2.4. Competition structure

Manchester United as a football club takes a participation mainly in three tournaments. There are English Premiere League, Champions League and England Cup. We can consider these tournaments as a market segments. In this segments football clubs compete for:

• _{Championship (Fans, more broadcasting, more merchandising, prize money)}

• _{Sponsor’s money (In a condition of financial fair-play it would be a main source of revenue)}

• _{New players (Main asset for each football club)}

Prize money for UEFA Champions League of 2010–11 were 2.1 million to each team in the play-offs round. For reaching the group stage, UEFA awards €3.9 million, plus €550,000 per group match played. A win in the group is awarded €800,000 and a draw is worth €400,000. In addition, UEFA pays teams reaching the first knockout round €3 million, each quarter finalist €3.3 million, €4.2 million for each semi-finalist, €5.6 million for the runners-up and €9 million for the winners.²² In the last Champions League MU, who lost the final earned 53,2 million euro in total against 51 million euro earned by Barcelona, who won the final.²³

In the same time prize money in English Premiere League for the championship are 18 million euro. And if club in one time take a participation in both tournaments it is a hard choice what will be the bet. You can concentrate all club’s effort on the Champions League in strive for getting prize money, you can lost Premiere League and you will not take a participation in the next Champions League. And all competition is building around these events, because if club doesn’t participate in championships and doesn’t get a trophy.

Another type of competition we can see at the transfer market, where twice in a year football clubs can sell and buy players. And it is a really tough competition period when several big clubs want to get one perfect player. In this case everything is important, image of the team, prestige of the National Championship, last trophies, wage and a sum of transfer. And financial questions depend on right business running compared with non-financial aspects which depend on right football game strategy.

2.5. Strategic maps of competition

To consider Manchester United position in the market and to define its strategic group we decided to use such business tools as strategic maps. And we created two strategic maps depending on the market of football club. As the first market we choose English Premiere League and as the second one Championships League. There are two really different markets even if we speak about strategy, about money, about image of the champion, etc.

First, several words about strategic map as a tool of strategic analysis, strategic map is a device used to communicate context and illustrate the basis managers have used for choosing a subset of the available measures to report on an organizational progress in implementing a strategy. Kaplan & Norton have suggested that it could be used as a simple strategy development tool.²⁴

Let’s start from the first market, English Premiere League, indeed. To create a strategic map and define position of each team we need to choose two axis’s. Correlation between them should not be really high, because we need to define different group with different strategic positioning. For the first axis we choose such variable as sport result. Below we describe our method of calculating these results. And the second axis was a pre-tax profit level.

To calculate sport results of all teams of English Premiere League we took a statistical data for the last six years and collect this data in one table, which you can see below (Table 2.1).

Table 2.1.Ranking distribution through the EPL in the last 6 years.

Football club	2011	2010	2009	2008	2007	2006
MC	3	5	10	9	14	15
MU	1	2	1	1	1	2
CLS	2	1	3	2	2	1
NWU	12	21	18	12	13	7
TTH	5	4	8	11	5	5
LIV	6	7	2	4	3	3
ARS	4	3	4	3	4	4
NORCITY	21	21	21	21	21	21
ST CITY	13	11	12	21	21	21
QPR	21	21	21	21	21	21
AV	9	6	6	6	11	16
WBA	21	21	20	21	21	19
EVE	7	8	5	5	6	11
SANDER	10	13	16	21	21	20
Swansee	21	21	21	21	21	21
Wolves	17	15	21	21	21	21
FLH	8	12	7	17	16	12
BOU	14	14	13	16	7	8
WIA	16	16	11	14	17	10
BBR	15	10	15	7	10	6

Figures which you see in the table mean ranking of the team in the year which indicated in the top. And you understand, if football club has a minimal point, we can say that this club demonstrate the best sport result in the League during last 6 seasons. In the table 2.2 you can see the rating of top 20 clubs of the English Premiere League by sport result:

Table 2.2.Top 20 clubs of the EPL by sport results.

Points	Football club	Ranking
8	MU	1
11	CLS	2
22	ARS	3
25	LIV	4
38	TTH	5
42	EVE	6
54	AV	7
56	MC	8
63	BBR	9
72	FLH	10
72	BOU	11
83	NWU	12
84	WIA	13
99	ST CITY	14
101	SANDER	15
116	Wolves	16
123	WBA	17
126	NORCITY	18
126	QPR	19
126	Swansee	20

There is one thing we need to clarify. You could notice that in the Table 2.1 there are several teams always stay with 21^st place, but there are only 20 places in the English Premiere League. 3 teams which are right now playing in the EPL, were not here for the last 6 years, they played in the 1^st division of English Championship.

Now we need to choose a variable for x-axis. We decided to use one sport indicator and one financial one. For this strategic map we picked up pre-tax profit indicator. Football clubs with a pre-tax profit for 2010 year can be observed in the Table 2.3.

Table 2.3.The English Premiere League pre-tax profit.

Football club	Pre-tax profit, million euro
MU	55
CLS	-70
ARS	-20
LIV	-10
TTH	-10
EVE	-5,8
AV	-5
MC	-5
BBR	-4,3
FLH	-2,2
BOU	-0,7
NWU	0,1
WIA	0,48
ST CITY	0,5
SANDER	3
Wolves	5
WBA	10,7
NORCITY	-5,8
QPR	0,1
Swansee	0,5

So we can see that only one club showed in 2010 really good pre-tax profit and this club is Manchester United. But we should consider the fact that Cristiano Ronaldo was sold to the Real Madrid. (Sum of transfer deal).

And the last but not the least important element of the strategic map is market share. It was really difficult to find an indicator of market share. Because if we speak about computer manufacturers for example, it is really simple, because we know market volume and we have sales data and financial data for calculating market share. But in the case with football league it is not relevant to use such financial factors; there is no market volume, and actually there is no manufacturing, and it is not relevant to use data from transfer market. And we decided to define market share through the prize money of the League and its distribution among clubs. Results are presented in the Table 2.4.

Table 2.4. Market share in the English Premiere League

Football club	Prize money EPL	Market share
MU	15,2	9,13%
CLS	16	9,62%
ARS	14,4	8,65%
LIV	11,2	6,73%
TTH	13,6	8,17%
EVE	10,4	6,25%
AV	12	7,21%
MC	12,8	7,69%
BBR	8,8	5,29%
FLH	7,2	4,33%
BOU	5,6	3,37%
NWU	6,2	3,73%
WIA	4	2,40%
ST CITY	8	4,81%
SANDER	6,4	3,85%
Wolves	4,8	2,88%
WBA	5	3,00%
NORCITY	2,4	1,44%
QPR	1,6	0,96%
Swansee	0,8	0,48%
	166,4	100%

Figure 2.2 presents the strategic map of the English Premiere League. The Manchester United has a strong leadership position, but there is threat of penetration from other strategic group. Especially we can speak about Chelsea club and Manchester City. Chelsea has almost the same sport results, but it doesn’t show such financial performance. On the other side, Manchester City has a really strong financial position6 especially because of the sponsorship and owners of the club, but MC doesn’t demonstrate such sport results as Manchester United does, except the last season and current season. MC’s penetration in MU’s strategic group is the biggest threat nowadays. MU united should concentrate all its efforts on the head to head matches with MC and Chelsea. It helps club to retain its leadership position.

Figure 2.2. Strategic map of the English Premiere League

UEFA Champions League market, when we speak about football club as business is crucial for gaining success. We can consider the domestic championship and euro league as two different markets, with different revenues and laws. We’ll analyze the Champions League, because MU is the permanent member of the cup. We also can see that the part of Champions League in the total euro competitions is more than 70%.

Figure 2.3. UEFA Markets

Due to the official UEFA financial report 2009/2010²⁵ this is 1,108.5 billion euro from the 1,54 billion euro. The clubs share of this revenue is 869,1 billion.

Figure 2.4. UEFA Revenue split

The profit from successful season varies very much. Manchester United, both the winner of the Barclays Premier League and the finalist of Champions League, earned 15,2 billion from the domestic championship and 53,6 billion from the Champions League. The core idea of the competition is different too, we speak about championship, when every team plays 38 matches and collecting the points, and the cup system, where the number of possible matches are from 6 to 13. The play-off stage is also totally different in terms of risks and possible benefits. The 32 clubs taking part in the UEFA Champions League group stage receive a participation bonus of 4.0 million each, plus a match bonus of 550,000 per group game played. On top of that, the following performance bonuses were paid: 800,000for every win and 400,000 for every draw in the group stage. Additional payments are made to the teams that progress in the competition, with a3 million the reward for advancing to the round of 16, 3.3 million for reaching the quarter-finals and 4 million for a semi-final place. These figures allows us to consider the Champions League market as the separate market.

First of all, we should choose 20 teams for our analysis. Each season different teams take part in the competition, we analyzed three last and picked the most frequent clubs, from different leagues (Table 2.5).

Table 2.5. Teams, taking part in the final part of Champions League in the last 3 years.

2010-2011	2009-2010	2008-2009
Tottenham Hotspur, Internazionale Milano, Schalke, Olympique Lyonnais, Manchester United, Valencia, København, Barcelona, Bayern, ACRoma, Chelsea, Olympique de Marseille, Real Madrid, Milan, ShakhtarDonetsk, Arsenal, PartizanBraga, Auxerre, Ajax, Žilina, SpartakMoskva, CFR Cluj 1907, Basel 1893, Panathinaikos, Rubin Kazan,Bursaspor, Rangers, Hapoel Tel-Aviv, Benfica, WerderBremen, Twente	Bayern München, Internazionale Milano,Barcelona, Olympique Lyonnais, Arsenal, Girondins de Bordeaux, CSKA Moskva, Manchester United, Chelsea, Fiorentina, Milan, Olympiacos, Porto, Real Madrid, Sevilla, Stuttgart, ,Club Atlético de Madrid, AZ Alkmaar, Beşiktaş JK, Debreceni VSC, Dynamo Kyiv, Juventus, Liverpool, Maccabi Haifa, Olympique de Marseille, Rangers,Rubin Kazan, R. Standard de Liège, UnireaUrziceni, Wolfsburg, Zürich	Barcelona, Manchester United, Arsenal, Bayern München, Chelsea, Liverpool, Porto, Villarreal, Club Atlético de Madrid, Internazionale Milano, Juventus, Olympique Lyonnais, Panathinaikos, Real Madrid, Roma, Sporting Clube de Portugal, Aalborg BK, Anorthosis Famagusta, Basel 1893, BATE Borisov, Girondins de Bordeaux, Werder Bremen, Celtic, CFR Cluj 1907, Dynamo Kyiv, Fenerbahçe SK, Fiorentina, Olympique de Marseille, Eindhoven, Shakhtar Donetsk, SteauaBucureşti, Zenit

The teams picked for the analysis are: Bayern München, AC RomaChelsea, Olympique de Marseille, Real Madrid, Milan, Shakhtar Donetsk, Arsenal, Olympique Lyonnais, Manchester United, Barcelona, Internazionale Milano, Girondins de Bordeaux, Porto, Liverpool, Club Atlético de Madrid, WerderBremen, Benfica, Stuttgart&Juventus.

To consider MU position on the market, we should first of all focus on the market share issue. It’s obvious, that we can’t choose some financial factors, because separately they do not cover main branches of gaining the profit. The participation bonus is only the part, the match day revenue, sponsorship bonuses, broadcast profits are not included. We tried to implement the criteria, which will cover all that and only in the context of UEFA Champions League. So, the idea of analyzing the market share focuses on the number of “matches played in the cup” criteria. The more you play, more benefits you have - more tickets, more broadcast hours, more profit, more popularity. Possible number of matches for one team in one season – 13. We analysed the situation for last years. At Table 2.6 you can see the figures and the total amount of matches for each of the selected teams.

Table 2.6. Amount of matches played in CL in the last 4 seasons.

Club	2010-2011	2009-2010	2008-2009	2007-2008	Total
Bayern München	8	13	10	0	31
AC Roma	8	0	8	10	26
Chelsea	10	8	12	13	43
Olympique de Marseille	8	6	6	6	26
Real Madrid	12	8	8	8	36
Milan	8	8	0	8	24
Shakhtar Donetsk	10	0	6	6	22
Arsenal	8	10	12	10	40
Olympique Lyonnais	8	12	8	8	36
Manchester United	13	10	13	13	49
Barcelona	13	12	13	12	50
Internazionale Milano	10	13	8	8	39
Girondins de Bordeaux	0	10	6	0	16
Porto	0	8	10	8	26
Liverpool	0	6	10	12	28
Club Atlético de Madrid	0	6	8	0	14
WerderBremen	6	0	6	6	18
Benfica	6	0	0	6	12
Stuttgart	0	8	0	6	14
Juventus	0	6	8	0	14

The volume of the market is 564 matches, which were played by 20 teams in 4 years. In the Table 2.7 below, you can see the market share of each club.

Table 2.7. The market share of the selected clubs.

Bayern München	5,4%	Barcelona	8,8%
AC Roma	4,6%	Internazionale Milano	6,9%
Chelsea	7,6%	Girondins de Bordeaux	2,8%
Olympique de Marseille	4,6%	Porto	4,6%
Real Madrid	6,3%	Liverpool	4,9%
Milan	4,2%	Club Atlético de Madrid	2,4%
Shakhtar Donetsk	3,9%	WerderBremen	3,1%
Arsenal	7%	Benfica	2,1%
Olympique Lyonnais	6,3%	Stuttgart	2,4%
Manchester United	8,6%	Juventus	2,4%

Now we need to choose a variable for x-axis. As in the first map, we decided to use one sport indicator and one financial one. For this strategic map we picked up broadcast profit indicator. Here there are some points to clarify. Usually, the broadcast revenues for clubs are shown for both domestic and international championships, but Deloitte Football Money League²⁶ gives us better understanding of how it works, and the opportunity to count the profit of broadcasting in Champions League only. The 20 Money League clubs’ collective broadcasting revenue is now almost€1.9 billion, and at 44% is comfortably the greatest contributor to total revenue. In the Premier League’s case, for domestic revenues, of the amount distributed to its20 member clubs, 50% is shared equally among clubs,25% according to TV appearances with the remaining 25% distributed according to finishing position.

One of clubs main source of broadcasting revenue comes from UEFA distributions for the Champions League and Europa League. Due to the report the percentage of revenue of CL tournament is about 40%. Using this information and current figures for club’s revenues we can analyze how much profit selected clubs gain from the Champions League broadcast (Table 2.8).

Table 2.8. The broadcast revenues of the selected clubs.

Club	Total broadcast revenue, bill. euro	CL broadcast revenue, bill. euro
Bayern München	83,4	33,36
AC Roma	65,6	26,24
Chelsea	105	42
Olympique de Marseille	70,8	28,32
Real Madrid	158,7	63,48
Milan	141,1	56,44
Shakhtar Donetsk	35,2	14,08
Arsenal	105,7	42,28
Olympique Lyonnais	78,4	31,36
Manchester United	128,1	51,24
Barcelona	178,1	71,24
Internazionale Milano	137,9	55,16
Girondins de Bordeaux	65,4	26,16
Porto	43,4	17,36
Liverpool	97,1	38,84
Club Atlético de Madrid	62,2	24,88
WerderBremen	40,3	16,12
Benfica	54,6	21,84
Stuttgart	45,3	18,12
Juventus	132,5	53

Another criterion is the amount of international players in the team. Table 2.9 you can see the percent of them in the team. We analyzing not only the players, who are taking part in the competition, but all, selected by the coach to play for a team in the Champions League. This also indicates the transfer market activity and strategy.

Table 2.9. The amount of foreign players of the selected clubs.

Club	Number of foreign players	Number of foreign players, %
Bayern München	10	66
AC Roma	6	40
Chelsea	4	26
Olympique de Marseille	11	73
Real Madrid	7	46
Milan	11	73
Shakhtar Donetsk	7	46
Arsenal	2	13
Olympique Lyonnais	10	66
Manchester United	6	40
Barcelona	10	66
Internazionale Milano	3	20
Girondins de Bordeaux	10	66
Porto	3	20
Liverpool	8	53
Club Atlético de Madrid	8	53
WerderBremen	8	53
Benfica	2	13
Stuttgart	7	46
Juventus	12	80

At figure 2.5 you can see the strategic map. It shows us the situation on the market of Champions League. Two groups are absolute leaders – their broadcast revenue is above 50 bill. euro, which is very huge success. We can notice, that both of them are not the leading ones in terms of market share – second (15,4%) and third (14,9%) by this criteria. There is also a surprise – 4 of 5 leading clubs are recently showing impressive sport results, except Juventus, which has pretty big problems, but shows great results in terms of broadcast revenue. Manchester United has very strong position. The fact, that it is one of the recent finalist of last Champions League seasons, and its rapidly increasing popularity in Asia, we can conclude, that it wouldn’t lose its position on the market, and, possibly, will enter the leading group, grow to the Barcelona level. From the other side, Barcelona’s companions (Milan and Juventus) are not so stable and we can predict them losing some points.

Figure 2.5. Strategic map for European Leagues

Nevertheless, there are two groups, which are leading in terms of market share & threaten the leaders. Analyzing the situation with them, we can see, that they were formed in last years, and previously were not a danger for competitors. Those groups gain power in different aspects. The leading one (21, 4%) was formed because of great results both on domestic championships and European arena, which helped them to increase the broadcast revenue in times. Their strategy, therefore is the strategy of creating a product which will be especially efficient in the short-term (Inter & Chelsea), based on huge investments in players, that’s why the number of national players is the lowest one. This group (some of its members) can unite with the leading one, if having more great victories and improve its results.

Second group consists of Bayern TV & 3 French teams. Their strategy is about stability, growing their own players and permanent growth. They showing very obvious results in terms of broadcast revenue. The main threat here is Bayern Munich, which is able to show the highest results, and is now very close to sign the first in Bundesliga individual TV contract, which will help them to increase broadcast revenue and enter the leading group.