaffected by the new rules. The club is currently the highest-ranked in regards to profit from ticket sales and has the highest profit rate of all the clubs in match revenue. This means that Arsenal’s venture with Emirates has been very successful with its construction of the new Emirates Stadium. It also must be considered that Alex Ferguson retired from the position of coach for Manchester United meaning that Arsenal’s Arch rivals and one of the most successful clubs in the league have been struggling with adjustments to the new style of play of a different coach. This means that Arsenal under Arsene Wenger is in a position to lead the standings for a significant period of time with less competition. This does have the advantage of less competition for the club however it is the paradox of sports that it is when a league is more competitive and unpredictable that it gets more viewers (Smith & Stewart 2013, p.11). A league is, therefore, more likely to attract followers when it has fewer guarantees on the outcomes of matches this however is not an issue as the other teams in the EPL and Champions League still offer sufficient competition to attract fans.

Trends and Possible Next Steps

            It is important for the management to note that Arsenal has only recently recovered from a dire financial situation where it could not generate sufficient profit from sponsors and ticket sales to be competitive; this was due to it signing contracts that were extremely long and therefore underestimated the rapid change in market trends. Arsenal should therefore minimize the time frame of sponsorships to a maximum of four years after which they can either renew the sponsorship or get into new ones with other partners. The Arsenal brand is still highly valued and should not be reliant on other companies to market them. Arsenal has also had a high turnover rate of team captains and this has been attributed to the overreliance on foreign players who therefore do not feel any sense of sentimentality to London and Britain as a whole. These players are therefore in the club simply due to the financial benefits they get playing in Arsenal and are ready to move to clubs in their home countries for equal pay or once they have reached a certain level of financial satisfaction. Arsenal should therefore focus on youth development from locals of East London and avoid putting the team captain position in individuals from foreign countries.

The insistence on financial fair play rules has meant that if a club cannot make sufficient profit then it should not rely on financial assistance from new investors in order to acquire new players. These financial fair play rules are in accordance with Arsenal’s long-time policy of self-reliance however it is important for more international sponsors to be got to market the brand abroad as new markets are emerging in Asia and Africa. Africa particularly has a significant football fan base and could be a place to develop a new market for Arsenal’s products.

Conclusion

Arsenal Football Club is one of the oldest football clubs in Britain and was founded in eighteen sixty-six in order for people in East London to have a venue where they could watch and play football at an affordable rate. The club has since grown to be one of the most successful in London and the tenth wealthiest club in the world. Arsenal has a market strategy that targets revenue generation through the sale of club merchandise, sponsorships from other companies as well as revenue from the sale of established players. As the club developed, it changed its strategy to focus on short-term sponsorships due to market unpredictability and the development of local talent. As the club grows, it can only achieve higher success as it targets new markets for its product.

 

References

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