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.”

hi-res-afe91e10675aad43b3dcf4438437a283_crop_north

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

Nike Relationship with Livestrong Charity Dies!

A relationship that generated millions and branded Nike to what it is today has finally come to an end. After a nine year relationship, Nike is closing down its support with the Livestrong Foundation that former bicyclist Lance Armstrong has created to help cancer survivors.

Livestrong-Nike-Cancelled
NIKE LIVESTRONG DISCONTINUED

The footwear company is pulling the plug on all Livestrong merchandise off of store shelves. I know exactly what all of you are thinking, “Wait a Sec! That means no more yellow Livestrong wristbands?” Yes this is exactly what it means. They are discontinuing all footwear and clothing, so the shoes you just bought last week that retailed over $100 will now be worth nothing. Nike has generated over 100 million in funds to the foundation since 2004 and during the time accounted for about a quarter of Livestrong’s average yearly revenue.

The foundation said that change in its relationship will have no affect on the services it provided to cancer survivors. Nike said they would continue the support in other ways, but they weren’t able to provide specifics at the moment.

The company ended the sponsorship last October after becoming aware to the news of Lance Armstrong using performance-enhancing drugs and lied to Nike for over a decade. Mr. Armstrong is now resigned from chairman of the foundation and dissociated himself from Livestrong.

Stores like Dick’s Sporting Goods and Sport Authority are now severely hurting due to heavy inventory of Livestrong merchandise of exercise equipment and clothing that failed to sell. Consumers have already turned their back on the brand that was once so dominating and meant so much. The foundation that is based in East Austin, Texas, is looking for a new outlook and a way of rebuilding itself to what it used to be. A Spokesperson for the foundation said, “We want to steer a strong and independent course that ensures the long-term health and sustainability of the organization.”

The foundation has derived 1/3 of its budget from corporate and licensing sponsors, 1/3 from events, and 1/3 from general fundraising, according to chief executive Doug Ulman.

Livestrong still has some corporate sponsors, and still in the works for seeking more. “The foundation has taken other steps to reinvent itself, including moving its “call-to-action” day—which was celebrated on the anniversary of Mr. Armstrong’s cancer diagnosis—to May 17, the day that its yellow wristband was introduced.” The foundation has started new relay marathons all throughout Austin, while ending the sponsorship with the Austin Marathon in April after three years being the top sponsor. Nearly 500 runners associated with Livestrong have already raised $250,000 this year.

I just feel that after the foundation was basically led by an imposter is going to be really hard for the company to regain its trust in its consumers and hard to rebuild itself after an impact like this.

WILL THE FOUNDATION BE ABLE TO REBUILD THEMSELVES AFTER NIKE DROPPING THEM?

WILL THIS AFFECT THE QUALITY OF THE SERVICE THE FOUNDATION PROVIDES?

 

Sources:http://online.wsj.com/article/SB10001424127887323855804578511271244741516.html#articleTabs%3Darticle

 

Rinse, Wash, Repeat and Waste Money

As a society, we are technically getting smarter.  More people are getting a higher education and attaining degrees. Between 1980 and 2011, people who had completed a bachelor’s degree or higher increased from 22 to 32 percent, and people who’d received a master’s degree or higher increased 2 percent from 1995.[1] So why is it that we very rarely think about the quality of our decisions and why we make them?

source: flickr.com

Ever think about  the effect a marketing strategy? For example, for products like shampoo, sales doubled by simply adding one word -“repeat” – to their products’ instructions. One would think this wouldn’t make much of a difference, but it seems that it does to the so many people that bought the product that was no different from before the marketing strategy took effect. That one word increased the rate at which shampoo was being used, thus increasing the rate to which someone needed to go buy a new bottle.  Not only that, but sales of other hair products such as conditioners increased as well since washing hair more than once can dry it out. Back in the 1940’s, it was necessary due to lack of technology and advancements that didn’t allow for shampoos to get rid of the oil in hair with just one wash.[2] However, today it’s changed to where we really only need one wash. Yet we are still buying into this marketing strategy today; it’s become integral to our daily body cleansing customs that we no longer question it.

Along the line of marketing strategies, there are also products that consumers are led into buying because of who endorsed it.

source: stuffpoint.com

Products such as Nike’s Air Jordan, for example, have long been a social fad that people first bought in association to the great basketball legend of Michael Jordan, despite its hefty price tag.  I’m sure they were once good quality basketball shoes, but today people don’t really buy them to play basketball but because of the transcendent quality associated with the name or because they look good. Another example would be the Beats headphones endorsed by Dr. Dre. Although they look good, they really aren’t the best that’s out there for the price. Imagine how much money we’d save or how meaningful our decisions can be if we stop to think about them and actually do research to find their true value. It’s amazing to me how we have the Internet at our fingertips yet we don’t bother to find the information we need, or how some people believe everything they read.

Questions:

What do you think? Is society getting more naive or lazier? Is quality a social fad everyone buys into? How different do you think your life would be if you’d asked more questions?

 


[1] “Education Attainment.” National Center for Education Statistics. <http://nces.ed.gov/fastfacts/display.asp?id=27>.

[2] Goldstein, Lauren. “Lather, Rinse, Repeat: Hygiene Tip or Marketing Ploy?” CNN Money. Oct. 1999. Web. May 12 2013. <http://money.cnn.com/magazines/fortune/fortune_archive/1999/10/11/267035/>.

Move over Nike… FILA’s making a comeback

Paris Hilton for FILA

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”?