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.”
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.
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).
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?
Many of us have heard of the fairly new workout brand CrossFit that has been sweeping the world for the past decade or so (2000). Some of you may even participate in the ultra intensified fitness regiments at your local CrossFit gym, or “boxes” as the growing cult has come to call them. For those of you who are unfamiliar with CrossFit, it is an exercise program that advocates a mix of aerobic exercise, body weight exercise, gymnastics, and Olympic weight lifting that requires an individual to “to keep up the intensity, each and every time.” What does CrossFit have to do with total quality management within a corporate conglomerate you ask?
Well it just so happens that Adidas recently purchased Reebok back in 2006 and the company has been struggling mightily ever since the latter lost its decade long contract to outfit the National Football League last April to its biggest rival, Nike. This loss will reportedly cost Adidas an estimate of upwards to $250 million in lost revenue annually, a crushing blow to a company that was already being scrutinized for its purchasing of the floundering organization that had become Reebok. Reebok has also suffered heavy losses from lawsuits regarding their falsified health claims of their new “toning” shoes that deceived consumers. These allegations were brought forth by the Federal Trade Commission and required Reebok to pay nearly $25 million in total refunds. To top it all off, there has been turmoil within the infrastructure of the organization as an investigation has been prompted relating to alleged fraud by two former executives. However, there may be a silver lining yet for this once promising business transaction as Adidas hopes that sponsoring CrossFit using their newly affiliated business partner Reebok as its representative will not only reverse the current trend of posting a decline in sales the last three of five years, but also restore the brands image as a major powerhouse in the industry that is a force to be reckoned with.
Adidas continues to stand by there decision to purchase Reebok and hopes that their new two year deal with CrossFit will help them accomplish their goals that they set for themselves prior to their recent setbacks. In hopes of reaching the $3 billion objective for 2015, Adidas believes that their sponsorship of CrossFit will help speed up the process and provide them with some insurance they desperately need. The rapid growth of the CrossFit health craze is most certainly a positive sign for pulling Reebok out of the gutter as more than 3,000 gyms have popped up worldwide. The cult-like fitness routine seems it will continue to grow in popularity in the future as people gravitate towards the infectious atmosphere of the contagious motivation/energy and the promise of a complete workout in under 20 minutes. Will Adidas end up regretting their decision to purchase Reebok in the future? Or will the new addition of Reebok and the sponsorship of CrossFit pay off in the long run?
When considering our class discussion of product placement and the product life cycle, I wondered how that would apply to a company that was already established and looking to ‘revamp’ their image. A newer company has the advantage of a clean slate and a fresh approach to whatever service or good they are looking to provide; yet a company that already has a reputation that they want to break free from must have a well thought out strategy to help them accomplish this.
I came across this article in the Economic Times that was a live example of what I was curious about. How FILA’s Gene Yoon plans to build a strong brand presence in India The article’s focus was Gene S. Yoon, Fila’s global chairman, and his strategy to break away from FILA’s image as a non-aggressive brand and become successful in India’s marketplace. This article was an interesting supplement to several of our class topics, but especially on product life cycles and product decision.
The Indian marketplace has become the focus of FILA’s strategic efforts at competitive advantage. Bata was the original company that dominated the marketplace; however Nike and Adidas have found success in this marketplace and FILA is hoping they will as well. While Nike is known for “Just Do It” and Adidas says “Impossible Is Nothing”, Fila’s first priority is to decide on a tagline that will effectively differentiate them from their competitors.
Fila’s main strategy for competitive advantage appears to be rapid response. FILA is one of the only brands that allows each retailer to devise regional marketing plans. Aside from the logo, FILA gives retailers creative freedom in regards to color, fabric choice and design allows them to tailor each product to local preferences. This strategy will assist in the growth of the brand throughout numerous markets. FILA is also focusing on differentiation and their general ‘cool factor’ by signing on celebrities, such as Paris Hilton, which aided in their success in outgrowing other markets in Korea.
FILA is currently present in 40 exclusive stores in India, and Yoon forecast’s the number to increase to 100 stores by 2014. I believe in Fila’s strategy to succeed in the Indian marketplace, however I do think they need to have a more focused strategy. I understand the idea behind regional marketing plans, I just think that they would be more successful if they have a definitive tagline and ensure that each product that is developed embodies what they are trying to represent. FILA expresses their interest in being a lifestyle brand, and in order for them to prevail, focus is needed in all areas of product development.
Do you believe that FILA’s strategic plan will be successful? Or do you think that regardless of their attempts, they will not be able to break away from their reputation of being non-aggressive and not very “cool”?