What does the internal analysis of Chelsea Football Club tell about its strategic drivers in the industry?
An external analysis of the environment in which EPL operates revealed some strategic drivers in the industry that can ensure growth and profitability of clubs in the global sports market. Now, there is a need to conduct an internal analysis of resources and capabilities of the league in order to identify its ability on successfully operating in global sports markets. Along with such an analysis it is also required to identify and study the routes and strategies to enter the markets and strategic options that can be followed to remain successful in domestic as well as global markets in long-term.
A resource-based analysis will help in identifying the major resources available with the league and whether these resources are imitable, appropriable, durable and substitutable in the international markets. Such an analysis will create an understanding of useful value creating resources guiding through the strategies that can be applied with the help of existing resources to achieve long-term growth and sustainability in the sports industry as a whole.
Considering the internal situation related to resources and values of Chelsea Football club the following major resources can be studied in detail:
Promotion and Regulation
Chelsea operates under English Premier League following the European club model including provisions for promotion and regulation of individual clubs among several divisions of English soccer. Here bottom three clubs are ‘relegated’ to the Championship for the next season and teams that hold top position in the Championship join the Premier League (Komberger, 2013).
As this model is not unique to EPL, it is easily imitable by competitors. However, this structure is used by EPL in a strategic manner to leverage various interesting situations created resulting in a competitive advantage. EPL combines the “any given Sunday” ideal in a manner that any team can beat any other team during any one game with a set of “mini-competitions” (Vooman, 2007). Here the interest of fans is increased, as there exist a race for the Premier League title and for qualification of UEFA Champions League along with the effort on avoiding relegation (Vooman, 2007).
Furthermore, the system of promotion and relegation as followed in EPL is durable offering a value creation in the long-term. The creation of revenue is not very high but is efficient enough to prevent a scenario where same set of teams are to be promoted and relegated in a frequent manner resulting in the insignificance of the complete system (Szymanski, 2010). Then considering the appropriable nature of the system, for a team to rise up from the championship for the EPL and attaining competitiveness represents an opportunity that is unique for creating value as there arise the possibility to draw on a complete new set of fans where a new team enters the league (Koufopoulos and Pitt, 2012). Finally, the system of promotion and regulation as followed under EPL is not substitutable as it insulates the teams against potential substitutes. This is so as a team under American-league structure might not be able to compete with traditional European teams on the basis of creating a social and economic value but can only carve out a niche on the basis of novelty.
EPL is focused on participating in multiple competitions occurring on international level and therefore clubs like Chelsea are given the opportunity of competing within EPL clubs as well as other domestic leagues on an yearly basis including UEFA Champions League, UEFA Europa League and FA Cup as well as on a four yearly basis to participate in the UEFA European Championship and FIFA Club World up (Szymanski, 2010).
This particular resource is imitable in nature only when the sport to be considered allows it. For instance, as Chelsea FC can travel to play against FC Basel in Switzerland as well as in Romania to compete with Steaua Bucuresti without issues of any administrative incongruities between the regions (Szymanski and Kuypers, 2011). However, sports like American football operates in a highly isolated manner within their own markets as other countries fail to appreciate and understand the game on the same level.
Considering the durability of the resource, the model can prove to be durable as long as some level of popularity and economic success is attached with every individual competition. The positive gross revenues from Champions League and FA Cup act as a direct economic stimulus for EPL and also act as an indirect stimulus for social values of the club offering the opportunities of exploring internal markets (Caye and Roberts, 2009). However, with lesser popularity of these competitions, the opportunities of value creation become less strategically benefiting as a resource for EPL to leverage.
Furthermore, the resource is appropriable with the application of the theory of ‘rising tide’ where with the rise in interest in international benefits offered by the game, there is a high possibility for every individual domestic league, UEFA as well as FA to capture the actually created economic and social value within the context of such competitions.
Finally, the resource is suitable in offering opportunity to move out through a multiple competition model and avoid isolation that may prevent the achievement of economic success. Such a scenario has helped EPL to dominate the sports landscape on an international level and is not substitutable on a domestic as well as global level.
The resource of tradition associated with the game, the clubs like Chelsea and the league as a whole offers several benefits to EPL. The league is operated through 20 major clubs that have a long tradition of more than 85 years each helping the league to promote and present itself at the league as well as the club level by leveraging its rich experience and history in the game (Koufopoulos and Pitt, 2012).
The league’s tradition is the most inimitable resource of EPL as other leagues may copy the administrative resources but it is not possible to imitate the historical tradition or experience of the teams (Komberger, 2013). This provides insulation from competitors attempting to copy this particular image of EPL. Furthermore, the tradition improves and becomes stronger over time and therefore as a resource is durable in nature. There is no present external threat to this resource but it can from inside if the management of the league anytime decides to abandon the tradition of the league.
Furthermore, the resource is appropriable as EPL has the opportunity to benefit from the reciprocal value derived through its resource of tradition by creating value to be appropriated by external partners. This tradition is valued by brands, sponsors and broadcasting organization by aligning themselves with the EPL and appropriates some of the league’s value which will again come back to the league through increased interest of fans or through increased capital for the league (Cave and Robert, 2009). Finally, the resource of tradition can only be substituted only by the novelty impact of a new league. Therefore, there lies least possibility of any new competing league to bring in some highly innovative or lucrative value enticing consumers to replace the tradition as a strategic resource.
A detailed analysis of strengths, weaknesses, opportunities and threats is conducted to identify the areas of improvement and the strengths that can be used to explore new opportunities in the sports market. The SWOT Analysis for EPL will be applicable for Chelsea FC too.
Considering the internal analysis of resources and capabilities as well as the identification of strengths, weaknesses, opportunities and strengths guide us through the future strategic options that can help the league and clubs under EPL to achieve success in domestic as well as global sports industry. Here the focus of the club should be on strategies driving management and organizational culture, brand development, commercial revenue, match day revenue, broadcasting revenue and overall popularity and positioning of club in global markets.
At the first instance, Chelsea FC is recommended to focus on improving the value creating activities on the demand side. Here differentiation in activities should be the centre of strategy to attract new supporters to consumer latest activities improving aesthetic value creation, integrating symbolic and functional value on match day and development of the stadium (Kesenne, 2005). Further activities improving brand management and improving commercial innovation should be considered to create additional opportunities on commercial side. The strategic aspect of brand development will be achieved through sporting success, global branding and global fab base attraction.
Secondly, certain activities to improve revenues and profitability are recommended to improve bargaining position of club with the players. This will improve club’s capability in retaining talent and capture more of the value created. Additionally, a system or policy to identify youth talent is required to add innovation through new teams and fresh talent acquisitions (Bar et al., 2008). Here the strategic aspects of commercial revenue and match day revenue increase will be achieved through domestic brand image, and home stadium expansion.
Besides the above recommended strategies for improving revenue and competitive advantage, it is required that club make efforts to explore new markets and find youth talent in international markets. Chelsea FC enjoys a strong fan following internationally and holds strong financial position along with some of the best teams playing for the club. This makes it quite evident that the club should strive to explore new markets especially in Asian region to expand the horizons.
Chelsea FC can enter Asian markets like China as one of the English Premier League team with proper strategy of integrating the operation plan before entering the new Asian markets like India, China, and Thailand. It is to be understood that Chinese football is becoming a game changer and the region already has well-established structures of leagues and competitions (Keat and Leng, 2013). These leagues may be very proactive of their involvement and ownership in domestic competition.
Therefore, it is recommended that Chelsea should establish foreign stores to sell their licensed products, enter into sponsorship programs with other global brands popular in Asian countries, participate in global pre-season friendly tours in destinations like Hong Kong and Thailand as well as use the language of these countries in its social media platforms in order to improve the cultural relationship. Further new football schools can be developed in target nations creating a mutual benefit by offering professional training to people interested in football and discover young players to form new teams (Keat and Leng, 2013).
This particular strategy will result in achievement of commercial revenues in the form of world leading brand name, global sponsorships and massive fan base at one hand and broadcasting as well as mat day revenues through sporting performance, global brand image and collective broadcasting deals on the other.
Form the above analysis it can be concluded that global sports management is a game changer that calls for updated strategies and latest plans for clubs and leagues to ensure long term success and stability along with attracting and maintaining a huge fan base in international markets. Chelsea FC while operating as a leading EPL member have some key strengths and resources that can help it in entering new markets and improve its position and popularity in local as well as international markets.
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