3.3. Strategy of the Club

The club’s ultimate strategy is to maintain and improve its leading position as of the top global football clubs in order to increase the revenue, profitability and free cash flow. This implies the following elements³⁷:

• Continue the success of the First Team by attracting some of the best players in the world and allocating resources in order to develop the young talents through its Youth Academy. This goal can be achieved by providing the top quality facilities and one of the best coaching teams.

• Develop the core fan base. In 2007 it consisted of 139 million people worldwide³⁸ and increased by 2011 up to 300 million people, two thirds of those living in Asia³⁹. That is why brand development in Asia is crucial for the club. The activities needed to build on this success include international promotional tours and tailor-made customer relationship management program. The latter implies creation of products and services to meet the demands of the supporters. Another crucial aim is the development of the engagement with the fans via digital media assets.

• Develop the sponsorship portfolio based on the strong appeal of the MU brand and club’s global fan base. The company has identified several sectors in global sponsorship including energy, mobile communications, informational technology and airlines. One of the aims is to attract companies from the industries which are not commonly associated with sports sponsorships by providing a strong co-branding opportunities.

• Improve the Old Trafford matches experience for the fans. The ultimate goal here is to make the ticket cost its real value and maintain attendance at near full capacity. The opportunities for the development include a range of options such as hospitality suites with food, beverages and other services. The significant investments have already been made at Old Trafford and this is only the beginning of the constant improvements.

• Increase control over the brand and key revenue generating assets such as MUTV Limited company and Club’s website www.manutd.com. The global reach of the brand can be expended by adding new languages to the media to reach new regions and developing an experienced and well motivated commercial team which FC MU currently is.

• Enhance the value of the Club’s media rights and digital media assets. Matches has a place for improvement in terms of content. The demand from broadcasters and advertisers remains high and this can bring additional revenues if managed properly. The aim in this sphere is to increase the price of the rights to Premier League and European cups matches. Digital media assets development includes the improvement of the website experience for the supporters worldwide and creation of the premium digital content for mobile devices. The latter implies the need for expansion of the mobile subscribes reach.

4. Strategy analysis

4.1. Meso-level – Porter 5 forces analysis

The threat of the entry of new competitors (low). Usually, profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms is blocked by the existence of entry barriers what is actually a situation in professional football industry. Entry barriers are extremely high because it is really difficult to establish a new football club and make it profitable. Sunk costs as well as capital requirements and absolute costs are just enormous and it is also very difficult to attract fan base and get customer loyalty.

The threat of substitute products or services (medium). The existence of products outside of the range of the common product boundaries increases the propensity of customers to switch to alternatives. First of all, if we analyze the treats of substitutes, we should take into account buyer propensity to substitute. It is pretty low because football is definitely the most popular sport in the United Kingdom and those people who like football will obviously like it forever and will not switch to other sports. But there is a big number of substitute products available in the market. Such sports as rugby, swimming, snooker, tennis, cricket and athletics are also very popular in the United Kingdom and have their own fans.⁴⁰

The bargaining power of customers (high). Actually, Manchester United has the largest football club stadium in the United Kingdom with a capacity of 75,797 seats, approximately 15,000 more than the next largest football club stadium. It has approximately 54,000 general admission season ticket holders, each of whom pays for their Premier League tickets in advance of the first game of the season, and 7,500 executive members, each of whom pays for all of their tickets in advance of the first game of the season. United has one of the highest capacity utilizations among English clubs. Average attendance for Premier League matches has been approximately 99% for each season since the 1997/98 season. Matchday revenues accounted for 39.1% of our total revenues, or £108.8 million, in the year ended 30 June 2009.⁴¹ Moreover, according to research conducted by TNS Sport in 2007, United has 139 million core fans and 333 million followers worldwide.⁴² This means that Manchester United has one of the most numerous armies of fans. But this also means that United has to take into account and meet expectations of all these people because fans are usually very exacting and if something goes wrong they can even organize some protest actions that would really damaged club’s reputation and budget.

The bargaining power of suppliers (low/medium). What are the suppliers for football club? Are there football academies? Or maybe, thinking a little bit further, are there TV-broadcasting channels (as “suppliers” of football) or even distribution channels and sponsors? Suppliers of labor and services and even money (sponsors) to the football club can be a source of power over the company, when there are few substitutes.

Football academies as suppliers of players. Manchester United has its own Youth Academy as a primary source of new talent for its First Team as well as a place for developing players that may be sold to generate transfer income. The aim of the Youth Academy is to create a flow of talent from the youth teams up to the First Team. Since the founding of the Premier League in 1992, a number of players from the Youth Academy have achieved a regular place on the First Team. Generally, Manchester United has experienced very good demand for players who do not become regular First Team players, from clubs in England and abroad.

TV-broadcasting channels as suppliers of football. As one of the most popular football clubs in the world, United receives significant revenues from its share of television, internet, mobile and radio rights relating to Premier League, Champions League and domestic cup matches. Historically, the club has been among the top English clubs in earnings from those sources. Media revenues accounted for 35.8% of United’s total revenues, or £99.7 million, in the year ended 30 June 2009. ⁴³But actually contracts for rights for Premier League and Champions League matches broadcasting and certain other revenues for those competitions are negotiated centrally by the Premier League and UEFA, respectively. Manchester United is not a party to such contracts and may not have any direct influence on the outcome of contract negotiations. As a result, United may be subject to broadcasting rights contracts with broadcasters with whom it may not otherwise contract or broadcast rights contracts that are not as favorable to United as it might otherwise be able to negotiate individually with broadcasters.

In order to lower such impact Manchester United has also developed a television platform, MUTV, and has its own website and mobile services that deliver premium content to its global fan base and enable United to engage and transact with its fans.

Distribution channels as suppliers of football goods & Sponsors as suppliers of money, distribution and advertising. Manchester Unites has strong sponsorship relationships with leading international businesses across a range of industries. Its largest sponsorship contract is with Nike, which runs until 2015. Nike supplies United’s playing kit and manages its global merchandising, licensing and retail operations. United’s current shirt sponsor is AIG. In June 2010, Aon succeeded AIG as shirt sponsor on a contract running through the end of the 2013/14 season. Manchester United also has a number of global, regional, mobile and supplier sponsors in industries including financial services, automotive, beverage, timepiece, betting and telecommunications. Company’s sponsorship arrangements provide its with stable and highly visible revenues in the near to medium term. Commercial revenues accounted for 25.1% of United’s total revenues, or £69.9 million, in the year ended 30 June 2009.⁴⁴ So, definitely, Manchester United has to take into account interests of these groups of companies.

The intensity of competitive rivalry (extremely high). There are a lot of very strong competitors both domestic and international. The major domestic competitors are Arsenal, Chelsea, Liverpool and Manchester City. These clubs are usually seen as the main competitors in Premier League. Also there are some football clubs which are not so popular but have their own market shares. The major international competitors are Barcelona and Real Madrid from Spain; Milan, Juventus and Internazionale from Italy; Bayer Munich from Germany and some other football clubs. They compete not only in the football fields but also they compete for fans and, therefore, customers.