Manchester United: Not a team, but a business

Sports play a role in many different people’s lives. Soccer or Football depending on where you live, takes the cake as far as being the most popular sport in the world. Manchester United happen to be the world’s richest and most popular soccer team. Often criticized for their large amount of spending in order to acquire the world’s greatest talents in the sport, Manchester United has managed to win the most Premier League titles and 3 UEFA Champion’s League titles. Although, Manchester United has had a lot of success on the field, they have had even more when it comes to the business aspect.

Wall Street Valuation
From a financial standpoint, Wall Street has valued Manchester United as being the richest soccer club in the world. Mike Ozanian from Forbes states, “Wall Street now affords United an enterprise value of $3.6 billion. Math: market value ($3.05 billion) + long term debt ($613 million) – cash ($57 million).” This valuation is very impressive due to Manchester United having a poor season due to their shift in management after Sir Alex Ferguson retired last season. 

Manchester United and Adidas:
Recently, Manchester United ended their partnership with Nike and moved on to Adidas. Mike Ozanian from Forbes tells us, “English soccer team Manchester United and German sportswear maker Adidas have agreed to the richest uniform deal in the history of sports. Adidas will pay $1.3 billion over 10 years to United, or $130 million a year, beginning with the 2015-16 season.” You would think that 1.3 billion is enough, right? Not for Manchester United. Mike Ozanian also states, “But the Adidas kit deal, coming comes along with the team’s $559 million, seven-year shirt deal with Chevrolet (also the richest in sports) means it will continue to have the cash flow to turn an operating profit and sign elite players.”

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Capacity and Inventory:
Since Manchester United are very popular, there will be a huge demand as soon as the new Adidas uniforms roll out. However, until then Manchester United will still have a lot of the Nike uniforms available. Manchester United will have to decrease their capacity slowly and lower the price of the Nike uniforms as the end of the season approaches. This will result in a decrease of the Nike inventory due to more sales, which is what they want as soon as they can start selling the new and highly anticipated Adidas uniforms.

Manchester-United-new-Kit

The Competition:
Manchester United may have the lead but other teams are getting closer. The two most popular teams in Spain would be Real Madrid and FC Barcelona. Forbes put a value of 3.44 billion for Real Madrid and a 3.22 billion valuation for FC Barcelona. Another advantage for these clubs is that they have the two best players in the world, Cristiano Ronaldo (Real Madrid) and Lionel Messi (FC Barcelona).

Questions:

  • Do you think that sports teams are nothing more than a business?
  • What are some good ways to sell inventory that consists of jerseys with decreasing demand?
  • Do you agree with Manchester United’s valuation?
  • Do you think it is fair to fans to constantly release new jerseys, which causes them to keep repurchasing?

Sources:

Valuations:
http://www.forbes.com/sites/mikeozanian/2014/07/15/wall-street-says-manchester-united-most-valuable-team-in-world-after-adidas-deal/

http://www.forbes.com/sites/mikeozanian/2014/07/14/manchester-united-and-adidas-agree-to-richest-uniform-deal-ever-in-sports/

Images:
http://img.bleacherreport.net/img/images/photos/003/038/545/hi-res-afe91e10675aad43b3dcf4438437a283_crop_north.jpg?w=630&h=420&q=75

http://i3.mirror.co.uk/incoming/article3823301.ece/alternates/s2197/Manchester-United-new-Kit.png

FORD is really “Shifting into Gear!”

Recently, Ford Motor Company has a announced they are putting a greater focus on their SUV and crossover cars to prepare for the future. You might ask, why? Well according to forecasts by IHS Automotive, one in five cars sold around the world annually in 2018 will be either a SUV or crossover. There is about 14 million vehicles sold world wide annually and a specific model taking up 20% of an entire market is a very large number.

Now after reading this article, I almost felt like I was ready the weekly courier, and analyzing the market conditions report from our simulation. Its really remarkable how this article pertains to the methods and leanings of the game we played in class.

ford

Ford’s SUV and crossover sales were up 37%, which also outpaced the industry increase of 17%. This is exactly what we tracked in the statistics segment of the segment analysis. Ford is clearly putting a focus on a specific segment of the market, or in our game “product type.” The amount of models of SUVs and crossovers has risen from 180 to 370 from 2000 to the current day. This market is becoming very competitive and in the simulation we would have to go into R&D and tweak our product to become better and have an edge. We would also encounter situations where we would have to buy more capacity in our plant to account for higher demand. Ford is doing exactly this. The article states, “…Where it is spending $700 million to expand.” Ford has announced it will continue producing their crossover product, The “Edge”, and expand its production capacity by spending $700 million dollars in Oakville, Ontario where the car is produced. Ford ships this model to over 60 countries, which obviously can be concluded the demand is very high. This scenario right here is exactly like the decisions we had to make within the simulation, adjusting capacity to meet demand and forecasts, along with the segment demand fluctuations.

Just to show exactly how intense this increase in market demand for these SUV’s and midsized crossover is, utility cars sales grew 10% and crossover sales grew 16% last year totaling about 2.2 million units…but that’s just in North America! In 2000 1.8 million units of utility vehicles were sold outside North America, today that number is now 10 million!

Obviously the future of the automotive industry is leaning in a specific direction. I think it is very interesting to see how Ford Motor Company is planning all of this now, and how closely this scenario relates to our simulation. How do you think this market preference for SUV’s and crossovers will affect the industry as a whole? Do you think this will create entry points for new automotive companies? What do you think will happen to all the inventory of the less preferred sedan and cope model type of cars?

Article Source: http://www.usatoday.com/story/money/cars/2014/02/16/ford-world-suv-shift-from-cars/5497343/

-Evan Meador

Hog-wild for Factory Farming: Hot Dogs Made in China

As the Chinese population and economy continue to grow, safer and more efficient industrialization practices are necessary to keep up with the demands of a hot dog hungry China. This is not an exaggeration as China is “the world’s largest consumer of pork.” A recent takeover of Smithfield Foods by Shuanghui Holdings Ltd., “China’s biggest meat processor,” will provide valuable insight into industry practices that are commonplace in the U.S. Current processing methods in China lack quality control as the majority of meat is produced by small farms that process less than 500 hogs per year.

From Hog to HotdogThese “conditions on smaller farms can be squalid, with a lot of physical contact between farmers and animals, which can transmit disease.” This type of environment can become a breeding ground for contamination leading to outbreaks of diseases like swine flu and foot-and-mouth disease, having major health implications on Chinese consumers. Authorities blame irresponsible farming practices and the disjointed meat processing system that is not easy to “regulate and makes it more difficult to avoid bad practices.”

In contrast, the highly sophisticated and streamlined systems of pork production in the U.S. is often viewed negatively by Americans and referred to as “factory farming.” Smithfield’s facilities have the “capacity to slaughter as many as 110,000 hogs a day,” and most U.S. farms are much larger than their Chinese counterparts, raising over 2,000 hogs annually. Ironically, these modern processing techniques are the envy of Chinese authorities who are looking to utilize the “expertise of Smithfield’s management team to enhance its pork-processing facilities.” Skeptics claim that the Shuanghi-Smithfield partnership “will exacerbate such problems as complex supply chains and food-contamination risks.”

Although the trend in U.S. agriculture is to go “back to the start” as expressed in marketing campaigns by environmentally conscious companies like Chipotle Mexican Grill, this is not the reality in China. As health out-breaks are more widespread in this Asian country and regulation lacking, efforts to “control food safety” and create more modernized processing methods are a welcomed site.

In such an industry, operational expertise will prove essential in restructuring the pork processing system in China. They will likely face challenges like determining adequate process and capacity design for farming facilities and distribution channels; forecasting to meet the demands of a growing population; Slaughter Pigs in Chinaand improving inefficient and broken supply chains. Improved product quality will likely be most prominent and follow a manufacturing-based definition as increased standards will ensure a safer finished product.

On a personal note, I am an advocate for more naturally produced food in smaller farming environments, yet I understand that the demands and current conditions in China are quite different from the U.S. All criticism aside, the majority of the U.S. population relies on the safe meat supply provided by corporations like Smithfield to ensure peace-of-mind at the dinner table. How do you think that the new deal between Shuanghi and Smithfield will impact Chinese and U.S. consumers, respectively. Will the Chinese citizens have a similar sentiment toward industrialized farming practices in future decades?

Article Source

 

 

Elimination of Enrollment Bottleneck: Graduates Who Don’t Do Science.

Bottleneck
Source: xda-developers.com

In class, we learned that a bottleneck is the longest activity that is the limiting factor in operations management. Managers want to match capacity and design while still maintaining the greatest efficiency possible.

Education is no different as it follows basic business rules. Schools increasingly want students to graduate, get jobs, and eventually donate back as alumni. Universities across the country have a problem with so called “bottleneck courses,” which prevent students from graduating. California State University (CSU) reports about 30 such courses that have a high rate of failure, including math, science, and history. Those courses distract students from their major studies and often cause failing or withdrawing, if not dropping out of college altogether.

science-lab
Source: brightlandcollege.in/

CSU wants to address the bottleneck courses by providing science labs online and moving away from traditional in-person classes, especially for students who do not major in science. CSU does not have sufficient capacity to match demand for bottleneck classes due to limited lab space. Virtual labs are a way of offering more lab sections and thus increasing enrollment and moving more students through the system (increasing the rate of graduation).

Low cost of such classes coupled with high demand means more money the school will earn and able to re-invest. However, CSU’s solution to bottleneck science courses raises concerns over the quality of education given. In-person classes are especially important for science labs; a biology department chair at CSU, Jeffrey Bell, says, “my biggest concern, especially with freshman classes is you don’t want students seeing reality as a video game—a key thing in science is we investigate reality.”

Before we can argue about the quality of such courses, let’s ask ourselves: “what is the real value of education?” The content that is learned in science classes is available online. Therefore, the content is not the sole value of education, but rather a college experience: the ability to interact with the professor and peers on one-to-one basis. But just how important is the experience for non-science majors who just want to pass the class to graduate?

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Source: biofluff.files.wordpress.com

CSU’s demand far exceeds school’s effective capacity, mainly due to struggling students repeating the class. School’s solution to increase the capacity through online sections to match enrollment demand is one way of managing the problem. School could also manage demand by increasing capacity—building new science labs and hiring more professors. This long-term solution would ensure that struggling students are offered adequate in-person help, rather than let them pass without a sufficient knowledge of science.

CSU’s tactic for managing bottleneck science lab courses is rather new, thus raises concerns about its quality, especially in the time when U.S. students lag behind in science and math compared to other countries. Is removing this bottleneck sacrificing or improving the quality of science lab courses? Will this decision eventually lead to graduates who do not have sufficient knowledge of science or scientific thinking? Can you think of other solution to tackle the bottleneck course problem?

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Source: www.scpr.org
Sources:

Heathrow Capacity Crisis

Capacity problems at airports have always been an issue. London’s Heathrow Airport is third busiest airports in the world and the busiest one in the United Kingdom. The capacity issue there has been forecasted to be even worse by 2030 if they do not do something about it now. As the article states “Even by the latest forecasts, London’s five airports will have to turn away about 13m passengers a year by 2030, rising to 46m in 2040 and 92m in 2050” (1). This includes not only Heathrow, but the four other airports in London. Heathrow has had to turn down many passengers and has had many delays due to the capacity issue. If it isn’t addressed soon, it can cause a shut down and lead to even more delays and cancelations. Even though their are 3 other airports in London, Heathrow gets the most traffic because of its location in Central London and it’s International accessibility.

Different solutions to the capacity issue have been in the works. In 2010 the government approved an construction of a 3rd runway, but it isn’t enough. “Even if a third runway increased Heathrow’s capacity by around 50%, growing demand would significantly have outrun the increase in supply of landing slots.” Another government official suggested for London to build a new large airport east of the capital. This would be a better solution because it will solve the capacity issue on a much larger scale than the 3rd runway would and it will also be far away from the central of the capital. This would cause less noise pollution to the residents. The only downfall is the price, the city would need 45 billion dollars to cover this. But this idea would only be successful if Heathrow shut down. You cannot have two major international airports in the same city because they will each take each others customers and won’t be as successful on their own. This will have a major effect on the economy of the UK.

According to this article, the best solution would be to expand Heathrow to the west and building 4 more runways. The article says, “simply moving the runways a couple of kilometres to the left offers the scope for almost doubling Heathrow’s capacity while significantly reducing the numbers of those subjected to oppressive din” (1). The capacity solution would be solved and it would keep Heathrow as the top airport in the UK and only increase its business and profit margin. Their plan is to finalize the proposals and to present them soon while shutting out any other proposals of building new airports and such. They hope the westward expansion goes as drafted.

We discussed capacity issues in class and how it relates to us in our everyday lives. We all travel through airports and we have all experiences delays due to issues like these. I think that for this particular situation, Heathrow should expand to the west and stay away from building any more new airports in the UK.

heathrow

 

Is the westward expansion the best solution for the capacity issues?

Would you suggest building a new airport?

Source: (1) http://www.economist.com/news/leaders/21574486-expanding-heathrow-westwards-could-give-london-airport-capacity-it-needs-reasonable

Breakfast for Dinner!? McDonald’s Doesn’t Think So…

At some point, everyone has wished that their favorite breakfast foods could be served all day. Maybe not everyone, but that is only because they’re not fans of crispy bacon, syrupy pancakes, and perfectly crafted, flavor-filled breakfast sandwiches. McDonald’s has begun entertaining this idea of 24-hour breakfast and has discovered many logistical issues.

A former McDonald’s restaurant owner and current restaurant franchisee consultant explains, “It’s been tried and failed repeatedly. It just makes the operation too complicated.” McDonald’s offers breakfast until 10:30 am on weekdays and 11:00 am on weekends. Their breakfast accounts for 25%of their sales, but dominates the fast-food breakfast market. Making these items available all day doesn’t seem that hard, right? Unfortunately it is just not that easy. As we discussed in class, capacity always comes into play. It is not about storage of the food, it is about grill capacity. Cooking meats and eggs require different temperatures on the grill. For breakfast, bacon and sausage is cooked ahead of time, and the grill is set to a higher temperature to cook the eggs until 10:30 or 11. The current grills do not have the capacity to accommodate this difference. The company would have to figure out a way to match the required capacity to the anticipated demand. Another strategic issue would be labor. Since the scrambled eggs need to be stirred constantly, it would be difficult to make them during peak lunch and dinner hours. Since 65% of customers come through the drive-thru, speed is of the utmost importance.

McDonald’s is also worried about losing profits as well. The breakfast sandwiches and meals are cheaper than those for lunch and dinner. If they are all offered at the same time, people may trade down to the cheaper products, hurting McDonald’s earnings. Good things can come from enacting this too. Most of the breakfast items are healthier than the greasy burgers and fries, giving customers lower calorie and more beneficial options.

One thing to take into consideration is how to estimate demand. Will people actually buy these items throughout the day, or is it just nice in theory? People tend to want what they can’t have, and once it is made available, it may not be as popular as originally expected.
There are discussions of meeting somewhere in the middle. One option is only serving the breakfast sandwiches and not worry about giving the scrambled eggs the attention they require. Another option would be to test demand by serving breakfast until noon.If the company needs to make major changes to grill capacity and labor, then they must know if profits will make up for those costs.

Is it about time McDonald’s serves breakfast all day? Based on demand and current statistics, would it be worth it and have the potential to succeed, or should they keep operations as they are?

References:

http://www.businessweek.com/videos/2013-05-06/whats-for-dinner-big-mac-or-egg-mcmuffin#r=most popular

http://www.businessweek.com/articles/2013-04-29/an-afternoon-mcmuffin-mcdonalds-is-still-considering-it

Ford’s European Struggles

A new article in the Wall Street Journal explains that Ford Motor Company has come up with a drastic plan to reduce operating losses in Europe due to its large decline in European sales.  The company plans to close three assembly and parts factories, cut 13% of their workforce, and reduce its new-car production capacity by 18%.  The cause for this big change is because of the continuous poor sales in Europe and forecasts that say sales are not expected to get any better in the near future.  These projected losses are one and a half billion dollars for this year and next.  The new plan will hopefully decrease operating costs for Ford by $500 million in the next two years.

The plan would decrease their production of vehicles produced in its Europe plants by 206,000, and also decrease the workforce by 6200 people.  According to the article, “Ford’s plans are the most drastic by European auto makers as they cope with the industry’s chronic overcapacity.”  So this plan is Ford’s way of matching capacity to demand, and two of the ways that a company can match its capacity to demand after overproducing are by making staff changes, in this case laying off workers, and by closing facilities, which Ford will do for three of its plants.

This restructuring plan is similar to a plan implored by CEO Alan Mulally in the U.S. in which Ford cut 30% of its workforce and reduced its plant capacity by 25% and has showed some success.  Ford hopes to duplicate similar success in Europe with this strategy.  The profits from the U.S. and North American sales have, so far, been able to offset the losses in Europe.

One of the plants in Genk, Belgium that Ford plans on closing was already operating at the lowest level of any plant in Europe.  The design capacity of the plan allowed it to create way more vehicles than they were, so the design and effective capacity were way higher than the actual production of the plant giving it poor efficiency.  The plants in Europe were not producing at the optimum operating level.  The tricky part for Ford is knowing the optimum capacity because with sales not expecting to increase anytime soon, it is hard to determine the level of output they need.

One question I had was even though a similar strategy worked for Ford in the U.S. is it possible to have the same success in Europe?  I think it would be difficult to repeat the success because the U.S. is just one country while in Europe it would be across multiple countries with different regulations and unions.  Will this ultimately decrease the losses in Europe?

http://online.wsj.com/article/SB10001424052970203897404578078360301276102.html?mod=ITP_marketplace_1

The Raise and Fall of a University

Our recent class discussions about Product Life Cycles made me think about the rise and fall of the New York Institute of Technology (NYIT) – Bahrain. After being one of the best universities on the island, the Management decided to phase-off their program from Bahrain, leaving behind thousands of Alumni, a team of staff members and two large campuses.

If I can make it there.. I can make it anywhere! was the thought of NYIT’s Middle East Chairman, Dr. M. Husain, after he succeeded in entering the United Arab Emirates education market with the first NYIT campus in the Middle East. His next mission was Bahrain; he believed that a campus in Bahrain could attract potential students living in Saudi’s eastern provinces and other GCC countries as well.

Like other organizations, Universities have a life cycle. They introduce their products as degrees to the market.

Introduction:

In October 2003, NYIT-Bahrain opened its doors for new applicants in a medium size villa in Juffair with a small team of academics and staff members. It was the first American university in Bahrain, offering limited Majors in Business and Information Technology. Students liked the idea of studying locally and earning an international degree and many were looking forward to attend the annual graduation trip to New York once they complete their programs.

 

Growth:

A year later, NYIT had to triple its intake capacity to fulfill the increasing demand. A new campus was built, more sections and classes were offered and the many part-time professors converted to full-timers. Several universities were established in the same year, but NYIT managed to stand out and to gain a large share of Bahrain’s higher education market by introducing new degrees in Interior design and Computer graphics as well as having a very creative and active student life.

 

Maturity:

The university was running at an ideal capacity, where the number of the graduated students was equal to newly accepted freshmen. NYIT was doing great until 2009, when the Higher Education Council of Bahrain decided to come up with a new set of regulations, aiming to standardize all private universities in Bahrain. This would be done by standardizing courses, degrees and majors names and interfering with the Management and the Board’s regulations. NYIT could not adapt to the changes like the other local competitors, as all NYIT campuses around the world must follow the same American standard programs, otherwise they would be threatened to lose their International License and Accreditation.

 

Decline:

Many attempts were made with the ministry to prevent further downturn, but all were unsuccessful.

Unfortunately in May 2010 NYITs’ Advisory Board officially declared the phase-off plan of the Bahrain branch, and started cost-cutting and shutting-down departments in order to reduce capacity. NYIT-Bahrain will continue to run until all students graduate by 2013.

 

Do you think that NYIT made the right decision by closing the Bahrain Campus? Were there any alternative solutions that they could’ve taken to extend their life cycle in Bahrain?

Tails: The Bahraini Pet Food Brand

“Tails” is the regions first all natural pet food brand that has been officially launched in February 2012.  Their aim was to provide healthy pet food that is free of preservatives, added colors and flavors as well as the use of 100 percent natural human grade ingredients. They club their services with the Highest Quality, the Best Customer Experience and Value for Money.

Being the first of its kind in the region, and with the general lack of data availability, i immediately thought ” How did they know that this was going to be successful?”

Leap of Faith 

i was fortunate to meet with the owners, in class we talked about all the different forecasting techniques and determined when it was best to use each technique. But what do you do if you had no history/data to use?

Well in this particular case there was no entity in Bahrain that actually registers or even keeps track of Dogs in Bahrain. The owners did alot of research and found that the only entity closest to giving them information was the airport customs office, and they only recorded how many dogs came into Bahrain and how many dogs went out. Moreover they started to get samples and estimates from vets. And the final number they came up with somehow met their expectations and they were comfortable with getting even 10% of it.

Capacity Issue

Within a four month span, sales at Tails has doubled . This led to a bottle neck in their production ( remember the paper puppet activity?) , the machines they had were not able to package and seal fast enough to meet the demand of their customers.  They tried to overcome it by cooking more on and storing it  but they did not have enough storage capacity to meet this unanticipated demand. to overcome this Tails had to quickly invest in new machines that will be able to seal and package faster in order to meet the demand of their customers, gives more flexibility on variety and size, and to start distribution to supermarkets.

Tails are slowly keeping up with their demand however it has been stressful for them because they were not able to accurately forecast.

So i leave you with a thought : how do you forecast with no data? and which forecasting method should Tails use today in order to help them predict their future sales?

 

For more information please visit www.tails.co to get your free dog food sample today!