Football is certainly one of the most powerful and renowned sports in the world, connecting communities, inspiring sentiments and breaking down cultural obstacles and obstructions (Kenyon and Bodet 2017). Football has also emerged as one of the most lucrative industries with a major financially viable impact in infrastructure growth, sponsorships, advertisement right and financial transfers of sportsmen. One of the recognized football teams which has generated substantial amount of economic growth and well-established position in the football business domain is Liverpool Football Club (Liverpool FC) (Liverpool FC 2018). Since the Liverpool FC has been founded in 1892, the club name has been identical with reputation and fame. Paché and Ika (2016) have revealed that both at international and national level, Liverpool is the most thriving British club of all time and have won around 20 league titles, 8 league cups, 5 European Cups and almost 3 UEFA Cups (Liverpool FC 2018). Furthermore, after claiming its ninth League Title in 1990, Liverpool entered into a downward spiral. However, with some Cup trophies along with certain average league finishes during the 1990’s and early 2000’s, it seemed that Liverpool’s star has declined (Paché and Ika 2016). Nonetheless, the football team eventually proved their determination in the most exciting method feasible following the success of the Champions League final in the 2005 they proficiently improved from 3-0 down at half time in order to ultimately defeat Milan on penalties (Liverpool FC 2018). The following report aims to provide inclusive financial analysis of Liverpool FC and further will offer Macro and Micro Environment analysis of the football club. In addition to this, the paper will highlight vital opportunities and threats of Liverpool FC with TOWS matrix and stakeholder approach towards Liverpool FC.
Being one of the most recognized sports club across the European continent belonging to Fenway Sports Group constitutes a strong brand name with highly dedicated fan following.
Strengths- The organization has an exceptional marketing and global brand prominence with exceptional quality merchandising Liverpool FC has proficiently achieved sponsorships with Crown Paints, Carlsberg, Candy as well as Standard Chartered Bank (Liverpool FC 2018). The introduction of James Milner has signified that Liverpool produced substantial rate of versatility in their line-up with the previous city man who exhibited competence of filling in at full back ore across the mid-field and sometimes at front with the forwards if required (Parnell, Millward and Spracklen 2015). Furthermore, the Liverpool line-up emerged as one of the most well-balanced line-ups with considerable potential.
Weaknesses- Kenyon and Bodet (2017) have claimed that two significant misfortunes like Heysel Stadium disaster (1985) as well as Hillsborough Disaster (1989) have caused detrimental impact on the football association. Furthermore, author has noted that Liverpool has not being competent to correspond to series of goals which the top four contenders were getting on a constant basis. Such a lack has posed challenges to the football association (FA) whether the new additions will have capability to fit appositely in the system Rogers plays with Liverpool defence (Parnell, Millward and Spracklen 2015).
Opportunities- Reports by Paché and Ika (2016) found that companies in all fields are shifting towards sports in order to drive higher level of awareness of their products and services with increasingly impressive brand visibility. Liverpool must benefit from this elevating rate of advertising and brand prominence which would facilitate the FA to successfully build on brand equity.
Threats- Hargreaves et al. (2016) have observed that in recent times, ‘the Liverpool way’ has been diluted and has been experiencing threats due to certain hybrid of politics and turmoil internally along with a shifting landscape of football externally. However, according to Paché and Ika (2016), though FA has undergone certain radical developments, the sincere fans of Liverpool have continued to show their dedication and watched their games with disdain as football became corporatized.
The globalization and commercialization of football are typically referred currently as the increasing commercialization of football that has resulted to new sponsorship agreements and deals. These phenomena recently have been experiencing certain forms of progress but are profoundly deep-rooted within every major club. Furthermore, several supporters still show importance with their presence as vital contributors to revenues (Liverpool FC 2018). In addition to this, match day incomes comprise around 19pc of all of Liverpool FC’s incomes along with the expansion of Anfield that serves a contributory role in sustaining competitive figures relative to rival base of Liverpool (Hargreaves et al. 2016).
Figure- 01
Liverpool FC’s Economic Performance
Source: (Rohde and Breuer 2016)
Reports by Liverpool FC (2018) have revealed that over the past two decades, European clubs ob average have experienced around 9.8 % annual growth with the average revenue that is three times estimated during the year 2000. Furthermore, within England, the average income since 2010 has been approximately 82% for football associations that is recognized as the major growth achieved by any of the European leagues. Thus, Bounds (2018) has claimed that only the German and Spanish leagues are sincerely comparable with 64% and 56% respective growth on average. With around £365.5 million generated in revenue, Liverpool FC has witnessed around 21% increase on aggregated revenues in comparison to past years valuation. This growth has been reflective of both the Premier League economic climate but further the commercial efforts Liverpool FC has done over the last few years. However financial reports have stated that though the matchday incomes of Liverpool FC has surpassed revenue rate of its strongest rival Manchester City, Liverpool’s total revenue growth has been below other competitors by emphasizing on the needs to extend Anfield stadium (Mcmahon 2018). The FA has been struggling related to its broadcasting authorities but these data have been calculated following Liverpool’s first season under Klopp as well as its broadcasting incomes which have been estimated to be lower as the FA has not been able to achieve success in the Champion’s League (Kenyon and Bodet 2017). However, in relation to commercial deals, Liverpool has attained a well-established position in comparison to both Arsenal and Chelsea.
Figure no 2
Club Revenues of Football Associations
Source: (Liverpool FC 2018)
Furthermore, as per Rohde and Breuer (2016) in 2014, revenue rate of Manchester United was estimated to be around €397m and currently has been estimated to be around €691 with a percentage growth of around 74%. Similarly Manchester City’s income growth has been calculated to have increased from € 284 million in 2013 to € 527 in 2016 that is regarded as an exceptional increase of around 85% (Liverpool FC 2018). Thus, comparatively, Liverpool FC’s revenue growth has risen from around €235 in 2013 to an amount of €407 in 2016 with an increase of around 75% which surpassed two Manchester Clubs (McDonagh 2017).
Political factors- The political factors which leverage the business processes of football in recent times have decreased at a significant rate ever since the administrative policies of Margaret Thatcher. Hewer, Gannon and Cordina (2017) have claimed that during those days government intervention in football was profoundly largest. However, currently the taxation policy is regarded as a feature which poses immense impact on the business and specifically on the sportsmen of FA such as Liverpool FC. Furthermore, McCarthy et al. (2014) have mentioned that because of increased taxation rates that have reached up to 55%, Liverpool FC’s players develop disinterest to participate in the English Premier League and showed inclination towards nations with lower rates.
Economic Factors- Liverpool FC along with other FA are subject to similar forms of inflation as well as interest rates as any other sectors dealing with labour expenses. Though remuneration rate of football players are augmenting in contradiction to general business trend, attaining revenue amounts greater than the yearly turnover of Liverpool (Hewer, Gannon and Cordina 2017). Furthermore, the overall economic crisis followed by increased levels of unemployment does not appear to be identified as a critical obstruction for the football industry in relation to the effects it has had on diverse industries. According to Mcmahon (2018), one of the major revenue stream which has propensity to influence Liverpool FC is sponsorship contracts which tend to characterize around less than one-fourth of revenue of the English football business. The growing demand for tickets has been witnessed to be high regardless of price rates whereby it justifies high rate of footfall in Premier League stadium even when ticket prices have ranged between 32 to 75 pounds (Plumley, Wilson and Ramchandani 2017). Thus, the demand for club’s merchandising decline tends to fall under same category with diverse range of branded products being sold at regular basis by Liverpool club at high prices. Such a purchase emerges as an anomaly in the overall economic crisis and further signifies reasons of continual scrutiny by the governing bodies of sport industry (Liverpool FC 2018).
Social Factors- Throughout years and regardless of shifting changes in lifestyles, Liverpool has remained a major part of football lovers’ life. Such an association with developments in consumer behaviour must not be disregarded. Furthermore, Corporate Social Responsibility (CSR) initiatives are identified as expanding trend in the industry (Rohde and Breuer 2016). Thus, as an essential effort to set up strong social profile, Liverpool FC has been efficiently engaged with several programs in order to counteract current issues in both local such as illiteracy as well as high rate of criminal offense among juveniles and international community like hunger and shortage of proper medication in low developing nations such as Africa (Liverpool FC 2018).
Technological Factor- According to reports by author, certain technological developments such as magnetic season ticket strips have permitted clubs like Liverpool FC to enhance their services towards spectators thus efficiently providing enhanced experiences. Meanwhile, innovative ideas related to perimeter promotion in moving or laser panels has efficiently facilitated clubs like Liverpool FC with industrial products to be sold further amplifying their revenue rate (Bounds 2018).
Environmental Factors – At this juncture, author has noted that environmental determinants have diminutive rate of influence to football sector thus very low on Liverpool FC. However, changes in climatic conditions along with environmental calamities have certain propensity to leverage football industry but only as an encouragement for initiatives in Corporate Social Responsibility program for example the “Reds Going Green” campaign (McDonagh 2017).
Legal Factors- Legal cases and declarations such as Premier League versus Karen Murphy concerning television and communications rights are likely to have significant control the air as well as sponsorship deals of Liverpool clubs that tend to pose critical impacts on one of the major revenue streams of Liverpool FC (Paché and Ika 2016).
In this section, Porter’s Five Forces model will be applied to analyse competitive forces which Liverpool FC experiences by separately evaluating the bargaining power of customers and suppliers alongside threat of substitute products and new entrants as well as the competitive balance within the industry.
TOWS Matrix
|
Threats |
Opportunities |
|
Other peak clubs importing more proficient players Critical problems among stakeholders |
Must target international fan bass such as India, China and the United States Greater rate of brand visibility would facilitate Liverpool set up brand recognition (Bounds 2018). |
|
Weakness |
Strengths |
|
Player and management issues unable to achieve major titles in the English competition (Mcmahon 2018). |
Strong global brand name and dedicated fan base Exceptional marketing, worldwide brand existence and high quality merchandising. |
Figure no 3
Created by author
The stakeholder (players and coaches’) most significant expectation lies on sportive success. In Liverpool FC, these stakeholders’ agreement financial incentives typically relates to success when the team wins. Furthermore, Horrocks et al. (2016) have stated as the Bosman rule is implemented in Europe; often players typically engaged to their club are exceptions. Stakeholders’ approach tends to cost between 50% to around 72% of Liverpool’s total cost. Author has also mentioned that Liverpool players are stronger as most of them are engaged to unions like PFA in England (Butler and Massey 2018). The impact of these unions over is fundamentally based on wages and establishes minimum remuneration and clubs are not allowed to evade their bottom line.
Implementation
Liverpool FC must implement competitive strategy which will combine the influence of external situational analysis as well as certain integrative apprehensions of the inner situation of the FA (García and Welford 2015). Through the competitive strategy Liverpool FC will aim at achieving significant competitive benefits in the football industry against its rivals. Furthermore, according to Reeves et al. (2018), competitive strategy will comprise of the business strategies as well as initiatives applied by Liverpool to magnetize customers or its fan followers and further reinforce its position as a major FA (François and Bayle 2017). The competitive strategy comprises a competitor angle which will prescribe several ways to set up the sustainable competitive advantage.
Conclusion
Therefore, from the above conclusion it can be stated that, Liverpool FC must implement efficient competitive strategy in order to attain significant competitive advantage position in the football industry. Liverpool despite of relatively low revenue in comparison to its rivals has achieved success in many leagues thus maintaining its huge follower base. The paper has offered inclusive insights of the way Liverpool has expanded its follower base and its stadium recently. In addition to this, the report offered detailed financial analysis of the FA in the last few years along with comprehensive macro as well as micro environmental analysis.
References
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Hewer, P., Gannon, M. and Cordina, R., 2017. Discordant fandom and global football brands:‘Let the people sing’. Journal of Consumer Culture, 17(3), pp.600-619.
Horrocks, D.E., McKenna, J., Whitehead, A., Taylor, P.J. and Morley, A.M., 2016. Qualitative perspectives on how Manchester United Football Club developed and sustained serial winning. International Journal of Sports Science & Coaching, 11(4), pp.467-477.
Kenyon, J.A. and Bodet, G.S., 2017. Supporter engagement through social media: a case study of Liverpool Football Club. Routledge.
Liverpool FC 2018. LFC announces financial results for the year to May 31, 2017. [online] Liverpool FC. Available at: https://www.liverpoolfc.com/news/announcements/292412-lfc-announces-financial-results [Accessed 12 Nov. 2018].
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McDonagh, P., 2017. Football–marketplace icon?. Consumption Markets & Culture, 20(1), pp.7-11.
Mcmahon, B. 2018. Head-To-Head Financial Results And How Liverpool Is Set To Overtake Arsenal. Available from https://www.forbes.com/sites/bobbymcmahon/2018/01/01/part-2-head-to-head-financial-results-and-how-liverpool-is-going-to-overtake-arsenal/ Accessed on 12 November 2018.
Paché, G. and Ika, L., 2016. European Professional Football Club Image and Human Capital Management. International Journal of Business Administration and Management Research, 2(3), pp.31-34.
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